The Proceedings of COBRA 2009 - Project Topics
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mpagiThe Proceedings of COBRA 2009 - Project Topics
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mpagiCOBRA 2009
The construction and building research conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
Organising Committee
The Organising Committee for the RICS COBRA 2009 Conference consisted of:
Paul Bowen (Chair) University of Cape Town
Ian Jay University of Cape Town
Keith Cattell University of Cape Town
Kathy Michell University of Cape Town
Stephen Brown RICS
The Doctoral Session was arranged and conducted by:
Monty Sutrisna University of Salford
Les Ruddock University of Salford
The CIB W113 session was arranged and conducted by
Paul Chynoweth University of Salford
The RICS COBRA Conference is held annually. The aim of COBRA is to provide a platform for the
dissemination of original research and new developments within the specific disciplines, sub-disciplines
or field of study of:
Management of the construction process
• Cost and value management
• Building technology
• Legal aspects of construction and procurement
• Public private partnerships
• Health and safety
• Procurement
• Risk management
• Project management
The built asset
• Property investment theory and practice
• Indirect property investment
• Property market forecasting
• Property pricing and appraisal
• Law of property, housing and land use planning
• Urban development
• Planning and property markets
• Financial analysis of the property market and property assets
• The dynamics of residential property markets
• Global comparative analysis of property markets
• Building occupation
• Sustainability and real estate
• Sustainability and environmental law
• Building performance
The property industry
• Information technology
• Innovation in education and training
• Human and organisational aspects of the industry
• Alternative dispute resolution and conflict management
• Professional education and training
Peer review process
All papers submitted to COBRA were subjected to a double-blind (peer review) refereeing process.
Referees were drawn from an expert panel, representing respected academics from the construction
and building research community. The conference organisers wish to extend their appreciation to the
following members of the panel for their work, which is invaluable to the success of COBRA.
Rifat Akbiyikli Sakarya University, Turkey
John Boon UNITEC, New Zealand
Richard Burt Auburn University, USA
Kate Carter Heriot-Watt University, UK
Keith Cattell University of Cape Town, South Africa
Sai On Cheung City University of Hong Kong
Grace Ding University of Technology Sydney, Australia
Peter Edwards RMIT, Australia
Charles Egbu University of Salford, UK
Hemanta Doloi University of Melbourne, Australia
Peter Fenn University of Manchester, UK
Peter Fisher University of Northumbria, UK
Chris Fortune University of Salford, UK
Rod Gameson University of Wolverhampton, UK
Theo Haupt Cape Peninsula University of Technology, South Africa
Godfaurd John University of Central Lancashire, UK
Keith Jones University of Greenwich, UK
Mohammed Kishk Robert Gordon’s University, UK
Andrew Knight Nottingham Trent University, UK
Esra Kurul Oxford Brookes University, UK
John Littlewood University of Wales Institute, Cardiff, UK
Champika Liyanage University of Central Lancashire, UK
Greg Lloyd University of Ulster, UK
S M Lo City University of Hong Kong
Martin Loosemore University of New South Wales, Australia
Tinus Maritz University of Pretoria, South Africa
Steven McCabe Birmingham City University, UK
Andrew McCoy Virginia Tech, USA
Kathy Michell University of Cape Town, South Africa
Henry Odeyinka University of Ulster, UK
Robert Pearl University of KwaZulu, Natal, South Africa
Keith Potts University of Wolverhampton, UK
Matthijs Prins Delft University of Technology, The Netherlands
Richard Reed Deakin University, Australia
Herbert Robinson London South Bank University, UK
David Root University of Cape Town, South Africa
Kathy Roper Georgia Institute of Technology, USA
Steve Rowlinson University of Hong Kong
Winston Shakantu Nelson Mandela Metropolitan University, South Africa
Melanie Smith Leeds Metropolitan University, UK
Suresh Subashini University of Wolverhampton, UK
Ming Sun University of the West of England, UK
Joe Tah Oxford Brookes University, UK
Derek Thomson Heriot-Watt University, UK
Basie Verster University of the Free State, South Africa
John Wall Waterford Institute of Technology, Ireland
Sara Wilkinson Deakin University, Australia
Francis Wong Hong Kong Polytechnic University
Ing Liang Wong Glasgow Caledonian Unversity, UK
Andrew Wright De Montfort University, UK
George Zillante University of South Australia
Sam Zulu Leeds Metropolitan University, UK
In addition to this, the following specialist panel of peer-review experts assessed papers for the COBRA
session arranged by CIB W113
John Adriaanse London South Bank University, UK
Julie Adshead University of Salford, UK
Rachelle Alterman Technion, Israel
Jane Ball University of Sheffield, UK
Michael Brand University of New South Wales, Australia
Penny Brooker University of Wolverhampton, UK
Alice Christudason National University of Singapore
Paul Chynoweth University of Salford, UK
Philip Chan National University of Singapore
Sai On Cheung City University of Hong Kong
Ron Craig Loughborough University, UK
Asanga Gunawansa National University of Singapore
Rob Home Anglia Ruskin University, UK
Peter Kennedy Glasgow Caledonian University, UK
Anthony Lavers Keating Chambers, UK
Tim McLernon University of Ulster, UK
Wayne Lord Loughborough University, UK
Frits Meijer Delft University of Technology, The Netherlands
Jim Mason University of the West of England, UK
Brodie McAdam University of Salford, UK
Tinus Maritz University of Pretoria, South Africa
Mark Massyn University of Cape Town, South Africa
Issaka Ndekugri University of Wolverhampton, UK
Robert Pearl University of KwaZulu, Natal, South Africa
Linda Thomas-Mobley Georgia Tech, USA
Yvonne Scannell Trinity College Dublin, Ireland
Cathy Sherry University of New South Wales, Australia
Henk Visscher TU Delft, The Netherlands
CONTENTS
Project management
Correlates of time overrun in industrial ........................................................................ 1
construction projects in India
A study of the causes and resolution of disputes ......................................................... 7
in the Nigerian construction industry,
Competencies of quantity surveyors as ....................................................................... 23
value managers in a developing economy
Evaluating the level of use of bar chart and ................................................................. 39
its impact on project performance in the Nigerian construction industry,
Investigating the effects of waste management ........................................................... 49
programmes on construction sites,
Development of Value Management approach ............................................................. 60
for the Saudi public sector
Assessment of contractor’s understanding .................................................................. 73
of risk management in the Seychelles construction industry
Project management: structure, maturity .................................................................... 87
and the pillars of development in the South African construction industry,
Evaluating material storage strategies and their .......................................................... 103
relationship with construction project performance
The impact of risk on contractors pricing: ..................................................................... 114
a study of building projects in Lagos state, Nigeria
Balancing site information and communication ............................................................ 128
technology systems with available ICT skills
Identifying key sources of re-work affecting ................................................................. 138
construction cost performance
Theft and vandalism on construction sites .................................................................... 150
Investigating a new integrated cost management ........................................................ 165
system within lean project delivery
Working together for a collective culture of construction safety .................................... 181
Strategic systems perspective to project ...................................................................... 193
manage socio-technical systems
Project variables influencing contingency on ................................................................ 204
construction contract in Nigeria
Modelling client values with utility curves ...................................................................... 215
Construction professionals' perception of risk............................................................... 227
impact on cost of building projects in Nigeria construction industry
Achieving cost performance from client’s, .................................................................... 244
consultant’s and contractor’s perspectives
Training and skills
Construction management graduates – ....................................................................... 256
do they have the competencies that industry need?
Early career training of quantity surveying professionals .............................................. 267
The key drivers for leadership skills development ........................................................ 278
practices in the UK construction industry – an empirical study
Education
What should the educational requirements be ............................................................. 289
for property valuers in South Africa?
New project management education curriculum ........................................................... 302
Surveying education and training in the UK: a cross profession comparison................ 314
Sustainable research platform at the University of Botswana ....................................... 332
Research and teaching linkages: do they lead to better graduates? ............................ 344
A reflective evaluation of group assessment................................................................. 356
Satisfied students, “I’d like to see that”: a discussion of .............................................. 362
strategies introduced in the classroom with the aim of improving
student satisfaction
“Dual-Sector” teaching - a method of optimising .......................................................... 381
university resources to facilitate better learning and teaching
Transformation in property education in South Africa ................................................... 398
Professor/Lecturer career progression in project ......................................................... 414
management academic careers
Procurement
Corruption in the construction industry: the case of Malawi .......................................... 426
An evaluation of the reliability of bills of quantities in building procurement .................. 435
Information and communication technology - based application .................................. 447
of ‘just- in- time’ (JIT) to internal logistics on site
Public private partnerships: what does the future hold?................................................ 462
Value for money: a quantity surveyor's perspective ..................................................... 475
of the quantitative versus the qualitative
Prediction of consultant performance for the selection process .................................... 494
Acceptance of PIPS in Botswana.................................................................................. 509
The role of incentivisation in partnering projects ........................................................... 522
Study of the utilization of modern methods and techniques ......................................... 537
of building construction in low cost housing provision
Contractors’ perspectives of the condition of the South African ................................... 553
construction industry as captured by the CIDB survey of
construction industry indicators 2008
Urban development
The transformation of the South African built environment - ........................................ 566
an institutional approach
A critical analysis of the influences of city planning policies.......................................... 578
on property development within a metropolitan municipality
Factors influencing the residential development of a ................................................... 595
site-and-service project: a case study of Mamelodi Extension 5
Integrating informal land delivery systems into
urban land use planning: a case study of Mbale Municipality, Uganda......................... 608
The urbanisation of Caribbean coastlines: a case study .............................................. 621
of the Trinidad West Coast
Sustainability
Community resilience to extreme weather events: a review of theory .......................... 630
Considering real estate in the sustainable development of Mbale, Uganda.................. 640
Performance of tertiary institutions in terms of managing their assets .......................... 658
Industry structure
Capacity of the UK construction sector ......................................................................... 672
International expansion of quantity surveying consultants ........................................... 698
from developing economies: the case of Malaysia
Creating a software marketplace for the SME community ........................................... 711
in the Irish construction industry
Planning for profit and reimbursable expenses ............................................................ 727
in the South African architecture profession
The effect of non-monetary incentives on the .............................................................. 737
performance of construction craftsmen in Nigeria
Factors impacting on project leadership performance: an exploratory study ................ 754
The new role of the construction manager/client engineer/quantity surveyor ............... 763
An analysis of the changing structure of the contractor ............................................... 775
in the UK construction sector using New Institutional Economics
Work empowerment as an antecedent to organisational ............................................. 784
commitment of architects and quantity surveyors in
consultancy firms in Lagos state, Nigeria
Competitiveness in construction: a literature review of ................................................ 799
research in construction management journals
Obstinate agents or maturing stewards? A critical look at the ...................................... 813
private sector’s commitment to BEE policy in South African PPPs
Investigation of market management in construction: .................................................. 827
the importance of influence and referral markets in business development
Marketing of built environment SMME professional consultancy firms ......................... 841
Organisational innovation in the South African quantity surveying profession .............. 852
The built asset
The role of organisational culture in workspace ........................................................... 865
planning and design: a Cape Town case study
Relationship between building collapse and poor quality ............................................. 873
of materials and workmanship in Nigeria
Assessment of fire safety practices in public buildings in western Nigeria .................... 885
Construction problems of buildings on expansive soils in Kibaha, Tanzania ................ 904
Measuring performance in-use in UK social housing .................................................... 916
A comparative analysis of residential satisfaction ........................................................ 929
in three income levels public housing estates in Nigeria
Valuation of broiler units: a practical approach ............................................................. 944
The condition of the vertical transportation infrastructure in Gauteng ........................... 966
Occupants’ satisfaction approach to housing performance .......................................... 985
evaluation: the case of Nigeria
Design and user /occupier needs in building performance .......................................... 998
The impact of a view on the value of vacant residential stands .................................... 1011
Finance for development
Use of ‘judgment’ by commercial property developers in the UK .................................. 1029
How has South Africa been insulated from the global financial crisis? ......................... 1044
Evaluation of credit risk assessment criteria for ........................................................... 1054
commercial property finance applications by black
economic empowerment borrowers
Integrated optimum mark-up ......................................................................................... 1069
Public private partnerships in South Africa: analysis and management of risks............ 1081
Are the incentives offered by the social housing programme ....................................... 1094
attractive enough to ensure the participation of the private sector
CIB W113 - environmental law
Do South African buildings have to be more sustainable? ........................................... 1113
A review of relevant legislation
Urban forest management and protection from the perspective .................................. 1125
of environmental law in Malaysia: issues and challenges
Eurocodes and the structural safety of existing buildings – .......................................... 1136
considering the publication of the Dutch NEN 8700
Environmental crime and the role of the Magistrates’ Courts........................................ 1147
Policy and legislative initiatives on climate change ...................................................... 1161
mitigation and adaptation strategies for the construction
industries in three coastal cities
Legal frameworks for losses attaching to increased .................................................... 1175
incidence of floods in an era of climate change
CIB W113 - housing
Equitable distribution of low-cost houses: a Malaysian perspective.............................. 1188
Common area design in high rise residential buildings ................................................ 1202
and its building control in Asia Megacities
– a study of Singapore, Hong Kong and Beijing)
Family intervention tenancies: the (de-) marginalisation of social tenants .................... 1212
CIB W113 - construction
Indonesian construction law: challenges toward globalization ...................................... 1223
Contractor design and standard forms of contract – a problem solved ......................... 1234
Corruption of the commercial process – an update....................................................... 1243
Role, dimensions, and degrees of incompleteness ...................................................... 1258
in construction contract documentation
Liability for construction operations: the law in evolution .............................................. 1276
European Directive for tendering architectural services; .............................................. 1292
A too strict interpretation by Dutch local authorities?
Pure economic loss relating to construction torts - a comparative analysis .................. 1305
CIB W113 - building regulations
Measuring the evolution of e-government on a ............................................................ 1328
municipal level: the case of building permit permissions in Europe
Comparison of the building control system in European countries................................ 1339
The impact of energy performance regulations on systems of building control............. 1356
Building regulations and control, and energy efficiency in buildings ............................. 1368
Professional liability, knowledge and enforcement of ................................................... 1380
the seismic laws in Italy (the case of S. Giuliano di Puglia)
CIB W113 - international perspectives
Between the Lines: the spirit behind land agreements.................................................. 1389
The juridical security of the immovable property in Belgium ......................................... 1401
Planning at the urban periphery in Australia: issues .................................................... 1415
relating to private residential back and front yards
Urban land ownership reform and political forces in transitional China......................... 1427
Legal and economic review of natural resource ........................................................... 1763
compensation valuation practice in the Niger delta area of Nigeria
(NOTE: Page numbering out of sequence for this paper)
The impact of Black Economic Empowerment transactions on shareprice ................... 1438
CIB W113 - professional practice
The role of law and legislation in quantity surveying maturity ....................................... 1446
Use of moral theory to analyse the RICS Rules of Conduct.......................................... 1462
The built environment: disciplinary knowledge base .................................................... 1475
and implications for educators
CIB W113 - alternative dispute resolution
Promotion of administrative justice in town planning tribunals ...................................... 1487
An investigation of the factors influencing dispute resolution method selection ............ 1496
in construction projects
Has mission drift rendered statutory adjudication in ..................................................... 1505
NSW open to valid criticisms?
Prometheus unbound: unravelling the underlying nature of disputes............................ 1519
The introduction of statutory adjudication for building and ........................................... 1540
construction payment disputes in South Australia –
a review and assessment
What are the requirements for the South African ......................................................... 1556
construction industry to fully utilise adjudication?
Conception of disputes amongst Malaysian quantity surveyors ................................... 1568
Doctoral session
Cost savings, time savings and project quality in PPP/PFI: ......................................... 1585
a review of PPP/PFI projects
Building performance evaluation in educational institutions: ........................................ 1598
a case study of universities in south east Nigeria
The security of payment regime in Malaysia: will it be effective? .................................. 1626
Climate design strategies in hot regions: an application of Tripoli, Libya ...................... 1640
Impact of ICT on the integration of construction............................................................ 1653
procurement chains in Nigeria
Value creation in houses of culture - developing intellectual capital ............................. 1675
A methodological framework for the assessment of Turkish ........................................ 1687
contractor firms’ innovativeness
Improving the energy performance of Dutch houses: .................................................. 1697
drawing lessons from neighbours
Evaluation of maintenance management practices in .................................................. 1710
prison institutions, south-west Nigeria
Commercial real estate auctions – an investigation of the British market ..................... 1736
A knowledge-based decision support system for roofing ............................................. 1753
materials selection and cost estimating
COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Ifte Choudhury, pp 1-6
Correlates of time overrun in industrial construction projects
in India
Ifte Choudhury1
1
Texas A&M University
College Station, TX
Email: [email protected]
Abstract:
The purpose of this study was to identify the factors of time overrun in industrial
construction projects in India. An extensive review of the literature indicates factors that
could possibly have an effect on delay in completion of an industrial construction
project include underestimation of project cost, changes to design during construction,
and project delivery method. A web-based instrument was prepared to gather the data
related to the effects those variables on time overrun in industrial projects. The
instrument was sent to the Chief Executive Officers of 70 randomly selected
construction companies. Forty-seven completed responses were received. The data was
analyzed by administering multiple regression technique using SPSS. The results of the
study indicate that only the number of change orders made during construction has a
statistically significant (p=<0.001) effect on time overrun in industrial construction in
India.
Keywords:
Change Orders, Cost Overrun, Industrial Construction, Indian Construction Industry,
Project Delivery Method, Time Overrun.
1 Introduction
The Indian construction industry contributes more than 5 per cent to the country’s GDP
and generates more than $30 billion in revenues (Datamonitor, 2006). Growth of the
industry has greatly influenced the economic development in India, stimulating
significant growth in other sectors. Therefore, improvement in efficiency and
productivity in construction sector make significant contribution to the improvement in
productivity in other sectors.
Like most other developing countries, time overrun in construction projects is very
common in India (Tommy et al., 2006). It is simply a difference between the agreed
upon time of completion of a project at the time of signing the contract and the actual
time of completion of the project. Construction time is a basis for evaluating the success
of a project and the efficiency of the project organization. Completion of projects on
time, as a matter of fact, is symbolic of an efficient construction industry (NEDO,
1988). In contrast, severe criticism of the industry arises when buildings take much
longer than the contract time (Bennett et al., 1979). It is extremely important to analyze
the factors that significantly influence time overrun in different construction sectors.
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RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Ifte Choudhury, pp 1-6
The objective of the present study was to identify the factors of time overrun by
collecting, processing, and analyzing the data related to industrial construction projects
in India.
2 Literature Review
The emphasis on duration of construction projects from inception to completion is
gradually assuming immense importance in the construction industry. Clients or
consumers are no longer content simply with minimal cost and adequate functional
performance for their projects; increasing interest rates, inflation and other commercial
pressures, among other factors, dictate highly cost-effective solutions. One of the ways
to meet this demand is to complete a project within the shortest possible time without
compromising with quality.
Construction time can be regarded as the elapsed period from the commencement of site
works to the completion and handover of a building to the client. The construction time
of a building is usually specified prior to the commencement of construction. There are
no ‘hard-and-fast’ rules for predicting construction durations of projects. Construction
time is usually deduced from the client’s brief or derived by the construction planner
from available project information such as design drawings, bill of quantities, method
statements, specifications, bar chart programs, etc. (Nkado, 1994). The completion
periods are often calculated on the basis of the planner’s own previous experience on
similar projects. Quite often there is a difference between contract cost and actual
construction cost at the completion of a project. Factors that influence such cost
overrun could range from simple errors in original quantity takeoff to changes in
quantities of items of work or inclusion of new items of work. Whatever the reasons, it
entails an increase in size of a project in terms of volume that may trigger an increase in
construction time.
It is not uncommon for the delays to happen during the design and construction phases;
Indian construction industry is no exception. Even the best prepared plans are subject to
changes during construction phase and the mediocre and worst laid plans often end up
in lawsuits since they may cause serious productivity losses (Thomas, 1995; Hanna &
Gunduz, 2004). They may lead to budgetary and schedule changes. Budgetary changes
are principally measured by the amount of work adjusted and the data related to
budgetary changes is generally objective and reliable. However schedule changes can be
complicated, as time extensions or reductions are not always necessarily proportional to
budgetary changes (Chao et al., 2004).
The literature does not provide any consensus among researchers on the identification of
factors that affect specified, planned, or completed construction times of buildings. One
reason for this is that different investigators may view the subject from different
perspectives. Such points of view include identification of discrete factors related to
design, contract, finance, and management (Nkado, 1994).
Studies indicate that project performance is also affected by procurement method
(Choudhury & Pitkar, 2007; Ling et al., 2004; Chan et al., 2002). Construction
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Ifte Choudhury, pp 1-6
procurement is the process of obtaining services and supplies for efficient and timely
delivery of the end product. The major procurement methods include (1) Design-Bid-
Build, (2) Design-Build, and (3) Construction Management at Risk. Even though it is
advisable to select a procurement strategy that suits the nature of a project, Design-Bid-
Build is still the method of choice in India.
There are quite a large number of factors that could possibly have an effect on time
overrun. However, some of the studies have prioritized these factors in order of their
importance in relation to delays in completion of construction projects (Odeh and
Battaineh, 2002; Majid and McCaffer, 1998; Chan and Kumaraswamy, 1997). In view
of the suggestions made in these works, the following factors have been identified for
use in this study:
(1) Underestimation of project cost
(2) Changes to design during construction
(3) Delivery method of construction works
3 Research Methodology
3.1 Data collection
Seventy construction companies from industrial sectors in India were randomly selected
from an existing database. A questionnaire was prepared to collect data related to actual
construction time, actual construction cost, project delivery method, and total number of
change orders during the construction period. It was sent electronically to all the
companies selected. Data for 47 industrial projects, constructed during last five years,
from as many companies. The response rate was 67.14 per cent.
3.2 Variables and their Operationalization
Time Overrun (TIMEOVER): It is difference between the contractual time for
completion and the actual time of construction of a project measured in months.
Cost Overrun (COSTOVER): It is difference between the contractual cost and the actual
cost of construction of a project measured in millions of Indian Rupees (1 US Dollar =
45 Indian Rupees).
Number of Change Orders (CORDER): It is the number of change orders associated
with a project.
Delivery Method: This is the method used for construction and delivery of the projects.
The procurement methods are (1) Construction Management at Risk, (2) Design-Bid-
Build, and (3) Design-Build. Two dummy variables (CMR and DBB) and were created
from this category variable using dummy coding as shown in Table 1.
Table 1. Coding of Delivery Method
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Category of Procurement Method CMR DBB
Construction Management at Risk 1 0
Design-Bid-Build 0 1
Design-Build 0 0
3.3 Hypothesis
It was hypothesized that time overrun in industrial construction projects in India is
affected by (1) underestimation of project cost, (2) changes to design during
construction, and (3) delivery method of construction.
4 Findings and Discussion
A multiple regression model was employed to analyze the data. Regression analysis is a
modelling technique for identifying a function that describes the relationship between a
dependent and one or more independent variables. The reason for utilizing this
particular method was primarily to find independent variable(s) that had a statistically
significant effect on time overrun. A common value of this probability in research is
0.05. In this study a level of significance of the statistical test (p-value) was, therefore,
set at 0.05. The following model was used for the analysis:
TIMEOVER = β0 ± β1(COSTOVER) ± β2(CORDER) ± β3(CMR) ± β4(DBB) ± e (1)
where
β0 = Intercept
β1, β2, etc. = Regression coefficients, and
e = error term.
The results of the analysis are shown in Table 2.
Table 2. Multiple Regression Analysis of TIMEOVER
Variable Regression Coefficient |T| p<|T|
Intercept 0.644 0.419 0.677
COSTOVER 0.001 1.149 0.257
CORDER 1.730 9.754 <0.001
CMR -0.949 -0.577 0.567
DBB 1.527 0.847 0.402
Model R2 = 0.74
Model F = 29.29
p<F = 0.0001
The results indicate that only the total number of change orders made during the
execution of a project had a relationships with time overrun in industrial construction
projects in India at a level of significance of <0.001. All other variables included in the
model did not make any difference in the increase of project duration.
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RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Ifte Choudhury, pp 1-6
The F statistic of the model was significant at the 0.0001 level, which is strong evidence
that a relationship exists between time overrun and at least one of the independent
variables selected for the statistical procedure. An important aspect of a statistical
procedure that derives model from empirical data is to indicate how well the model
predicts results. A widely used measure of the predictive efficacy of a model is its
coefficient of determination, or R2 value. If there is a perfect relation between the
dependent and independent variables, R2 is 1. In case of no relationship between the
dependent and independent variables, R2 is 0. Predictive efficacy of this particular
model was found to be moderately high with an R2 of 0.74.
Time overrun is indicated to have a statistically significant positive relationship with
change orders; the higher the number of change orders, the more is the delay in
completion of a project. No other variables in the model seem to contribute to delays in
completion of an industrial project in India.
5 Conclusion and Further Research
The results of the study provide moderate support to the hypothesis that the total
number of changes made during construction of an industrial project in India has a
statistically significant effect on time overrun. The higher the number of change orders,
the more is the actual construction time. This is not very surprising in context of Indian
construction scenario. Generally, it takes a long time to process a change order due to
tedious bureaucratic procedures. This is more visible in industrial construction, where
most of the clients are governmental agencies or public sector companies.
The study was limited to investigate only to the effect of cost on construction time and
change orders in the context of industrial projects in India, keeping all other variables
constant. For future studies, it will be useful to include other variables such as
productivity of the workforce, impact of client decision-making, management attributes,
construction materials, and project environment, and analyze their effect on time
overrun.
6 References
Bennett, J., Flanagan, R., Goodacre, P., Gray, C., McLaughlin, N., and Norman, G.
(1979). UK and US Construction Industries: A Comparison of Design and
Contract Procedures. London: Surveyors Publications.
Chan, D. W. M. and Kumaraswamy, M. M. (1997). ‘A comparative study of time
overruns in Hong Kong construction projects’, International Journal of Project
Management, Volume 15, pp 55-63.
Chan, A. P. C., Scott, D. & Lam, E. W. M. (2002). ‘Framework of design criteria for
design-build projects’, Journal of Management in Engineering, Volume 18(3), pp
12-128.
Chao, H., Hsieh, T., Cheng, W., & Lu, S. (2004). ‘Grey relation analysis of causes for
change orders in highway construction’, Construction Management and Economics,
Volume 22, pp 509-520.
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Ifte Choudhury, pp 1-6
Choudhury, I. & Pitkar, M. (2007). ‘An analysis of project delivery systems in
commercial construction’, Journal of American Institute of Constructors, Volume
31(1), pp 23-27.
Datamonitor, 2006 (May), “India - Construction & Engineering”, Datamonitor, URL:
http://www.marketresearch.com/product/display.asp?productid=1096652&g=1,
viewed: March 25, 2007
Hanna, A. S. & Gunduz, M. (2004). ‘Impact of change orders on small labor-intensive
projects’, Journal of Construction Engineering and Management, Volume 130(5),
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Nkado, R.N. (1994). Construction time influencing factors: the contractor’s perspective.
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Odeh, A. M. and Battaineh, H. T. (2001). ‘Causes of construction delay: Traditional
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Oladapo and Onabanjo, pp 7-22
A study of the causes and resolution of disputes in the
Nigerian construction industry
Adebayo Oladapo1 and Babajide Onabanjo2
1
Scohool of Built & Natural Environment
University of Central Lancashire, Preston, PR1 2HE,
United Kingdom.
Email: [email protected]
2
Department of Architecture
Obafemi Awolowo University, Ile-Ife, 220005
Nigeria.
Email: [email protected]
Abstract:
The construction industry worldwide is dispute-prone due to the complex and
fragmented nature of the industry and the adversarial relationships that traditionally
exist between project participants. The aim of the study was to highlight the state of
dispute management in the Nigerian construction industry. A questionnaire survey of
industry participants provided data on the incidence and management of disputes.
Analysis of the data using percentage score and severity index methods with the
Statistical Package for Social Sciences (SPSS) showed that disputes occurred very often
due mainly to clients’ payment delays and contractors’ contractual claims. Adjudication
is the most commonly used method of dispute resolution and mini-trial the least. The
results also showed that arbitration and litigation are still popular while adjudication and
negotiation are the only ADR methods in common use. Widespread use of the other
ADR methods is hindered mostly by a general lack of awareness of their existence and
unfamiliarity with their workings among stakeholders in the industry.
Keywords:
Alternative dispute resolution (ADR), construction disputes, dispute resolution, Nigeria
1 Introduction
Disputes are inevitable in all human relationships, whether business or personal.
Disputes therefore arise in all industries including construction. In construction they
often arise when parties to a contract cannot agree on the interpretation and
implementation of contractual clauses during the execution of the contract. Thus under
Rule 1 of the Institution of Civil Engineers Arbitration Procedure, for example, disputes
arise where a claim or assertion made by one party is rejected by the other party and that
rejection is not accepted (Kumaraswamy, 1998).
According to Cheung et al. (2000), the complex nature of construction can confound
even the most intricate management systems. This, coupled with the fact that
construction projects require the coordinated efforts of a temporarily assembled task
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Oladapo and Onabanjo, pp 7-22
force of many independent participants, each having a different speciality, and each
expecting to make a profit, creates problems that make the construction industry
adversarial and dispute-prone. (Rhys Jones, 1994). According to Harmon (2003),
disputes result from such factors as unfair allocation of project risks, multiple prime
contracts, unrealistic schedule and expectations, poorly prepared contract documents,
variation orders and communication problems, among others.
Over the years, and particularly during periods of economic slowdown such as the
current global economic crisis, the number of construction disputes has been increasing.
This, according to Kangari (1995), is a result of the fact that a sluggish economy creates
an environment in which construction firms are forced to bid for projects at or below
minimum profit level (in order to stay in business) with the hope of recovering their
losses through negotiations or claims. Ho and Liu (2004) call this opportunistic bidding
giving birth to new phenomenon called ‘loophole engineering’ (Carmichael, 2002l) or
‘claimsmanship’ which Zack (1993) defines as the art or practice of making or winning
claims by questionable expedients without actually violating the rules. These
developments give the reason why dispute management has become an essential skill
requirement for construction professionals. The very large number of disputes
represents a substantial dilution of effort, delays, and diversion of capital in construction
(Matyas et al. (1996).
Although several authors, including Aniekwu and Okpala (1987; 1988), Aniekwu
(1995), Adams (1997) and Ogunsemi and Aje (2006), have established disputes as one
of the major problems plaguing the Nigerian construction industry, very little literature
exists on dispute management in the industry. The objectives of this research were
therefore to explore the nature and frequency of disputes in the industry and to examine
the resolution mechanisms in use to contribute to the body of knowledge on the subject.
2 Literature Review
No construction project design or contractual arrangement is perfect. Hence, as in all
other interpersonal and contractual relationships, disputes are inevitable in construction
contracts. In fact, disputes are a common occurrence in construction and dispute
resolution is now a routine management function for project participants (Cheung et al.,
2000). It is not surprising therefore that the Royal Institution of Chartered Surveyors
(RICS) has elevated conflict avoidance, management and dispute resolution procedures
to a mandatory competency level for assessing candidates for chartered and technical
membership (RICS Education and Training, 2006). Disputes in the construction
industry consume a lot of resources which could otherwise be used in a more productive
manner (Cheung and Yiu, 2007) and are ranked high as a cause of project time and cost
overruns in the industry (Kumaraswamy and Chang, 1998; Elinwa and Joshua, 2001;
Frimpong and Oluwoye, 2003; Aibinu and Odeyinka, 2006). They have indeed been
identified as a principal cause of poor performance in construction projects (Elis and
Baiden, 2008)
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2.1 The Nigerian Construction Industry
The construction industry was the dominant contributor to Nigeria’s GDP from the
immediate post-independence years in the 1960s to the 1980s, accounting for about 70
per cent of the GDP (Planning Committee on the National Construction Policy, 1989).
This made the industry very strategic to the nation’s development efforts.
Unfortunately, however, the industry has been bedevilled by a combination of low
demand and consistent low productivity and poor performance since the decline of the
national economy started at the end of the 1980s (Aniekwu, 1995; Okuwoga, 1998;
Adeyemi et al., 2005). This has reduced its contribution to the national economy to a
mere 1 per cent of the GDP in 2002 (AfDB/OECD, 2004). The industry suffers very
high rates of cost and time overruns which in the public sector, for example, are in the
order of 140 per cent of initial project cost and 81 per cent of original contract period,
respectively (Oma-Williams, 1991). Disputes have been blamed not only as significant
causes of these overruns (Elinwa and Joshua, 2001; Aibinu and Odeyinka, 2006) but
also as a key hindrance to the performance of the Nigerian construction industry in
general (Adams, 1997).
2.2 Disputes in the Construction Industry
The complexity of construction contracts makes them open to different interpretations
by different contractual parties. According to Kilian and Gibson (2005), the parties
often view the construction process from differing perspectives and it is therefore not
uncommon for a dispute to arise, for example, when a contractor evokes contractual
clauses to claim for additional monetary compensation and/or extension of time for an
issue that has developed on the project. The global economic crisis has engendered an
environment of cutthroat competition among construction firms for a rapidly decreasing
number of jobs, forcing them to bid for projects at or below minimum profit levels. In
addition, clients are demanding of contractors to execute complex projects with poorly
detailed documentation. This has placed an additional burden on contractors to construct
increasingly sophisticated projects with limited capital resources to lower than expected
standards of quality (Ravi Kumar et al., 2007)
Disputes in construction contracts are generally rooted in the fact that while the client
on the one hand usually aims to optimize quality and functionality at minimum cost, the
contractor on the other hand strives to satisfy the client and achieve maximum profit at
the same time using minimum resources (Howard et al., 1997). These priorities are
mutually exclusive, unsurprisingly at conflict with one another and set the framework
for a repetitive cycle of hostilities (Gebken and Gibson, 2006). This is responsible for
the adversarial win-lose relationships generally found in construction contracts.
The causes of construction disputes originate from a variety of sources ranging from
unrealistic schedules and expectations to changes in the economic situation. Table 1 is a
summary of some of the literature on the causes of construction disputes.
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Table 1: Summary of the literature on the causes of construction disputes
(Sources: as indicated in the table)
Literature sources
Gebken Ravi Kumar et al.
Heath Rhys Semple Bristow & Conlin Sykes & (2007),
Hewit et al., Jones et al Vasilopoulous, et al. (1996 Harmon Peckar Gibson
Cause of dispute (1991) (1994) (1994) (1994) (1995) (1996) (2003) (2005) (2006)
Unrealistic schedules and
expectations • • • •
Unpredictability of construction
including weather effects • •
Poorly prepared contract documents
and terms • • • •
Lack of communication and
information leading to • • • •
misunderstandings
Unexpected or changed
conditions/variation orders, • • • • •
Payment and financial issues • • •
Tendering pressures • •
Unfair allocation of project risks •
Changes in the economic situation • •
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Virtually all construction disputes are ultimately about money. According to Peckar
(2005), while a case may be described as a “differing site condition” case, or a “design
defect” case, or by reference to some other type of construction dispute, in the end the
dispute is usually about one party wanting money from the other. Construction disputes
have become more common and their resolution more legalised. The fees paid to
lawyers, claims consultants and expert witnesses and the time lost in resolving
construction disputes are a huge cost to the industry. In addition, the project disruptions
and delays resulting from disputes create grounds for new claims and disputes in an
ever-increasing "spiral of conflict" (Groton, 1997). Against this background, one cannot
but agree with Groton (1997) that it is rather ironic that construction, which is the one
industry that more than all others depends upon coordination, cooperation and
teamwork among multiple participants, should become the most adversarial industry.
2.3 Dispute Resolution Methods
Dispute resolution is a very important task in construction because huge sums are
invested in projects and stakeholders are eager to resolve disputes before they bring
their projects to a halt and bankrupt them. At the project level, unresolved disputes can
lead to programme delay, increased tension, and can damage long term business
relationships as a result. Hence, the importance of dispute resolution cannot be over-
emphasized, and selecting the most appropriate resolution strategy is equally important
(Cheung and Suen, 2002). It is for this reason that the industry has managed to develop
and adopt many unique ways of dispute resolution (Groton, 1997; Harmon, 2003;
Gebken and Gibson, 2006) and has thus become a paradoxical leader in both dispute
generation and resolution (Gibbons, 2007). Because disputes arise from so many
different sources and are so complex, there is no single "one size fits all" technique for
resolving them. Also, according to Groton (1997), the spiral of conflict, which can
cause a simple problem to develop into a difference of opinion, then a disagreement,
and ultimately a dispute, makes it impossible to use a single dispute resolution
technique to deal with all successive stages in the development of a dispute.
Dispute resolution methods range from the traditional techniques of litigation and
arbitration to alternative dispute resolution (ADR) methods including mediation,
adjudication, conciliation, negotiation, dispute resolution board, mini-trial, and dispute
resolution adviser. Figure 1 shows a continuum of dispute resolution methods with the
degree of control of the outcomes by the stakeholders compared to both the cost of
resolution and the extent of hostilities resulting from their use. The fundamentals of the
use of these methods and their combinations and hybrids, including their relative merits
and demerits have been extensively discussed by various authors, including Brooker and
Lavers (1997), Cheung and Suen (2002), Harmon (2003), Chan et al., (2006), Teo and
Aibinu (2007) and Elis and Baiden (2008)
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Figure 1: Continuum of dispute resolution methods
(Source: Adapted from Richter, 2002)
The perceived shortcomings of litigation and arbitration, with their concomitant
escalation in costs, delays, and adversarial relationships, have encouraged the rapid
growth of ADR (Brooker, 1999; Cheung et al., 2002, Zenaldin, 2006, Teo and Aibinu,
2007; Elis and Baiden, 2008). However, Groton (1997) has expressed the view that the
best way to deal with disputes during the evolution of a construction project or the life
of an individual dispute is not through the ad hoc application of individual dispute
resolution techniques. Instead, he advocates a pre-planned and well-managed "system"
of dispute prevention, control and early resolution techniques. This “systems” thinking
has given birth to such hybrid resolution methods as mini-trial (Groton, 1997 and
Harmon, 2003), mediation/arbitration (MedArb) (Chan, 1997; Harmon, 2003, Smith,
2007), arbitration/mediation (ArbMed) (Smith, 2007) and dispute resolution advisor
(DRA) (Cheung and Suen, 2002).
2.4 Institutional and Legal Framework for Dispute Resolution in the Nigerian
Construction Industry
The resolution of disputes in the construction industry must of necessity be within the legal
framework of national legislation and applicable international protocols and conventions. In
Nigeria, the applicable law in most construction contracts is Nigerian law, which gives the
High Courts unlimited jurisdiction over commercial disputes, depending upon the monetary
values involved. Disputes involving small values, i.e. from 100,000 to 1 million naira
(about $700 to $7000), can be heard before magistrates and in some northern states in
Sh’aria (Islamic) courts (World Bank, 2008). Domestic arbitrations are statutorily
governed by the Arbitration and Conciliation Act (ACA) Cap A18 Laws of the
Federation of Nigeria (2004). The Act provides a unified legal framework for the fair
and efficient settlement of commercial disputes by arbitration and conciliation; and
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makes applicable the Convention on the Recognition and Enforcement of Arbitral
Awards (New York Convention) to any award made in Nigeria or in any contracting
state arising out of international commercial arbitration. It is modelled on the United
Nations Commission on International Trade Law (UNCITRAL) Model Law on
International Commercial Arbitration. In addition, both the Nigerian Institute of
Architects and the Nigerian Institute of Quantity Surveyors have provisions for the
appointment of arbitrators and the conduct of arbitration in their professional practice
documents.
The use of ADR is being championed and encouraged by such institutions as the Multi-
door Courthouse (MDCs) in Lagos and Abuja, the Regional Centre for International
Commercial Arbitration (RCICA) in Lagos, the Lagos Chamber of Commerce and
Industry and the Institute of Construction Industry Arbitrators, among others (US
Department of Commerce, 2003). The MDCs provide court-based, cost-effective
dispute resolution alternatives to litigation while RCICA was established by the Asian-
African Legal Consultative Organization (AALCO) to promote and administer
international commercial arbitration in the sub-Saharan region under UNCITRAL
model rules. The Institute of Construction Industry Arbitrators was formed by
construction industry professionals to encourage the industry to embrace ADR in
resolving disputes.
3 Research Methodology
A questionnaire survey of contractors and consulting architects, engineers and quantity
surveyors was carried out in South West Nigeria where the majority of the consultants
and contractors are based. The questionnaire used a five-point Likert-type scale to
measure a range of opinions from “Very weak” to “Very strong”, “Very low” to “Very
high”, “Never” to “Very often”, etc. as the case may be. The significant agreement or
otherwise with the notion being tested was determined by adopting the mid-point value
of the index (that is 3) as the hypothesized mean (Coakes and Steed, 2001). This means
that any result significantly different from this uncommitted or unsure value was
assumed to be either positive or negative to the notion being tested (Pullin and Haidar,
2003). The questionnaire was distributed to a total of 200 construction and consulting
firms. Eighty-nine questionnaires were completed and returned by the respondents but
only 81 were found to be properly completed and useful for analysis. This represented a
response rate of 40.50%, which according to Ellhag and Boussabaine (1999) and Idrus
& Newman (2002) is good enough in construction studies. The Statistical Package for
Social Sciences (SPSS) was employed to analyse the data using the percentile method
and severity index analysis.
The formula for severity index (SI) is by Elhag and Boussabaine (1999) as
,
where fi is the frequency of response, wi is the weight for each rating (i.e. rating in
scale/number of points in a scale), and n is the total number of responses. The value (fi x
100)/n is the valid percentage as computed by SPSS.
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4. Findings and Discussion
The findings of the study are analysed and presented in this section with respect to the
respondents’ profiles, the frequency and causes of disputes, and the methods of dispute
resolution used.
3.1 Respondents’ Profiles
Close to half of the respondents (45.7%) have been in practice for over 10 years and
were therefore very familiar with and had a good knowledge of the industry. Hence they
were considered as well placed to provide useful data for the survey. Fig. 2 shows the
respondents’ profiles by the type of business while Fig. 3 categorises them by their
experience of the disputes in the industry.
Figure 2: Respondents' profession
Of the 81 respondents, 23 (28.4%) were architects, 21 (25.9%) were contractors, 13
(16.1%) were engineers and 24 (29.6%) were quantity surveyors. A very large majority
of them (98.7%) had experienced disputes. As many as 58% responded that they often
experienced disputes on the projects they were involved in. This indicates that disputes
are quite common in the Nigerian construction industry.
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Oladapo and Onabanjo, pp 7-22
Figure 3: Respondents’ experience of the occurrence of disputes
4.2 Frequency and causes of disputes
Table 2 shows that a majority of the respondents (67.7%) experienced up to 10 disputes
while only a few (2.5%) experienced over 30 in the last 10 years.
Table 2: Cases of disputes in the last 10 years
Number of disputes Frequency Percentage cumulative percentage
None 1 1.2 1.2
1-10 54 66.7 67.9
11-20 12 14.8 82.7
21-30 12 14.8 97.5
Above 30 2 2.5 100.0
Total 81 100.0
The most common cause of dispute was delayed payment by the client with SI =
95.80% and breach of contract the least common with SI = 70.00% (Table 3)
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Table 3: Ranking of the causes of disputes
Cause 1 2 3 4 5 Severity Index (%) Rank
Breach of 5.0 15.0 40.0 5.0 35.0 70.00 6
contract
Professional 5.0 6.3 32.5 43.8 12.5 70.56 5
negligence
Contractual - - 8.6 17.3 74.1 93.10 2
claims
Consultants’ 1.3 7.6 39.2 34.2 17.7 71.88 4
design
deficiencies
Contractors’ 1.3 2.5 12.5 27.5 56.3 87.06 3
poor
workmanship
Delayed - - 6.2 8.6 85.2 95.80% 1
payment by
client
1 Very uncommon 2 Uncommon 3 Average
4 Common 5 Very common
3.2 Dispute resolution techniques
The methods of dispute resolution used in the Nigerian construction industry include the
traditional methods of litigation and arbitration as well as ADR methods.
Table 4: Dispute resolution methods in use
Method 0 1 2 3 4 Severity Index (%) Rank
Litigation 57.1 32.5 - 9.1 1.3 13.00 4
Arbitration 3.8 - 22.5 57.5 16.3 56.54 3
Adjudication 6.5 1.3 - 27.3 64.9 68.56 1
Conciliation 87.2 6.4 - 4.3 2.1 5.54 6
Mediation 78.7 8.5 - 10.6 2.1 9.74 5
Negotiation 7.7 1.9 - 38.5 51.9 65.00 2
Mini-trial 93.3 4.4 - - 2.2 2.64 8
Mediation-arbitration 91.1 2.2 - 6.7 - 4.46 7
0 never 1 seldom 2 average
3 often 4 very often
Table 4 shows that adjudication is overall the most popular method and mini-trial the
least. Litigation and arbitration are still popular while adjudication is the most
commonly used ADR method. The results also showed that arbitration and litigation are
still popular while adjudication and negotiation are the only ADR methods in common
use The fact that litigation and arbitration, in spite of their documented shortcomings,
are still popular in the Nigerian construction industry points to the fact that ADR is yet
to gain common acceptance. The major hindrances to widespread adoption of ADR
methods are general lack of awareness of their existence and unfamiliarity with their
workings among stakeholders in the industry (Table 5).
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Table 5: Obstacles to widespread use of ADR
Factor 1 2 3 4 5 Severity Index (%) Rank
Lack of awareness - 2.1 8.5 4.3 85.1 94.48 1
Nonbinding nature of 6.5 2.2 50.0 15.2 26.1 70.44 3
ADR
Resistance to change 17.0 25.5 31.9 19.1 6.4 54.4 4
Unfamiliarity with ADR - 4.3 10.6 12.8 72.3 90.62 2
1 Very weak 2 Weak 3 Average 4 Strong
5 Very strong
Table 6: Awareness/understanding of ADR by respondents
Level of awareness/understanding Frequency Percentage Cumulative percentage
Very poor - - -
Poor 48 59.3 59.3
Average 16 19.7 79.0
Good 2 2.5 81.5
Very good - - 81.5
Not sure 15 18.5 100.0
Total 81 100.0
A majority of the respondents (59.3%) actually indicated that they had a poor
understanding of ADR (Table 6). It is hoped that this will change for the better with the
current drive by construction industry professionals and institutions as well as other
local and international bodies to promote the use of ADR in Nigeria.
4 Conclusion and Further Research
Disputes have been blamed as one of the factors responsible for the poor performance of
the Nigerian construction industry. With a questionnaire survey of industry participants,
this study examined the frequency and causes of construction disputes as well as the
methods commonly employed in resolving them in Nigeria. The results showed that the
major causes of dispute were “Delayed payment by client”, “Contractual claims” and
“Contractors’ poor workmanship”. It is therefore suggested that clients must improve
their cash flow planning to minimise payment delays. Contractors on their part need to
improve the poor quality of work supervision which is the major cause of poor
workmanship. Designers could also help to minimize contractual claims and their
impact by providing adequate project information. The industry as whole must shift
from the currently prevalent adversarial traditional procurements methods to more
cooperative and partnering methods.
It is hoped that, although litigation and arbitration are still popular in the industry, the
use of ADR will gain widespread acceptance in the very near future with the efforts
being made by the government (by way of pro-ADR legislation), non-governmental
organisations and professional bodies to promote ADR..
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Oladapo and Onabanjo, pp 7-22
It is suggested that further studies be carried out to quantify the cost of disputes and the
use of traditional resolution methods in the Nigerian construction industry as a way to
encourage the industry to prefer ADR. The studies should also aim to measure the
impact of the efforts being made to promote widespread use of ADR in the construction
industry.
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22
COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Ayodejo Oke and Deji Ogunsemi, pp 23-38
Competencies of quantity surveyors as value managers in a
developing economy
Ayodeji Oke1 and Deji Ogunsemi1
1
Department of Quantity Surveying,
Federal University of Technology, Akure,
Nigeria
Email: [email protected]; [email protected]
ABSTRACT
One of the important requirements of any profession is its ability to respond to changes
in its professional environment. The dynamism of the construction industry throughout
the world call for no other skill of a professional quantity surveyor than the need for
stringent cost control and effective cost management in providing value for money for
construction clients. The aim of this research work is to examine the competencies of
quantity surveyors in a developing economy with a view to ascertaining their
preparedness for the challenge of value management. Primary data were collected via
questionnaire and interview. Percentile, mean internal score, Cronbach’s alpha test and
Spearman’s rank were employed in the analysis and testing of the hypotheses generated.
The study revealed that all the identified areas of competencies of quantity surveyors
are significant to the practice of value management and Nigerian quantity surveyors
exhibit all the required areas of competencies of value managers. It was concluded that
Nigerian quantity surveyors has the potential to fully participate in value management
exercise and contribute their expected quota. The study finally recommended a need for
special training for quantity surveyors in Nigeria – especially the older ones- in order to
keep them abreast with the current incidence in the construction industry especially in
the area of value management.
Keywords: Competencies, Nigeria, Quantity Surveyors, Value Managers,
1 Introduction
Jagun (2006) opined that the quantity surveying profession is faced with great
challenges for its survival in Nigeria. Steven (1990) observed that quantity surveying is
becoming an increasingly client influenced occupation while Sigle, Klopper and Visser
(2000) believed that these clients are increasingly demanding application of value
management to their projects. Quantity surveyors have been linked to the discipline of
value management right from its inception. Brown (1992) as cited by Olanrewaju and
Khairuddin (2007) noted that value management represents a natural progression for the
quantity surveyors in leading the search for alternative approach towards achieving
client’s requirements at the lowest cost. This is expected to be the same virtually in all
other countries and Nigeria is gradually moving toward this era.
The discipline of value management, which was first applied to construction projects in
the United States in 1970s (over four decades ago) according to The College of Estate
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Ayodejo Oke and Deji Ogunsemi, pp 23-38
Management (1995), is receiving an increasing amount of attention within the
international project management community (Stuart, 1994). In South Africa, Sigle et al
(2000) observed that clients are insisting that value management should be applied to
their construction projects and such could probably be attributed to the effectiveness of
value management as a tool for ensuring value for money. According to schedule of
services and recommended charges (2002 edition)) for quantity surveying and cost
consulting services by Canadian Institute of Quantity Surveyors (CIQS), value
management is a key service of a Canadian quantity surveyor and detail of schedule of
services under this is well explained in the manual. This is supported by a report on
required skills and knowledge of a cost engineer (2000) of AACE international
recommended practice No. 11R-88 where value management is placed under section VI
that has to do with economic analysis and business planning.
Value management has not been fully embraced in the Nigerian construction industry as
only very few number of value management workshops have been organised so far
according to investigation and the workshops were even concluded prematurely. This
may be a good start for the practice in the country and probably, one will expect it to
gain ground in the next couple of years. The concept of value management is also
gaining ground among Nigerian quantity surveyors than any other professionals as
revealed by Olanrewaju and Khairuddin (2007) where about 36%, 30%, 11% and 19%
of the research population that are familiar with value management are quantity
surveyors, engineers, architects and estate mangers respectively. It is to be noted at this
point that familiarity with the practice of value management does not necessarily
connote competencies to function as a value manager neither is it enough to ascertain
the number of professional that has been involved in value management workshop at
one time or the other.
The challenge to the Nigerian quantity surveyors can be linked to an assertion by Anago
(2006) that, “when a professional man holds himself out as qualified in a particular
professional discipline, he thereby indicates that he is competent to render the services
associated with such a profession to the required degree of skill and expertise”. This is
supported by a report of Royal Institute of Chartered Surveyors (1991) where it was
stated that “quantity surveying is very much a client led profession in that the
professional quantity surveyors respond to client needs and must continue to develop
more on their own initiatives. Concerns in the coming decade will be dominated by the
need to anticipate and satisfy changing client requirements”. Value is one of the
fundamental requirements of any client and the quantity surveyor is the professional
trained to shoulder this client need. This called for a need to look into the competencies
of Nigerian quantity surveyors with respect to their skills, knowledge and experience in
their quest to function as a major and key member of construction projects value
management team and this is the concept behind this study.
The problem lies not in ascertaining whether the quantity surveyors should be a part of
value management team (which has already been established right from the emergence
of value management as detailed by The College of Estate Management (1995)) neither
does it lie in proofing that quantity surveyors are the best value managers compared to
other construction professionals. The problem lies in asking the question that “can
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RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Ayodejo Oke and Deji Ogunsemi, pp 23-38
Nigerian quantity surveyors contribute their expected quota efficiently and effectively to
value management exercise based on their experience and training?
2 Literature Review
2.1 Value management
There are so many views and opinion on the discipline of value management. The
Institute of Value Management (2008) defined the term value management as “a style of
management particularly dedicated to motivating people, developing skills and
promoting synergies and innovation, with the aim of maximizing the overall
performance of an organization”
The concept of value management according to Society of American Value Engineers
(2008) is defined as “a systematic, multi-disciplinary effort directed towards analysing
the functions of projects for the purpose of achieving the best value at the lowest overall
life cycle cost”. This definition is not complete as observed by De Leeuw (2006) where
he stated that return on investment, which is a vital issue to the private sector, is
supposed to be included.
Value management according to The Office of Government Commerce (2007) is “a
well established methodology for defining and maximising value for money”. As
incomplete this definition may be, it suggests that the discipline of value management
can be applied to any type of project regardless of size or timeframe and at all stages i.e.
throughout the life cycle of the project from inception to completion. This may be
contrary to the general belief that value management must and can only be applied at
the design stage of construction project. This connote that value management is
becoming dynamic and various forms of its application in the construction industry are
springing up. This discrepancy is further clarified by Kelly and Male (2006) where
value engineering is said to be a sub-set of value management in that the former deals
mainly with the design processes while the latter deals with the overall management of
value throughout the contract. This is further supported by The College of Estate
Management (1995).
Odeyinka (2006) defined value management as “a service, which maximises the
functional value of a project by managing its development from concept to completion
and commissioning through the audit (examination) of all decisions against a value
system determined by the client”. The following can therefore be described as the core
of value management definition as observed by Short, Barrett, Dye and Sutrisna (2008):
A systematic or organised approach; Multi-disciplinary; Analysis of function
(Functional analysis); Inception to completion and commissioning; Best value; Lowest
possible overall life cycle project cost; and Return on investment. In summary, value
management can therefore be seen as “a systematic and multi-disciplinary process
directed towards analysing the functions of projects from its inception to completion
and commissioning (through auditing or examination) for the purpose of achieving best
value and return on investment at lowest possible overall life cycle cost.
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RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Ayodejo Oke and Deji Ogunsemi, pp 23-38
2.2 Competencies of value managers
Meyer and Semark (1996) described competence as the demonstration of an integration
of knowledge, skill, personal attributes and value orientation. Wisher (1994) insisted
that competencies provide a common cultural thread, a language for success, a
framework for thinking about excellence and a way of communicating the future.
Sigle et al (2000) identified ten key skills required of a value manger by Potential Index
Battery (PIB) based on series of diagnostic instruments developed by Erasmus and
Minnas (1996) over a period of twenty years. These ten basic skills that form the
competencies areas of a value manager in rank order were creativity, mental alertness,
leadership – transformational, listening skills, conflict management – collaborative,
social style – expressive, innovation, adaptability, self motivation and abstract
reasoning.
2.3 Personal skill attributes of value managers
Daddow and Skitmore (2005) identified 20 personal skill attributes of a value manager
through the results of an interview survey involving 17 professionals working in the
property and construction industry. These attributes are lateral thinking ability and
intuition, an inquiring mind, industry expertise, life experiences, a positive, constructive
approach, knowledge of the client/owner requirements, motivated and enthusiastic,
proactive, attentive, smart thinking, having an open mind and an objective approach to
communication, having personal skills, no preconceived ideas, able to bring expertise to
the value management workshop, ability to communicate ideas confidently and
professionally, confidence, understanding that what people may say, may not be quite
what they mean, so they need to be able to interpret and ‘read between the lines’,
recognise reactions whether verbal or physical, able to listen to other ideas and relate to
others and be adaptable and flexible.
2.4 The quantity surveyor
Quantity surveyors are called by so many names all over the world such as cost
engineers, building economists, cost managers, construction accountants, etc and
different authors have adopted these different names in different studies (RICS, 1991;
Kelly and Male, 2006) and in Nigeria such as (NIQS, 2004; Ogunsemi, 2004; Babalola,
2006; Odeyinka, 2006; Oke, 2006). It is to be noted that the most common name for this
professional in Nigeria is “quantity surveyors”. Quantity surveyor according to
Wikipedia (2008) is “a professional trained, qualified, and experienced in handling
construction cost, construction management and construction communication on behalf
of the client”.
The Nigerian Institute of Quantity Surveyors (2004) defined a quantity surveyor as the
expert professionally trained and experienced in dealing with construction cost,
construction management and construction communication. This he exhibit in various
types of projects including building construction, civil and structural engineering,
mechanical building and engineering services, petrochemicals, mineral extraction, cost
and production engineering, environmental economics, planning and urban
development, landscaping, interior design and all other relevant areas.
2.5 Competencies of quantity surveyor
The RICS (1998) set out the requirements and competencies for the assessment of
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Ayodejo Oke and Deji Ogunsemi, pp 23-38
professional competence by listing the competencies required of quantity surveyors in
three categories: basic competencies, core competencies and optional competencies, as
shown in Table 1. The basic competencies are widespread to all construction
professions under the RICS while core competencies are exclusively vital to the
profession of quantity surveying. The optional competencies reveal areas of specialty or
future career diversification.
Table 1: Headings of competencies required by quantity surveyors for APC
Basic competencies Core competencies Optional Competencies
*Arbitration and other dispute
*Personal and interpersonal skills *Construction contract practice
resolution procedures
*Construction technology and
*Business skills *Development appraisal
environmental services
*Data management; information
*Economics of construction *Facilities management
technology
*Procurement and financial
*Professional practices *Insolvency
management
*Law *Insurance
*Measurement *Project management
*Mapping *Property investement funding
*Research methodology & techniques
*Taxation allowance &grants
*Valaution
Source: The Royal Institution of Chartered Surveyors (1998)
2.6 Quantity surveyors and value management
Quantity surveyor has been linked to value management right from its inception in the
United States. It was observed by Kelly and Male (2006) that there can not be a
successful value management exercise except there is an involvement and full
participation of a cost expert (or a quantity surveyor as the case may be). Most times, it
is the quantity surveyors that spare head, organise and plan most value management
workshops. In Nigeria, Olanrewaju and Khairuddin (2007) concluded from a research
on value management in Nigeria that quantity surveyors are the most familiar with the
discipline of value management. This is a convincing report that a value management
exercise can not be successful as expected if there is no participation of at least a
quantity surveyor.
Although, value management was not listed in the RICS areas of competencies required
by quantity surveyors for APC (Assessment of Professional Competence), it is to be
noted that this discipline can be categorised under optional competencies since it is not
compulsory for all quantity surveyor to participate or get involved in value management
process – it remains an optional area of competencies. This has been catered for by
other associate bodies of RICS in their list of professional services or areas of
competencies required of a quantity surveyor. Such includes AACE (Association for the
Advancement of Cost Engineering International), NIQS (Nigerian Institute of Quantity
Surveyors), CIQS (Canadian Institute of Quantity Surveyors), AIQS (Australian
Institute of Quantity Surveyors), etc.
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Ayodejo Oke and Deji Ogunsemi, pp 23-38
The skills of the value manager comprise the ability to understand a value problem,
design, structure and implement a process to bring value systems together and introduce
improvements (Male and Kelly, 2008). Stuart and Anita (2007) observed that the
involvement of value management practitioners from quantity surveying firms is limited
to the later stages of the project life cycle as a result of the stereotypical expectations
that clients have of quantity surveyors as ‘after-the-event cost cutters’. In Leung (2005)
view, students of the value management postgraduate course should have completed a
standard undergraduate course in construction related subjects such as architectural
design, development planning, civil engineering, building services engineering, quantity
surveying, etc suggesting a link between the two fields.
3 Research Methodology
Primary source of data collection through a well-structured questionnaire was
administered to relevant and appropriate professionals in the construction industry. Due
to the nature of the research (i.e. predictive/future based), open and close ended
interview was also considered a good means of collecting data because the research
needed to acquire much information about the subject thus did not place any limitation
on the way the respondents are to respond. Also, there isn’t much available literature on
value management exercise/workshop in Nigeria, so the research required firsthand
information.
The population were the Nigerian construction professionals that are eligible to be a
member of construction projects value management team and they are: Architects;
Quantity surveyors; Builders; Engineers; and Estate Surveyors and Valuers.
Due to a large population as identified above, the sampling frame was delimited to
Lagos state of Nigeria where research questionnaires were distributed. The choice is on
the premise that Lagos is the commercial capital city of Nigeria and most of the
construction professionals in this state handle projects in other states of the federation.
Fagbemi (2008) observed that 75% of quantity surveying firms in Nigeria are either
based in Lagos state or have their branches located there. The result of the study is
expected to represent the whole population. More so, the list of professionals were
obtained from relevant professional bodies and the sample size in respect of the various
categories of respondents was determined from the following formulae as used by Kish
(1965) in Shash and Abdul-hadi (1992)
nl
n= …………………………………………………1
nl
1+
N
S2
Where n = sample size: n = 2 ……………………………………….2
l
V
N = Total population, V = Standard error of sampling distribution = 0.05,
S = the maximum standard deviation in the population elements
Using the formulae, the sample sizes for each of the respondents were calculated and
the result is as shown in table 2. Out of the 265 questionnaires administered, 94 were
returned and filled, this represent 35.5% of the total questionnaire sent out which is
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Ayodejo Oke and Deji Ogunsemi, pp 23-38
considered sufficient for the study base on the assertion of Moser and Kalton (1999) that
the result of a survey could be considered as biased and of little significant if the return
rate was lower than 20-30%. More so, 12 construction professionals cutting across all
the professional bodies were also interviewed.
Tables were employed in this research for data presentations and analysis of the
collected data was carried out using the following descriptive and inferential statistical
methods: frequencies; percentiles; cronbach’s alpha test; mean internal score (MIS); and
Spearman’s rank correlation coefficient.
Cronbach’s alpha test was used in testing the reliability and viability of the research
instrument and the result is as presented in table 3.
Table 2: Sample size and returned questionnaires
Ref. No. Respondent Population Sample size Returned
A Architect 233 66 22
B Quantity Surveyors 148 49 21
E Estate valuers 194 52 13
C Professional Builders 107 43 17
D Structural Engineers 214 55 21
Total 896 265 94
Table 3: Reliability Coefficients for the Measuring Scales
Scale of Measure Cronbach’s α
Significance of areas of competencies of value managers 0.697
Performance of Nigerian quantity surveyors with respect to the areas of competencies of
0.805
value managers
Significance of personal skill attributes of value managers 0.756
Performance of Nigerian quantity surveyors based on the personal skill attributes of value
0.766
managers
Significance of areas of competencies of quantity surveyors 0.521
Performance of Nigerian quantity surveyors with respect to their areas of competencies 0.501
Relevance to value management of areas of competencies of quantity surveyors 0.725
Table 3 shows that the Cronbach’s α value for scale of measures of the research
instruments ranged from 0.501 to 0.811. Since the degree of reliability of the instrument
is more perfect as the value tends towards 1.0 (Moser and Kalton, 1999), it can then be
concluded that the instruments used for this research are significantly reliable.
4 Findings and Discussion
4.1 Characteristics of the respondents
Table 4 shows the general characteristics of respondents for the questionnaire
distribution. It is observed that about 23%, 18% and 14% of the respondents were
quantity surveyors, builders and estate valuer respectively while engineers and
architects that responded to the questions were about 22%. The mean year of working
experience of these respondents was calculated to be 9.83 which could be considered
appropriate for the study.
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As expected, all the professionals were members of their professionals’ bodies as the
frequencies for each body corresponds with that of the professionals. However, majority
of these professionals are corporate (Associate or members) members (about 46%)
followed by graduate members with about 37% while probationers and fellows were
about 14% and 3% respectively. On the geographical zones that the respondents have
executed one or more projects, all the respondents have been involved in project located
in the South-West region as expected and this is followed by South-South and South-
East respectively. It could be concluded that about 41% of construction professionals in
Lagos state i.e. the respondents have participated or involved in other projects located in
other geographical zones of the country.
On the other hand, table 5 shows the general characteristics of the respondents for the
interview. It could be observed that the respondents are spread across all the
professional bodies relevant to the study with mean year of working experience of about
16 years.
Table 4: Summary of characteristics of respondents for questionnaire administration
Category Classification Frequency Percent
Profession Quantity Surveying 22 23.40
Of Architecture 21 22.34
Respondents Estate Surveying and valuing 13 13.83
Building 17 18.09
Engineering 21 22.34
Total 94 100.00
Year 0-5 36 38.30
Of 6 - 10 20 21.28
Working 11 - 15 20 21.28
Experience 16 - 20 9 9.57
21 - 30 9 9.57
Mean 9.83
Professional NIQS 22 23.40
Qualification NIA 21 22.34
NIESV 13 13.83
NIOB 17 18.09
NSE 21 22.34
Total 94 100.00
Professional Graduate 35 37.23
Membership Probationer 13 13.83
Type Corporate 43 45.74
Fellow 3 3.19
Total 94 100.00
Geographical North-East 6 4.51
Zones of North-Central 8 6.02
Project North-West 4 3.01
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Ayodejo Oke and Deji Ogunsemi, pp 23-38
Execution South-East 9 6.77
South-South 12 9.02
South-west 94 70.68
Total 133 100.00
Table 5: Summary of characteristics of interviewees
Category Classification Frequency Percent
Profession Quantity Surveying 4 33.33
Of Architecture 2 16.67
Respondents Building 3 25.00
Engineering 2 16.67
Estate surveying and valuing 1 8.33
Total 12 100.00
Year 0–5 0 0.00
Of 6 – 10 2 16.67
Working 11 – 15 4 33.33
Experience 16 – 20 4 33.33
21 – 30 2 16.67
31 and above 0 0.00
Mean 15.83
Academic HND 1 8.33
Qualification PGD 5 41.67
Bachelor 1 8.33
Masters 5 41.67
Ph.D 0 0.00
Total 12 100.00
Professional Graduate 2 16.67
Membership Probationer 1 8.33
Type Corporate 9 75.00
Fellow 0 0.00
Total 12 100.00
4.2 Competencies of Nigerian quantity surveyors as value managers
On the ability of Nigeria quantity surveyors to perform and participate effectively in
value management if fully incorporated into construction projects in Nigeria, the
opinion of respondents based on the questionnaire showed that about 53%, 35% and 4%
of the respondents rank them as good, excellent and average respectively as shown in
table 6. This shows that their performance is between good and excellent.
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Ayodejo Oke and Deji Ogunsemi, pp 23-38
Table 6: Ability of Nigerian quantity surveyors to perform as value managers
Criteria Frequency Percent
Average 4 4.26
Good 50 53.19
Excellent 33 35.11
Missing data 7 7.45
Total 94 100.00
Based on the result of the interview, table 7 shows that quantity surveyors are rated as
good in term of general performance while fresh graduates were rated as just above
average. All the respondents were of the opinion that Nigerian quantity surveyors do
possess the ability to function as value managers and they were also rated as very good
(between good and excellent) in respect to their ability to contribute and participate
effectively in value management exercise.
Table 7: Nigerian quantity surveyors and value management
Category Criteria Frequency Percent
Performance of Average 1 8.33
Nigerian Good 10 83.33
Quantity surveyors Excellent 1 8.33
Total 12 100.00
Competence of Poor 1 8.33
Nigerian fresh Average 6 50.00
QS graduates Good 5 41.67
Total 12 100.00
Ability of QS Yes 12 100.00
as Value managers No 0 0.00
Total 12 100.00
Ability of QS to Average 1 8.33
Contribute to Good 5 41.67
Value management Excellent 6 50.00
Total 12 100.00
The competencies of Nigerian quantity surveyors was examine using the areas of
competencies of value managers, personal skill attributes of value managers and the
areas of competencies of quantity surveyors. Hypotheses were generated and tested
accordingly.
4.3 Using the areas of competencies of value managers as criteria
Based on the respondents’ opinion on the competencies of value managers, the mean of
their significance and that of the performance of Nigerian quantity surveyors are
presented in table 8. It could be observed that the minimum mean value recorded in
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Ayodejo Oke and Deji Ogunsemi, pp 23-38
term of performance of Nigerian quantity surveyors is 3.79 which if more than average
and well above the minimum recorded mean score in terms of the significance i.e. 3.73.
The mean were correlated based on the following hypothesis:
Null Hypothesis (H0): There is no significant relationship between the areas of
competencies of value managers and the performance of Nigerian quantity surveyors.
Alternate Hypothesis (H1): There is significant relationship between the areas of
competencies of value managers and the performance of Nigerian quantity surveyors.
From the result of the analysis, it was observed that Spearman’s rank correlation
coefficient (Rs) = 0.712 and P-value is 0.000 at 10% significance level i.e. there is
significant relationship. Therefore, the null hypothesis is rejected while the alternate
which state that “there is significant relationship between the areas of competencies of
value managers and the performance of Nigerian quantity surveyors” is accepted.
Table 8: Nigerian quantity surveyors and value management competencies
Significance to VM Performance of QS
No Competencies of Value Managers (VM)
Mean Rank Mean Rank
A Creativity 4.03 4 3.89 6
B Mental alertness 4.12 2 4.11 2
C Leadership – transformational 4.02 5 3.79 9
D Listening skills 4.05 3 3.96 4
E Conflict Management (Collaboration) 3.73 10 3.94 5
F Social style (Expressive) 3.81 8 3.89 6
G Innovation 4.13 1 3.82 8
H Adaptability 3.81 8 3.77 10
J Self motivation 3.92 7 4.16 1
K Abstract reasoning 4.00 6 4.08 3
4.4 Using the personal skill attributes of value managers as criteria
With respect to respondents’ opinion on the personal skill attributes of value managers,
the mean of their significance and that of the performance of Nigerian quantity
surveyors were presented in table 9. It could be observed that the minimum mean value
recorded in term of performance of Nigerian quantity surveyors is 3.80 which is more
than average and well above the minimum recorded mean score in terms of the
significance of the identified factors i.e. 3.49. Correlation test was carried out based on
this hypothesis:
Null Hypothesis (H0): There is no significant relationship between the significance of
personal skill attributes of value managers and the performance of Nigerian quantity
surveyors.
Alternate Hypothesis (H1): There is significant relationship between the significance
of personal skill attributes of value managers and the performance of Nigerian quantity
surveyors.
From the result of the analysis (as detailed in the appendix), it was observed that
Spearman’s rank correlation coefficient (Rs) = 0.682 and P-value is 0.001 at 10%
significance level i.e. there is significant relationship. Therefore, the null hypothesis
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Ayodejo Oke and Deji Ogunsemi, pp 23-38
(Ho) is rejected while the alternate which state that “there is significant relationship
between the significance of personal skill attributes of value managers and the
performance of Nigerian quantity surveyors” is accepted.
Table 9: Nigerian quantity surveyors and personal skill attributes of value managers
Significance to Performance of
No Personal Skill Attributes of Value Managers (VM) VM QS
Mean Rank Mean Rank
A Lateral thinking ability and intuition 4.06 9 4.05 10
B An inquiring mind 4.00 14 4.16 4
C Industry expertise 4.04 11 3.94 15
D Life experiences 4.11 5 4.09 7
E A positive, constructive approach 4.06 9 4.44 1
F Knowledge of the client/owner requirements 4.22 2 4.43 2
G Motivated and enthusiastic 4.03 12 4.14 6
H Proactive 4.13 4 3.90 16
J Attentiveness 4.01 13 3.99 14
K Smart thinking 4.40 1 4.07 9
L Having an open mind and an objective approach to communication 4.11 5 3.80 20
M Having personal skills 4.09 8 3.89 18
N No preconceived ideas 3.49 20 3.86 19
P Ability to bring expertise to the VM workshop 3.86 17 3.90 16
Q Ability to communicate ideas confidently and professionally 4.11 5 4.09 7
R Confidence 4.19 3 4.19 3
Understanding that what people may say, may not be quite what
S 3.74 19 4.01 12
they mean
T Recognise reactions whether verbal or physical 3.84 18 4.00 13
U Able to listen to other ideas and relate to others 3.92 15 4.03 11
V Be adaptable and flexible 3.87 16 4.15 5
4.5 Using the area of competencies of quantity surveyors
Based on the respondents’ opinion on the areas of competencies of quantity surveyors,
the mean of their relevance to value management and that of the performance of
Nigerian quantity surveyors were presented in table 10. It could be observed that the
minimum mean value recorded in term of performance of Nigerian quantity surveyors is
3.54 which is above average. Correlation test was also carried out based on this
hypothesis:
Null Hypothesis (H0): There is no significant relationship between relevance of areas of
competencies of quantity surveyors and the performance of Nigerian quantity surveyors.
Alternate Hypothesis (H1): There is significant relationship between relevance of areas
of competencies of quantity surveyors and the performance of Nigerian quantity
surveyors.
From the result of the analysis (as detailed in the appendix), it was observed that
Spearman’s rank correlation coefficient (Rs) = 0.684 and P-value is 0.001 at 10% level
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RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Ayodejo Oke and Deji Ogunsemi, pp 23-38
i.e. there is significant relationship. Therefore, the null hypothesis (Ho) is rejected while
the alternate which state that “there is significant relationship between relevance of
areas of competencies of quantity surveyors and the performance of Nigerian quantity
surveyors” is accepted.
Table 10: Areas of competencies of quantity surveyors and value management
Relevance to VM Performance of QS
No Areas of competencies of quantity surveyors
Mean Rank Mean Rank
A Personal and interpersonal skill 4.26 7 4.17 6
B Business skill 4.26 7 3.91 14
C Data, information and information technology 4.27 6 3.97 12
D Professional practice 4.42 1 4.18 5
E Law 3.94 17 3.91 14
F Measurement 4.11 11 4.22 4
G Mapping 3.88 19 3.82 17
H Construction contract practice 4.23 9 4.26 3
J Economics of construction 4.42 1 4.16 7
K Procurement and financial management 4.36 4 4.06 10
L Construction technology and environmental services 4.37 3 4.11 8
M Arbitration and other dispute resolution procedures 4.08 13 4.10 9
N Developmental appraisal 4.06 16 3.86 16
P Facilities management 4.09 12 3.75 19
Q Insolvency 3.88 19 3.54 21
R Insurance 3.92 18 3.93 13
S Project management 4.20 10 4.26 2
T Property investment funding 4.08 13 3.76 18
U Research methodologies and techniques 4.08 13 4.01 11
V Taxation allowances and grant 3.78 21 3.68 20
W Valuation 4.36 4 4.40 1
4.6 Discussion of findings
The research found out that fresh quantity surveying graduates in Nigeria are
performing well above average and this is supported by Babalola and Dada (2005)
where it was stated that Nigeria has capable and highly intelligent quantity surveying
graduates.
Using the areas of competencies of value managers, their personal skills and areas of
competencies of quantity surveyors, the Spearman’s rank correlation statistical test
carried out showed that Nigerian quantity surveyors are competent to function as value
managers. In agreement, De Leeuw (2006) concluded that the outgoing and
knowledgeable quantity surveyor could, with the necessary training, be a superb
candidate for acting as a value management facilitator.
On the average, most of the respondents for the survey rated Nigerian quantity
surveyors between good and excellent (i.e. very good) in respect to their ability to
perform as value managers. This is supported by the result of the interview where all the
respondents responded yes to question on whether Nigerian quantity surveyors possess
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RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Ayodejo Oke and Deji Ogunsemi, pp 23-38
the ability to function as value managers. In contrary, Sigle et al (2000) found out that
the extent of match between the skill profile of the quantity surveyor and that for value
manager is below average to average. This may be as a result of different approaches
the study employed; the finding employed a survey method while Sigle et al (2000)
made use of a combination of structural test and survey. It was however stated that, as a
result of their background and training, some quantity surveyors do have the potential to
be a successful value manager.
5 Conclusion and Further Research
It can be conclude based on the result of the finding that quantity surveyors in a
developing can significantly function as value managers and contribute their expected
quota effectively and efficiently. The study finally recommended the following based on
the opinions of the interviewee:
1. The need for quantity surveyors to broaden their knowledge of value management by
attending international conferences, seminar, workshop, symposium, etc
2. Institute regulating Quantity Surveying in developing countries could include value
management as a course in their professional examinations as this will contribute to
the knowledge of their members.
Some of the findings of the study provide possible directions for further studies in the
following areas:
1. The study was limited to construction professionals in Nigeria. More research work
can be done using professionals from other developing nations of the world.
2. The current study adopted the use of interview and questionnaire. Further research
can be of structural test (as used by Sigle et al (2000)) for selected quantity surveyors
of good number of years of experience. The test should not be limited to areas of
competencies of value managers but should also include the identified personal skill
attributes of value managers and areas of competencies of quantity surveyors.
6 Acknowledgement
This paper is part of a larger research work in fulfilment for the award of Masters of
Technology (M.Tech) degree in quantity surveying.
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Babalola, O. (2006). Harnessing the opportunities at the grassroots to make quantity
surveying profession competitive at the national and international markets. Paper
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Babalola, O. & Dada, J. O. (2005). Training strategies for effective quantity surveying
education in Nigeria. Conference proceedings on “New Partnership for Africa’s
Development for Built Environment Professionals in Africa. African Association of
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Daddow, T. and Skitmore, M. (2005) Value Management in practice: an interview
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Kelly, J., & Male, S. (2006). Value management. In Kelly, J., Morledge, R., &
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Godwin Idoro, pp 39-48
Evaluating the level of use of bar chart and its influence on project
performance in the Nigerian construction industry
G. I. Idoro
1
Department of Building, University of Lagos, Akoka, Lagos, Nigeria
E-mail: [email protected]
Abstract:
Project planning is regarded worldwide as the most important tool for achieving success
in project delivery. In Nigeria, research studies confirm that bar chart is the commonest
technique for project planning. This understanding prompts this study which
investigates the use of bar chart in project planning and its impact on project
performance in the Nigerian construction industry. The objectives are to evaluate the
level of use of bar chart for project planning and its influence on project performance.
To achieve these objectives, a field survey involving a sample of 86 construction
projects selected by random sampling was carried out. Variables selected for the study
were classified into two categories namely: level of use of bar chart and project
performance. Six variables represented the level of use of bar chart while seven
performance indicators were selected to represent project performance. Data collected
consist of the type of technique used to prepare selected project plans, initial and actual
project cost and time and clients’ assessment of project cost, time and quality. The data
were collected with the aid of structured questionnaires and analysed to evaluate the
level of use and the ranking of the level of use of bar chart and their correlation with
project performance using percentage and Spearman correlation test. The results reveal
that bar chart is used to prepare majority of project plans except project cash-flow chart.
The level of use of bar chart is higher in contract plans than in pre-contract plans and its
use has no significant correlation with all the variables of project performance. The
study concludes that bar chart remains the main technique for both pre-contract and
contract planning. However, its use and popularity still cannot be justified because it has
no positive influence on time and cost overruns. The study considers the inability of the
use of the technique to be a challenge to stakeholders in the industry especially
contractors and project planners. It suggests a re-appraisal of how bar chart is prepared
and implemented in the Nigerian construction. It will also prompt further study on the
content of project plans prepared with bar chart and its influence on project
performance.
Keywords:
Bar chart, Nigerian construction industry, level of use, project performance, and project
plans.
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RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Godwin Idoro, pp 39-48
1 Introduction
Construction projects require adequate planning for them to be successful because of the
numerous materials, plants and equipment, parties, several stages and activities and
complex methods that are involved. Mawdesley (2001) maintained that the numerous
activities or operations and parties, constraints such as time and cost involved in a
construction project necessitates careful and proper planning before the start of work.
Naoum et al. (2004) identified planning as the main tool for achieving success.
Research studies discovered that the performance of construction companies in project
delivery depended to a large extent upon their production planning and control
structures (Arditi, 1985; Mauricio and Carlos, 2002). Kaming et al. (1997). Cox et al.
(1999) and Radujkovic (1999) in separate studies identified inadequate planning as one
of the four most important factors that influence project cost overruns. Based on the
importance of planning to the success of projects, clients usually engage the services of
several professionals or consultants to prepare different plans during the development of
construction projects. Mawdesley (2001) stated that good scheduling can eliminate
production bottlenecks, facilitate timely procurement of necessary materials and ensure
the completion of a project on schedule while poor scheduling will result in
considerable wastage in machine and labour production hours and delay in the
completion of a project. There are several techniques that are used for preparing the
series of plans that are prepared during project development. One of the options is bar
chart. Neale (2001) maintained that of all the available techniques, bar chart is the
commonest technique in the Nigerian construction industry. This study evaluates the
level of use of bar chart and its influence on project performance in the Nigerian
construction industry.
1.1 Objectives of the study
The main aim of the study is to find out the importance and impact of bar chart in the
planning of construction projects in Nigeria. The objectives are to evaluate the level of
use of bar chart for project planning and its influence on project performance.
1.2 Hypotheses of the study
To achieve the objectives above, two hypotheses were postulated. The first hypothesis
states that the level of use of bar chart is not significantly higher than the level of use of
network analysis. This hypothesis was tested to know whether or not bar chart is more
preferred to network analysis in project planning in the Nigerian construction industry.
The second hypothesis states that the use of bar chart for project planning has no
significant correlation with project performance. This hypothesis was tested to evaluate
the impact of the use of bar chart on project performance.
1.3 Variables used for the study
In the attempt to achieve the objectives of the study, two categories of variables namely:
level of use of bar chart and project performance were selected. The variables that
represent the level of use of bar chart consist of the percentage of projects used for the
study whose programmes of work were prepared with bar chart, the number of projects
executed by the respondents in 2006 and 2007 whose programmes of work were
prepared with bar chart, the ratio of the number of projects programmed with bar chart
to the total number of projects executed by the respondents in 2006 and 2007 and the
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RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Godwin Idoro, pp 39-48
percentage of the number of selected pre-contract and contract plans prepared with bar
chart to the total number of respondents. The plans selected for the purpose of
evaluating the use of bar chart are programme of work, weekly programme of work,
plant, material and labour schedules, daily programme of work, project life-cycle and
cash flow chart Project performance is represented by respondents’ assessment of
project duration, cost and quality, time and cost overruns, time-overrun/initial contract
period and cost-overrun/initial contract sum
2 Literature Review
Project delivery involves carrying out a number of activities in order to ensure that a
project is delivered to meet the requirements of a client. These activities are commonly
categorized into five main stages namely: opening or conception, design, tendering,
construction and closing or handing-over based on the parties and activities involved
(Puthamont and Charoenngam, 2004). These stages make up the project life cycle
(Duncan, 1996). From the perspective of planning, these five stages can be further
categorized into two phases namely: pre-contract and contract. Pre-contract phase
consists of the opening, design and tendering stages of project development while
contract phase involves construction and the closing of project development (Oxley &
Poskitt, 1971; Ward, 1979). Pre-contract planning describes project plans prepared at
conception, design and tendering stages while contract planning refers to project plans
prepared at the construction and close-out stages of a project.
Hore et al. (1977) and Faniran et al. (2000) in separate studies described project
planning as the systematic arrangement of project resources in the best way so as to
achieve project objectives. Planning involves the setting up of objectives and the
strategies to achieve them. When viewed from this perspective, project planning can be
described as the process of defining project objectives, determining the framework,
strategies and tactics, targets/deadlines to achieve the objectives and communicating
them to project stakeholders. The process of project planning requires that client’s
expectations or requirements and available resources be defined first, matching them to
set project objectives, evaluating options and selecting most appropriate frameworks,
strategies and tactics to achieve the objectives. It also involves communicating the
objectives and strategies to achieve them to persons, parties and organisations
concerned with their implementation, monitoring and control. The process involves
preparing numerous project plans; each representing defined strategies to achieve
defined project objective(s). The most common ones being list of activities, bar chart,
network analysis and line of balance (Harris and McCaffer, 2001).
2.1 Bar chart
Bar chart as a programme was first developed by Karol Adamiecki who did not publish
the chart and later designed as a method for scheduling and controlling military
operations by Henry Gantt and published in 1910 (Gantt, 1974). After the 1st World
War, the technique was first adapted for programming manufacturing processes and
later construction activities. In the construction industry, the technique is commonly
used for preparing the programme of work for the construction of projects. The chart
shows the list of the different work activities involved in a project with the start,
duration and finish of each activity shown as a bar plotted to a time scale (Harris and
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RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Godwin Idoro, pp 39-48
McCaffer, 2001). It serves as an option to other planning techniques notably network
analysis and line of balance. However, Harris and McCaffer (2001) maintained that bar
chart is most useful for smaller projects and the short-term programme for a section of a
large project and that even when sophisticated technique like network analysis is used,
the eventual schedule of work is usually presented in bar chart form. They further
opined that bar chart is simple, the most useful and successful tool for conveying
planners’ intentions and serves as effective means of communication between engineers
and foremen.
2.2 Project performance
Project performance is a measure of the outcome of a project that is the level to which
desired project objectives are achieved. Researchers regard it as an evaluation or
assessment of project success (Nahapiet and Nahapiet, 1985; Naoum, 1991). The
variables that serve as indicators of project performance are many and researchers
classify them differently. Pinto and Slevin (1998) classify them into (1) internal factors
which are project variables namely: schedule, cost and quality and (2) external factors
which are concerned with stakeholders’ satisfaction with the performance of a project
and the perceived impact on organisation’s effectiveness. Ling (2004) identifies two
categories of indicators of project success namely: product success which consists of
measures of achievement of quality standards and process success which is made up of
variables that measure the achievement of time and cost. The commonest measures of
process success are time-overrun and cost-overrun. From these indicators, seven
parameters stated in the variables of the study were selected as indicators of project
performance. These parameters can be classified into objective and subjective indicators
of project performance.
3 Research Methodology
The study adopted a questionnaire survey approach to achieve its objectives. In the
approach, a field survey involving a sample of 86 contractors and construction projects
was carried out in 2008. The sample was drawn from the population of contractors that
are registered with the Federation of Construction Industry which is the umbrella body
of construction contractors in Nigeria and projects executed by them. While the
contractors used for the study were randomly selected, the projects were selected by
purposive sampling to ensure that only one project from each contractor was selected.
Data collected consist of the type of technique used to prepare the programmes of work
of selected construction projects used for the study, the number of projects executed in
2006 and 2007 by the contractors who executed the projects sampled and the number of
the projects programmed with bar chart, the type of technique used to prepare eight
project plans selected from pre-contract and contract stages, the initial and actual
contract periods, the initial and actual contract sums and respondents’ assessment of the
duration, cost and quality of the projects used for the study. The data were collected
with structured questionnaires and analysed to determine the level of use of bar chart
using percentage and ratio, the difference between the levels of use of bar chart and
network analysis using t-test and to determine the correlation between the level of use of
bar chart and project performance using Spearman correlation test,
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RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Godwin Idoro, pp 39-48
4 Findings and Discussion
The results of the analysis of data collected are presented as follows:
4.1 Level of use of Bar Chart Technique
To evaluate the level of use of bar chart, data were collected on the type of technique
used to prepare the programmes of work of selected construction projects used for the
study, the number of projects executed in 2006 and 2007 by the contractors who
executed the projects sampled and the number of the projects programmed with bar
chart. The data were analysed to evaluate the level of use of the bar chart as follows:
4.1.1 Percentage of projects programmed with bar chart
The ranking of the level of use of bar chart was first determined using the percentage of
the projects selected for the study that were programmed with available programming
techniques. The results are presented in Table 1.
Table 1 Ranking of the percentage of projects programmed by bar chart and network analysis
Technique Number % Rank
Bar chart 72 83.7 1
Network analysis 14 16.3 2
Line of balance 0 0.0
Total 86 100
The results in Table 1 reveal that the percentage (83.7) of projects used for the study
that were programmed by bar chart ranks first while that of projects programmed by
network analysis (16.3) ranks second. Line of balance technique was not used for any of
the projects. This result indicates that bar chart is more used than network analysis and
line of balance in preparing the programmes of work of construction projects.
4.1.2 Ratio of projects procured to projects programmed by bar chart and network
analysis in 2006 and 2007
From the number of projects executed and the number of projects programmed with bar
chart and network analysis by the respondents, the ratios of projects programmed by bar
chart and network analysis to the total projects executed were determined. The ranking
of the ratios of projects programmed by the two techniques was determined to compare
their levels of use. The results of the analysis are presented in Table 2.
Table 2 Ranking of the level of use of bar chart and network analysis by respondents in 2006 and 2007
Year Variable N Sum Mean Rank
2006 Total projects executed 76 1282 15.87
Projects planned by bar chart 80 1050 13.13 1
Projects planned by network analysis 78 286 3.41 2
Level of use of bar chart 76 57.78 0.76 1
Level of use of network analysis 76 18.42 0.24 2
2007 Total projects executed 78 1376 17.64
Projects planned by bar chart 76 1080 14.21 1
Projects planned by network analysis 76 230 3.03 2
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Level of use of bar chart 76 64.03 0.84 1
Level of use of network analysis 76 11.96 0.16 2
The results in Table 2 reveal that the means of the number of projects programmed by
each respondent with bar chart in 2006 (13.13) and 2007 (14.21) rank first while those
of projects programmed with network analysis in 2006 (3.41) and 2007 (3.03) rank
second. The result indicates that mean number of projects programmed with bar chart
by the respondents in 2006 and 2007 is higher than that of network analysis. These
results imply that bar chart is more preferred and used than network analysis by the
respondents. The results in Table 2 equally show that the mean of the ratios of projects
programmed by bar chart to total projects executed by the respondents in 2006 (0.76)
and 2007 (0.84) rank first while those of network analysis in 2006 (0.24) and 2007
(0.16) rank second. These results also confirm that the level of use of bar chart for
programming construction projects is higher than the level of use of network analysis
among the respondents.
4.2 Test of difference in the level of use of bar chart and network analysis
The results of the analysis of the two parameters of the level of use of the two
programming techniques have established that the level of use of bar chart is indeed
higher than that of network analysis. The study proceeds further to determine whether
the difference is significant or not. This involves the test of the first hypothesis of the
study which states that the level of use of bar chart is not significantly higher than the
level of use of network analysis. The hypothesis is tested using t-test at p-value <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 of the test are presented in Table 3.
Table 3 Results of t-test for difference in the levels of use of bar chart and network analysis
Variables compared Year N Mean t-value Df p-value Decision
Projects planned with bar chart 2006 78 13.28 2.666 77 0.009 Reject
Projects planned with network analysis 78 3.41
Level of use of bar chart 76 0.76 9.135 75 0.001 Reject
Level of use of network analysis 76 0.24
Projects planned with bar chart 2007 76 14.21 3.012 75 0.004 Reject
Projects planned with network analysis 76 3.03
Level of use of bar chart 76 0.84 15.558 75 0.001 Reject
Level of use of network analysis 76 0.16
N=Number of respondents, Df=Degree of freedom
The results in Table 3 show that the p-values for the test of difference between the mean
numbers of projects programmed with bar chart and network analysis in 2006 (0.009)
and 2007 (0.004) and between the mean ratios of projects programmed with bar chart to
total projects procured by the respondents and projects programmed with network
analysis to total projects procured by the respondents in 2006 (0.001) and 2007 (0.001)
are greater than the critical p-value (0.05) therefore the hypothesis is rejected. This
result implies that the numbers of projects programmed by bar chart by the respondents
is significantly higher than the numbers of projects programmed by network analysis in
both 2006 and 2007. It equally implies that the ratio of projects programmed with bar
chart to total projects executed by the respondents is significantly higher than that of
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network analysis. These results confirm that the respondents actually use bar chart more
than network analysis.
4.3 Level of Use of Bar Chart in Project Planning
The study further investigated the level of use of bar chart for the preparation of major
plans of the projects sampled. For this purpose, eight project plans stated in the
variables of the study were selected. These plans have alternative techniques to bar chart
for preparing them therefore the level of use of bar chart for preparing the plans was
measured as the number of each project plan prepared with bar chart to the total number
of respondents. The ranking of the levels of use of bar chart for the selected plans is
presented in Table 4
Table 4 Percentage of number of plans prepared with bar chart to number of plans studied
Project plan N1 N2 % of N2 to N2 Rank
Programme of work 84 78 92.9 1
Weekly programme of work 86 72 83.6 2
Plant schedule 86 70 81.4 3
Material schedule 86 66 76.7 4
Daily programme of work 84 64 76.2 5
Project life-cycle 86 62 72.1 6
Labour schedule 86 52 60.5 7
Project cash flow chart 86 28 32.6 8
N1 = Number of respondents, N2 =Number of plans prepared with bar chart
The results in Table 4 show that the level of use of bar chart for programme of work
(92.9%) ranks first. The level of use of bar chart for weekly programme of work
(83.6%) ranks second while those of plant (81.4%) and material (76.7%) schedules rank
third and fourth. The levels of use of bar chart for daily programme of work (76.2%),
project life-cycle (72.1%) and labour schedule (60.5%) rank fifth, sixth and seventh
respectively while that of cash flow chart (32.6%) ranks eight. These results indicate
that bar chart is most used for preparing programme of work, more preferred for
contract plans than pre-contract plans and that bar chart is the tool used to prepare
majority of each of the project plans except cash-flow chart.
4.4 Correlation between level of use of bar chart and project performance
The results of the study on the level of use of bar chart for project planning have
revealed that the technique is indeed the most prominent planning technique among the
respondents. This finding prompts the evaluation of the effectiveness of the technique.
Since project planning is about project success, the evaluation involves the test of the
second hypothesis of the study which states that the use of bar chart for project planning
has no significant correlation with project performance. The hypothesis was tested using
Spearman correlation test at p-value <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 of the test are presented in Table 5.
Table 5 Results of Spearman test of correlation between level of use of bar chart and project performance
Parameters correlated N R p-value Decision
Level of use of bar chart for project planning &
Respondents’ assessment of contract period 86 0.269 0.012 Reject
Respondents’ assessment of contract cost 86 0.218 0.044 Reject
Respondents’ assessment of project quality 86 0.258 0.017 Reject
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Godwin Idoro, pp 39-48
Project time-overrun 74 -0.120 0.310 Accept
Project cost-overrun 74 -0.101 0.390 Accept
Time-overrun/initial contract period 68 0.106 0.389 Accept
Cost-overrun/initial contract sum 70 0.294 0.014 Reject
N=Number of respondents, R=Correlation coefficient
The results in Table 5 reveal that the p-values for the test of correlation between the
level of use of bar chart and project time-overrun (0.310) and cost-overrun (0.390),
percentage time-overrun to contract period (0.389) are greater than the critical p-value
(0.05) therefore, the hypothesis is accepted. The results indicate that the use of bar chart
does not influence time and cost-overruns and the ratio of time-overrun to initial
contract period. The p-values for the test of correlation between the level of use of bar
chart and contractors’ assessment of contract period (0.012), cost (0.044) and project
quality (0.017) and percentage cost-overrun to initial contract sum (0.014) are less than
the critical p-value (0.05) therefore, the hypothesis is rejected. The results indicate that
the use of bar chart has significant influence on contractors’ assessment of project
performance and the ratio of cost-overrun to initial contract sum.
4.5 Discussion of findings
Six parameters have been used to evaluate the level of use of bar chart for project
planning in this study. The results show that 83.7% of the projects used for the study
were prepared with bar chart while the remaining 16.3% were prepared with network
analysis. Each of the respondents planned an average of 13 projects and a ratio of 0.76
of projects executed in 2006 and 14 projects and a ratio of 0.84 of projects executed in
2007 with bar chart and an average of 3 projects and a ratio of 0.24 of projects executed
in 2006 and an average of 3 projects and a ration of 0.16 of projects executed in 2007
with network analysis. The results confirm that bar chart is the tool used to programme
majority of the projects sampled.
The results of the study on the levels of use of bar chart to prepare important project
plans selected from both pre-contract and contract stages revealed that bar chart was
used to prepared majority of seven out of the eight plans selected. It was only in cash-
flow chart that the level of use of bar chart was less than 50%. These results clearly
indicate that the preparation of most project plans is done with bar chart. It is
specifically used to prepare both pre-contract and contract plans. These results imply
that bar chart is really a very popular planning technique for project planning among the
respondents. The significant difference between the use of bar chart and other planning
techniques shows that bar chart is the most prominent tool for project planning in the
Nigerian construction industry. These results agree with previous findings on the use of
planning techniques in the Nigerian construction industry.
The dominant position that bar chart occupies in the techniques used for project
planning implies that the technique has significant contribution to make towards the
success of construction projects. The results of the study on the correlation between the
use of bar chart and project performance revealed that the use of the technique has
significant influence on the respondents’ perception of the duration, cost and quality of
projects. The positive value of the correlation value shows that contractors will rate the
performance of projects high when more of the project plans are prepared with bar
chart. However, the results also show that the use of bar chart has no significant
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Godwin Idoro, pp 39-48
influence on project time and cost overruns and the ratio of time-overrun to initial
contract period which are objective are objective indicators of project performance. This
result implies that the influence that the use of bar chart has on project performance is
subjective, it does not really influence the actual time and cost of projects. Since project
planning is all about achieving project success and the effectiveness of project planning
is commonly measured by actual overrun in time and cost schedules of a project, the
result tends to indirectly imply that the use of bar chart for project planning is
ineffective.
5 Conclusion and Further Research
With the planning of majority of construction projects being prepared with bar chart,
increase in the ratio of projects programmed with bar chart between 2006 and 2007 and
the use of bar chart for both pre-contract and contract planning, it is clear that the
technique is the main tool for project planning in the Nigerian construction industry.
However, the study discovers that the use of this main technique for project planning in
the construction industry does not have influence on the overruns in the time and cost
schedules of projects. This result can be interpreted to mean that the overruns in the
time and cost budgets of a project are not reduced by the number of plans prepared with
bar chart. This result should be a serious concern to all stakeholders in the construction
industry, the Nigerian government and researchers as well because the essence of
project planning is to enhance project performance particularly time and cost. The result
implies that the use of the technique for project planning is ineffective. It is necessary
for stakeholders to put in place measures that will make the use of bar chart effective.
Training and development, formats, standards and frameworks for effective project
planning with bar chart are very important. It should also be realised that the
effectiveness of project plans does not lie solely with the use of a technique and
preparation of plans, the information contained in the plans, how accurate and realistic
the information is and the implementation of the plans are equally important. The
reasons why the use of the technique does not contribute to project success should be
the beginning of the efforts to make the technique effective. The result of the study
challenges researchers to find out the causes of the ineffectiveness of bar chart for
project planning. This study will therefore prompt further study on the content of project
plans prepared with bar chart and its influence on project performance.
5 References
Arditi, D (1985) Construction Productivity Improvement. Journal of the
Construction Division, ASCE, 111, 1-4
Cox, I D, Morris, J P, Rogerson, J H and Jared, G E (1999) A quantitative study of
post-contract award design in construction. Construction Management and
Economics. 17. 427-439.
Faniran, O O, Love, P E D and Smith, J (2000) Effective front-end Project
Management – A key element in achieving Project Success in Developing
Countries. Proceedings of the Construction Development Conference.
Botswana 2-16 June 2000
Gantt, H (1974) Work, Wages and Profit. The Engineering Magazine, 12, 39-43.
Harris, F & McCaffer, R (2001) Modern Construction Management. 5th edition,
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Blackwell Science, London
Hore, A V, Kehoe, J G, McMullan, J and Penton, M R (1997) Construction 1:
Management Finance Measurement. 1st ed. Macmillan Press Limited, London
Kaming, P F, Olomolaiye, P O, Holt, G D and Harris, F C (1997) Factors influencing
construction cost and time overruns on high-rise projects in Indonesia.
Construction Management and Economics. 15, 53-94
Ling, F Y Y (2004) Key determinants of Performance of Design-bid-build projects in
Singapore. Building Research and Information, 32(3), 128-139.
Mauricio, M S B and Carlos, T F (2002) Contribution to the evaluation of Production
Planning and Control System in Building Companies. Proceeding of IGL
Conference. Granado, Brazil. 12 August 2002.
Mawdesley, M (2001) Planning and Controlling Construction Projects. Journal of
Engineering Management, 143(2), 196-203
Nahapiet, H and Nahapiet, J (1985) A comparison of contractual arrangements for
building projects. Construction Management and Economics, 3, 217-231
Naoum, S, Fong, D. and Walker, G. (2004) Critical success factors in project
management. Proceedings of International Symposium on Globalization and
Construction. CIB 2004. W107, TG23. School of Civil Engineering, Asian
Institute of Technology, Thailand. 17 – 19 September 2004
Naoum, S G (1991) Procurement Systems and Project Performance. Occasional
Paper 45. Chartered Institute of Building, UK.
Neale, D E (2001) Construction Planning. Engineering Magazine Series. Thomas
Telford Ltd, London
Oxley, R and Poskitt, J (1971) Management Techniques applied to the Construction
Industry. 2nd edition. Withham Chowes & Sons Limited, London
Pinto J K and Slevin, D P (1988) Project Success: Definitions and Management
techniques. Project Management Journal, 19(1), 67-71
Puthamont, S and Charoenngam, C (2004) Strategies Project selection in
Government Organisations. Proceedings of International Symposium on
Globalization and Construction. CIB 2004, W107, TG23 School of Civil
Engineering, Asian Institute of Technology, Thailand. 17-19 Sept. 2004
Radujkovic, M. (1999) The causes of Time and Cost Overruns in Construction
Projects. In Bowen P and Hindle R (eds) Proceedings of the CIB W55 & W56.
Joint Triennial Symposium on Customer Satisfaction. A focus for research and
practice. Cape Town 5-10 Sept.
Ward, P A (1979) Organisation and Procedure in the Construction Industry. 1st
edition. MacDonald & Evans Limited, London.
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Mogodi Keabetswe, Mosomane Rosinah and Mukucha Claver, pp 49-59
An investigation into the waste management programmes of selected
construction sites in Johannesburg
Mogodi Keabetswe, Mosomane Rosinah and Mukucha Claver
School of Construction Economics & Management,
University of the Witwatersrand,
Johannesburg, South Africa.
Email: [email protected]
Abstract:
Purpose: To find out the effects of waste management controls on construction sites.
Design: Questionnaires were divided in two sections (i.e. for management and for material work
person) and sent out to construction sites.
Findings: Some of the workers try to minimize waste when working but most of them feel that
waste is a management problem and don’t take necessary measures to reduce it. Experience,
skills and communication plays a major role in managing the waste.
Value: Waste on construction site should be properly monitored and controlled to avoid
necessary costs i.e. cost of purchasing new material and costs of disposing the waste.
Research limitations: Study limited to construction sites around Johannesburg within 10Km
radius from the University of the Witwatersrand.
Practical implications: Waste management programmes should be implemented at initial stages
and monitored throughout the life of the project.
Keywords:
Disposal, Environmental degradation, management, Recycling & Waste.
1 Introduction
This research was seeking to establish the level of waste management on selected construction
sites within the city of Johannesburg. This was limited to a radius of 10km from the University
of Witwatersrand. The objectives of the research were, to;
• Define wastage in the construction industry.
• Establish the causes of material wastage on a construction site e.g. tiles, bricks and concrete.
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• Compare the difference between waste allocations (10% to 15%) of different materials
versus the actual waste occurring on a site.
• Establish the extent to which material waste affects the tendered for budget of the project.
• The role of a clearly defined waste management programme in order to eradicate waste on
site.
• When is it ideal to establish a waste management programme on a site?
2 Literature Review
In this chapter the researchers were seeking to define and magnify the problems associated with
waste management on construction sites. Reference is used from publications by authors in this
area. It contains the following subtopics of the problem areas i.e.
• Direct Waste, its definition and identification of all the problems inside and outside of the
site. These fully identified and examples given as a way of magnifying their presence.
• Indirect waste is also defined and a collection all the areas that are covered under this topic
are highlighted.
Material wastage has been recognised as one of the factors constraining the achievement of the
budget. There are lots of wasted materials that are disposed from construction sites which cause
unnecessary expenses during the construction process. According to (Reinecke 1986) the control
of purchasing, scheduling, delivery and handling of materials on site is an essential part of the
control process. Whereas the waste problem is well known, it seems to be given little attention.
(Reinecke 1986)
Waste
A dictionary definition of environment waste is that of any substance, solid, liquid or gaseous for
which no use can be found by the organisation or system that produces it for which a method of
disposal must be devised. However (Mnyani 2003, pg4-5) describes it as any waste that is
generated during the process of construction, leftovers that are to be disposed post construction
and this includes demolition debris. Commenting on an opinion survey carried by the National
Business Research Institute (NBRI) ( Reinecke, 1986 p7) looking at the cynical effects of the
economy on waste, these would suggest that during recession builders become more concerned
with the waste and loss. During these periods the erosion of their profits due to waste is more
significant than during the boom where the client increasingly carried the burden of wastage. Out
of this waste (Reinecke 1986) it can be grouped into two groups which are Direct and Indirect
waste.
Direct Waste
This waste is sometimes called avoidable waste it is the waste of materials that are lost or
damaged so that they are unsuitable for future use on site i.e. the complete or physical loss of or
write off of a material. It includes the following:
• Transport and Delivery Waste;
Which covers all losses in transit to the site, damage caused during loading, and unloading
and placing of material to the initial storage.
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• Site storage and internal site transport site:
The waste caused by bad stacking at the initial storage, and transporting the materials
around the site to the point of use.
• Conversion waste;
Waste arising uneconomic cutting of shapes e.g. Timber
• Fixing waste:
Material dropped, spoiled or discarded during the fixing operation.
• Application and residue waste:
It occurs when materials such as mortar, plaster and paint are spilled or dropped due to their
nature. Similarly paint left in cans which are not resealed, mixed mortar left to harden at the
end of a working day.
• Waste caused by other trades;
Damage caused to work or materials by succeeding or replacing it.
• Criminal waste;
It arises due to pilfering, theft from site and vandalism, because the site is not properly
secured with temporary fence.
• Waste due to wrong use;
This is when wrong type of quality of material is used.
• Waste arising from material wrongly specified;
It is due to errors made in the bills of quantities.
• Learning waste; the direct waste caused by apprentice and tradesmen on new operations,
trying to learn their respective trades.
• Management waste;
Waste arising from the wrong decisions making or indecision e.g. failure to decide and work
out a plan for the storage of materials.
Indirect Waste
On the other hand it is different from direct waste in that usually the materials are not lost
physically, but payment for the whole or part of their value is lost. (Skoyles, 1989p22) Indirect
losses of material arise principally from:
• Substitution waste; this is when materials are used for the purposes other than those for
which they were intended in the specification
• Production waste; this type of waste occurs when materials are used in excess of those
indicated in the bills of quantities because of the production process.
• Negligent waste; the contractor negligently builds more than is required e.g. work built in
error, over dug trenches. This causes waste of resources, time and added cost to the
contractor.
• Natural waste; There is a level beyond which is not sensible to attempt to reduce waste any
further since the cost of doing so will be greater than the value of the materials saved thus
the acceptable level of waste is compromised. This acceptable level is what is referred to by
(Skoyles 1987p19) as natural waste.
Further studies indicate that waste in the simplest form may occur where a material is left lying
around on site, gets damaged and then discarded. Basing their report on a study in UK, by BRE ,
(Ekanaye & Ofori 2000) basing their study on 230 different building sites, found that waste
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levels for specific materials is consistently higher than the estimated level for all materials
studied. New purchases to replace wasted materials rework to correct mistakes, delays and
dealing with generated waste cause heavy financial losses to the contractor.
On the other hand (Johnson, 1981p6) Waste occurs on site for a number of reasons, most of
which can be prevented, some of the more obvious ones include:
• Misinterpretation of drawing
• Overestimating of quantity required
• Faulty workmanship
• Careless handing of materials.
According to a study done at Singapore on Construction Material Waste Source Evaluation, the
study found that design changes while construction works are in progress is the most significant
cause of waste generation on site.
www.sustainablesettlement.co.za/events/ssbe/proceedings/ekanyaka.pdf cited on19/04/20008
Waste Management
Management is defined by the Oxford English dictionary as the application of skill or core in the
manipulation, use, treatment or control of things or persons, or in the conduct of an enterprise
operation. The minimization and disposal of waste, has become one of waste can have a
significant impact on the environment, especially as the total volume of available landfill is
decreasing. Therefore, effective waste management will;
• Ensure compliance with all current environmental legislation.
• Reduce the costs associated with waste disposal.
• Reduce the amount of material sent to landfill by adopting the, reduce, reuse, recover and
recycle ethos.
• Reduce the environmental and health and safety risks that staff and contractors may be
exposed to.
There are however a number of concepts about waste management which vary in their usage
between countries or regions, one of these which is widely used is the concept in waste
minimizing hierarchy. It classifies waste management according to their desirability in terms of
waste minimisation. The hierarchy in the form of a pyramid has disposal at the foot and then
prevention is at the apex. It suggests that the first step of any waste minimization strategy is to
try and prevent the waste and it is the most favoured approach. Prevention saves on collection
and disposal costs. The step move on to minimisation, reuse, recycling energy recovery and the
least favoured method which is disposal.
Recycle and composition involves the collection and separation of materials and subsequent
processing to produce new materials. These processes use energy and resources and thus are
lower in the waste management hierarchy than reuse. Its economic viability also depends on
transportation distances that might prove costly.
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Mogodi Keabetswe, Mosomane Rosinah and Mukucha Claver, pp 49-59
Waste Management at initial stages of Project
These are simply plans that detail the amount and type of waste that will be produced on a
construction site and how it will be reused, recycled and disposed of.
(http:www.contractjournal.com/Articles/2008/03/31/58355)
Economic changes tend to have an effect on prices of which building materials are not
exempted. It there becomes imperative to design a waste management plan to control or
minimise the profit loss.
The aim of the Site Waste Management Plans is to make construction companies forecast how
much of each type of waste they will produce on a project, and how much of this waste they
will reuse or recycle. Companies are expected to develop and enforce a site waste management
and recovery plan. The plan will vary depending on the size and type of job and should outline
materials to be targeted, causes of waste, responsibilities, training, measuring performance and
minimization practices. Coordinate and communicate the plan to site project managers,
supervisors, workers and contractors. (http:www.wrapp.nsw.gov.au/material/ed.shtml) cited 23
May 2008.
A site management plan does not set a format, and varies according to the size of building
company or project. However, as a bare minimum, it should identify the following issues;
• Who is responsible for waste management on site?
• The types of waste that will be generated.
• How you will manage each of these waste streams.
• Which licensed waste management contractors you will use, and
• A plan for monitoring and reporting on the amount of waste you generate.
An advance approach in communication can play very important role waste management. Waste
may be caused by lack of communication between the management team and the construction
team. Therefore cooperation of each member on each side is needed in order to achieve the
desired success as set out by the management team in the first place.
Benefits of Construction Waste Management
Recycling and reuse of materials have long been associated with wise construction practises.
Experienced contractors are now reaping the economic advantage of construction waste
management. Many of the contractors that have embraced waste management have made
changes to their operation and practices to take advantage of reduced waste disposal costs and
revenues derived from recycle, reuse and salvage materials. Utilizing, reuse and salvage
methods on site reduces materials that end up in the landfill, creates a cleaner and safer project
site and improves community relations. (http://www.ga.wa.gov/eas/cwm/guidegoline.htmI11
June 2008 The following is suggested:
Recycling, reusing, and salvaging construction waste can save money. Through reselling waste
materials or using it as rubble, hardcore or on land refill to those in need.
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A company’s experience in waste prevention and recycling is a valuable marketing tool for
bidding on projects in response to customer interest in Construction Waste Management. Effort
to prevent waste, to recycle and to use recycled-content materials of a project can help the
project team to earn points towards qualifying for Leadership in Engineering and Environmental
Design (LEED) and other local and national programmes.
In the long run, preventing waste reduces dependence on natural resources such as trees, oil, and
minerals plus creates less pollution by reducing manufacturing and transportation related
emissions. Reduction of the energy and water required to produce building supplies from virgin
materials contributes to a reduction of greenhouse gasses related to the manufacturing and
transportation of these materials.
Recycling and reuse of construction waste can also help the economy through the creation of
jobs related to salvaging and recycling of construction waste. New products create jobs through
the manufacture of recycled content materials
Organisations such as Habitat for Humanity can use surplus building materials. Pick-up of
materials at the project site can sometimes be arranged.
(http://www.ga.wa.gov/eas/cwm/guidegoline.htmI11 June 2008
Good site management has been highlighted as also of importance with regards to waste. The
role of site manager is very important and regarded as one of the factors that influence waste
minimisation activities on construction site.
(http://www.cardiff.ac.uk/archi/progrmmes/cost8/case/waste/constructionswaste.html,) cited on
19 June 2008.
Therefore it is said that a good site management must be able to:
• Anticipate the progress and problems of construction
• Control men and material with equal efficiency
• Complete the contract within the programmed period and
• Carry out the work to specification.
A site manager should have a positive role, in touch with all aspects of the site. Changes in
materials, techniques and workforce are a clear indication that there is a need for better control
on site. (Johnston, 1981p 9-11) It was also highlighted that responsibilities on site must be
defined to avoid the usual controversial dilemmas where everyone else thinks that someone else
is dealing with the problem, when in fact no one is dealing with it.
Proper control of material requires controlled supervision at every stage of the operations and the
tendency to economise on supervision shows up as lost material. Trades foremen must inspect
materials when they are delivered and even though they are busy men, quality inspection of
materials takes up little time and save a deal of time and frustration later on. For example, if face
bricks were properly inspected and sorted before they reached the bricklayer, he would not have
rejected them when placing them, drastically reducing the usual spread of rejected bricks around
the scaffold. (Johnston, 1981, p114
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Section 3 Research design and approaches
Methodology according to (Runeson & Skitmore, 1999) they defined it as concerning the
principles and procedures of orderly thought or process applied to a particular scientific
discipline. In this research qualitative approach was used which led to a quantitative method.
As a basis for this research, a review of literature was conducted through, journals, books,
dissertations and the internet. Basing the instruments on the literature reviewed the researchers
visited various construction sites to administer questionnaires and interviewing the subjects, who
were expected to address this area of waste management on sites.
The Questionnaires
The questionnaires were designed in such a way as to address the objectives. The questioners
were divided into two instruments. Instrument “A” was meant for the management team. It was
meant to define their role in the control of waste on site. Instrument “B”, targeted the stores
person or material controlling personnel on site, and the cleaners. The aim was to find out
whether construction sites are aware of the problem of waste, how it is controlled and what the
effects of having controls are. These instruments consisted of simple questions that required
indicating the appropriate answer and elaborating where possible. The aim was to get direct
answers from these simple questions without wasting much of the contractor’s time as this might
lead them to being impatient with long questions.
These instruments were delivered personally on site. The main reason for this approach was to
make sure that they were handed to the right parson. It also gave the researchers a chance to
observe firsthand how each site was managing their waste.
Sampling
Sampling is defined as items selected at random population and used to test a hypothesis about
the particular population. In this research the hypothesis was “Effectively controlling waste
management programmes on construction sites throughout the whole of the project will minimise
the level of waste. This leads to reducing unnecessary costs of disposing that waste and the cost
of replacing the material.” The targeted sample for this research was construction sites around
Johannesburg. Out of this targeted population a sample of ten construction companies out of a
possible hundreds within a 10km radius from Wits University as a convenient sample. The
reasons for this limited sample were because of its convenience and economical factors like costs
involved in travelling when covering a wider radius.
Data Analysis
The results that were obtained from the questionnaires were analysed and presented in the form
of tables, bar charts and pie charts. (Wegner 2006) explains that statistical findings are only of
value to managers if they can only be effectively communicated to them. Graphs can display
findings concisely, clearly and in an-easy-to understand format. There is much truth in the adage:
“a picture is worth a thousand words.” Wegner (2006) further explains that data from qualitative
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Mogodi Keabetswe, Mosomane Rosinah and Mukucha Claver, pp 49-59
random variables are summarised into table format by counting the number of observations
within each category of the random variable. A pie chart is defined as a circle divided into
segments. The size of each segment is proportional to the importance or frequency of the data
category of a random variable relative to the whole and is usually expressed in percentage terms.
On the other hand states that a simple bar chart can display the same information as a pie chart.
The display is in bar form instead of a circle. The height of each component bar is proportional
to the importance or frequency of the random variable component in relation to the whole.
The possible advantage is that the contrast between category importances may be more apparent
from a bar chart than from a pie chart. A bar chart, however, does not convey a sense of the
“whole” which a pie chart clearly displays.
Therefore a careful inspection of graphical output can convey information more vividly and
quickly than the same information contained in numerical tables and written reports. This is the
approach that was adopted in this research.
All in all the total response was feedback of about 80% of the instrument that were distributed to
various sites. Each question that was on both instruments was analysed for its own merits and its
contribution to the whole research.
In analysing the available data from the responses on the question how long most managers had
been working in the construction site 60% had worked for more than 10 years. This was meant to
use their experience as a source of wide reference. When asked if they considered waste
management was of major concern to management they all acknowledged that it was so.
When asked further to define if these programmes in waste management were successful only
80% indicated that it was. 20% were not successful. When asked if the companies offered any
training to their workers on waste management 95% of the managers indicated that they did the
5% felt it was not necessary. However this did not seem to tie in with the workers response to the
same question when asked if they ever received any form of training from the same companies
that had indicated that they did so 75% of this workforce had not received any form of training.
The 25% of trained workers stated that they were put in a training workshop at the initial stages
of the project. When asked if they thought management did put a lot of pressure on them leading
to waste60% said no but of the 40% they felt at times it would have been the management’s
failure to give explicit instruction then errors are committed due to poor communication. This
type of waste according to workers is the most common. Despite all this the workers make all
possible to avoid being held responsible for the waste by double checking as they might end up
paying for the waste from their wages.
With delivery all the workers both management indicated that they always checked the supplies.
A major problem seemed to come in on storage. When asked how often they checked if all the
material was available 63% indicated that they did almost regularly but the other 37% only did
rarely hence when material or equipment was needed or required for auditing did they notice it
missing.
From this data analysis it was evidenced that there will always be a waste factor on any
construction site. The level of waste material is not checked at all stages, examples are at storage,
if materials are not regularly checked and criminal waste is likely to occur. If criminal waste
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Mogodi Keabetswe, Mosomane Rosinah and Mukucha Claver, pp 49-59
occurs then management will only notice later when the damage is done, because regular checks
are not conducted properly. In order to reduce the levels of waste occurring on sites proper
control, monitoring and management of waste occurring on sites proper control, monitoring and
management of waste is very essential.
Conclusions and Recommendations
In this section the literature review was compared with what was observed and drawn from the
data and the following conclusions where put across.
Material wastage has been taking place on construction sites for many years and it is a fact that
material always has a wastage variable. It therefore becomes the contractors aim to try and
reduce the waste as much as possible. From the data analyzed it was found that waste
management plays a major role in reducing the level of waste especially if implemented from the
initial stages throughout the whole project. These waste management plans must be monitored
and controlled by a site manager in order for them to be effective. A good waste management
will yield positive effects including the following:
• Better site organisation
• Cleaner site (Better image for the contractor)
• Cost savings
• Improved productivity
It was also pointed out that experience plays a major role. Contractors who have been in the
industry for many years seem to be implementing the waste management plans and are working
efficiently to reduce the waste.
The following recommendations were also drawn from the data analysed:
• The contractor should implement waste management programmes at initial stages of the
project
• The cycling plant is on site or an easily accessible alternative one nearby.
• A site waste manager should make daily checks on materials during delivery and storage
and in use.
• It was also observed that on most construction sites there are posters alerting the workers
about safety measures, it is therefore recommended that waste reduction posters are placed
to make workers aware that is a major concern on site.
• Training on material waste must be strongly emphasised for workers to improve their skills
and waste less.
References
Alloyby, M. (1977) “A Dictionary of the Environment.” Macmillan, London
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RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Mogodi Keabetswe, Mosomane Rosinah and Mukucha Claver, pp 49-59
Chung. C. (2000) “Material Waste Management.” Discourse, University of the Witwatersrand.
Johannesburg.
Ekanayake, L.L. & Ofori,G. (2000) “Construction Material Waste Source Evaluation,” National
University of Singapore.
Fellows, R. (2003) “Research Method for Construction” Blackwell Science, Oxford.
http://www.admin.com.ac.uk/offices/environment/guidance/construction/html#heading1.1 cited
on 19/05/2008
http://www.cardiff.ac.uk/archi/programmes/cost8/case/waste/constructionwaste.html, cited on
19/06/2008
http://www.contractjournal.com/Articles/waste/management-plans-qa.html, cited on 19/05/2008
http://www.ga.wa.gov/eas/cwm/guideline.html, cited on 11/06/2008
http://www.wrapp.nsw.gov.au/material/ed.shtml cited on 23/05/2008
Inskip, D.P.N. (1990) “A study of the wastage of materials on building sites” Thesis, University
of the Witwatersrand. Johannesburg.
Johnston,J.E.(1981) “Site control of material” Butterworth, London.
Mnyani, X(2003) the disposal of material generated on construction site.” Discourse, University
of the Witwatersrand. Johannesburg
Reinecke, P.T.(1986) “Material wastage in house construction” Dissertation, University of the
Witwatersrand. Johannesburg
Runeson, G. & Skitmore, M (1999)”Writing a research report: Apractical guide for students of
the built environment.” Deakin University Press, Victoria, Australia.
Skoyles, E.R. (1987) “Waste prevention on site” The Mitchell publishing company, London.
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RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Mogodi Keabetswe, Mosomane Rosinah and Mukucha Claver, pp 49-59
Wegner, T.( 2006) “Applied Business Statistics, Mathods & Application” UCT, Juta & Co, CTP
book printers Cape Town.
Wolcott, H.F.(1995) “The art of fieldwork.” AltaMira Press, Walnut Creek.
www.commons.wikipedia.org, cited on 15/05/2008
www.sustainablesettlement.co.za/events/ssbe/proceedings/ekanyaka.pdf cited on19/04/20008
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Mohammed Auda Alalshikh and Steven Male, pp 60-72
The development of a value management approach for the Saudi public
sector
Mohammed Auda Alalshikh 1 and Steven Male 2
1&2
School of Civil Engineering, Leeds University, LS2 9JT,
United Kingdom
Email: ¹ [email protected]; ² [email protected]
ABSTRACT:
Value Management (VM) is increasingly being utilised and contextualised by many
countries in order to suit their cultures and national markets. Saudi Arabia has used
the traditional American VM approach without contextualisation since the 1980s.
This research aims mainly at developing a suitable VM approach that fits the Saudi
Public Sector (SPS) by creating a hybrid approach that combines the suitable
attributes of the Society of American Value Engineers (SAVE) and European
approaches. Twelve interviews were conducted with VM practitioners and clients, and
four case studies and 25 VM reports were analysed. It was found that, for the most
part, VM is conducted by an independent VM team in the SPS and that this causes an
adversarial relationship between the VM teams and the design teams. Additionally,
VM is conducted in the late stages of the lifecycle of projects, which increases the
resistance of the design team to changes suggested by the VM study. Having taken
these and other obstacles into account and benefited from the VM approaches of other
countries, the approach that was developed for the SPS is discussed in detail in this
paper. Additionally, a framework was designed to facilitate conducting VM at any
stage of the lifecycle of a project to increase the probability of reaping the benefits of
VM.
KEYWORDS: Construction Management, Value Engineering, Value Management,
Saudi Public Sector, Saudi Arabia.
1. INTRODUCTION
Value Management (VM) originated in the industrial sector of the USA by Miles at
General Electric in 1947 and was used in the construction industry between 1963 and
1965 (Zimmerman and Hart, 1982). Because of the success achieved by this
technique, it has since been used by many countries throughout the world. Some
countries such as the UK adopted the VM approach and changed it to fit the country’s
culture and the markets, whilst others used the American VM approach without
making significant changes. Saudi Arabia’s General Directorate of the Military Works
(GDMW) adopted this type of VM approach in the 1980s (Alyousefi et al., 1999). In
2001, the Saudi Minister of Finance signed a resolution that stipulated that SPS
organisations must apply VM on projects with budgets of Saudi Riyals (SR) 20m and
on typical projects with budgets of SR 5m. Even so, less than 10% of public sector
organisations use VM (Shublaq, 2008). Additionally, Al-Yousefi (2000) stated that, as
a result of a survey conducted by King Saud University in 1999, only 4% of the Saudi
clients were satisfied with their projects, which indicated that there was a significant
problem that should be investigated.
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This paper is part of an ongoing research effort that aims to conduct an appraisal
study for the VM approach used in the SPS, to investigate the VM approach and the
techniques used to conduct VM, and to identify the obstacles that hinder the use of
VM in the SPS. Furthermore, the researchers conducted an extensive literature review
to compare and contrast the VM approaches used throughout the world, the results of
which were utilised in the development of an appropriate VM approach that would fit
the situation in the SPS. In order to achieve these objectives, extensive data were
required. Therefore, a mixed-method, concurrent-triangulation, multi-level model
design was used, for which quantitative and qualitative data were collected to
represent different levels of analysis within a system, with the intention of forming an
overall interpretation of the system (Creswell and Clark, 2007).
However, in addition to this research, an ongoing process of reviewing the literature
was used to maintain awareness of current and new research findings and techniques
in VM and other related fields. Twelve interviews were conducted with VM
practitioners and senior managers in SPS organisations to investigate in depth the VM
approaches used. The interviews were used to determine the characteristics,
techniques, success factors, clients’ attitudes, awareness, satisfaction and obstacles
that hinder the use of the VM approach in the SPS. Additionally, four case studies
were conducted to analyse in depth the VM approach and techniques used, as well as
the VM proposals that were implemented. Furthermore, the results reported from 25
VM studies were analysed quantitatively to triangulate and validate the findings of the
qualitative data and to enrich the understanding of the VM approach and techniques
used in the SPS. The reports of the case studies were sent to the interviewees to
review them. Additionally, the field work report results were sent to the interviewees
for verification purposes.
Having collected and analysed these data – thereby benefiting from the experiences of
other countries with VM – the findings were used along with other information
acquired from the literature to develop the VM approach that best fits the SPS; the
resulting approach is illustrated in this paper. This approach was validated by eleven
experts from the SPS, VM practitioners and clients, who then they filled out a
questionnaire designed for this purpose.
2. VM LITERATURE:
VM originated in the U.S. in 1947 through the Society of American Value Engineers
(SAVE), which was founded in Washington, DC, in 1959 (Younker, 2003). The
success of VM in the U.S. encouraged other countries to adopt this approach, and, at
present, SAVE International’s members, who come from more than 35 countries in
diverse fields, practise VM in public and private sector organisations (SAVE
International, 2007). VM began in the UK manufacturing sector in the early 1960s
and was introduced to Australia in the same decade by multinational companies.
Value societies were formed in Germany and France in 1974 and 1978 respectively,
and both countries have national standards for VM. Japan, India and South Korea
have also adopted the SAVE International model of practice and certification (Male et
al., 1998).
In the first four decades of the VM age, North American thought dominated the
growth of VM; over the past decade, there has been a noticeable development in VM
in other areas such as Australia, Hong Kong and Europe, from which different
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Mohammed Auda Alalshikh and Steven Male, pp 60-72
philosophies have emerged (Male et al., 2004). Countries such as Japan and South
Korea adopted the U.S. approach for VM early into their manufacturing sectors,
whereas other countries took up the methodology and melded it to suit their national
markets and cultures (Male et al., 2007).
There are differences in the VM approaches used by the various countries, which tend
to relate to terminology, job planning, team size and affiliation, VM timing, and
workshop duration. Generally, there are two primary VM approaches – the first is
used by SAVE International and its affiliates, and the second is that used by Europe
Australian and New Zealand, which has much in common in terms of the underlying
philosophy. The SAVE VM standard describes function analysis as the foundation of
the VM process, and is the key activity that differentiates VM from other problem-
solving techniques. However, in the British/European standard and the
Australian/New Zealand standard, VM is viewed as management style, noting its
similarities with other management approaches (Male et al., 2005).
In SAVE’s Value Methodology Standards (2006), the typical duration of the
Workshop Stage was identified as five days. Projects with a concise or very large
scope may be carried out in less or more time depending on the size and the
complexity of the project. Additionally, it is suggested that VM must be applied as
early in the design cycle as feasible to achieve maximum benefits. For large
construction projects, specific value studies are carried out during the schematic stage
and then again at the design development (up to 45%) stage. Furthermore, it is stated
that additional value studies may be conducted during the construction phase. VM
team size and composition are project-dependant, and team members should represent
the range of disciplines and end- users. Regarding the VM approach used in the US
private sector, Male et al. (1998) stated that an independent value manager is
employed to work with the existing multidisciplinary team to carry out a VM study.
In the UK, Connaughton and Green (1996) identified four VM/VE (Value
Engineering) intervention stages as follows: concept, feasibility, scheme design and
detail design. Additionally, Male et al. (1998), in their international VM
benchmarking study, stated that there is a generally held consensus that the following
six opportunities help to achieve the highest effect on any project during a VM
study’s lifecycle: the pre-brief, briefing, concept design, Charette (Brief Review
Workshop), detail design, and operational study (during the construction phase).
However, VM tends to be carried out in the UK at the early stages of a project’s
lifecycle in order to resolve any soft issues such as structuring the problem in hand,
deciding whether the project is the best solution for this problem and gaining project
stakeholders’ consensus about the objectives of the project. As each country might
use a different VM approach according to its unique environment, this research
therefore investigates appropriate intervention opportunities in the SPS.
3. RESEARCH METHODOLOGY
Research methods are chosen depending on the aims of the research, the research
problem or purpose and the required format of the conclusions (Gill and Johnson,
2002). Bell (1999) stated that classifying research approaches (e.g. as quantitative,
qualitative, ethnographic, survey, or action) does not mean that selecting one
approach restricts the researcher from adopting other research methods in preference
to the selected approach’s associated techniques. Each approach has its own strengths
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Mohammed Auda Alalshikh and Steven Male, pp 60-72
and weaknesses, and each is specifically appropriate for a particular context; the
research approach and the selection of the data collection method depend on the
nature of the inquiry and the type of information required.
Creswell and Clark (2007) added that combining qualitative with quantitative data
provides a more complete picture by noting trends and generalisations, as well as
determining an in-depth knowledge of participants’ perspectives. Additionally, this
methodology stresses objectivity during the analysis of the data, which overcomes to
some extent the individual weaknesses of the qualitative approach. However,
triangulating the research methods strengthens the research and ensures its validity.
Furthermore, it helps to collect enough quality data that is supported by the literature,
which can be used to develop a suitable VM approach based on the real situation
illustrated by the data collected and benefit from other countries’ VM approaches
concluded from the literature review.
The research method explained above, which was used to conduct this research,
complies with the definition of the mixed methods approach, as defined by Creswell
and Clark (2007). It focuses on collecting, analysing and mixing both quantitative and
qualitative data in one study. The mixed methods, concurrent-triangulation, multi-
level model design was used, in which quantitative and qualitative data were collected
to represent different levels of analysis within a system, with the intention of forming
an overall interpretation of the system.
The rationale for this approach is the complexity of the research problem, which calls
for answers beyond simple numbers in a quantitative sense, or words in a qualitative
sense. A combination of both forms of data can provide the most complete analysis of
the problem, achieve accurate results and cross-validate findings. In multi-level
research, different methods (quantitative and qualitative) are used to address different
levels within a system. Each set of data can be analysed independently, using the
techniques traditionally associated with each data type. The findings of each level are
then merged into one overall interpretation (Creswell and Clark, 2007; Tashakkori
and Tedllie, 1998).
The sample is small, i.e. eight VM practitioners and three SPS organisations that use
VM, and extensive data are needed. Interviews are more suitable for complex
situations, and they are useful for collecting in-depth information (Leedy and Ormrod,
2005). Therefore, semi-structured interviews were used, employing standard
questions with the option of asking individually-tailored questions to gain clarification
or investigate the reasons for previous answers (Leedy and Ormrod, 2005). These
interviews were conducted with VM practitioners and clients to carry out an in-depth
investigation into the VM approach used in the SPS, i.e. its characteristics,
weaknesses, strengths, timing, workshop duration, obstacles, success factors,
contractor contributions, and the effects of traditional procurement approaches on VM
and the project value chain. The interviewees’ attitudes, recommendations and
comments regarding VM enhancements should be taken into account when
developing the VM approach. NVivo software was employed to categorise and
analyse these data.
Additionally, case studies help to explore the process within a real-life context,
without the need for the researcher to control any events (Yin, 2003). Therefore, four
case studies were conducted to investigate the VM approach, the techniques used and
the implementation of VM proposals. Finally, the results from the reports of 25 VM
studies were analysed to gain a deep and objective understanding of the VM approach
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Mohammed Auda Alalshikh and Steven Male, pp 60-72
utilised in the SPS. These reports were taken from the main SPS organisations that
use VM, led by five different VM practitioners. Statistical Package for the Social
Sciences (SPSS) software was used to analyse these reports and test the correlation
between variables, using statistical methods to feed into the VM approach developed.
4. FINDINGS AND DISCUSSION
The full findings of this research will be published in detail in a separate paper. The
findings of the data analysis, however, were correlated with the literature to develop a
VM approach for the SPS, which will now be outlined in further detail. The
interviews noted that a traditional procurement system is used in the SPS, and there is
no incentive clause in contracts to encourage contractors to use the VM approach.
Furthermore, even when the VM approach is used by some of the SPS organisations,
it is conducted in the later stages of the project, usually after 30% of the designs have
been completed. This causes a resistance to change by the design team and by the
client as well, since the VM proposals are stipulated as changes to the designs, which
ultimately consume time and resources. For example, the case studies illustrated that
there is a high percentage – possibly reaching as high as 70% – of VM proposals that
are not implemented, mainly because the VM was conducted in the later stages of the
project and stipulated major changes for the designs, thereby increasing the cost and
the design team’s resistance.
Additionally, the traditional SAVE VM approach was present in the four case studies
– VM was conducted after the scheme design stage, targeting the elements of high
costs, trying to achieve functions at the lowest cost without sacrificing the quality and
supposing that the soft issues are sorted out. For example, in Case Study 3, the VM
team did not check the strategic directions of the organisation or the fitness of the
project for this strategy. During construction, there was a substantial change in the
requirements of the project, because two administrations had been allocated the same
building space. This strategic decision caused a radical change in the project’s scope,
budget and schedule.
On occasion, when a project has a limited budget in the SPS, VM is conducted in the
later stages of the project in order to reduce the overall cost of the project. Conducting
the VM at this late stage might diminish the chance of benefiting from some of the
VM proposals, because the need to make design changes may take a long time.
Additionally, resistance to these changes increases, because the detailed designs are
almost completed.
4.1. VM INTERVENTION STAGES:
The literature illustrated that the VM, used at any time during the lifecycle of the
project, can reap fruitful results. However, some authors (e.g. Connaughton and
Green, 1996; Male et al., 1998) as well as standards (e.g. the SAVE standards, 2006)
identified specific points at which VM can intervene effectively to improve project
decisions. Nevertheless, the cost of changes increases as the project life increases,
indicating the importance of conducting VM in the early stages to avoid high costs
and change resistance, which increase with time. The following intervention points
were elicited from the data analysis and the literature.
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4.1.1. STRATEGIC BRIEF (VM1):
Some interviewees stated that their organisations assign committees that include all
related parties to sort out any conflicts between project objectives. One of the clients
stated that: “[We achieve this] by establishing special committees including the
various parties, meeting and agreeing the project’s function, objectives and
requirements, and signing off a report. Sometimes, these committees take about three
months and hold many meetings until they sort out the conflict about the project”. If
these meetings take the amount of time as illustrated above, it is better to hold a one-
day VM workshop (VM1) including the related parties, which helps to decide whether
or not the project is the best solution for the problem in hand, and to come up with a
consensus about the principal requirements and strategic objectives of the project.
On the other hand, some of the practitioners assume that in-hand designs achieve the
objectives of the project. For example, one stated that: “Objectives are already
identified with the designer, and, sometimes, some of the design team members attend
the workshop”. This was clear in Case Study 3, a headquarters building for an SPS
organisation. After constructing the foundations and the structural skeleton of the
basement floors, there was a change in the organisational structure; therefore, it was
decided to use this new project to accommodate the main organisation in the area and
the subsidiary organisation for which the project was built. This change caused an
increase in the project’s budget and scope. The project manager and VM team had not
expected this decision; therefore, it was not planned during the project design and VM
study. However, the strategic objectives and directions of the organisation should be
considered during the planning of any project, and should be discussed with the
project stakeholders beforehand.
However, VM1 is needed at the pre-brief stage to gain a consensus among the
project’s key stakeholders about strategic objectives and the client’s needs and
requirements. Furthermore, VM1 is required to identify the need for investment,
assess the business fit of the project to the organisation’s strategy, and to structure a
strategic brief and to plan the next stages.
4.1.2. PROJECT BRIEF (VM2):
The SPS clients were asked about the method they use to brief the project objectives
and their requirements for the design team. Most of the SPS clients stated that they
hold meetings that include all parties to discuss the project brief. A client stated that:
“A committee is allocated, which consists of [various administrations and users]. It
takes from 3 to 6 months, involves various meetings and committees. Roughly, there
are about 6 meetings, each one between 1.5 and 2 hours”. Another client stated that:
“There should be a preparation meeting before starting the design, between the VE
and Design team, to know the requirements, objectives, elements of the project from
the point of view of the ministry”.
This demonstrates that there is a need for conducting a VM study (VM2) to gain a
consensus among the project stakeholders about the project’s objectives. This study
helps to translate the strategic brief into design and construction terms, to come up
with the project brief, communicate it to the design team, and plan for the next stages.
This will save time and ensure that the strategy is correct from the outset.
Additionally, all the stakeholders should be included in this workshop to consider
their expectations and requirements, otherwise the project may not achieve all its
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objectives, or changes will be requested by those who are not included during the next
stages, which will cost more or affect the project’s success.
4.1.3. CONCEPT DESIGN (VE3):
The interviewees agreed that it is important to conduct VE earlier than at the 30%
point in the design stage. For example, one of the practitioners stated that: “We carry
out VE at 30% of the design stage to optimise designs, although it is difficult at this
stage to go back and change the concept design, and the most savings are in the
spaces (before architectural design approval)”. Another practitioner stated that: “I
personally prefer three: firstly, at the programming stage to discuss client
requirements (2-3 days); secondly, at the design concepts stage to discuss the plans,
elevations and concept designs; and thirdly before 60% of the design stage to discuss
systems (electrical, HAV, etc.)”. Most of VM practitioners in the SPS addressed the
significance of this VM study. Additionally, the literature (e.g. Male et al., 1998) also
illustrates the importance of conducting a VE study at this stage. Mainly, this study
aims at testing the concept design against strategic and project briefs – identifying
other technical solutions that satisfy project objectives, client requirements, defined
criteria and the project functions effectively – and planning for the next stages.
4.1.4. SCHEME DESIGN (VE4):
Some interviewees addressed the importance of conducting a VE study for 30% of the
designs in order to optimise systems. For example, one of the practitioners stated that:
“Generally, the earlier the better. But if VE is conducted at the concept design stage,
it should be conducted again at 30-60% of the design. At the concept design stage, the
VE study is conducted to ensure that architectural design complies with the function
needed and the performance, regardless of the engineering systems. Additionally, at
30% of the design stage, engineering systems can be considered and optimised, and
LCC can be considered as well”. At this stage, the VM team can test 30% of the
designs against project objectives, client requirements and defined criteria in an effort
to identify other technical solutions that will satisfy the project functions effectively in
line with LCC and buildability, and to plan the next stages. The focus will be on
optimising the designs and checking them against the objectives and requirements
identified previously.
Although one of the VM practitioners suggested a VM study after conducting the
detail design, Case Studies 1, 2 and 3 revealed that if the VM study is carried out after
conducting the detail design, the cost of the design reworks, as well as change
resistance, increase. Consequently, the potential to conduct VM proposals decreases.
Although VE can be conducted by the contractor during the construction stage and
will achieve valuable benefits, this cannot be done in the SPS. This is because the
procurement system used in the SPS does not allow the use of this study, and there is
no incentive associated with SPS contracts. However, it is vital to consider adopting
other procurement systems within the SPS to encourage integration between project
parties, and to encourage the contractor to conduct VM studies. This is because the
contractor is best able to understand the constructability and market issues.
Conducting too many VM studies may disrupt and delay the project, especially at the
feasibility stage. Likewise, too few studies may fail to recognise any opportunities to
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improve the definition and effectiveness of the proposals (Merna, 2008). Additionally,
the data showed that VM is conducted once during a project in the SPS, and most
interviewees do not prefer the idea of conducting VM more than once on the same
project. Therefore, this VM approach should be sufficiently flexible to allow its
adoption by the SPS. For the sake of flexibility, the probability of adopting one or
more of the previous VM studies was taken into account. This was done by
considering that if an organisation missed one of these opportunities, a combined VM
study could be conducted, and thus cover most of the issues that had been missed.
This facilitates conducting the VM at any time and gaining most of the benefits
overlooked in the VM studies. Figure 1 shows the VM approach developed in this
research for the SPS. It illustrates the main VM/VE studies discussed above and the
combined VM/VE studies if one of the main studies is missed. For example, if VM1
was missed and an organisation wanted to conduct a VM study at the brief stage, the
appropriate study would be VM1+2 as it covers the issues included in the two VM1
and VM2 studies. The main outputs of this combined VM study will be the strategic
and the project briefs. Additionally, the other issues included in VM1 and VM2 are
discussed in this study.
VE 3+4 or:
VME 2+3 or: VME 2+3+4 or:
VM 1+2 VME 1+2+3
Alternative
VME 1+2+3+4
VM/VE studies
VM1 VM2 VE3 VE4 Main Studies
Concept
30 % of Detailed
Programming design Bidding Construction
design stage design
(10-15 %)
Elevations Proclaiming
Strategic Elements Components
and and warding
brief and and Systems and detail Construction
architectural the project
project brief are identified designs
design
Strategic Project Approved Approved Main outputs
brief brief concept 30%
designs designs
Figure 1: Main and alternative VM/VE studies for the SPS
Figure 2 shows a flowchart of the VM approach developed for the SPS, which
describes the probability of intervention opportunities, and scenarios included with
this approach. Additionally, Table 1 shows the participants, VM study duration and
outputs.
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4.2. CONTRIBUTION OF THE EXISTING DESIGN TEAM IN THE
VM STUDY:
Most of the VM practitioners interviewed in the SPS prefer employing an independent
team to conduct a VM study. They disagree with the employment of an existing
design team, which has conducted the designs in hand, arguing that design team
members will not change their engineering solutions. Nevertheless, the design team
can participate effectively in the VM workshop with other experts, as illustrated and
concluded from the fourth case study. In this case study, the existing design team
members contributed with other experts from inside the organisation to conduct the
VM study. They came up with remarkable proposals, of which 85% were eventually
implemented. However, in early VM studies (VM1 and VM2), the design team – or at
least the design architect – should participate in the VM workshop to understand the
objectives and requirements of the project. This is because the design team is best
able to structure the strategic and project briefs. If the design team has not yet been
appointed, a shadow design team can be employed.
Table 1: Participants, duration and outputs of VM/VE studies
VM Duration (days)
Participants Pre- Post- Outputs
study workshop
workshop workshop
VM1 Senior representatives from the client Strategic brief and
2-3 1 2-3
org. and project manager if allocated plan for next stages
VM2 Client representatives, design
Project brief and
architect, end user and project 2-3 1 2-3
plan for next stages
manager.
VE3 Client representatives (management Approved concept
and operation), end user, design team design and plan for
2-4 2-3 2-4
and project management team next stages
VE4 End user, Maintenance manager, Approved 30%
design team and project management 2-4 3 2-4 designs and plan
team for next stages
VM1+2 Senior representatives from the client
Outputs of:
org., end user, design architectural 2-4 1-2 2-4
VM1+VM2
and project management team
VME Client representatives (management
Outputs of:
1+2+3 & operation) design team, end user 2-4 3-4 3-5
VM1+VM2+VE3
and project management team
VME2+ Client representatives (management
3 & operation) Outputs of:
2-4 2-3 3-4
End user, design team and project VM2+VE3
management team
VE 3+4 Maintenance manager, end user,
Outputs of:
design team and project management 2-4 3 3-5
VE3+VE4
team
VME2+ Client representatives (management
3+4 & operation) Outputs of:
2-4 3-4 3-5
End user, design team and project VM2+VE3+VE4
management team
VME Client representatives (management Outputs of:VM1+
1+2+3+4 & operation), design team, end user 2-5 3-4 3-5
VM2+VE3+VE4
and project management team
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Mohammed Auda Alalshikh and Steven Male, pp 60-72
Start VM
VM1
No Has VM1 been
VM 1+ 2 Yes, but VM2
conducted? is covered
Yes
No Has VM 1+2
been conducted? VM 2
Yes Yes, but VE3
is covered Has VM2 been No
conducted?
VME 1+2+3 Yes
VME 2+3
VE 3
Yes, but VE4 is
No Has VE3 been covered
VE3+4 conducted?
Yes
Has VME1+2+3 Yes Has VME2+3 No
been conducted? been conducted?
Yes
No
VE4
VME 1+2+3+4 End VME 2+3+4
Figure 2: Flow chart of VM approach developed for the SPS
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Mohammed Auda Alalshikh and Steven Male, pp 60-72
For the other VM studies, namely VE3 and VE4, designs are already in hand. Therefore,
the existing design team can be supported by other experts, either from inside or outside
the organisation, and be employed to conduct the VM study in the SPS. The design
team has good experience with project design because it is part of their overall
responsibilities. The experts will help to conceive new ideas that satisfy the requisite
functions. There will be meaningful and productive discussions among the design team
members and the external experts concerning the design solutions already in hand and
the new ones being proposed. This discussion will improve the designs, as the design
team will discuss their perspective on the old designs while the experts will describe the
benefits of the new ideas and offer a clear understanding about the assumptions
associated with the current designs. If an independent team is employed without
including the design team, these discussions will occur after the VM workshop takes
place between the design team and the client, who in all likelihood will not have a good
engineering background. At the end of the process, the design team may persuade the
client to ignore most of the VM proposals. Furthermore, when the design team members
contribute to the VM workshop, they will participate in the change process; therefore,
their resistance to change will be mitigated.
4.3. CONTRIBUTION OF THE CONTRACTOR IN THE VM STUDY:
The data showed that the contractor’s inputs are not included in the SPS because of the
traditional procurement system used. The contractor represents the best party to
understand the constructability issues, market prices and technologies. The contractor’s
contribution is therefore beneficial, particularly in the VE3 and VE4 studies.
Consequently, it is vital to consider adopting other procurement systems within the SPS
to encourage integration among the project parties and to encourage the contractor to
conduct VM studies. However, the contractor can be involved as a partner with the team
or as a construction advisor. The benefits include knowledge of constructability,
logistics, realistic costs, and innovation and supply chain management (Standing, 2000).
4.4. THE DURATION OF THE VM WORKSHOPS:
Although most of the VM practitioners interviewed used 5-day or longer workshops to
conduct VM, one VM department in the SPS uses a 3-day workshop effectively, and has
achieved remarkable results such as in Case Study 4. Additionally, it has been
illustrated that VM practitioners tend to use short workshops to remain competitive and
that there is a push by SPS organisations to use VM workshops of shorter duration as
many projects require the application of VM. On the other hand, the quantitative
analysis of the VM reports illustrated that a relationship exists between workshop
duration and the savings achieved by VM. Therefore, the duration of VM workshops
should be balanced between the two directions and according to the outputs required
and desired. Figure 2 shows the flowchart of the VM approach developed, including the
duration and details of each study among the main and combined VM studies.
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Mohammed Auda Alalshikh and Steven Male, pp 60-72
5. CONCLUSION
The SAVE approach is used in the SPS by employing an independent and
multidisciplinary team to conduct the VM study at a late stage. This is accomplished
primarily after the scheme design stage and focuses on the elements needed to achieve
the functions required at the lowest cost, but without sacrificing quality. However, one
of the SPS organisations employs a mixed VM team, which consists of the design team
and experts from outside the design team and inside the organisation. Most of the VM
studies are conducted at a late stage during the project’s lifecycle, for example after
completing the detailed designs. At this stage, the design team resists changes and the
client may reject some of these changes. Additionally, the VM team tries to furnish
proposals that do not suggest radical changes to the designs in order to avoid the cost of
redesign and mitigate this resistance.
However, a need exists for VM at the pre-brief stage to determine whether the project is
the best solution for the problem at hand or to pursue a better solution. Additionally, it
is needed to structure the strategic brief and high-level requirements, and to reconcile
the conflicts that occur among stakeholders regarding the project’s strategic objectives.
Additionally, the following stages of conducting the VM were elicited: the briefing
stage to structure the brief, the post architectural design phase to optimise it before its
approval and, finally, after the scheme design to optimise the systems. There is a
requirement to add an incentive clause to SPS contracts in order to encourage the
contractor to adopt VE at the construction stage.
The inclusion of the design team within the VM team and the conduct of the VM study
at an early stage help to derive effective and implementable VM proposals that also
mitigate the design team’s resistance. Additionally, the design team has a good
background regarding the project, which helps the VM team understand all of the issues
related to the project. Moreover, the inclusion of all project parties in the VM study is
crucial to the improvement of integration and communication. VM can ensure this
integration by locating the related parties in one place to achieve consensus concerning
the project’s objectives. Consequently, the designs are tested against these agreed upon
objectives and requirements.
The findings of the data analysis were integrated with the literature and produced a
suitable VM approach that fits the situation in the SPS. This approach is indeed flexible,
as it facilitates carrying out VM at any stage of the project’s lifecycle and achieves the
most benefit from VM.
6. REFERENCES
Al-Yousefi, A. S. 2000. Value Management: Concept & Techniques (Arabic Language).
4th Edition. Riyadh.
Alyousefi, A, Al-Khuwaiter, A, Al-Oshaish, S and Shublaq. 1999. VE in Saudi Arabia:
Overview and applications in Public and Private Sectors. SAVE International
Conference Proceedings 1999
Bell, J. 1999. Doing a research project: a guide for first-time researchers in education
and social science. 3rd edition. Open University Press, England.
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Mohammed Auda Alalshikh and Steven Male, pp 60-72
Connaughton, John N. and Green, Stuart D. 1996. Value Management in Construction:
A Client’s Guide, Published by CIRIA, London, UK.
Creswell, John W. and Clark, Vivki L. Plano, 2007. Designing and conducting mixed
methods research. Califorina: SAGE Publications.
Gill, J. and Johnson, P. 2002. Research methods for managers. 3rd edition. SAGE
Publications Ltd, London.
LEEDY, P. D. and ORMROD, J. E. 2005. Practical Research: Planning and Design, 8th
edition. Pearson, Merrill Prentice Hall, New Jersey.
Male, S., Kelly, J, Fernie, S, Gronqvist, M and Bowles, G. (1998). The Value
Management Benchmark: Research Results of an International Benchmarking Study,
Thomas Telford, UK.
Male, S, Kelly, J, Grongvist, M and Graham, D. 2004. A Re-appraisal of Value
Methodologies in Construction, In: SAVE International proceeding July 12, 2004, USA.
MALE, S, KILLY, J, GRONQVIST, M and GRAHAM, D. 2005. Reappraisal value
methodologies in construction for achieving best value. In: The Queensland University
of Technology Research Week International Conference, 4-8 July 2005,Brisbane,
Australia.
Male, S, Killy, J, Gronqvist, M and Graham, D. 2007. Managing Value as a
Management Style for Projects, International Journal of Project Management. 25
(2), February 2007, pp. 107-114.
Merna, Anthony, 2008. Value Management. In: N. J. Smith, ed. 2008. Engineering
Project Management. Oxford: Blackwell Publishing Company. Ch.2.
SAVE International. 2006. Value Methodology Standards and Body of Knowledge. The
Value Society, USA.
SAVE International (2007), [online]. [Accessed 25th April 2007]. Available from World
Wide Web: < http://www.value-eng.org/about.php>
Shublaq, Emad. 2008. Common mistakes in VE practice in Gulf Area (Arabic
Language). In: The 4th Gulf Value Engineering Conference, 22-23 April 2008, Riyadh.
Standing, N. 2000. Value engineering and the contractor. PhD thesis, University of
Leeds.
Tashakkori, A. and Teddlie, C. 1998. Mixed methodology: combining qualitative and
quantitative approaches. London: Sage Publications Inc.
Yen, R. K. 2003. Case study research: design and methods. 3rd edition. SAGE
Publications, USA.
Younker, D. L. 2003. Value Engineering Analysis and Methodology. Marcel Dekker
Inc., New York, USA.
Zimmerman, L. W. and Hart, G. D. 1982. Value Engineering: A Practical Approach for
Owners, Designers and Contractors. Van Nostrand Reinhold Inc., New York, USA.
72
COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Ayodeji Ojo and Deji Ogunsemi et al, pp 73-86
Assessment of contractor’s understanding of risk management in
Seychelles construction industry
Ayodeji S. Ojo1; Deji. R. Ogunsemi2
1
Senior Quantity Surveyor, Project Implementation Unit, Ministry of National Development, Seychelles
2
Department of Quantity Surveying, Federal University of Technology, Akure, Nigeria.
E-mail: [email protected]
Abstract
The knowledge and understanding of risks in construction projects are expected to contribute to a more
effective risk management process and enhanced project output and added value for both clients and
contractors. This paper assesses the extent of the contractor’s understanding of risk before bidding for
projects in Seychelles with specific focus on contractors' perception of expected and actual practice of
risk allocation. A structured questionnaire backed up with interview was administered to a sample of C1
and C2 contractors according to the Seychelles Licensing Authority as well as Consultants. The data
collected were analysed using percentile and Importance Index(II). The findings show a lack of proper
understanding of risk by majority of the contractors and lack of proper approach to risk management by
others, though they are aware of the risk involved at bid stage. The study also discovers that the only
types of risk that occur in practice as initially envisaged as being borne by clients and contractors are
inflation and safety accidents respectively. Therefore, absence of risks records and the systematic risk
management which is noted throughout in the survey must be effectively addressed in order to reduce
the adverse implications of poor risk management.
Keywords
Risk, risk management, risk allocation, construction industry, Seychelles
1 Introduction
Risk is inherent in all human endeavors, including construction activities, and the risk elements involved
are diverse and varied. The scope of building activities extends to risk identification and management in
planning, arranging and controlling activities and resources in order to minimize the impact of uncertain
events. Risk in construction has been the object of attention because of time and cost over-runs
associated with construction projects (Akintoye and MacLeod, 1997). Time and cost over-runs have
been identified to be the most important factors responsible for abandonment and project failure (Elinwa
and Uba, 2001). This risk is often not dealt with satisfactorily and the construction industry has suffered
poor performance as a result.
It is generally accepted that the major goals in a construction project are budget, schedule and quality,
although there are other more specific objectives, such as safety consideration and market entry,
depending on the nature of the project and company. A variety of factors determine the performance of
projects in terms of these objectives. The identification of the factors for these objectives will enable
limited resources of time, manpower and money to be allocated appropriately. Some researches have
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been conducted to identify success factors for project performance using quantitative measures of
various factors (Jaselskis and Ashley (1991). The risk identification stage, which is the first stage,
should be detailed and thorough. Toakley and Ling (1991) reported that if a risk is not identified, it
cannot be controlled, transferred or otherwise managed, and therefore risk identification is a necessary
first step before risks can be analyzed and an appropriate response can be determined. While it is true to
say that most projects contain a number of reasonably standard and recognizable risk situations, each
new project requires careful and individual consideration. Construction projects are becoming
increasingly and dynamically complex in their nature and the introduction of new procurement methods
means that many contractors have to rethink their approach to the ways in which risks are treated within
their project and companies. It is also increasingly difficult for contractors to make reasonable profit
because construction projects are predisposed to risks which would not have been adequately provided
for in the bid estimate (Fu, Drew and Lo, 2003).
The assessment of level of risk is a complex subject shrouded in uncertainty and vagueness. The vague
terms are unavoidable since project managers find it easier to assess risk in qualitative linguistic terms.
Therefore, the aim of this research is to examine risk, risk factors and establish a relationship between
risk and project performance. As risk perception or understanding of it is an important aspect of risk
management, the attitudes towards and the barriers to risk management and the benefits perceived are
prerequisite for the analysis and management of the risks.
The construction industry in Seychelles has grown through thick and thin of the world economy. The
industry is the second largest employer of labour both local and expatriate labour, therefore to advance
the construction industry there is need to ascertain the level of risks involve, understanding of them,
reaction to these risks and how to best practically approach or handle them so as to enhance the
objective of the industry. Thus, the objective of this study is to assess the current perception,
understanding and attitude of some categories of contractors to the risks involved in the construction
industry.
2 Literature Review
Risk is defined as the chance of an adverse event depending on the circumstances (Macquarie
Dictionary), whereas Warszawski and Sachs(2004) see it as the occurrence of an undesirable event.
According to Hayes et al (1998), risk and uncertainty are part of all construction works regardless of the
size of the project. The construction industry is subject to more risks than other industries due to the
unique features of construction activities, such as long period, complicated processes, abominable
environment, financial intensity and dynamic organization structures (Smith, 2003; Akintoye and
MacLeod, 1997; Flanagan and Norman, 1993).
Assaf (1982) proposes a systematic approach for the management of pure risk. It includes:
i. Risk identification by either financial statements, flow chart, questionnaire and checklist; or a
combination of them
ii. Analysis of risk treatment alternatives by either risk control, avoidance. retention or risk transfer
iii. Risk administration by either the contractor agency or an outside agency.
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Perry and Haynes (1985) have suggested a simple and systematic approach for construction
management, which consists of three stages namely risk identification, risk analysis and risk response.
Buchan (1994) while proposing the same steps implemented a 15-step sequence to account for risk
management. He concludes that if these simple steps are followed, then beneficial outcomes and a stable
risk environment should be obtained.
Nummedal et al. (1996) and Eloff et al. (1993) propose five steps to manage risks. These systematic five
steps used for a comprehensive risk management procedure are risk identification, risk estimation, risk
evaluation, risk response and risk monitoring. Baker et. a1 (1999) have suggested fitting these five steps
in a simple circular procedure which, if maintained, will yield a controlled risk environment. The first
two steps, namely risk identification and risk estimation, can come under the broader title of risk
analysis. Risk analysis with risk evaluation can be grouped under risk assessment, with response and
monitoring collectively entitled risk control as shown in Figure 1
Risk Identification Risk Monitoring
Risk Analysis
Environment Controlled Risk
Risk Estimation Risk Response
Risk Evaluation
Figure 1. Circular procedure of Risk control
Source: Baker (1999)
Knowing the impact of risks in a project, the task of actual identification of risks needs to be
undertaken. Risk identification either by contractors, professionals in construction industry or risk
experts is often undertaken through different means, which may include checklists, brainstorming,
visits to site, corporate experience, analysis of prior projects, the use of organisational charts to review
internal structures and flowcharts to review process issues and through research, interviews and
surveys of parties likely to be impacted by the proposal. These events might prevent, degrade, delay or
enhance the achievement of those objectives.
Thompson (1992) and Akintoye and MacLeod (1997) have identified risk sources in construction at the
pre-contract stage to include design risk, competitive tendering risk, tender evaluation risk and
estimating risk among others. In addition, they also identified risk factors at the post-contract stage to
include physical risk, site condition, inclement weather, legal risk, environmental risk, logistic risk,
political risk, financial risk and contractual risk among others. Responses to risks in construction can
take any of the four approaches: risk retention, risk reduction, risk transfer and risk elimination/
avoidance (Raftery, 1994).
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The risk perception or understanding will go a very long way to help in determining the response to it.
However, it depends on individuality experiences. Wong and Hui(2006) noted the differences between
the contractors’ perception of risks and their attitude towards making mark-up decisions. In response to
this, Fang, Fong and Li(2004) stressed the need for contractors when tendering, to take into account the
various risk factors associated with the particular projects and take appropriate decision. The experts in
risk management will depend on the scientific perception using scientific analytical paradigms to
prescribe the method of interpretation and while the lay man will depend on experiences, intuition and
others contribution on risks from environment.
A lay person is not interested in dealing with the risk involved in the project at start but prefer to deal
with them as they arise and also not interested in the probabilistic quantification of risk. Beck (1986)
stresses this and states that what becomes clear in risk discussions are the fissures and gaps between
scientific and social rationality in dealing with the hazardous potential involved. Douglas (1992) also
agrees with this when he claims that when faced with estimating probability and credibility, they come
already primed with culturally learned assumptions and weightings.
The expert using the most available software for risk management also still depend on their
experiences for final conclusion and decision making, thus both lay person experts has factor of
human constraints. The risk management software available is still only as effective as the person
utilising the data is. The perceptions of the individual inputting the information into the computer will
naturally bias that information, not only in its raw state, i.e. what is to be included as an uncertainty,
but how the manipulated data, i.e. the risk, is to be acted upon.
3 RESEARCH METHODOLOGY
In this study, both questionnaire and in-depth interviews were used for collecting data. However, most
information was collected by questionnaire (after a careful explanation of meaning of risk) and
interview was conducted in order to clarify the confusions and misunderstanding regarding the
questionnaire.
According to the Seychelles Licensing Authority all contractors in Seychelles are divided into six
categories. The category C1 is designated the largest contractor having a contract size of no limit and
C2 represents the contractors that are limited to low-rise buildings. Only these two categories of
contractors were selected for this study. This is because they are expected to have qualified staff with
basic understanding of the theory and practice of risk management. Again, a study of the remaining
categories of contractors would require more time and resources which could not be accommodated
during this study.
All the 45 contractors in these two categories which formed the population of this study were contacted.
The respondents were first contacted through phone, discussing the objective of the research. After
agreeing to participate, the questionnaires were forwarded to them. The questionnaire contained 36 short
and straightforward questions, designed in such a way that completing it should not take more than 25-
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30 minutes considering the busy schedule of project managers/ project engineers completing the survey
questionnaire. Only 32 questionnaires were eventually retrieved and were all found suitable for analysis.
Data gathered from the questionnaire was analyzed and used to identify the respondents’ understanding
and allocation of the risk associated with their works, while scoring was as follows:
“Very important” equals 5 points
“Important” equals 3 points
“Less important” equals 1 point
Importance Index(II) was used for each category and calculated as follows:
IIR1 = 5x1 + 3x2+ 1x3/(x1+x2+x3)
Where:
IIR1 : importance index (R1 denotes risk category 1 in this case
x1 : Number of respondents answering very important
x2 : Number of respondents answering important
x3 : Number of respondents answering less important
The survey experienced major unexpected difficulties in that some of the respondent did not really have
the full understanding of risk associated with their works. This made us to change the questionnaire to
include the section testing their knowledge of risks related to their area of works.
4 DATA ANALYSIS AND DISCUSSION
Table 1 shows that most of the respondents have more than 10 years experience which represent about
82%, the educational level of majority were below the Bachelor degree, while majority has no
knowledge of risk in its entirety. The categories of the contractor are the class one and two, the class two
generally do not have any exposure to the risk involve in construction projects. They are little bit
covered because of the type project they are allowed to undertake.
Table 1 General information of the respondents and companies
Characteristics Frequency Percentage
Years of Experience in >10 years 18 56
construction work
5-10 years 8 25
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Ayodeji Ojo and Deji Ogunsemi et al, pp 73-86
3-5 years 4 13
1-3 years 2 6
BSc 4 13
HND 3 9
Educational Level OND 13 40
Technical 8 25
College 4 13
C1 11 34
Category of Company
C2 21 66
Above average 3 9
Average 22 69
Level of understanding
of risk in construction Below average 4 13
No
3 9
understanding
Table 2 shows the respondents’ understanding of the party perceive to bear the risk and the actual
practice. The table also shows the level of importance of each of the risks.
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Table 2 Risk Allocation: Perception versus Practice
Contractor's opinion on how risk Contractor's opinion on how risk
should be allocated is allocated in practice
Types of risk
Owner Contractor Shared Owner Contractor Shared
Permits and regulations 53% 13% 33% 11% 76% 13%
Site access 22% 58% 20% 73% 7% 20%
Scope limitation and work
73% 13% 13% 87% 4% 9%
definition
Labour, Material and
4% 51% 44% 51% 27% 22%
Equipment Availability
Labour and Equipment
0% 87% 13% 33% 62% 4%
Productivity
Defective design 38% 42% 20% 40% 56% 4%
Changes in work 49% 13% 38% 22% 71% 7%
Differing Site Condition 31% 27% 42% 49% 49% 2%
Adverse Weather
47% 40% 13% 80% 20% 0%
Conditions
Acts of God 27% 18% 56% 47% 49% 4%
Defective Material 11% 73% 16% 53% 29% 18%
Changes in Government
40% 27% 33% 36% 49% 16%
Regulations
Labour Dispute 13% 33% 53% 18% 56% 27%
Safety Accidents 0% 93% 7% 4% 91% 4%
Inflation 84% 2% 13% 93% 2% 4%
Contractor’s Competence 73% 27% 0% 64% 33% 2%
Change-Order Negotiations 11% 64% 24% 49% 40% 11%
Third Party Delays 49% 18% 33% 71% 24% 4%
Co-ordination with
11% 84% 4% 18% 44% 38%
Subcontractors
Delayed Dispute Resolution 16% 13% 71% 29% 49% 22%
Delayed Payment on
93% 0% 7% 18% 73% 9%
Contract
Quality of work 13% 56% 31% 64% 27% 9%
Financial failure 49% 9% 42% 36% 62% 2%
Actual quantities of work 80% 16% 4% 11% 73% 16%
Accuracy of project
13% 80% 7% 4% 84% 11%
program
In this study, the respondents frequency is considered to be undecided if it is less than 45%, in a similar
studies by Kangary (1995) in USA, he assumed a response rate of 70% for a risk to be regarded as
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appropriately allocated. The response is low in this study due to the level of education, past experiences
of the respondent and the general situation of the nucleated nature of the construction industry in
Seychelles, which is not part of the scope of this study.
Table 3 Allocation of Risk: Contractor’s Opinion
Risk
Risk Description
Allocation
Owner Delayed Payment on Contract
Inflation
Actual quantities of work
Contractor’s Competence
Scope limitation and work definition
Permits and regulations
Third Party Delays
Changes in work
Financial failure
Adverse Weather Conditions
Contractor Safety Accidents
Labour and Equipment Productivity
Co-ordination with Subcontractors
Accuracy of project program
Defective Material
Change-Order Negotiations
Site access
Quality of work
Labour, Material and Equipment
Availability
Shared Delayed Dispute Resolution
Acts of God
Labour Dispute
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Table 4 Risk Allocation as Practiced
Risk
Risk Description
Allocation
Owner Inflation
Scope limitation and work definition
Adverse Weather Conditions
Site access
Third Party Delays
Contractor’s Competence
Quality of work
Defective Material
Labour, Material and Equipment Availability
Differing Site Condition
Change-Order Negotiations
Contractor Safety Accidents
Accuracy of project program
Permits and regulations
Delayed Payment on Contract
Actual quantities of work
Changes in work
Financial failure
Labour and Equipment Productivity
Defective design
Labour Dispute
Differing Site Condition
Changes in Government Regulations
Delayed Dispute Resolution
Shared Acts of God
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Risk Importance
The contractors were asked to describe the importance of each risk as related to their projects. The
importance of particular risk varies from one project to another; generally the assessment is able to
identify the key risk important to the contractors as they affect their projects.
Table 5 Percentage of the respondents towards Risk Importance
Very Less
Important
Types of risk important important
(4-7)
(8-10) (1-3)
Permits and regulations 80% 20% 0%
Site access 29% 71% 0%
Scope limitation and work definition 84% 16% 0%
Labour, Material and Equipment
93% 7%
Availability 0%
Labour and Equipment Productivity 71% 27% 2%
Defective design 49% 51% 0%
Changes in work 22% 62% 16%
Differing Site Condition 11% 27% 62%
Adverse Weather Conditions 18% 13% 69%
Acts of God 62% 36% 2%
Defective Material 36% 62% 2%
Changes in Government Regulations 51% 40% 9%
Labour Dispute 7% 76% 18%
Safety Accidents 36% 49% 16%
Inflation 87% 13% 0%
Contractor’s Competence 33% 29% 38%
Change-Order Negotiations 27% 71% 2%
Third Party Delays 4% 87% 9%
Co-ordination with Subcontractors 7% 93% 0%
Delayed Dispute Resolution 38% 18% 44%
Delayed Payment on Contract 91% 9% 0%
Quality of work 56% 44% 0%
Financial failure 27% 64% 9%
Actual quantities of work 7% 44% 49%
Accuracy of project program 7% 16% 78%
Using the importance index of 45% as stated above as level of reliability, the following were been
regarded as very important risk with their respective percentage response. - labour, material and
equipment availability, delayed payment on contract, inflation, scope limitation and work definition,
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Ayodeji Ojo and Deji Ogunsemi et al, pp 73-86
permits and regulations, labour and equipment productivity, acts of god, quality of work, changes in
government regulations, defective design 93%, 91%, 87%, 84%, 80%, 71%, 62%, 56%, 51% and 49%
They regarded the following as important risk to the project, co-ordination with subcontractors, third
party delays, labour dispute, site access, change-order negotiations, financial failure, defective material,
changes in work, defective design, and their respective percentage of respondent in allocating these as
important are 93%, 87%, 76%, 71%, 64%, 62%, 51%.
The respondent regard the following as less important to in their construction project - accuracy of
project program, adverse weather conditions, differing site condition, actual quantities of work, delayed
dispute resolution, and their respective percentage of 78%, 69%, 62%, 49%, and 45%.
In assessing the extent to which a particular type of risk affect the final cost of construction, the
programme schedule, safety and the quality of the projects, the table shows the first ten ranked and
with importance index of greater or equal to 45%.
It was observed that the risks that are affecting the profit margin of contractors were of more concern to
them. They rated inflation, financial failure from client, availability of labour, materials and equipment
as the highest risk facing them.
Table 6 Risk affecting the final cost of the project with their respective ranking
Types of risk Ranking
Inflation 1
Labour, Material and Equipment Availability 2
Defective Material 3
Scope limitation and work definition 4
Labour and Equipment Productivity 5
Defective design 6
Acts of God 7
Actual quantities of work 8
Quality of work 9
Safety Accidents 10
Table 7 Risk affecting the programme schedule of the project with their respective ranking
Types of risk Ranking
Financial failure 1
Permits and regulations 2
Delayed Payment on Contract 3
Inflation 4
Changes in Government Regulations 5
Differing Site Condition 6
Defective Material 7
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Ayodeji Ojo and Deji Ogunsemi et al, pp 73-86
Labour and Equipment Productivity 8
Scope limitation and work definition 9
Changes in work 10
Table 7 Risk affecting the safety on site during execution of project with their respective
ranking
Types of risk Ranking
Site access 1
Labour and Equipment Productivity 2
Scope limitation and work definition 3
Acts of God 4
Contractor’s Competence 5
Changes in work 6
Adverse Weather Conditions 7
Defective Material 8
Labour, Material and Equipment Availability 9
Differing Site Condition 10
Table 8 Risk affecting the quality of work with their respective ranking
Types of risk Ranking
Quality of work 1
Defective Material 2
Contractor’s Competence 3
Change-Order Negotiations 4
Defective design 5
Adverse Weather Conditions 6
Co-ordination with Subcontractors 7
Inflation 8
Labour and Equipment Productivity 9
Labour, Material and Equipment Availability 10
CONCLUSION
The study describes the views of the construction contractors in Seychelles with special attention on the
contractors view or understanding of the risks associated with their construction projects. The study has
enlightened in a little way to some of the contractors that they are indirectly dealing with risks in their
daily activities. They all have being mitigating the risks without any special consideration. It was
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Ayodeji Ojo and Deji Ogunsemi et al, pp 73-86
observed that none of the contractors keep risk register making it difficult to ascertain if they are really
aware of risk affecting their projects either before bidding or during construction.
The prominent risks facing the contractors among others are defective materials, inflation, labour,
material & equipment availability and labour & equipments productivity. All the risk are being
influenced by the fact that all things are being imported and the local materials like crusher dust (sand),
aggregates and concrete block are being produce by two companies. This call for further studies on the
effect of monopoly and selective sales has on the construction industry with special focus on the private
or individual developers. The study is being affected by the present economic recession; it was gathered
from the contractors’ response during verbal interview for their reasons in apportioning the values to
each risk. Further study during economic stability may reflect different scenario of ways apportioning
value to the level of risk affecting their construction projects.
References
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Warszawski, A. & Sachs, R.(2004) Practical multifactor approach to evaluating risk of investment in
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Wong, J.T.Y., & Hui, E.C.M. (2006) – Construction project risks: further considerations for
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‐ 86 ‐
COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
JJP Verster and Carl van Zyl, pp 87-102
Project Management: Structure, Maturity and the Pillars of
Development in the South African Construction Industry
JJP (Basie) Verster1 and Carl H van Zyl2
1&2
Department of Quantity Surveying and Construction Management,
University of the Free State, Bloemfontein, South Africa
Email: [email protected]; [email protected]
Abstract:
Project management has made extensive progress as a practiced discipline in the South
African construction industry, but there seems to be a lack of scientific comparative
analysis regarding the actual performance of practitioners benchmarked against
international maturity standards. A useful technique that may be applied to address this
is to introduce Operational Project Management Maturity Models (OPM3) in project
management orientated enterprises (Project Management Institute, 2003).
Design/methodology: A selected group of international researchers were invited to
participate in a project management maturity study. This survey focussed on firms,
entities and companies that are seen as project oriented businesses. In South Africa,
twenty-two (22) firms were selected. The research was based on a comprehensive
questionnaire designed by the Project Management Group, Wirtschafts University of
Vienna, Austria as well as interviews by involved researchers of the University of the
Free State. Simultaneous with the South African survey, surveys were also conducted
and finalised in 6 other countries in order to obtain international comparative data.
Findings: The empirical results reported in this paper stem from the collaborative
research described above. A comparative analysis of the results of these six countries
and South Africa is provided. Further research is being planned. The study may enable
companies and enterprises in assessing their actual performance/ability, benchmarked
against both South African and international enterprises and practitioners. The
outcomes of these results indicate that project management as a discipline in South
Africa is satisfactory, providing guidance to partaking enterprises on an individual basis
regarding specific dimensions and processes. It is further proposed that the maturity
study and dimension status may assist professions to develop their intellectual capacity
using genetic pillars of development.
Keywords: Organisational maturity, South Africa, construction industry
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Introduction
The Project Management Group of the Wirtschafts University, Vienna, Austria initiated
the research programme: Project Orientation International (POI), at the beginning of
2005. The project concluded in July 2007. The objective of the research programme
was to analyse and benchmark companies and nations in respect of project orientation.
112 Project-oriented companies (in 7 project-oriented nations) participated. Project
orientation is seen as the significance of a project or a programme in society, including
companies and other organizations, in respect of its history and expectations of the
future. They see projects and programmes as adequate organisational forms to perform
unique business processes (Gareis, 2005: 579). “Businesses recognised they were in
essence multi-project entities, with each venture and each function in effect being a
project.” (Oosthuizen, Köster and De la Rey, 1998: 19). The models are based on the
project-oriented company and management of the project-oriented society or nation. It
also addresses the most important elements of a project oriented nation referred to in
Figures 6 to 12, in this instance reflecting South Africa, Austria, Finland, Germany,
Lithuania, Romania, Slovakia. The results gained may lead to strategies on how to
further develop the project-oriented entities (Project Management Group, 2006).
Research Methodology
Research Process: Project Orientation International
The first part of the research was performed in each national project. It included the
analysis of the maturity of Project-oriented companies as well as the analysis of the
Project-Oriented Nation (PON). In the second part, the international benchmarking was
performed.
The analysis of the maturities of the project-oriented companies includes the following
steps:
• Briefing workshop for project-oriented companies: During this workshop the
process of the analysis, the maturity model including the questionnaire was
explained to representatives of project-oriented companies.
• Self-analysis: At least 5-10 representatives per company answered the online
questionnaire individually. Alternatively, the representatives jointly, during the
workshop, filled out the questionnaire.
• External analysis: Relevant documents (e.g. project management procedures,
project documentation, etc.) provided by the project-oriented company are analysed
by the national research team. This was to verify the quality of the results of the
self-analysis.
• Benchmarking: Comparison of a company’s maturity with maturities of other
project-oriented companies.
• Analysis and benchmarking report: The report includes the analysis and the
benchmarking as well as the definition of potentials for the further development of
the maturity of the company.
A selected group of twenty-two (22) firms and companies in various industries that are
seen as project oriented businesses were invited to capture the data.
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The questionnaire for the analysis is based on Management of the Project-oriented
Enterprise and consisted of 74 questions. It is structured according to the dimensions or
processes of the project-oriented enterprise.
Persons (up to 10 persons per enterprise) qualified to answer the questionnaire held one
or more of the following roles: project managers, project owners, and project
management office managers, depending on the internal structure of the company
(Project Management Group, 2006a). The respondents were aided by the involved
researchers of the University of the Free State after jointly attending the workshops,
facilitated by the University of the Free State and presented by Gareis in 2005 in South
Africa.
The Maturity Model and Dimensions
Project-oriented companies, organisations, enterprises or nations have specific
strategies, structures and cultures. The maturity model may be divided into dimensions
or processes and sub-dimensions. Various weights were allocated to the dimensions to
indicate the importance of a specific dimension (Gareis, 2005: 32).
The dimensions (processes) which are described below are analysed in a project-
orientation maturity model in Figure 1,.
Project Management
Business Process 5
Management in the Project- 4 Programme Management
3
oriented Organisation 2
1 Assurance of the Management
Personnel Management in the
0 Quality of a Project or a
Project-oriented Company
Programme
Organisational Design of the Assignment of a Project or a
Project-oriented Company Programme
Project Portfolio Co-ordination
and Networking between
Projects
Figure 1. Project-orientated maturity model
Source: Gareis, 2005: 32
Table 1 shows the dimensions, weights and sub-dimensions of the research model
which were included in the composition of the questionnaire to investigate the maturity
of the international enterprises involved, and for nations (South Africa, Austria, Finland,
Germany, Lithuania, Romania, Slovakia) as depicted in Figures 6 and 12. The criteria
for the weights are the importance of the process in the project-oriented organisation.
Furthermore, the interdependencies of the processes are taken into account (Wirtschafts
Universitat. Project Management Group. 2005).
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JJP Verster and Carl van Zyl, pp 87-102
Table 1: Project-oriented company maturity model
Source: (Own table adapted from Gasse, 2006: Online)
Dimension / process Sub-dimension / sub-process Weight
Project management Project-commencement, -co-ordination,
A
-controlling, -resolving, -discontinuity, and -close down 20
Programme Programme commencement, -co-ordination, -controlling,
B
management -resolution of programme discontinuity, -programme 10
closedown
Assurance of the Quality of a project or programme, management-
C
management quality of consulting, auditing 10
a project or programme
Assignment of project A decision is taken whether or not a project or programme
D
or programme is to be performed or undertaken 15
Project portfolio Project portfolio-co-ordination, whether projects will be
E
management started or abandoned, priorities between projects are set, 10
co-ordination of the internal and external resources
Personnel management Recruiting, disposition and continuous development of
F
project personnel like the project- or programme-owner, 10
-manager, -team members, and project contributor
Organisational design Establishment of a project management office, a project
G
portfolio group and expert pools, procedures and standard 15
project plans
Business process A sequence of tasks with several roles performed by one or
H
management more organisations involved, primary-, secondary-, 10
tertiary-processes
An organisation operates in a bigger system defined as a nation or society. This
research project also aims at providing an understanding of the maturity of a project-
oriented nation.
Füessinger (2006: 3-4) proposes that the maturity of a project-oriented nation also
includes the following additional project-management related services:
• Education- Formal education programmes are provided
• Research- Research projects, publications and events
• Marketing- A national project management association
For the purpose of understanding the maturity of a nation, the dimension of Assignment
of a project or programme was omitted.
Research Programme Organisation
Figure 2 shows the participating nations and the organisation of the research project
done during 2005 – 2007.
These countries were responsive in respect to the invitation by the Wirtshafts University
Project Management Group in Vienna, Austria, and also pro-actively participated in the
research project.
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JJP Verster and Carl van Zyl, pp 87-102
Scientific
director
PROJECT:
Project orientation Programme Programme PROJECT:
[austria ii] manager office Project orientation
[south africa]
Project owner & CENTRAL
project manager RESEARCH TEAM Project owner &
project manager
Project owner &
project manager Project owner &
project manager
PROJECT:
INTERNATIONAL
Project orientation RESEARCH TEAM PROJECT:
Project orientation
[finland]
[slovakia]
Project owner &
project manager Project owner &
project manager
PROJECT:
Project
Project orientation owner & PROJECT:
[germany] project Project
orientation
PROJECT: [romania]
Project
orientation
[lithuaniai]
Figure 2: Programme organisation of project orientation [international]
Source: Gareis & Füessinger 2007
Presentation of South African results
In respect of the South African research project, the groups were divided according to
the business and nature of the selected enterprises. In respect of construction project
management, three groups were identified:
• Building and civil construction: See Figure 3
• Building consulting: See Figure 4
• Engineering consulting: See Figure 5
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JJP Verster and Carl van Zyl, pp 87-102
S.A. Bldg & Civil
Construction Companies
Project Management 77% Ave: 68%
100
Business 80 Programme Management
Process Management 62% 60 64%
40
20
Personnel Assurance of Management
0
Management 68% of Quality 72%
Assignment of a Project or
Organisational Design 63% Programme 72%
Project Portfolio
management 69%
Figure 3: Average Maturities of Building and Civil Construction Companies in South Africa
Source: (Projektmanagement Group, 2006a. Results of Maturity of the Project-
Oriented Company, Groups and South Africa)
Figure 3 shows the average maturity ratio of Building and Civil construction companies
in South Africa of 68.4% (a reasonably high result). The major strength of this group
lies in project management with an average of 77%, assignment of a project or
programme (72%), and quality management (72%). From the results it is clear that the
dimension Programme management (64%) and Business Process management (62%)
are development areas, needing attention by construction companies.
S.A. Building Consulting
Project Management 65% Companies
100 Ave: 55%
Business Process Management 80
Programme Management 43%
58% 60
40
20
Personnel Management 57% Assurance of Management of
0
Quality 62%
Organisational Design 53% Assignment of a Project or
Programme 57%
Project Portfolio management
42%
Figure 4: Average Maturities of Building Consulting (mostly Quantity Surveying) Companies /
Firms in South Africa
Source: (Projektmanagement Group, 2006a.
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JJP Verster and Carl van Zyl, pp 87-102
S.A. Engineering Consulting
Project Management 78% Companies/Firms
Business Process
100
Ave: 66%
80 Programme Management
Management in the Project-
60 60%
oriented Organisation 60%
40
20
Personnel Management in Assurance of the
Project-oriented Company 0 Management of Quality of a
66% Project or a Programme 65%
Organisational Design of
Assignment of a Project or a
the Project-oriented Company
Programme 70%
62%
Project Portfolio Co-ordination
and Networking between
Projects 65%
Figure 5: Average Maturities of Engineering Consulting Companies/ Firms in South Africa
Source: (Projektmanagement Group. 2006a.
Figure 5 shows that the average maturity ratio of the Engineering Consulting
companies/firms in South Africa is 65.8% and therefore, the second highest of the three
groups analysed. The strength of this group also lies in project management with 78%,
Programme management (60%), and Organisational design (62%), which are the
development areas for this group.
Figure 6 shows the maturity of South Africa (combination of industries) as a project
oriented nation (62%). The three additional dimensions for nations are shown, i.e.
education, research and marketing.
Mature ratio:
PON South Africa: 62%
Project Management 72%
100
Project Management related
80 Programme Management 59%
Marketing 72%
60
Project Management related 40 Assurance of Management of
Research 57% 20 Quality 66%
0
Project management related Project Portfolio Management
Education 49% 59%
Process Management 59% Organisational Design 57%
Personnel Management 63%
Figure 6: Average Maturities of South Africa based on the survey results
Source: Gareis & Füessinger, 2007
Figure 6 shows a high maturity ratio in Project Management with 72%. Organisational
Design (57%), and Project Management related Education (49%) shows the lowest
maturity ratio. These are the development areas for South African organisations.
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JJP Verster and Carl van Zyl, pp 87-102
Maturities of Different Industries in the other Six Nations and
Comparison of Results
Figure 7 shows the spider web for Austria, as project-oriented nation (PON), as 58%.
Mature ratio: ■
PON Austria: 58%
Project Management 70%
100
Project Management related
80 Programme Management 36%
Marketing 74%
60
Project Management related 40 Assurance of Management of
Research 44% 20 Quality 40%
0
Project management related Project Portfolio Management
Education 59% 60%
Process Management 57% Organisational Design 54%
Personnel Management 63%
Figure 7: Spider web of Austria as a project-oriented nation
Source: Gareis & Füessinger, 2007
Figure 7 also shows the comparative maturity of Austria as a project orientated nation
(POI). Added to the eight dimensions are three dimensions indicating the maturity of a
nation i.e. Education, Research and Marketing. Assignment of a Project or a
Programme, one of eight dimensions, is not applicable and eliminated, as previously
discussed.
Figure 8 shows the average maturity of Finland, as project-oriented Nation (PON), as
63%
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JJP Verster and Carl van Zyl, pp 87-102
Mature ratio: ■
PON Finland: 63%
Project Management 75%
100
Project Management related
80 Programme Management 37%
Marketing 65%
60
Project Management related 40 Assurance of Management of
Research 60% 20 Quality 59%
0
Project management related Project Portfolio Management
Education 51% 71%
Process Management 62% Organisational Design 61%
Personnel Management 71%
Figure 8: Spider web of Finland as a project-oriented nation
Source: Gareis & Füessinger, 2007
Figure 8 shows Finland’s development areas as being programme management (37%)
and project management education (51%). The results have unfortunately been
provided by a very small sample and should be seen as provisional
Figure 9 shows the average maturity of Germany, as project-oriented nation (PON), as
60%.
Mature ratio: ■
PON Germany: 60%
Project Management 70%
100
Project Management related
80 Programme Management 41%
Marketing 82%
60
Project Management related 40 Assurance of Management of
Research 55% 20 Quality 40%
0
Project management related Project Portfolio Management
Education 63% 59%
Process Management 62% Organisational Design 52%
Personnel Management 60%
Figure 9: Spider web of Germany as a project-oriented nation
Source: Gareis & Füessinger, 2007
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JJP Verster and Carl van Zyl, pp 87-102
Figure 9 shows the development areas as being programme management (41%) and
management of quality (40%), while marketing shows excellent results (75%).
Figure 10 shows an average maturity ratio of 47% for Lithuania
Mature ratio: ■
PON Lithuania: 47%
Project Management 61%
100
Project Management related
80 Programme Management 21%
Marketing 28%
60
Project Management related 40 Assurance of Management of
Research 43% 20 Quality 35%
0
Project management related Project Portfolio Management
Education 45% 52%
Process Management 56% Organisational Design 52%
Personnel Management 57%
Figure 10: Spider web of Lithuania as a project-oriented nation
Source: Gareis & Füessinger, 2007
Figure 10 shows that Lithuania as a project-oriented nation has an overall development
need. Their best results are seen in respect of the management of projects, 61%.
Figure 11 shows an average maturity ratio of 39% for Romania
Mature ratio: ■
PON Romania: 39%
Project Management 43%
100
Project Management related
80 Programme Management 40%
Marketing 46%
60
Project Management related 40 Assurance of Management of
Research 26% 20 Quality 38%
0
Project management related Project Portfolio Management
Education 40% 42%
Process Management 35% Organisational Design 39%
Personnel Management 38%
Figure 11: Spider web of Romania as a project-oriented nation
Source: Gareis & Füessinger, 2007
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JJP Verster and Carl van Zyl, pp 87-102
Figure 11 shows a total need for development of project orientation in Romania,
especially in respect of research.
Figure 12 shows an average maturity ratio of 47% for Slovakia
Mature ratio: ■
PON Slovakia: 47%
Project Management 59%
100
Project Management related
80 Programme Management 31%
Marketing 51%
60
Project Management related 40 Assurance of Management of
Research 26% 20 Quality 51%
0
Project management related Project Portfolio Management
Education 35% 60%
Process Management 46% Organisational Design 43%
Personnel Management 47%
Figure 12. Spider web of Slovakia as a project-oriented nation
Source: Gareis & Füessinger, 2007
Figure 12 shows Slovakia’s development areas to be programme management (31%),
personnel management (43%), organisational design (47%) and research (25%). The
Slovakia spider web shows a very erratic pattern.
“A society which uses projects to perform relative unique processes can be perceived as
a project oriented society” (Gareis, 2005: 579). This is therefore also true for
construction professionals because they always perform their functions within a project
environment.
The previous Figures 6 – 12, benchmark nations, but in respect of the industry and this
paper, it is also important to benchmark these against the construction industry. Table 2
and Figure 13 illustrate this.
Table 2 shows the comparison between all 7 nations and the Construction industry in
South Africa, in respect of the 8 dimensions of the Project Oriented Companies in the
specific nations.
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JJP Verster and Carl van Zyl, pp 87-102
Table 2. Comparison of Maturities of 7 Project-oriented Nations and the South African
Construction Industry
Source: Gareis & Füessinger, 2007
Lithuania
Germany
Romania
Industry
Slovenia
Finland
Austria
Constr.
Africa
South
S.A.
AVT 57 65 57 50 40 51 62 68
Process 57 62 61 56 35 46 59 62
Personnel 54 61 52 52 39 43 63 68
Organisation & Design 63 71 57 57 38 47 57 63
Portfolio 53 69 51 38 38 54 56 69
Assignment 64 72 64 62 45 64 61 72
Quality 40 59 32 35 38 51 66 72
Programme Management 36 37 40 21 40 31 59 64
Project Management 70 75 70 61 43 59 72 77
Table 2 shows the comparison between South Africa and the other six nations, and
separately, the South African Construction Industry; based on the eight organisation
related dimensions. Results from the research project indicate that project management
in South Africa, as a project-oriented nation, is satisfactory compared with the
participating nations that participated. Companies do not operate in isolation and as
project orientated organisations function within a greater system.
Figure 13 shows the comparison related to Table 2.
70
60
50
40
%
30
20
10
0
Slovakia
Lithuania
Average
Finland
South
Const.Ind.
Romania
Austria
Germany
Africa
SA
Figure 13. Averages of the Project Oriented Nations and the SA Construction Industry
Source: Gareis en Füssinger (2007).
To compare the project orientation of nations, the ten dimensions shown earlier are used
to identify the PON-levels of each nation. Figure 14 shows this comparison in respect
of the Project Orientated Nations (PON), which indicates the three dimensions added by
the Project Management Research Group in Vienna, to illustrate a nation’s maturity
related to project orientation.
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JJP Verster and Carl van Zyl, pp 87-102
2.17
Lithuania 2.27
1.42
1.32
Romania 2
2.31
Project Management ‐ related
1.32 Research
Slovakia 1.73
Nation
2.56 Project Management ‐ related
Education
3.02
Finland 2.57 Project Management ‐ related
3.25
Marketing
2.85
South Africa 2.46
3.61
2.2
Austria 2.94
3.69
0 1 2 3 4
mature ratio
Figure 14. Project management-related services per nation
Source: Gareis & Füssinger. (2007)
Identifying the Pillars of Development
The establishment of the dimensions of a mature system leads to the question of how
maturity of such a system should be developed and facilitated, and how important the
suggested support systems of maturity development are.
Education and research were identified as important dimensions of project management
maturity and are seen as development areas of many nations including South Africa
(Refer to Figures 6 – 12). It was further suggested that education and research underpin
development towards the other dimensions. Other support systems (pillars) of
development were also reviewed to evaluate their developmental importance for a
society or profession.
A previous research project that should be linked to this approach was conducted by the
University of the Free State, South Africa. This project was based on the opinions of
professional people active in the construction industry and aimed at establishing the
importance of the five identified pillars in respect of their role and influence on the
profile of a profession as a mature or learned society, was conducted during 2008 to
evaluate the importance of proposed pillars in relation to the quantity surveying and
construction management professions (Verster, Kotzé & Hauptfleisch, 2008)
It is proposed that the five pillars identified previously are important in respect of the
development of orientation: Research and education were identified, while mentorship
and training closely relate to development of members of the learned society. CPD
relates to infrastructure and requirements by societies in respect of development.
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JJP Verster and Carl van Zyl, pp 87-102
Table 3 shows the results in respect of the five dimensions as pillars in respect of their
importance on a scale where 1 is of no importance and 5, very important.
Table 3: Five-pillar importance rating of dimensions of a learned society
Source: University of the Free State, Department of Quantity Surveying and Construction Management,
2008
DIMENSIONS IMPORTANCE SCALE: Opinions of respondents
Study 1: Quantity Surveyors Study 2: Construction Managers
Education 4.02 4.09
Training 4.04 3.82
Mentorship 4.59 4.64
CPD 4.02 4.46
Research 4.00 4.18
It is interesting to note that respondents to the construction management questionnaire
consider training less important than the respondents to the quantity surveying
questionnaire. However, mentorship and CPD received a much higher rating by the
respondents of the construction managers’ questionnaire (University of the Free State,
Department of Quantity Surveying and Construction Management, 2008)
For the growth of a professional society and for such a society to be world class and a
learned society, research, education, training and professional development are therefore
fundamental pillars for future survival, development and prosperity. This clearly seems
to be true in respect of project management. It is suggested that the project management
profession in South Africa is well positioned to becoming a pro-active learned society.
However, it is also evident that many members of the profession are not active enough
in building the profession’s profile towards development and growth. Maturity models
can assist with the establishment of benchmarks, prompting project managers to
concentrate on their particular maturity dimensions that may require improvement. In
this regard CPD can make an important contribution. An integrated research, education,
training, mentorship and development process is also proposed, in respect of project
management, to achieve the goals of the profession.
A model for maturity which includes education, training, research, mentorship and
continuing professional development may assist in bridging the gap between formal
education providers and providers of the project management service to the market
place. Such a model is diagrammatically proposed in Figure 13.
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RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
JJP Verster and Carl van Zyl, pp 87-102
PROJECT
MANAGEMENT
MATURITY OF THE
PROFESSIONS
AS A LEARND SOCIETY
M
E T E C R
D R N P E
U A T D S
C I O E
A N R A
T I S R
I N H C
O G I H
N P
THE PILLARS OF PROJECT MANAGEMENT
STRATEGY OF THE PROJECT MANAGEMENT PROFESSION TOWARDS A LEARNED
SOCIETY
Figure 13: Five-pillar (education, training, mentorship, CPD and research) model to achieve quantity
surveying and construction management maturity
Source: (Verster, 2009: own drawing adjusted from Verster,Kotzé & Hauptfleisch, 2008)
It is recognised that a registration system and required CPD programmes may assist new
qualified entrants to the profession to develop to the required levels of competence.
Verster, Kotze & Hauptfleisch (2008) proposed that training the trainers and mentoring
will further enhance the development of new entrants and promote the continuing
development of all professionals. It will remain difficult to establish scientifically
whether all the proposed objectives (dimensions of maturity) have been reached at the
required level.
Conclusion
The results of the six (6) other participating countries have been analysed and are a clear
benchmark for South Africa in respect of project management maturity.
If all seven (7) participating countries are taken into consideration, it is assumed that
South Africa, and in particular the construction industry, compare favourably with it’s
peers.
Although the South African results are fairly positive, they should be viewed against the
relative small sample of participants (7-).
Maturity models and maturity as an integrated overall goal may be very helpful tools for
companies and a society at large to keep developing and maintaining a competitive
edge. Companies, enterprises, organisations and nations can benchmark their maturity
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RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
JJP Verster and Carl van Zyl, pp 87-102
against others in relevant fields, but may also use their maturity evaluation to ensure
continuous growth and improvement in terms of knowledge, skills and performance in
areas of concern. It may also be important for learned societies and associations to
evaluate their status regarding the pillars of development. The results of a maturity
survey such as the project discussed are of particular importance for companies and
institutions in order to develop a strategic focus regarding the proposed pillars of
development, i.e. education, training, research, mentorship and CPD.
It is proposed that a professional society may be confident in respect of their status as a
learned and mature society if the strategy and development of their society is evidently
supported by the five pillars, and shown as comparatively mature. The professional
society, however, should be aware that continuous development remains necessary.
References
Füessinger, E. 2006. Maturities of project-oriented companies of about 15 project-
oriented Nations. In: 1st International Cost Engineering Council (ICEC) &
International Project Management Association (IPMA) Global Congress on Project
Management, Proceedings. Ljubljana, Slovenia, April.
Gareis, R. 2005. Happy Projects!. 1st ed. Vienna. Manz
Gareis, R. & Füessinger, E. 2007. Project Management Group. Final Report: Analysis
and Benchmarking of the Maturities of Project-oriented Nations. Vienna University
of Economics and Business Administration, Austria. July.
Gasse, F. 2006. Maturity Model of the Project-Oriented Company. [Online]. Vienna.
Project Orientation International. Available from: <http://poi.pmgroup.at/index>
[accessed 2007:02:06]
Oosthuizen, P., Köster, M and De la Rey, P. 1998. Goodbye MBA: A paradigm shift
towards Project Management. Thomson Publishing. Johannesburg, South Africa.
Project Management Group, 2006a. Results of Maturity of the Project-Oriented
Company, Groups and South Africa. Vienna University of Economics and Business
Administration, Vienna, Austria
Project Management Group, 2006b. Project- orientated company mature. [online].
Available from: http://www.poi.pmgroup.at/index.php?id=76 [Accessed 25 March
2007].
Project Management Institute, Inc. 2003. OPM3TM Organizational Project Management
Maturity Model Knowledge Foundation. Pennsylvania. Project Management
Institute.
University of the Free State, Department of Quantity Surveying and Construction
Management, 2008. Questionnaire on Dispute resolution, Maturity and Creativity of
Construction Managers in South Africa. Bloemfontein, South Africa
Verster, J.J.P., Kotzé, B.G. & Hauptfleisch, A.C. 2008. The pillars of quantity
Surveying for a learned society. Proceedings CD: 52nd Annual meeting of
Association of American Cost Engineering (AACE) International and the 6th World
Congress of the International Cost Engineering Council (ICEC) on Cost Engineering,
Project Management, and Quantity Surveying. Toronto, Canada. 29 June – 2 July.
Wirtschafts Universitat. Project Management Group. 2005. Questionnaire: Results of
Maturity of the Project-Oriented Company, Groups and South Africa. Vienna
University of Economics and Business Administration, Vienna, Austria
- 102 -
COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
G L Idoro and O Jolaiya, pp 103-113
Evaluating material storage strategies and their relationship with
construction project performance
G. I. Idoro1 and O. Jolaiya1
1
Department of Building, University of Lagos, Akoka, Lagos, Nigeria
E-mail: [email protected]
Abstract:
Materials continue to play a very important role in the delivery of construction projects
with researchers claiming that materials account for 50-60% of project cost and control
80% of its schedule. This study evaluates the strategies for the storage of materials for
project delivery and their relationship with project performance. The objectives are to
evaluate the levels of use of selected materials storage strategies, compare their levels of
use by indigenous and expatriate contractors and evaluate their relationship with project
performance. The study relies on a field survey involving a sample of 53 contractors
selected by stratified random. Data collected consist of percentages of material storage
in head and site offices and site annex; percentages of material storage in the three
locations by indigenous and expatriate contractors, respondents’ assessment of the
frequency of shortage of materials for work on site, project time, cost and quality and
initial and final contract periods and sums of selected projects executed by the
respondents. The data were collected using structured questionnaires and analysed using
percentage, mean item score, mean and Spearman correlation test. The study discovers
that the percentage of material storage in site office ranks first, material storage in head
office ranks second while storage in site annex ranks third. It also discovers that
contractors’ assessment of project time and cost, project cost-overrun and percentage of
cost-overrun to initial contract sum are not related to the use of the three selected
material storage strategies. However, contractors’ assessment of project quality, project
time-overrun and percentage of time-overrun to initial contract period are significantly
related to the storage of materials on site and head offices. The study considers these
results as indication that increased storage of materials on site and head offices are
strategies that promote early delivery of projects. It advocates that contractors should
adopt measures that will promote greater storage of materials on site during project
delivery.
Keywords:
Contractors, material storage in head office, material storage in site annex, material
storage in site office and project performance.
1 Introduction
Materials remain the most significant input in project development and play a very
important role in the delivery of construction projects. Researchers claimed that
materials account for 50-60% of project cost and control 80% of its schedule (Ibn-
Homaid, 2002; Lee, 2004). The significance of materials in the achievement of project
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objectives and indeed the overall success of a project is borne out of the fact that
materials constitute the most significant component of project cost and cost-overrun in
construction projects. One aspect of materials that has been identified in research
studies (Veronica et al. 2006; Latif et al. 2008) to have a major effect on cost-overrun in
projects is material storage. Although, storage is not the major component of material
cost however, it does constitute a significant element of material cost and cost-overrun.
Storage is used to reduce material shortage, wastage, pilfering and damage and to
support bulk purchase of materials thereby getting the benefits of economies of scale.
The ways by which storage contributes to project cost and most important cost-overrun
are numerous. Johnston (1987) identified material storage related processes as the major
causes of variance in material cost. Veronica et al. (2006) discovered that material
storage is one of the eleven groups of corrective actions for preventing material cost-
overrun. The significance of material storage to project cost and cost-overrun prompted
the evaluation of the strategies of material storage and their influence on project
performance in the Nigerian construction industry.
1.1 Objectives of the study
The objectives to be achieved by the study are to compare the use of site and head
offices and site annex for the storage of construction materials generally and between
indigenous and expatriate Nigerian contractors and to determine the correlation between
the use of site and head offices and site annex for the storage of project materials and
project performance. The achievement of these objectives will make the major
stakeholders in the Nigerian Construction Industry (NCI) especially Nigerian
contractors to know how well the three storage strategies contribute to the success of
construction projects.
1.2 Hypotheses of the study
Three hypotheses were postulated in the attempt to achieve the objectives of the study.
The first hypothesis states that the percentages of the values of construction materials
stored on site, head office and site annex are not significantly correlated. The test of this
hypothesis will enable stakeholders to know whether contractors’ preference in the use
of the three strategies is significant or not. The second hypothesis states that the values
of construction materials stored on site and head offices and site annex by indigenous
and expatriate contractors are not significantly different. The test of this hypothesis will
enable stakeholders to know whether or not the values of materials stored in each of the
three locations by indigenous and expatriate contractors are the same. The third
hypothesis states that the percentages of the values of construction materials that are
stored on site, head office and site annex have no significant correlation with project
performance. The hypothesis is tested to know whether or not the use of the three
storage strategies contributes to successful project delivery.
1.3 Variables of the study
The variables selected for the study were classified into three categories namely:
Nigerian contractors, material storage strategies and project performance. Nigerian
contractors were classified into indigenous and expatriate contractors. Material storage
strategies consist of material storage in site office, head office and site annex. The
variables selected for project performance are respondents’ assessment of the frequency
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of shortage of materials for work on site, project duration, cost and quality, project time-
overrun and cost-overrun.
2 Literature Review
The importance of materials in successful project delivery was emphasised in several
research studies. Ibn-Homaid (2002) observed that materials account for substantial
portions of project cost and time. Lee (2004) maintained that materials constitute more
than 40% of the total construction cost therefore materials constitute an important
success factor in construction project. The fact that materials constitute the major
component of project cost means that effective material management is a sine-qua-non
of project success. While Illingworth and Thain (1988) described material management
as a planned procedure that included the purchasing, delivery, handling and
minimisation of waste that is aimed at ensuring that project requirements are met, Kini
(1999) regarded it as a management system that integrates purchasing, shipping and
material control from suppliers. Veronica et al. (2006) defined material management as
a process of planning, executing and controlling the right source of materials with the
exact quality, time and place suitable for minimum cost construction process.
One of the processes for achieving effective material management system is material
cost control. Veronica et al. (2006) regarded the objective of material cost control as
early detection of any possibility of cost variance from budget or material cost-overrun
so that corrective actions can be taken. Latif et al. (2008) however maintained that the
objective of material cost control is to ensure that materials are supplied as scheduled.
The two studies identified material storage as one of the main components of material
cost control. While Veronika et al. (2006) identified ten main steps (planning &
scheduling, organisation & personnel, procurement, delivery, quality assurance/control,
storage and storage facilities, usage, change order, monitoring & control and external
factors) in material cost control, Latif et al. (2008) maintained that material cost control
has four indicators which are purchasing cost, transportation cost, storage cost and
excess materials (waste) cost. He identified eleven causes of material cost-overrun and
six of them (material shortage during construction, excess materials, delay in work,
increased purchasing cost, delay in delivering materials and increased damaged
materials) have events that are related to storage. Johnston (1987) in his study also
identified several causes of variance in material cost and many of these causes are
storage-related.
Johnston (1987) opined that material storage involves delivery of goods to site, off-
loading, stockpiling, protection against deterioration, damage, identification for future
reference, accounting procedures and issuance of materials to operatives for use on site.
Baker (1989) and Olusola et al. (2002) in separate studies confirmed that construction
firms have at least two stores namely: head office otherwise known as generalised or
centralised store and site office which can be described as decentralised store. Baker
(1989) maintained that centralisation of store refers to a situation whereby a firm
operates one site while decentralisation of store describes a situation whereby a firm
operates two or more sites. He added that centralisation of stores is primarily adopted
because of the benefits to be derived from economies of scale and centralised control
and identified nature of materials, control, security and vulnerability and transportation
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as some of the factors that will determine whether stores should be decentralised or
centralised. Decentralisation will also be considered where a firm has many projects at
hand whose sites are far from each other. In such cases, a site annex can be developed
that will serve as a store for two or more sites. In addition, where a firm operates a
confined site that is far from its head office, a site annex may also be set up for the
storage of materials that cannot be stored on site.
3 Research Methodology
The study adopted a survey approach to achieve its objectives. In the approach, a field
survey was conducted in 2008. In view of lack of accurate data, a preliminary survey
was first conducted and 191 contractors were identified. These contractors were used as
the population frame for the study. The population was first categorised into indigenous
and expatriate contractors thereafter, a sample of 104 contractors was selected by
stratified random sampling. An on-going project being executed by each of the
contractors was selected for the collection of data. Data collected consisted of the type
of contractor (indigenous or expatriate), the percentages of material stored in head and
site offices and site annex; contractors’ assessment of the frequency of shortage of
materials for work on site, project time, cost and quality and initial and final contract
periods and sums of the selected projects. The data were collected using structured
questionnaires and analysed using percentage, mean item score, mean and Spearman
correlation test.
4 Findings and Discussion
The results of the analysis of data collected are presented as follows:
4.1 Level of Use of Material Storage Strategies
For this investigation, three material storage locations namely: head office, site office
and site annex were selected. The percentage of the value of materials stored in each of
the three storage locations to the total value of materials procured for the projects
selected were determined. The mean percentage of the value of materials stored in each
location and their ranks were analysed. The results are presented in Table 1.
Table 1 Ranking of the mean percentages of the value of materials stored in three selected storage
locations
Storage locations Number Sum Mean Rank
Site office 104 5580 53.65 1
Head office 98 3520 35.92 2
Site annex 56 1300 23.21 3
The results in Table 1 reveal that material storage in site office (53.65%) ranks first.
Material storage in head office (35.92%) ranks second while storage in site annex
(23.21%) ranks third in level of use. The results indicate that the most used storage
strategy for construction materials is storage on site. The high level of use of this
strategy is due to the advantage of single handling and transportation of materials from
procurement location to construction location that it offers. This advantage which
translates into cost advantage makes the strategy the first consideration in terms of
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storage of construction materials. The second most used storage location is the head
office while the least used storage location is site annex. The use of head office and site
annex storage facilities often require double handling and transportation of materials.
4.2 Correlation between levels of use of selected material storage strategies
Te test of the correlation between the levels of use of the three material storage
strategies was further carried out. For this investigation, the first research hypothesis of
the study was tested. The hypothesis states that the percentages of the values of
construction materials stored on site, head office and site annex are not significantly
correlated. The hypothesis was tested using Spearman correlation test at 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 result of
the test of the hypothesis is presented in Table 2.
Table 2 Results of Spearman test for correlation between the percentages of the values of materials used
for construction that are stored on site, head office and site annex.
Level of use % value of % value of % value of
materials stored materials stored materials stored
on site in head office in site annex
% value of materials stored on site N - 84 56
R -0.802 -0.487
P 0.001 0.001
% value of materials stored in head office N 84 - 68
R -0.802 0.025
P 0.001 0.839
N=Number of respondents, R=Correlation coefficient, p=p-value
The results in Table 2 show that the p-values for correlation between the percentages of
values of materials used for projects that were stored on site and head office (0.001) and
site and site annex (0.001) are less than the critical p-value (0.05) therefore the
hypothesis is rejected. This result indicates that the percentage of the value of materials
stored on site has significant influence on the percentages of the values of materials
stored in head office and site annex. The p-value for correlation between the
percentages of the values of materials stored in head office and site annex (0.839) is
greater than the critical p-value (0.05) therefore the hypothesis is accepted. This result
implies that the percentage of the value of materials stored in site annex has no
significant influence on the percentage of the value of materials stored in head office
and vice versa.
4.3 Levels of use of selected material storage strategies by Indigenous and
Expatriate Contractors
The levels of use of the three selected material storage strategies by indigenous and
expatriate contracting firms were investigated. Data on the percentage of the value of
materials stored in each of the three storage locations to the total value of materials
procured for projects by the two categories of contractors were collected. The mean
percentage of the value of materials stored in each location by the two contractors and
their ranking are presented in Table 3.
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Table 3 Ranking of the mean percentage of the values of materials stored in selected locations by
indigenous and expatriate contractors
Storage location Indigenous contractors Expatriate contractors
N Mean Rank N Mean Rank
Site office 64 57.81 1 22 48.18 1
Head office 58 29.83 2 22 43.64 2
Site annex 40 24.25 3 8 22.50 3
N=Number of respondents
The results in Table 3 show that the mean percentage of the values of materials stored in
site office by indigenous (57.81%) and expatriate (48.18%) rank first. The mean
percentages of the values of materials stored in head office by indigenous (29.83) and
expatriate (43.64) contractors rank second while the mean percentages of the values of
materials stored in site annex by both indigenous (24.25) and expatriate (22.50)
contractors rank third. The results indicate that the preference for the storage strategies
by the two categories of contractors is the same.
4.4 Comparing the levels of use of selected storage strategies between
indigenous and expatriate contractors
Based on the results in Table 2 that the preference for the three selected material storage
strategies by the two categories of contractors is the same, the study further compared
the levels of use of the three strategies by the two categories of contractors. The ranking
of the mean percentages of the values of materials stored in each location between
indigenous and expatriate contractors are presented in Table 4.
Table 4 Ranking of the mean percentage of the values of materials stored in selected locations by
indigenous and expatriate contractors
Storage location Indigenous contractors Expatriate contractors
N Mean Rank N Mean Rank
Site office 64 57.81 1 22 48.18 2
Head office 58 29.83 2 22 43.64 1
Site annex 40 24.25 1 8 22.50 2
N=Number of respondents
The results in Table 4 show that the mean percentages of materials stored by indigenous
contractors in site office (57.81) and site annex (24.25) rank first while those stored by
expatriate contractors in site office (48.18) and site annex (22.50) rank second.
However, the mean percentage of materials stored in head office (43.64) by expatriate
contractors ranks first while that of indigenous contractors (29.83) ranks second. The
results indicate that indigenous contractors store more materials on the site and site
annex than expatriate contractors while the latter stores more materials in their head
offices than the former.
Further confirmation of differences in the levels of use of the three material storage
strategies by the two categories of contractors involves the test of the second research
hypothesis of the study. The hypothesis states that the values of construction materials
stored in site and head offices and site annex by indigenous and expatriate contractors
are not significantly different. The hypothesis is tested using t-test at p≤0.05. The rule
for the acceptance or rejection of the hypothesis is that when p-value > 0.05, the
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hypothesis is accepted but when p-value ≤ 0.05, the hypothesis is rejected. The result of
the test of the hypothesis is presented in Table 5.
Table 5 Results of t-test for difference in levels of use of selected material storage strategies by
indigenous and expatriate contractors
Storage location Contractor type Number Mean t-value Df p-value Decision
Site office Indigenous 64 57.81 1.343 84 0.183 Accept
Expatriate 22 48.18
Head office Indigenous 58 29.83 -2.135 78 0.036 Reject
Expatriate 22 43.64
Site annex Indigenous 40 24.25 0.214 46 0.831 Accept
Expatriate 8 22.50
The results in Table 5 show that the p-values for the test of differences in the
percentages of materials stored in site office (0.183) and site annex (0831) between
indigenous and expatriate contractors are greater than the critical p-value (0.05)
therefore the hypothesis is accepted. The result indicates that the differences in the
percentages of materials stored on site and site annex by the two categories of
contractors are not significant. However, the p-value (0.036) for the test of difference in
the percentages of materials stored in head office by the two contractors is less than the
critical p-value (0.05) therefore the hypothesis is rejected. The result implies that the
percentage of materials stored in head office by expatriate contractors is significantly
higher than the percentage of materials stored in head office by indigenous contractors.
In other words, the result indicates that expatriate contractors depend more on their head
offices for the storage of materials for construction work on site than indigenous
contractors.
4.5 Correlation between the levels of use of selected material storage strategies
and project performance
Attempt to evaluate the impact of the three strategies prompted the analysis of the
correlation between the percentages of the values of materials stored in the three
locations and selected indicators of project performance. For this purpose, the six
indicators of project performance namely: respondents’ assessments of the frequency of
shortage of materials for work on site, project duration, cost and quality and time and
cost overruns were used. Data on the percentages of the values of materials used for the
projects and on the six indicators of project performance were measured as explained
above. The analysis involves the test of the third hypothesis of the study which states
that the percentages of the values of construction materials that are stored on site, head
office and site annex have no significant correlation with project performance. The
hypothesis was tested using Spearman correlation test at 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 result of the test of the
hypothesis is presented in Table 6.
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Table 6 Results of Spearman test for correlation between the percentages of the values of materials used
for construction that are stored on site, head office and site annex and project performance.
Level of use % value of % value of % value of
materials stored materials stored materials stored
on site in head office in site annex
Frequency of shortage of materials on site N 88 96 66
R -0.039 -0.172 0.099
p 0.716 0.093 0.430
Respondents’ assessment of project N 86 96 68
duration R 0.041 -0.167 -0.106
p 0.707 0.103 0.388
Respondents’ assessment of project cost N 88 96 68
R -0.138 0.129 0.146
p 0.199 0.210 0.235
Respondents’ assessment of project N 84 96 68
quality R 0.311 -0.326 0.032
p 0.004 0.001 0.794
N *28 *34 *28
Project time-overrun R -0.215 -0.123 0.206
p 0.272 0.490 0.292
N *38 *38 *25
Project cost-overrun R 0.015 -0.061 0.171
p 0.931 0.717 0.414
N=Number, R=Correlation coefficient, p=p-value
* Number of respondents is low because many of the projects sampled are on-going
The results in Table 6 show that the p-values for correlation between the percentage of
the value of materials stored on site and respondents’ assessment of the frequency of
shortage of materials on site (0.716), project duration (0.707) and project cost (0.199),
project time-overrun (0.272) and project cost-overrun (0.931) are greater than the
critical p-value (0.05) therefore the hypothesis is accepted. The result shows that value
of materials stored on site has no significant influence on respondents’ assessment of
the frequency of shortage of materials on site, project time and cost and project time and
cost-overruns. This result is an indication that the level of material storage on site has no
significant influence on shortage of materials on site, project delivery time and cost.
However, the p-value for correlation between the percentage of the value of materials
stored on site and respondents’ assessment of project quality (0.004) is less than the
critical p-value (0.05) therefore the hypothesis is rejected. The result implies that the
storage of materials on site has significant influence on the quality of works on site.
The results in Table 6 also reveal that the p-values for correlation between the
percentage of the value of materials stored in head office and respondents’ assessment
of the frequency of shortage of materials on site (0.093), respondents’ assessment of
project duration (0.103), respondents’ assessment of project cost (0.210), project time-
overrun (0.490) and project cost-overrun (0.717) are greater than the critical p-value
(0.05) therefore the hypothesis is accepted. The result is an indication that the storage of
materials in head office has no significant influence on shortage of materials on site,
project delivery time and cost. However, the p-value for correlation between the
percentage of the value of materials stored in head office and respondents’ assessment
of project quality (0.001) is less than the critical p-value (0.05) therefore the hypothesis
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is rejected. The result also implies that material storage in head office also has
significant influence on the quality of works on site.
The results in Table 6 also reveal that the p-values for correlation between the
percentage of the value of materials stored in site annex office and respondents’
assessment of the frequency of shortage of materials on site (0.430), respondents’
assessment of project duration (0.388), respondents’ assessment of project cost (0.235),
respondents’ assessment of project quality (0.794), project time-overrun (0.292) and
project cost-overrun (0.414) are greater than the critical p-value (0.05) therefore the
hypothesis is accepted. The result indicates that material storage in site annex office has
no significant influence on shortage of materials on site, project delivery time, cost and
quality.
4.6 Discussion of findings
The results of the levels of use of the three material storage strategies indicate that the
storage of materials on site is the most adopted strategy. In other words, Nigerian
contractors consider the location of proposed or on-going projects first for the storage of
materials to be used for construction. This preference is expected because the strategy as
discussed above offers cost advantage over the other two strategies. The preference is
further confirmed by the results of the correlation between the levels of material storage
on site, head office and site annex. The results that the value of materials stored in site
office has influence on the values of materials stored in head office and site annex
indicate that contractors consider the storage of materials on site before considering
head office and site annex. The results imply that when the storage of materials cannot
be accommodated on site, the next option is to store them in the head office. The
preference of head office to site annex is because contractors usually maintain storage
facilities in their head offices therefore providing storage facilities for materials to be
used for construction works on site in the head office is expected to be at little extra cost
as against the cost of setting up new storage facilities in a site annex close to the
locations of proposed or on-going projects. The result of the study that there is no
correlation between the levels of use of head office and site annex indicates that the
choice of head office does not influence the choice of site annex for material storage.
The results of the levels of use of the three material storage strategies by indigenous and
expatriate contractors indicate that the two categories of contractors consider site office
first and head office next. The results of no significant differences in the levels of
material stored on site and site annex between indigenous and expatriate contractors are
further confirmation of the preference. The significant difference in the levels of
material stored in head office between the two categories of contractors is only an
indication that expatriate contractors provide more storage facilities and therefore store
more materials to be used for construction in their head offices than indigenous
contractors.
The results of the study that there is significant correlation between the percentages of
the values of materials stored on site and head office and respondents’ assessment of
project quality imply that the storage of materials on site and head offices influences the
judgement of contractors on the quality of works. While the storage of materials in the
locations of proposed or on-going projects increases contractors’ judgement on the
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quality of works, the storage of materials in head office tends to lower it. The result of
the correlation between the percentage of the value of materials stored in site annex and
respondents’ assessment of project quality indicate that the distance from the location of
site annex to that of the project has no influence on the quality of works. Other results
which are intended to evaluate the influence of the level of use of the three strategies on
project performance indicate that the preference for site office as the first storage
location and head office as the next storage location before site annex have no influence
on project time and cost. The implication of the results is that the cost advantage derived
from single handling and transportation of materials stored on site and the extra cost of
setting up new storage facilities in site annex are not reflected in time and cost of
projects. The result suggests that the storage of materials in head office and site annex
would have been envisaged during tendering and the cost already included in contract
sum therefore additional or extra cost that will lead to cost-overrun may not be incurred
on the part of the client but for the contractor, additional cost is inevitable
5 Conclusion
The study has established that the storage of materials on site is the most preferred and
used storage strategy by Nigerian contractors generally. Although, the strategy may not
result in time and budget reduction because project plans and targets are likely to have
been based on selected strategies however, the strategy is discovered to have positive
influence on the quality of work. This result justifies the preference for storage of
materials on site. Contractors should therefore promote the strategy and adopt measures
that will make the strategy more effective and efficient.
6 References
Baker, T (1989) Essentials of Materials Management. 1st edition, Berkshire, London
Bertelsen, S and Nielsen, J (1997) Just-in-Time Logistics in the Supply of Building
Materials. Proceedings of the 1st International Conference on Construction
Industry Development: Building the Future Together, Singapore, pp 1-9
Johnston, J E (1987) Site Control of Materials: Handling, Storage and Protection. 1st
edition, Butterworth, London.
Ibn-Homaid, NT (2002) A Comparative Evaluation of Construction and Manufacturing
Materials Management. International Journal of Project Management, 20,
263-270
Illingworth, J and Thain, K (1988) Material Management – Is it worth it? Technical
Information Service, 93, 1-5
Kini, U D (1999) Material Management: The Key to Successful Project Management.
Journal of Management in Engineering.
Latif, Y; Abiodun, I and Trigunarsyah, B (2008) Knowledge-Based Material Cost
Control for Building Construction Project using Expert System Approach.
Proceedings of CIB International Conference on Building Education and
Research, School of the Built Environment, University of Salford, Salford, UK,
pp 1969-1978
Lee, S B (2004) A Study on Optimal Lead Time Selection Measure of the Construction
Materials. Journal of Architecture, 4(1), 28-35
Olusola, K D (2002) An Appraisal of the Management of Material Waste for Cost
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G L Idoro and O Jolaiya, pp 103-113
Reduction on Construction Sites. The Professional Builder, 8(3), 24-29
Veronica, A; Riantini, S L and Trigunarsyah, B (2006) Corrective Action
Recommendation for Project Cost-Variance in Construction Material
Management. The 10th East Asia-Pacific Conference on Structural Engineering
& Construction, Bangkok, Thailand, pp 23-28.
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
H Onukwube, A Adenuga and I Enang, pp 114-127
The impact of risk on contractors pricing: a study of building
projects in Lagos state, Nigeria
Henry N. Onukwube 1, Olumide A. Adenuga 1 and Imowo J. Enang 1
1
Department of Building,
University of Lagos,Akoka,Yaba,Lagos,
Nigeria.
Email: [email protected]; [email protected];
Abstract:
Risks on building projects have been treated with much levity by contractors and such
risks when not properly identified and effectively priced have overtime contributed to
unsuccessful project delivery. This paper presents the results of a study with the
objectives to assess the impact of financial, design and construction risks on contractors
pricing of building projects. The study was carried out through questionnaire survey
administered to a population of sixty construction professionals in construction
companies. The data analysis included relative index technique,analysis of variance
.The various risk factors (financial, design and construction risks) were correlated in
order to determine the statistical significance of the relationship between the variables
and contractors’ pricing. The results of the analysis from the questionnaire survey
showed that the most statistically significant risk variable was inadequate cash flow.
The results also showed that the various types of risk factors: financial risk, construction
risk, and design risk all have impact on contractors’ pricing of building projects.
Keywords: Building Projects, Contractors Pricing, Risk Impact, Nigeria.
1 Introduction
Risk is inherent in all human endeavours, including construction activities, and the risk
elements involved are diverse and varied (Odeyinka, 2000). Construction projects are
normally executed under an environment characterized by varying degree of risks and
uncertainties, which can result from ‘known’, ‘known-unknown’, and ‘unknown-
unknown’ conditions (Smith, 1999). Failure to adequately deal with these uncertainties
has been shown to cause cost and time overruns in construction projects (Thompson and
Perry, 1992). According to Carr and Tah (2000), communication of construction project
risk tends to be poor, incomplete and inconsistent both throughout the construction -
supply chain and through the full project lifecycle. Quite often, contractors are unable to
effectively price for the risk in construction projects (Laryea and Dontwi, 2007).
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Risk in construction can be described as exposure of construction activities to economic
loss, due to unforeseen events or foreseeing events for which uncertainty was not
properly accommodated (Joshua and Jagboro, 2007). Whenever a construction project is
embarked upon, there are some risk elements inherent in it, such as physical risk,
environmental risk, logistics risk, financial risk, legal risk and political risk among
others (Perry and Hayes, 1985). Common risks faced by contractors include: (1)
changes in work (2) delayed payment on contract (3) financial failure of owner (4)
labour disputes (5) labour, equipment and material availability (6) productivity of labour
(7) defective materials (8) productivity of equipment (9) safety (10) poor quality of
work (11) unforeseen site conditions (12) financial failure of contractor (13) political
uncertainty (14) changes in government regulation (15) permits and ordinances (16)
delays in resolving litigation/arbitration disputes (17) inflation (18) cost of legal
process and (19) force majeure. Contractors either respond to risk before the
construction of a project or after; they can choose to forecast a price for risk based on all
information available at the tender stage and account for it in the bid or overall business
strategy, or they can be indifferent and count the cost of risk in severe losses after a
contract. (Laryea and Dontwi, 2007).
The aim of this study is determine the impact of risk on contractors’ pricing of building
projects in Lagos State, Nigeria.This will be achieved through the following objectives.
• To assess the impact of financial risk on contractor’s pricing of building
projects.
• To evaluate the influence of design risk on contractors’ pricing of building
projects.
• To assess the impact of construction risk on contractors’ pricing of building
projects.
2 Literature Review
2.1 Risk and Risk Management
Risk is a multi-facet concept. In the context of the construction industry, it could be the
likelihood of the occurrence of a definite event/factor or combination of events/factors
which occur during the whole process of construction to the detriment of the project
(Faber, 1979). Risk management is a formal and orderly process of systematically
identifying, analysing, and responding to risks throughout the life-cycle of a project to
obtain the optimum degree of risk elimination, mitigation and/or control (Wang,
Dulaimi and Aguria, 2004). According to (Wang, Dulaimi and Aguria, 2004), a
systematic approach to risk management in construction industry consists of three main
stages: a) risk identification; b) risk analysis and evaluation; and c) risk response. The
risk management process begins with the initial identification of the relevant and
potential risks associated with the construction project. It is of considerable importance
since the process of risk analysis and response management may only be performed on
identified potential risks. Risk analysis and evaluation is the intermediate process
between risk identification and management. It incorporates uncertainty in a
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quantitative and qualitative manner to evaluate the potential impact of risk. The
evaluation should generally concentrate on risks with high probabilities, high financial
consequences or combinations thereof which yield a substantial financial impact. Once
the risks of a project have been identified and analysed, an appropriate method of
treating risk must be adopted.
2.2 Risk identification
Risk identification according to Flanagan and Norman (1993) is important in that during
the early stages of appraisal of the project, it is of direct assistance in establishing
project constraints and provides useful data to assist the choice between different
projects. According to them, risk identification later provides a basis from which the
appropriate organisational structure, tendering procedure, type of contract and risk
allocation through the contract documents can be formulated. Lockyer and Gordon
(1996) revealed that the project team and others connected with a project can be
encouraged to recognise the potential areas of risk and of beneficial effects by:
• brainstorming
• using experience and lessons from past projects
• using the project network to model possible risk events
According to Perry and Hayes (1985), the identification and initial assessment of risk
associated with a project is a first necessary step before analysis, response and
reporting. In the early stages of appraisal of a project, it is of direct assistance in
establishing project constraints. Lockyer and Gordon (1996) maintained that tools of
risk identification must be available to the person whose job is to identify risk. Risk
identification is the process of examining the program areas and critical technical
processes to identify and document the associated risks. Risk can be classified in to the
following categories:
2.2.1 Financial Risks
Project related financial risks are carried by the contractor, with the greatest exception
being the overall project funding by the owner. Contractor default is a form of financial
risk that the owner can reduce by pre-qualification, but performance and payment bonds
are more directly aimed at shifting the risk to the surety. The contractor obviously has a
major risk in the event of contract default. They can minimize the extent of this risk by
carefully selecting projects and avoiding ventures where they have little expertise.
Contractor financial risks often arise from poorly prepared estimates (Smith, 1992) as
cited by (Usta, 2005).
2.2.2 Construction Risks
Mitigation measures are the most recommended management method. The mitigation
measures focus on improved planning and implementation of project control systems.
Contingency is an alternative management method in quality problems, poor
productivity (time contingency), changes, and delays. These problems are predictable,
which suggests that they can be anticipated, but their magnitude and cost are very
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difficult to forecast. For quality problems, rework can be estimated from prior work, if
rework costs have been independently tracked. Generally, rework costs are part of
historical costs but are not tracked independently. Schedule contingency and related cost
contingency can be allocated for potential productivity problems. The owner usually
sets the schedule deadline so that schedule contingency would include mitigation
measures such as increasing the number of crews. This contingency is most directly
addressed to sensitive activities or those with an anticipated higher risk. Construction
changes should be included in a changes clause, but in those instances where no clause
exists, an extension time for changes in works should be allowed to the Contractor.
Losses due to the Contractor’s poor planning or execution would have to be recovered
from internal funds. Recovery for errors in method selection may not be possible, even
with a contingency account. Changes in the method of construction are highly
significant when the estimate and schedule are both linked to pre project planning
assumptions (Smith,1999).
2.2.3 Design Risks
The client traditionally assumes most of design risks, and the client’s project budget
should have some level of contingency. According to Usta (2005),it is difficult to
estimate productivity and potential delays without a basis for making the estimate.
Rather than include contingency, contractors adjust their productivity rates or unit costs
to reflect anticipated difficulties. In design build or construction management it is
common to add additional sums for unknowns and difficulties. This form of
contingency is not allocated to overall project risk but for specific work related risks. In
the event of scope changes without proper contract language contractors would include
contingency. However, the recommended method for handling scope changes is through
proper allocation in the changed conditions clause. Differing site conditions and
changed design are similar to scope changes.
2.3 Factors Affecting Contractors’ Pricing
2.3.1 Project definition
The amount of project definition (tender documentation) is the single most important
factor controlling the accuracy of any tender. When the documentation is inadequate,
the time spent to estimate the cost is low and the percentage of possible error is high
hence contractors’ price high, to cover the cost of all the unknown risks associated with
the project.
2.3.2 Contracting Plan
Atton (1982), as cited by Onukwube (2002) opines that the first decision which faces
the contractor is whether or not he wishes to tender. His decision will be influenced by
his corporate plan and his available resources. Manpower and cash availability are
usually the principal factors which affect his decision. If the contractor is disposed to
decline the invitation, but believes such an action may prejudice his chances of being
invited to tender on future occasions, he may decide to accept the invitation but take
steps to ensure that his tender will not be accepted. This may be done by submitting an
inflated tender.
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2.3.3 Type of Development
Ritz (1994) as cited by Onukwube (2002), observed that if the type of development is
such that the contractor has the experience, technical knowledge and ability to execute,
his tender price will be competitive. On the other hand, his tender price may be high if
he doesn’t have the experience, technical knowledge and ability to execute the project.
2.3.4 Labour Productivity Basis
Peoples’ ability could be said to vary, even as their will to work varies. According to
Onukwube (2002), Ages, nutrition, temperature and humidity are factors affecting
labour productivity, but these factors are beyond the control of management. If the
management of any contracting organisation creates enabling work environment and
provides adequate welfare packages for the workers, this may facilitate higher labour
productivity which will have a positive effect on the tender price of such a contractor,
however, if the contracting organisations encourage increased unproductive time of
work force, this will have a negative effect on the tender of such a contractor.
2.3.5 Material Availability
When the material component of any project has a lot of foreign materials, such
materials must be imported and hence, this will be reflected on the tender prices and
where most of the materials specified in the project is not in stock or where the source
of supply is far from the project location, this will increase the tender price.
2.3.6 Volume of Building Projects with back-up finance
Ayeni (1997) asserts that when the market is booming with many building projects
which the client has the backup finance to execute, tender prices will definitely be at the
highest possible because most contractors will be busy and competition will not be
keen.
2.3.7 Contract Types
Lump sum contracts based on fluctuating prices are priced more cheaply than those
based on firm prices (Ayeni, 1997) and further to this, Ritz (1994) as cited by
Onukwube (2002) points out that contracts where the project definition and contract
documentation is well detailed and project risks well defined and isolated and where the
client knows the contract sum before the commencement of the project result in the
tender sum being competitive unlike contracts where the project definition and contract
documentation is not well detailed or where such is still being prepared such that the
client will not know the contract sum before the commencement of the project. In such
an instance, the tender sum will be high.
2.3.8 Management Ability
Ritz (1994) as cited by Onukwube (2002), observed that the most important line
function in the construction organization takes place under the direction of the site
management, where the largest commitment of human and physical resources are
managed. If a contracting firm has good management, their tender price may be
competitive but if their management is inadequate, this may have a negative effect in
the control of their construction resources with the resultant effect of higher tender
prices.
2.3.9 Zonal Rates
Ayeni (1997) observed that rates within the building industry are influenced by the
location of the project, since prices of building materials are not uniform throughout
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Nigeria. Hence, when a contractor is tendering for a project located where the prices of
building materials are high, the tender price will also be high, but if the project is
located in an area where the prices are moderate, then the tender price will be
competitive.
2.3.10 Method of tender selection and degree of competition
Generally, the degree of competition which a contractor faces while tendering, depends
on the method of tender selection adopted. This can either be open competition,
selective competition or negotiated competition. Ramus (1981) as cited by Onukwube
(2002) stated that in open competitive tendering, where the number of competitors is
unlimited, contractors tend to keep their mark-ups low, thereby resulting in low bids,
with the hope of winning the contract. In selective competition, the number of
contractors is reduced when compared to open tendering. Seeley (1997) describes how
the selection factors ensure that these tenderers on the shortlist are of comparable
technical competence and has good financial standing, this increases the estimating
accuracy.
2.3.11 Category of the Contractor
Ayeni (1997) opined that the category of the contractor affects the price of the tender.
He observed that contractors with higher overheads will price higher than contractors
with marginal overheads. Onukwube (2002) therefore recommended that only
contractors of the same category be invited to tender for a project they can handle.
2.3.12 Level of Profit
The magnitude of organizational structure of a contractor will have an effect on the
level of profit charged on a project. Contractors that have a large overhead will allow a
higher percentage of profit than contractors that have minimal overheads. Hence the
tender price will be high if the percentage allowed for profit is high; and competitive if
the percentage allowed for profit is moderate.
2.3.13 Level of Workmanship
Some contractors employ highly skilled labour in executing their work. Such skilled
labour cost money and must be reflected in their tender price.
2.3.14 Government Policy
Government can through its monetary policy, increase the percentage of interest
charged on borrowed finance for construction work. The resultant effect is that when
contractors borrow money at such high interest rates charged by the banks, they then
transfer such to their tender prices. When the reverse is the case, contractors may then
submit tenders which are competitive.
3 Research Methodology
The study was carried out through questionnaire survey. The questionnaire contained
twenty items which include: name of respondents, profession, designation in the
organization, years of working experience in the construction industry, highest
educational qualification, professional body affiliation, age, gender, marital status,
number of employees, number of technical staff, annual turnover, age of company, type
of project, procurement method adopted, client type, project value, the degree of
occurrence and impact of risk factors in contractors pricing, contractors pricing. The
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respondents were given 5 financial risk factors, 7 construction risk factors, 3 design risk
factors, 7 political risk factors. The respondents were asked to score on a scale of 1 to 5,
the extent of occurrence of the risk factors in selected building projects using 1 for no
occurrence, 2 for low occurrence, 3 for medium occurrence, 4 for high occurrence and 5
for very high occurrence. In addition, they were asked to determine the order of impact
they would place on the risk factors where it occurred. This was done on a scale of 1-5,
where 1 – no impact, 2 – little impact, 3 – critical impact, 4 – very critical impact and 5
– extremely critical impact. The respondents were also given 21 factors that contractors
take into consideration during pricing of building projects and were asked to assess the
importance of these factors on a 5 – point likert scale of 1 for not important, 2 for
somewhat important, 3 for of little importance, 4 for important and 5 for very important.
Statistical analysis was undertaken using statistical package for Social Sciences
(SPSS).Frequency counts of demographic details of the respondents were produced.
Three hypotheses were stated and tested using repeated measure analysis of vaiance.
Using a stratified sampling technique the questionnaires were distributed to 100
construction professionals in construction companies. Data for professionals in
construction companies were obtained by probabilistic sampling technique because the
population is defined. Overall, 60 construction professionals returned completed
questionnaires in a usable format, representing 60% response rate.
3.1 Statistical Methods Employed
This section details some of the statistical methods employed for data analysis. The
assumption underlying each statistical method is stated where applicable.
Mean Response Analysis / Mean Item Score
Mean Item Score
Where n1 = number of respondents who answered ‘no impact’ or ‘not important’
n2 = number of respondents who answered ‘little impact’ or ‘somewhat important’
n3 = number of respondents who answered ‘critical impact’ or ‘of little importance’
n4 = number of respondents who answered ‘very critical impact’ or ‘important’
n5= number of respondents who answered ‘extremely critical impact’ or ‘very
important’
Analysis of Variance (ANOVA)
This statistical tool is used to test the significance of differences between more than two
sample means.
The method assumes that each sample is drawn from a normal population; each
population having the same variance.
Sample variance:
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The between group variance is:
where nj = number of items in sample j
The within group variance is: sample variance-
For the ANOVA to be carried out in this study, the SPSS software was employed
through the discriminant analysis procedure of the package. In addition to the F
statistics produced, the procedure also produces the levels of significant differences
between groups to be determined at 5% significance level.
4 Findings and Discussion
Table 1: Demographic Characteristics of the Respondents
Variables Freq. C. Freq. % Cum %
1. Designation of the Respondents (N=60)
Architect 9 9 15 15
Builder 11 20 18.3 33.3
Quantity Surveyor 11 31 18.3 51.6
Civil Engineer 12 43 20 71.6
Mechanical Engineer 9 52 15 86.6
Electrical Engineer 8 60 13.4 100
2. Academic Qualification of Respondents (N=60)
ND or equivalent
HND 2 2 3.33 3.33
B.Sc. 25 27 41.67 45
MBA 21 48 35 80
M. Sc. 3 51 5 85
9 60 15 100
3. Construction Industry Experience less than 5 years
5-10 years 19 19 31.67 31.67
11-20 years 28 47 46.67 78.34
21-30 years 8 55 13.33 91.67
31 years and above 3 58 5 96.67
2 60 3.33 100
Freq. = Frequency, C. freq = Cumulative frequency
% = Percentage, Cum% = Cumulative percentage
Designation of the respondents is as shown in table 1. The breakdown indicates that
20% of the respondents are Civil Engineers, 18.3% respectively are Builders and
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Quantity Surveyors, while Architects and Mechanical Engineers each had 15%.
Electrical Engineers had 13.4%.
The breakdown in table 1 also shows the academic profile of the respondents. 41.67%
had Higher National Diploma (H.N.D), 35% had Bachelor of Science Degree (B. Sc.),
15% had Master of Science Degree (M. Sc.), 5% had Masters in Business
Administration (MBA) while 3.33% had National Diploma qualification.
The respondents profile also indicates that majority of the respondents (46.67%) had
construction industry experience in the range of (5-10) years.
4.1 Hypotheses One
Financial risk has no impact on contractors pricing of building projects in Lagos
state, Nigeria.
Using contractor pricing score as a dependent variable and financial risk score as the
predictor, a repeated measure analysis of variance was completed for contractors pricing
and financial risk. The result is as shown in Table 2.
Table 2: The Impact of Financial Risk on Contractors Pricing.
Source Sum of Df Mean Square F Sig
Squares
Between 1854.44 1 1854.44 936.51 0.000
groups
Within 139.50 53 4.36 2.20 0.31
groups
Total 1993.94 54
The result in Table 2 above is represented as F (1, 54) = 936.51; P < 0.01
The P-value (sig) for the F ratio of 936.51 is listed as 0.000, which means that it is less
than 0.05, therefore The null hypothesis, H0 which states that financial risk has no
impact on contractors’ pricing of building projects in Lagos State is rejected and the
alternative hypothesis which states that financial risk has impact on contractors’ pricing
of building projects in Lagos State is accepted. This result agrees with the observation
of Thompson and Perry (1992) that failure to deal with risk causes cost overrun. The
result of the study done by Joshua and Jagboro (2007) also confirms that financial risk
has impact on contractors pricing.
Table 3: Relative index of financial risk variables
Financial risk variables Relative Ranking
Index
Inadequate cash flow 0.68 1
Cost overrun due to schedule delay 0.62 2
Exchange rate and inflation 0.58 3
Contractors default 0.53 4
Corporate fraud 0.49 5
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4.2 Hypotheses Two
Design risk has no impact on contractors pricing of building projects in Lagos
state, Nigeria.
Using contractor pricing score as a dependent variable and design risk score as the
predictor, a repeated measure analysis of variance was completed for contractors pricing
and design risk. The result is as shown in Table 4.
Table 4: The Influence of Design Risk on Contractors Pricing.
Source Sum of Df Mean Square F Sig
Squares
Between 1799.31 1 1.799.31 570.63 0.000
groups
Within 151.28 53 4.73 1.50 0.167
groups
Total 1950.59 54
The result in Table 4 above is represented as F (1, 54) = 570.63; P < 0.01
The P-value (sig) for the F ratio of 570.63 is listed as 0.000, which means that it is less
than 0.05, therefore H0 which states that design Risk has no impact on contractors’
Pricing of building projects in Lagos State is rejected and the alternative hypothesis
which states that design Risk has impact on contractors’ Pricing of building projects in
Lagos State is accepted. This result is in agreement with the result of the study done by
Usta(2005),in his study he pointed out that if design risk is not adequately managed it
result to a lot of economic losses.
Table 5: Relative index of Design risk variables.
Design risk variables Relative Ranking
Index
Variations to work 0.63 1
Changes to original design 0.58 2
Financial failure of client 0.58 2
Deficiencies in specifications/drawings 0.57 4
Defective design 0.54 5
The impact indices for 5 design risk variables are shown in Table 5.From the table their
level of impact (based on the ranking of the mean item scores (MIS) are: Variations to
work (0.63), Changes to original design (0.58), Financial failure of client (0.58),
Deficiencies in specifications/drawings (0.57) and Defective design (0.54).The views of
respondents were base on the impact of these variables on contractors pricing. From the
survey inadequate variations to work had very critical impact on contractors pricing. On
the 5- point likert scale used, 0.61-0.80 mean item score falls under the classification of
very critical impact. Changes to original design, financial failure of client,
Deficiencies in specifications/drawings and defective design had little impact.
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4.3 Hypotheses Three
Construction risk has no impact on contractors pricing of building projects in
Lagos state, Nigeria.
Using contractor pricing score as a dependent variable and construction risk score as the
predictor, a repeated measure analysis of variance was completed for contractors pricing
and construction risk. The result is as shown in Table 6.
Table 6: The Impact of Construction Risk on Contractors Pricing.
Source Sum of Df Mean Square F Sig
Squares
Between 2497.92 1 2497.92 1713.17 0.000
groups
Within 117.26 48 3.91 2.68 0.016
groups
Total 2615.18 49
The result in Table 6 above is represented as F (1, 48) = 1713.17; P < 0.01
The P-value (sig) for the F ratio of 1713.17 is listed as 0.000, which means that it is less
than 0.05, therefore the null hypothesis, H0 which states that construction risk has no
impact on contractors’ pricing of building projects in Lagos State is rejected and the
alternative hypothesis which states that construction risk has impact on contractors’
Pricing of building projects in Lagos State is accepted. This result is in conformity with
the outcome of the study done by Joshua and Jagboro (2007), where they pointed out
that construction risk results in economic loss.
Table 7: Relative index of construction risk variables
Construction risk variables Relative Ranking
Index
Labour, equipment and material availability 0.69 1
Defective materials 0.62 2
Unforeseen site conditions 0.62 2
Productivity of equipment 0.59 4
Poor performance of suppliers/sub-contractors 0.58 5
Poor quality of work 0.56 6
Contractors competence 0.55 7
Based on the analysis of the respondents, ‘labour, equuipment and material availability ’
with mean item score of (0.69) was ranked as having the greatest construction risk
impact on contractors’ pricing. The researcher concurs with the findings because labour,
equipment and material availability are cost significant factors which the contractor
considers during pricing. When there is the possibility of availability of labour,
equipment and materials, the contractor will price low and is likely to price high if the
converse is the case.Defective materials and unforeseen site conditions with mean item
score of (0.62) were ranked second respectively. All the factors recorded above average
impact on contractors pricing, this implies that all the factors must be taken into
consideration by the contractors when tendering for building projects.
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Table 8: Contractors Pricing Variables
Contractors’ Pricing Variables M.I.S RANK
Material availability 0.82 1
Type of client 0.81 2
The financial capability of the client 0.81 2
The risk involved in the project 0.80 4
Complexity of the project 0.78 5
Overheads and profit of the company 0.78 5
Conditions of the contract 0.77 7
Payment conditions attached to the project 0.76 8
Likely trend in material cost over the period of the contract 0.76 9
The technical manpower and equipment of the company 0.75 10
Current work load and turnover of the company 0.75 10
Labour productivity basis 0.75 10
Location of site 0.74 13
Likely trend in wage rates over the period of the contract 0.72 14
The likely output or performance standards of the various trades and the
selected plant 0.72 14
Fluctuating or non-fluctuating contracts 0.72 14
Assessment of the ease of difficulty of carrying out the various work items 0.69 17
The weather conditions 0.68 18
The organisational structure of the construction company 0.67 19
Profile of other competitors 0.59 20
The total number of bidders 0.57 21
M.I.S = Mean Item Score
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The variables which contractors take into consideration in contractors’ pricing were
ranked in order of their importance ratings as shown in table 8. The highest ranked
being material availability’ which had a mean item score (MIS) of 0.82 and was
perceived by the respondents to contribute immensely in contractors’ Pricing. The next
on the ranking was type of client and financial capability of client both with an (MIS) of
0.81. The fourth to be ranked was the risk involved in the project with an (MIS ) of 0.80
and then complexity of the project was ranked fifth with an (MIS )of 0.78, the lowest to
be ranked was the total number of bidders which was ranked twenty first with an (MIS)
of 0.57.The inference that can be drawn from the table is that material availability, type
of client, the financial capability of the client, the risk involved in the project are very
important factors that contractors must take into consideration when pricing building
projects, since the mean item score of these factors are up to 80%.While the factors
ranked from fifth position to nineteenth position are important factors. All the factors
recorded a mean item score of more than 50% which means that contractors must
consider all the factors while bidding for building projects.
5 Conclusion and Further Research
From the results of the study, it is evident that inadequate cash flow had a significant
impact on contractors pricing of building projects in Lagos, Nigeria. Another important
inference is that most of contracting organisations investigated do not take construction
and design risk into consideration while pricing building projects in Lagos state,
Nigeria. This study and article had been able to establish that material availability, type
and financial capability of the client as well as risk involved on the project e very
important factors that contractors must take into consideration while pricing building
projects. Contractors can improve their risk management by taken financial risk,
construction risk and design risk into consideration while bidding for building projects.
This study was limited to building projects within Lagos state, Nigeria.However no
attempt was made to cover civil engineering projects. This can be carried out as a
further study.
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6 References
Atton, W. (1982), Estimating Applied to Building, George Godwin Limited, London.
Ayeni, J. O (1997), Principle of Tendering and Estimating, Building Magazine
Limited, 2nd ed; Lagos, Nigeria.
Carr, V. and Tah, H. M. (2000), Information Modelling for a construction Project Risk
Management System, Journal of Engineering, Construction and Architectural
Management,7 (2) ,pp107-119.
Faber, W. (1979), Protecting Giant Projects: A Study of Problems and Solutions in the
Area of Risk and Insurance, Ipswich, Willis Faber, England.
Flanagan, R. and Norman, G. (1993), Risk Management and Construction, Blackwell
Science Ltd, London.
Joshua, O. and Jagboro, G. O. (2007), An Evaluation of the Impact of Risk on Project
Cost Overrun in the Nigerian Construction Industry, Journal of Financial
Management of Property and Construction, 12 (1),pp 37-44
Laryea, S. E. and Dontwi, K. I. (2007), The Price of Risk in Construction Projects:
Contingency Approximation Model (CAM), Journal of Construction
Management and Economics, pp 1-13.
Lockyer, K. and Gordon, J. (1996), Project Management and Project Network
Techniques.,E&FN Spore, London.
Odeyinka, H. A. (2000), An Evaluation of the use of Insurance in Managing
Construction Risks, Construction Management and Economics, 18 (1),pp 512-
524.
Onukwube, H.N. (2002), An Evaluation of Factors which influences Tender Prices of
Building works in Nigeria. The Quantity Surveyor, 40(1), pp33-44.
Perry, J. G and Hayes, R.W. (1985), Risk and its Management in Construction Projects ,
The Institution of Civil Engineers Proceedings, Part 1, (78).pp 499-522
Ramus, J.W.(1981),Contract Practice for Quantity Surveyors,Heineman,London.
Ritz, G. J. (1994), Total Construction Project Management, McGraw Hill, New York .
Seeley, I. H. (1997), Building Economics, 4th Ed; Macmillan, London.
Smith, N.J. (1999), Managing Risk in Construction Projects, Blackwell Science,
Oxford.
Smith, R.C. (1992), Estimating and Tendering for Building Work. 4th Ed,
Longman scientific & technical, England.
Thompson, P. and Perry, J.G. (1992), Engineering Construction Risks, Thomas
Telford, London.
Usta, E. (2005), Comparison of international federation of consulting Engineers and
general specification for public works Contracts from risk management perspective.
Unpublished Masters Thesis.
Wang, S. Q.; Dulaimi, M. F. and Aguria, M. Y. (2004), Risk Management Framework
For Construction Projects in Developing Countries. Journal of Construction
Management and Economics 22 (1), pp 237-252.
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Obinna Ozumba and Winston Shakantu, pp 128-137
Balancing site information and communication technology
systems with available ICT skills
Aghaegbuna Ozumba1 and Winston Shakantu2
1
School of Construction Economics and Management,
University of the Witwatersrand, Johannesburg, Wits 2050, South Africa.
2
Department of Construction Management,
Nelson Mandela Metropolitan University, Port Elisabeth, South Africa.
Email: [email protected]; [email protected]
Abstract
The paper studies a number of site information and communication technology
support systems. The paper examines the set-up / deployment issues of these
systems in light of the obvious Information and Communication Technology skills
gap in the construction industry. This approach is intended to enable a closing of the
ICT skills gap. Issues raised include set-up time, user interface, end-user-
friendliness, rapidity and ease of setting up, and level of specialist skill required in
setting up ICT support systems. Findings suggest that there is need to make user
interfaces more user-friendly, increase the use of modular designs for component
parts of these systems and reduce the degree of specialist skill requirements in the
setting up and management of these systems. The paper suggests the use of a
‘reverse approach’ to developing ICT systems especially for the site. The approach
suggested, addresses issues around ICT implementation. This is done by being
sensitive to the level of ICT skills in the construction industry, among other factors.
Keywords: set-up time, user-friendliness, acceptability, ICT skills, skills
requirement, reverse-approach.
Introduction
Information and Communication Technology (ICT) has experienced unprecedented
growth with the advent of wireless technologies and mobile computing. Similarly,
integration of ICT in construction here referred to as construction ICT (CICT), has
been influenced by the recent growth in construction. In recent times, there has been
increased research and development activity in CICT. The positive influence on
CICT research is resultant of a combination of things; Growth in construction, the
drive to solve construction problems with technology, and the new opportunities
offered by recent ICT. There is also a growing research towards increasing
pervasiveness in the Site Management Process (SMP). This would realise a truly
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intelligent construction site environment and the enable ubiquity in the SMP
(FIATECH, n.d.; Ozumba & Shakantu, 2008b). This background has in many ways
engendered research efforts towards the development of ICT-based support systems
for the coordination of construction site activities. Support systems make use of
‘convergence technologies’, automation and robotics (NetTel@AFRICA, n.d.;
Howard, 1998).
However, as with other areas of CICT or implementation of ICT in construction, a
number of issues surround the operational success of these systems. One of the
fundamental problems has been the lack of a good spread of users for these systems
within the industry. Most of these systems represent cutting edge technology and as
such require high level ICT skills for effective deployment. High skills requirement
for support systems is a problem partly because of the ICT skills shortage in the
construction industry. ICT skills shortage has had a subtle but direct impact on ICT
implementation in construction, especially in the SMP. Areas of implementation
such as the use of site ICT support systems show the effect of ICT skills shortage
appreciably. Research shows that the success or failure of mobile ICT projects
depends heavily on the response of the end users, to the technology. Acceptability is
critical to the success of any CIC project and it depends on the end user (May &
Mitchell, 2007).
Construction Industry ICT skills gap
Some key barriers have been noted as hindering ICT implementation in
construction:
(a) Absence of a continuous development strategy, which involves the end-user.
(b) Poor information on end-user requirements, sound knowledge and understanding
of construction, using unsuitable technology.
(c) Consequently systems developed are difficult to use.
(d) Not addressing skills levels and capacity building for the end-user (Ugwu &
Kumaraswamy, 2007).
The rate of development of ICT and level of ICT skills have been identified as
factors affecting ICT implementation the most. Another factor identified is the use
inappropriate implementation methods due to poor understanding of the meaning of
ICT implementation. In addition, the need for strategic thinking has been
emphasised, especially around the issues of implementation and involvement of
industry professionals in ICT implementations. There is a gap between skills
requirement for these systems and ICT skills levels obtainable generally in
construction. Various skills acquisition programmes constitute the easier approach to
solving the problem. This is done by intensifying and facilitating education and
training at entry level and through continuous education. Skills acquisition
programmes are good because skills are imparted and acquired through closeness
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with the skills’ source. However skills acquisition takes appreciable length of time.
Education, practical training and understudying are necessary for skills in any area
of construction to be acquired. In the case of ICT, which is fast developing, the risk
of being equipped with near obsolete technologies is real. Hiring ICT specialists to
manage ICT systems in construction has been an inevitable course of action. This
approach has its disadvantages. Firstly it escalates the initial cost of implementing
ICT on site. Secondly except the issue is specifically addressed, it does not aid
closure of skills gap appreciably. People from outside the industry are hired as
consultants / specialists for different aspects of a project. Therefore they do not
necessarily come to the project with the mindset of a teacher or mentor (Rivard,
2000; Peansupap & Walker, 2005; Whyte et al., 2002; Azmi & Kamarani, 2002).
Factors mentioned above point to the fact that construction industry professionals
need to become more involved generally in CICT. The level of understanding
necessary for proper ICT implementation would come through increased familiarity
with relevant issues, current trends and contemporary themes. Such familiarity is
achieved when the user is able to engage with technology productively, and at a
good depth.
Methodology
The paper uses a purposive sample of special informative publications such as
technical reports, journal and conference papers, and a study of reports on select
SISS. The paper attempts to define and describe Site ICT Support Systems. With
this background, the paper examines five SISS in order to achieve the following:
(a) Determining the relationship between ICT skills levels and the success of SISS
on site.
(b) Determining how ICT skills’ issues in construction have been addressed.
(c) Drawing on the findings to suggest an approach that could address the issues
highlighted with measurable outcomes.
Issues addressed include set-up time, user-friendliness and level of specialist skill
requirements, design framework, interface design and visual communication, as
documented.
Site ICT Support Systems (SISS)
Site ICT Support Systems (SISS) can be defined as ICT-based hybrid systems,
which incorporate convergence technologies, collaboration technologies, automation
and robotics, and are designed to aid / facilitate smooth management of the site
process. SIS can be designed with the entire Site management process (SMP) in
mind, or to support an aspect of Site management (SM). SISS would consist of
software and hardware, wireless and mobile technologies. A system could also
include remote control and operating capacity. It would be deployed mostly in
information management and communication cycles within the SMP. These systems
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could also be linked to other Information and Automation Systems (IAS) on site. In
the past decade, research effort in SISS has achieved appreciable results. A number
of systems have materialised, at different stages of development with meaningful
results and lessons learnt (Convergence Technology Centre (CTC), n.d.; Advanced
Institutes of Convergent Technologies, n.d.; FIATECH, n.d.; Wilkinson, 2005).
Data
Data on Site ICT support systems was collected from research reports, product
descriptions, reviews and reports on field testing / deployment of these systems.
Some of the systems studied where at conceptual stage, others have been developed,
while some have been field-tested. This choice was made in the course of research in
order to show the difference in focus, concepts, direction and depth of development
that have emerged from CICT research. Five system designs were studied.
Limitations imposed on the research are due to availability of information regarding
the chosen SISS examples.
SightSafety
SightSAfety is a conceptual design for a hybrid site support system aimed at
reducing vehicle / pedestrian collision within the construction site. This would be
achieved through tracking machinery and vehicles, and workers on site. The design
makes of tracking, positioning and smart detection technologies. It incorporates
audio / visual communication through internet access with video display and audio
transmission. The sensor based system uses e-tagging for workers and mobile
objects on site. This approach reduces the skills requirement for usage but not for
setting up. From literature available, functionality seems to be the major focus. As
such description of the concept shows the use of component parts not housed
together and appreciable specialist skills requirement for deployment (Riaz et al.,
2006).
COnstruction Sites Mobile Operations Support (COSMOS)
COnstruction Sites Mobile Operations Support (COSMOS) is hybrid information
and communication system developed by the ESPIRIT Project partners, between
1998 and 2001. The aim was to support full mobility in the construction process.
This is achieved with tailored hardware and software components, making use of
satellite connections and Wireless Local Area Networks (WLAN). Three servers are
used; (1) Main application server at the headquarters, (2) Second level application
server on-site located at the site office and (3) third level application server running
on each client. It makes use of palm size, handhelds and laptops as wireless mobile
clients, and desktop client personal computers (PC) terminals in the offices
(ESPIRIT Project EP-27021, 2001).
Being an integrated system of networks and applications, COSMOS makes use of
some common terminals as explained above. Secondly it has video conferencing
capacity within site and between the site office and headquarters. User-friendliness
at the interface level is thus increased. However, the COSMOS is still a hybrid
system. Firstly it involves a satellite service provider who enables the satellite
connection and video conferencing. The reception and transmission systems have to
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be deployed at both the headquarters and site offices. The same goes for the primary
and secondary level servers. While it integrates elements of known ICT, their
complexities are carried along as well. The specialist skills requirement for
deploying the system is appreciable. From available literature, design of the system
focused mainly on functionality. As a result the system is made up of many
component parts that area delicately connected. Issues such as rapid deployment,
which influence set-up time, seem not to be accounted for (ESPIRIT Project EP-
27021, 2001).
The Construction Job Site (IACJS) system
This is part an ongoing, seven year collaborative research and development effort
under FIATECH, which is labelled Element 4. It is a project for the development of
an Intelligent and Automated Construction Job Site (IACJS) system. The vision for
IACJS is based on the creation of a truly intelligent and integrated, element aware
construction site, where all elements of the site including the human being are
sensed and monitored. Going by this vision, this sort of project would produce state
of the art SISS. The direction for IACJS research seems to be towards automation.
In the research project literature, existing ICT skills gap in the industry is not
identified as a barrier but technology-enablement of workers is noted as a potential
benefit of IACJS. By its scope and direction the IACJS is aimed more at the future
than the present. It would seem that such problems are considered less threatening at
the present time (FIATECH, n.d.).
Project Greenbox
This project has reached prototype stage at the time of investigating. The
collaboration is between the COMIT group and Private Mobile Networks (PMN).
The aim is to produce a Rapid Deployment Unit (RDU) for communications support
on construction sites. Firstly, the entire unit is housed in one ‘Portakabin’ that is
brought to site and deployed on the first day of site. All necessary equipment has
been built in to this cabin thereby eliminating most set-up activities. PMN’s rapid
Global Standard for mobile communication (GSM) technology is used. The mobile
unit to be used by site staff will be the familiar GSM handsets. However, final setup
activities which include deploying communications dish overhead are performed by
PMN on site. It is also designed with sophisticated equipment, and meant to be
rented on a daily basis. That generally means that a PMN staff will be needed
manage the system operation. Nevertheless the one –unit design and day-one
deployment time frame is instructional in achieving a good level of acceptability for
the SISS. Adoption of such principles is in line with the R-A concept (COMIT,
2008a; PMN, 2008).
Instant Mobile Office (i-MO)
The i-MO system is a one-box all in one ICT mobile work support solution. It takes
into consideration lessons of past experiences. In this regard, the i-MO system seems
to perform well in incorporating these lessons. According to Construction
Opportunities for Mobile IT (COMIT), the solution so developed provides a resilient
Virtual Private Network (VPN), Internet Protocol (IP) compression for improved
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bandwidth and transmission speeds, automatic roaming ability for the network, and
Wi-Fi or Ethernet access on secure routes. The system incorporates very good
transmission standards such as HSDPA, EDGE, 3G and Wi-Fi. Though hybrid, there
is an integration and housing of the finished product which reflects principles of R-
A thinking. The research leading to the development of the i-MO specifies qualities
for an all-in-one solution of this nature thus:
(a) Rapid deployment on site
(b) High speed data access within company intranet
(c) Robust network connection
(d) Simplicity in usage, configuration and low cost.
Quality (a) and (d) would achieve the most in first impressions on the end user. In
applying these principles, simplicity in the start-up process is the first feature
mentioned for the finished product. The aim of increasing simplicity is to reduce the
requirement for technical knowledge on the user (Electronic Media Services Ltd
(EMS), n.d.; EMS, 2008; COMIT, 2008b).
According to the research report, part of the lesson learnt includes:
(1) The need to keep ICT solutions simple
(2) The need to consider the actual end user’s response to the product
(3) Full consideration of what the type of solution being developed should require
(4) The need to adapt form related or relevant developments elsewhere in the
construction industry (COMIT, 2008a).
Discussion
The study shows different approaches to solving the problems of SISS. Analyses
suggest that there is a strong relationship between ICT skills in the industry and the
general success of ICT systems deployed. However it seems that this strong
connection is not adequately addressed in some CICT efforts. The tendency would
be to treat ICT skills shortage as a second grade problem. There is also an indication
that a singular focus on developing sophisticated technologies still gives room for
high cost and failure in implementation. The human factor needs to be viewed more
seriously in the design of systems. Adding human-centeredness through increasing
end-user-friendliness would increase success rate at implementation. By human-
centeredness, the paper refers to incorporating more usability and acceptability into
the design of SISS. This is in relation to the construction worker as opposed to the
ICT specialist. Though the focused on SISS, the findings could be extrapolated to
CICT systems in general. In that sense, the success or failure of ICT implementation
in construction cannot be divorced from ICT skills gap in the industry. ICT skills
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Obinna Ozumba and Winston Shakantu, pp 128-137
shortage is a problem area where the construction industry needs to exercise better
judgement, allow a little more creativity in research and thinking out of the box.
From the discussion, the question that needs to be addressed centres around, “How
to balancing the skills (technical knowledge) requirements and set-up process
(deployment) requirements of CICT research output with available ICT skills in the
industry in order to facilitate expedient implementation?”
The question indicates a possible need to adjust the general mindset of CICT
research. There is need for a wider focus, which incorporates current realities of the
human element on site such as skills shortage. Special attention should be given in
this regard, to systems needing appreciable human interface in their operation.
Target users of the system and ease of starting up the system should be carefully
considered
The Reverse Approach (R-A) thinking
The paper here suggests a way of achieving the deductions above. This concept,
which is under development is termed, ‘Reverse Approach’. It is based on the
assumption that ICT skills and the sophistication of ICT support systems can be
balanced out in the short run. Reverse approach is basically a short term alleviation,
which creates the enabling environment for the long term solution; the approach
could balance the skills requirement for SISS with available skills in the industry as
an interim intervention. Such an intervention should give time for education and
training to yield tangible results. In other words, SISS systems are adapted to meet
available ICT skill levels without diminishing their capacity and functionality in any
way. To achieve this objective, issues concerning SISS deployment need to be
addressed. Issues include appropriateness of the design and adaptation to the
particular project. Since SISS are hybrid systems, addressing relevant issues would
result in further adaptation, which makes the systems more fitting to the particular
construction environment. The reverse approach principle would build SISS, with
the capacity to support prevailing ICT skills levels. This idea is essentially generic in
the sense that it can be applied to any ICT skills situation, construction project and
region. The adaptation in each case will be suited to the prevailing skills level.
While capacity building yields results in the long term, this interim measure creates
room for expedient CICT implementation (Ozumba, 2009).
Application of R-A thinking
Application of the R-A requires thorough analysis of ICT systems meant for the site.
This would be instructional on relevant issues such as acceptability and usability,
interface design and visual communication, product design frame work and skills
level requirement (user-deployable vs. specialist-deployable). For instance, the i-MO
project group approach contains essential applications of R-A principles though the
focus is on a different set of issues. Reported testimonies from users show that the
ease of use (the bridging of ICT skills gap) and simplicity in start-up (reduction in
set-up time / removal of specialist skill requirement for deployment) are inevitable
to the success rate of any SISS.
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Obinna Ozumba and Winston Shakantu, pp 128-137
The areas mentioned above contribute to the system set-up time. Therefore it can be
safely assumed that the more difficult it is to set up an SISS, the more delicate the
system will be in operation. Thus set-up time can be used as one yardstick for
assessing the performance of individual systems. In addition, deployment issues
could also be looked at as opportunities for the application of R-A.
Conclusion
The research paper has looked at issues surrounding the implementation Site ICT
support systems as an indicator of the existing ICT skills gap in the construction
industry. Investigations on SISS at different stages of development helped to bring
out some underlying principles which have guided CICT research. The paper looked
at the need for increased usability and acceptability as an inbuilt feature in ICT
systems, especially those meant for the construction site. Improvement of end user
factors in any given SISS was considered as being vital to the success of its
implementation. In addition, a reverse approach to addressing the issues arising from
the discussion was introduced. Moreover the study also helped to determine the
existence of elements relevant to the R-A concept in the systems investigated.
The findings in this paper though limited, are a first step in the research direction.
Yet the paper offers some insight into various R&D strategies for SISS and the
effect of ICT skills gap on the success of these projects. These are need areas that
require more attention than they seem to be getting at the moment. Areas for further
research would include, a system for determining the required levels of end-user-
friendliness for SISS, developing a generic set of guidelines for applying R-A
concept to related situations in CICT. It will be useful also, to look at developing a
generic design framework and user-interface (UI) for CICT systems following the
R-A concept. Such framework could then be applied to both new and adapted
systems.
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‐ 137 ‐
COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Bon-Gang Hwang, pp 138-149
Identifying key sources of rework affecting construction cost
performance
Bon-Gang Hwang
Department of Building, School of Design and Environment,
National University of Singapore, Singapore
Email: [email protected]
Abstract:
Construction projects often experience cost and schedule overruns, and rework is one of
the factors that directly contribute to these overruns. Considering that the direct costs
caused by rework average 5% of total construction costs, rework must be a significant
factor affecting project cost performance in the construction industry. Analyzing the
data obtained from 359 construction projects in the Construction Industry Institute
database, this study assesses the impacts of different sources of rework on construction
cost performance. Furthermore, it identifies sources of rework having the most impact,
permitting further analyses, and the development of rework reduction initiatives. The
results of this study establish that the impact of rework differs by source, but sources
having the greatest impact are not significantly different among different project types.
The recognition of the different impacts of rework and documentation of its sources can
be a starting point for reducing rework, thereby improving project cost performance.
Keywords:
Rework, Rework sources, Construction cost, Cost performance
1 Introduction
Rework is one of the factors that directly contribute to both cost and schedule overruns.
Research by the Construction Industry Institute (CII) reveals that direct costs caused by
rework average 5% of the total construction costs (CII, 2005). Considering that the cost
of the U.S. construction industry amounted to $1,245 billion in 2007 (BEA, 2009),
almost $63 billion was wasted in that year alone. Therefore, rework must be a
significant factor affecting cost performance in the construction industry.
Several research efforts have attempted to identify and classify the root causes of
rework, and to quantify its overall extent. Using data from 359 actual projects and
employing the metric, Total Field Rework Factor and the classification of rework
sources developed by CII, this paper aims (1) to identify the impacts of different sources
of rework on construction cost performance; and (2) to identify the root causes of
rework and recommend possible solutions for those causes.
Comparisons of the impacts by rework source will identify sources having the most
impact on construction cost performance. The sources of rework are classified as owner
change, design error/omission, design change, vendor error/omission, vendor change,
constructor error/omission, constructor change, transportation error, and other sources.
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After analyzing the cost impact of rework by source, the root causes of rework are
assessed and thus possible solutions can be suggested.
The recognition of the different impacts of rework is very important for project
managers. For those projects on which cost will be more affected by rework, project
managers should focus on minimizing rework by developing systems for addressing the
sources of rework. Pre-project and quality management plans should be drafted with an
understanding of the causes of rework in order to minimize its impact. This paper will
provide a clearer understanding of the different impacts of rework on construction cost
performance, ultimately helping to reduce rework and improve project cost
performance.
2 Literature Review
According to Love (2002) rework has various interpretations and definitions, including
quality deviations (Burati et al., 1992), non-conformance (Abdul-Rahman, 1995),
defects (Josephson and Hammarlund, 1999), and quality failures (Barber et al., 2000), in
construction management literature. Love et al. (2000) identified that rework is the
unnecessary effort of redoing a process or activity that was incorrectly implemented the
first time. Similarly, field rework is defined as activities that have to be done more than
once or activities which remove work previously installed as part of a project (CII,
2001). Based on CII’s definition, Fayek et al. (2003) proposed a definition of rework
adding the constraint that rework caused by scope changes and change orders from
owners should be excluded from being classified as rework. In the sense of
conformance, there are two main definitions of rework (Love, 2002; Fayek et al., 2003).
The first definition is that rework is the process to make an item conform to the original
requirement by completion, or correction (Ashford, 1992). The second definition
described by the Construction Industry Development Agency (CIDA) (1995) defined
rework as doing something at least one extra time due to non-conformance to
requirements. While the definitions and interpretations of rework vary in terms of
wording, there is a common theme; having to redo work due to non-conformance to
requirements.
Several studies have explored the cost of rework in the construction industry. Research
conducted by CII reports that direct costs caused by rework average 5% of the total
construction costs (CII, 2005). This result indicates that almost $63 billion is wasted
annually, considering that costs for the U.S. construction industry totalled $1,245 billion
in 2007 (BEA, 2009). Josephson and Hammarlund (1999) estimated that the cost of
rework on residential, industrial, and commercial building projects ranges from 2% to
6% of contract values. Similarly, Love and Li (2000) found that the costs of rework on
average for residential and industrial building projects are 3.15% and 2.4% of the
contract values, respectively. The non-conformance costs (excluding material wastage
and head office overhead) of a highway project are estimated to be 5% of the contract
value (Abdul-Rahman, 1995). This study insisted that non-conformance costs may be
significantly higher on projects where poor quality management is found. Consequently,
these significant wastes of money confirm that rework costs should not be overlooked in
efforts to improve project cost performance.
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Bon-Gang Hwang, pp 138-149
It is first necessary to identify and classify the causes of rework in order to manage
them. Many analyses have suggested that rework is often due to the complicated
characteristics of the construction processes. By distinguishing between engineering
rework and construction rework, O’Conner et al. (1986) argued that engineering rework
is caused by owner scope and specification changes, design errors, or procurement
errors and that construction rework is a result of poor construction techniques or poor
construction management policies. Focusing on origins of rework, Davis et al. (1989)
reported that there are five origins of rework: owner, designer, vendor, transporter, and
constructor. Similarly, CII (1989) and Burati et al. (1992) identified five major areas of
rework: design, construction, fabrication, transportation, and operability. Each of these
areas was further subdivided by type of deviation, i.e., change, error, or omission. These
classifications differ in perspective from those proposed by Love et al. (1999a and
1999b) and Fayek et al. (2003). The authors argued that rework occurs as a result of
uncertainty, poor leadership and communications, and ineffective decision-making
generated by the lack of or unreliable, inaccurate, and conflicting information among
project participants throughout project phases.
3 Research Methodology
3.1 Data Collection and Presentation
CII Benchmarking and Metrics (BM&M) program collects capital project data via
online questionnaire. At the time of this study, the CII BM&M database was composed
of data from 1057 owner and contractor projects. Among 1057 projects, analyses
presented in this paper used 359 projects containing all information needed for this
study. Table 1 summarizes the characteristics of these projects by industry group,
project nature, project size, project location, and work type (for contractor projects
only).
Table 1. Data Presentation
Owner Contractor Total
Project Characteristics
(N = 181) (N = 178) (N = 359)
Buildings 32 18% 15 8% 47 13%
Industry Heavy Industrial 103 57% 133 75% 236 66%
Group Infrastructure 15 8% 10 6% 25 7%
Light Industrial 31 17% 20 11% 51 14%
Add-on 47 26% 59 33% 106 30%
Project
Grass Roots 50 28% 77 43% 127 35%
Nature
Modernization 84 46% 42 24% 126 35%
<$15MM 112 62% 60 34% 172 48%
Project $15 - $50MM 49 27% 64 36% 113 32%
Size $50 - $100MM 12 7% 22 12% 34 9%
>$100MM 8 4% 32 18% 40 11%
Project Domestic 152 84% 144 81% 296 82%
Location International 29 16% 34 19% 63 18%
Work Construct Only NA NA 41 23% 41 23%
Type* Design and Construct NA NA 137 77% 137 77%
Bold indicates the predominant group in each category
* = contractor projects only; NA = Not Available
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Bon-Gang Hwang, pp 138-149
3.2 Total Field Rework Factor
CII developed a metric for quantifying the impact of rework on construction cost
performance. The metric is defined as the Total Field Rework Factor (TFRF) and its
formula is as follows:
Total Direct Cost of Field Rework
TFRF =
Actual Construction Phase Cost
In the formula, the TFRF for each project is expressed as a ratio of the total direct cost
of rework to the actual construction phase cost. As an example, assuming that the actual
construction phase costs for projects 1 and 2 are $10 million each, with the total direct
rework costs of $4 million and $2 million, respectively, the TFRF are thus 0.4 for
project 1 and 0.2 for project 2. If rework had not occurred on either project, the actual
construction phase costs of the projects would have been $6 million and $8 million,
respectively. In other words, due to rework, the cost of project 1 grew by $4 million and
that of project 2 increased by $2 million. Therefore, the rework occurring on project 1
contributed more to the increase of the actual construction phase cost and thus had a
relatively greater impact on construction cost performance.
To quantify the impacts of rework by source, the original TFRF is modified slightly into
the following formula:
Total Direct Cost of Field Rework from a Source
Formula =
Actual Construction Phase Cost
The sources of rework having the most impact on cost performance can be identified
using the formula. For this study, sources of rework were classified as owner change
(OC), design error/omission (DE), design change (DC), vendor error/omission (VE),
vendor change (VC), constructor error/omission (CE), constructor change (CC),
transportation error (TE), and other (OS), and their definitions are provided in the
Appendix. Each of the nine sources may be plugged into the formula and the higher the
value, the greater impact on actual construction phase cost.
3.3 Statistical Application Methods
In order to test if differences in the rank orders of rework sources having more impacts
on construction cost performance are significant, the Spearman Rank Order Correlation
was calculated and statistically tested. The Spearman Rank Order Correlation is a
method of computing a correlation between the ranks of scores on two variables. The
correlation is calculated on the ranks of scores, not the scores themselves. As a result,
without the consideration of normality or equal variance of data, this statistical method
can be used focusing on difference in rank orders of data rather than difference in
means. The coefficient equals 1 for a perfect positive correlation and -1 for a perfect
negative correlation. When the correlation is not perfect, the coefficient lies between -1
and 1. A level of significance of 0.05 was also applied for this analysis.
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Bon-Gang Hwang, pp 138-149
If differences in the rank orders of the sources ranked by cost impact are not statistically
significant, it could be concluded that those sources having a relatively greater cost
impact in a group were not significantly different from those of other groups.
4 Findings and Discussion
The data from 359 projects were analyzed separately for owners and contractors. The
results explore sources of rework that have more negative effects on construction cost
performance.
4.1 Rework Impact by Source: Owner Reported Projects
Tables 2 and 3 show the average Total Field Rework Factor for the sources of rework
by industry group, project nature, project size, and project location. The tables include
the total number of projects (N), the sources of rework, and the average Total Field
Rework Factor (Mean TFRF). The mean TFRF for a single source was calculated by
dividing the sum of the TFRF for the source within a group by the total number of
projects in the group. The sum of the mean TFRF for each source within a group was
equal to the mean TFRF for the group (Total). The mean TFRF for each source in the
‘All’ category was the sum of the TFRF of a single source in all projects divided by the
total number of all projects.
Analysis by industry group (Table 2) reveals that the mean TFRF for DE (0.015) and
OC (0.014) in buildings were higher than those of other sources in the group. This
indicates that DE and OC contributed much more to the increase in the actual
construction phase cost than other sources for buildings. In the case of heavy industrial,
the mean TFRF for DE (0.016) was highest and twice as high as that of OS (0.008), the
next highest source. In infrastructure, OC had the highest mean TFRF (0.020), followed
by CE (0.010). DE (0.032) and OC (0.028) were ranked as the first and second sources
by cost impact in light industrial, respectively. The mean TFRF for DE was highest at
0.018 in the ‘All’ category. That is, on an owner project, an average $0.018 million per
$1 million actual construction phase cost was spent on rework caused by DE.
Table 4 shows the Spearman Rank Order Correlations of the nine sources of rework
between each group within industry group, project nature, project size, or project
location categories. The bolded correlations are statistically significant at the level of
0.05. In the industry group category, the rank orders of rework sources in heavy
industrial, infrastructure, light industrial, and ‘All’ category were significantly
correlated with each other. This suggests that the greatest sources ranked by cost impact
were significantly similar between the groups. When the rank orders of the sources in
more than one group were significantly correlated with that of ‘All’, it was assumed that
the rank order of the sources in the groups could be expressed following the rank order
of the ‘All’ category. Therefore, as shown in Table 2, DE, OC, or OS had greater cost
impacts than DC, VC, or TE on heavy industrial, infrastructure, and light industrial
projects. The same conclusion cannot be drawn for buildings however, since its rank
order was significantly correlated only with that of light industrial.
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Bon-Gang Hwang, pp 138-149
Table 2. Rework Impact by Source: Owner Reported Projects (Industry Group and Project Nature)
Industry Group Project Nature
Heavy Light
Buildings Infrastructure All Add-on Grass Roots Modernization All
Industrial Industrial
(N = 32) (N = 14) (N = 179) (N = 47) (N = 48) (N = 82) (N = 177)
(N = 102) (N = 31)
Mean Mean Mean Mean Mean Mean Mean Mean Mean
Source Source Source Source Source Source Source Source Source
TFRF TFRF TFRF TFRF TFRF TFRF TFRF TFRF TFRF
DE 0.015 DE 0.016 OC 0.020 DE 0.032 DE 0.018 DE 0.013 DE 0.013 OC 0.018 DE 0.015
OC 0.014 OS 0.008 CE 0.010 OC 0.028 OC 0.013 OC 0.008 OC 0.009 DE 0.018 OC 0.013
OS 0.006 OC 0.007 DE 0.009 OS 0.012 OS 0.008 OS 0.004 CC 0.004 OS 0.014 OS 0.009
CC 0.006 VE 0.005 OS 0.008 CE 0.008 CE 0.004 DC 0.003 OS 0.004 VE 0.004 CE 0.003
DC 0.003 CE 0.004 DC 0.007 CC 0.007 VE 0.003 CE 0.003 VE 0.004 CE 0.004 VE 0.003
VC 0.001 DC 0.002 VE 0.002 VE 0.003 CC 0.003 VE 0.002 CE 0.003 CC 0.003 CC 0.003
VE 0.001 CC 0.002 CC 0.001 VC 0.002 DC 0.002 VC 0.002 DC 0.003 DC 0.002 DC 0.002
TE 0.000 VC 0.001 VC 0.000 DC 0.001 VC 0.001 CC 0.001 VC 0.000 VC 0.001 VC 0.001
CE 0.000 TE 0.000 TE 0.000 TE 0.000 TE 0.000 TE 0.000 TE 0.000 TE 0.001 TE 0.000
Total 0.046 Total 0.044 Total 0.057 Total 0.093 Total 0.054 Total 0.038 Total 0.041 Total 0.062 Total 0.050
OC = owner change; DE = design error/omission; DC = design change; VE = vendor error/omission; VC
= vendor change; CE = constructor error/omission; CC = constructor change; TE = transportation error;
and OS = other.
Table 3. Rework Impact By Source: Owner Reported Projects (Project Size and Project Location)
Project Size Project Location
$50 -
< $15MM $15 - $50MM > $100MM All Domestic International All
$100MM
(N = 107) (N = 49) (N = 7) (N = 175) (N = 150) (N = 27) (N = 177)
(N = 12)
Mean Mean Mean Mean Mean Mean Mean Mean
Source Source Source Source Source Source Source Source
TFRF TFRF TFRF TFRF TFRF TFRF TFRF TFRF
OC 0.014 DE 0.019 OC 0.022 DE 0.004 DE 0.015 DE 0.015 DE 0.017 DE 0.015
DE 0.014 OC 0.015 DE 0.020 CE 0.001 OC 0.014 OC 0.014 OC 0.009 OC 0.013
OS 0.008 OS 0.010 OS 0.009 VE 0.001 OS 0.008 OS 0.010 CE 0.004 OS 0.009
CE 0.004 VE 0.006 DC 0.006 OC 0.001 VE 0.004 VE 0.004 DC 0.004 CE 0.003
CC 0.003 CE 0.004 CC 0.006 DC 0.001 CE 0.004 CE 0.003 CC 0.004 VE 0.003
VE 0.003 DC 0.003 VE 0.006 CC 0.001 DC 0.003 CC 0.003 VC 0.002 CC 0.003
DC 0.002 CC 0.001 CE 0.002 VC 0.000 CC 0.003 DC 0.002 VE 0.002 DC 0.002
VC 0.001 VC 0.001 VC 0.002 OS 0.000 VC 0.001 VC 0.001 TE 0.002 VC 0.001
TE 0.000 TE 0.000 TE 0.000 TE 0.000 TE 0.000 TE 0.000 OS 0.001 TE 0.000
Total 0.049 Total 0.059 Total 0.073 Total 0.010 Total 0.052 Total 0.051 Total 0.045 Total 0.050
OC = owner change; DE = design error/omission; DC = design change; VE = vendor
error/omission; VC = vendor change; CE = constructor error/omission; CC = constructor change;
TE = transportation error; and OS = other.
Table 4. Spearman Rank Order Correlations: Owner Reported Projects
Industry Group Project Nature Project Size Project Location
Variable Heavy Infra- Light Add- Grass Moder- <$15 $15 - $50 - >$100 Inter-
Buidings Domestic
Industrial structure Industrial on Roots nization MM $50MM $100MM MM national
Buidings 1.000 − − −
Industry Heavy Industrial 0.650 1.000 − −
Group Infrastructure 0.417 0.783 1.000 −
Light Industrial 0.683 0.867 0.800 1.000
Add-on 1.000 − −
Project
Grass Roots 0.683 1.000 −
Nature
Modernization 0.833 0.883 1.000
<$15MM 1.000 − − −
Project $15 - $50MM 0.900 1.000 − −
Size $50 - $100MM 0.850 0.850 1.000 −
>$100MM 0.550 0.650 0.400 1.000
Project Domestic 1.000 −
Location International 0.467 1.000
Bold indicates statistically significant correlations at 0.05 level.
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In all groups categorized by project nature (Table 2), the mean TFRF for DE and OC
were higher than those of other sources. In addition, all rank order correlations in this
category (Table 4) were statistically significant and thus rework caused by DE, OC, or
OS contributed more to cost increase than DC, VC, or TE. For project size category
(Table 3), the mean TFRF for OC is highest in projects less than $15 million and
between $50 million and $100 million. In the case of those projects between $15 million
and $50 million, and greater than $100 million, DE had the highest mean TFRF.
Furthermore, except for projects costing greater than $100 million, the rank orders in
each group were significantly correlated with one another as shown in Table 4. In the
case of projects costing greater than $100 million, the rank order was unique showing
that DE, CE, or VE contributed more to cost increase than VC, OS, or TE. Table 3 also
shows that the cost impact of the sources of rework by project location. The mean TFRF
for DE was highest in both domestic and international projects. The rank correlation
between the two groups was not significantly correlated, however (Table 4). Therefore,
for domestic projects, DE, OC, or OS affected rework costs more than DC, VC, or TE
and for international projects, DE, OC, or CE had greater impacts than VE, TE, or OS.
4.2 Rework Impact by Source: Contractor Reported Projects
Tables 5 and 6 detail the average Total Field Rework Factor found for the recorded
sources of rework. Furthermore, the rank order correlations of the sources of rework
between the groups are shown in Table 7.
Table 5 shows that DE (0.009) had the greatest cost impact on heavy industrial projects,
followed by OC (0.005). Unexpectedly, for infrastructure projects, OS had the greatest
cost impact, meaning that the true causes were not clearly identified. This result also
affected the rank order analysis for infrastructure. The rank order of the group was not
significantly correlated with that of any other group as shown in Table 7. This is
because OS was the first rework source ranked for infrastructure, whereas it ranked
relatively lower in other groups. In addition, the rank order for light industrial was
negatively correlated with that of buildings. The negative correlation means that the
sources having the greatest impact in light industrial could be those having the least
impact in the buildings or vice versa. However, the correlation was very weak and not
statistically significant.
For project nature category, DE and OC were ranked as the first and second sources by
cost impact (Table 8) and the rank order correlations of all groups within the category
were statistically significant (Table 7). This result indicates that the cost impacts of DE,
OC, or DC on add-on, grass root, and modernization projects were greater than those of
CC, VC, or TE.
Table 6 shows the cost impact of the sources of rework by project size. Except for the
projects between $50 million and $100 million, DE has the highest mean TFRF and all
rank order correlations were statistically significant (Table 10). Thus, DE, OC, or VE
contributed more to cost increase than CC, VC, or TE. For domestic and international
projects, the analysis result indicates that DE, OC, or DC has a greater impact than CC,
VC, or TE with the significant rank correlation between the two groups. Lastly, work
type comparisons reveals that rework by the DE, OC, or DC contributed more to cost
increase than CC, VC, or TE.
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Table 5. Rework Impact by Source: Contractor Reported Projects (Industry Group and Project Nature)
Industry Group Project Nature
Heavy Light
Buildings Infrastructure All Add-on Grass Roots Modernization All
Industrial Industrial
(N = 12) (N = 10) (N = 167) (N = 57) (N = 72) (N = 40) (N = 169)
(N = 127) (N = 18)
Mean Mean Mean Mean Mean Mean Mean Mean Mean
Source Source Source Source Source Source Source Source Source
TFRF TFRF TFRF TFRF TFRF TFRF TFRF TFRF TFRF
CE 0.000 DE 0.009 OS 0.006 DC 0.007 DE 0.007 DE 0.007 DE 0.006 DE 0.007 DE 0.007
DE 0.000 OC 0.005 DC 0.003 OC 0.007 OC 0.005 OC 0.006 OC 0.004 OC 0.006 OC 0.005
VE 0.000 VE 0.003 DE 0.003 DE 0.003 DC 0.003 DC 0.003 DC 0.004 DC 0.004 DC 0.003
OC 0.000 DC 0.003 CE 0.002 CC 0.002 VE 0.003 OS 0.002 VE 0.003 VE 0.003 VE 0.003
DC 0.000 CE 0.002 OC 0.001 OS 0.001 CE 0.002 CE 0.002 CC 0.002 CE 0.002 CE 0.002
VC 0.000 CC 0.001 VE 0.001 VE 0.001 OS 0.001 VE 0.002 CE 0.001 OS 0.001 OS 0.001
CC 0.000 OS 0.001 VC 0.000 VC 0.000 CC 0.001 CC 0.001 OS 0.000 CC 0.000 CC 0.001
TE 0.000 VC 0.000 CC 0.000 CE 0.000 VC 0.000 VC 0.000 VC 0.000 VC 0.000 VC 0.000
OS 0.000 TE 0.000 TE 0.000 TE 0.000 TE 0.000 TE 0.000 TE 0.000 TE 0.000 TE 0.000
Total 0.000 Total 0.024 Total 0.016 Total 0.021 Total 0.022 Total 0.023 Total 0.021 Total 0.024 Total 0.022
OC = owner change; DE = design error/omission; DC = design change; VE = vendor error/omission; VC
= vendor change; CE = constructor error/omission; CC = constructor change; TE = transportation error;
and OS = other source.
Table 6. Rework Impact by Source: Contractor Reported Projects
(Project Size, Project Location, and Work Type)
Project Size Project Location Work Type
$50 - Construct Design and
< $15MM $15 - $50MM > $100MM All Domestic International All All
$100MM Only Construct
(N = 56) (N = 60) (N = 30) (N = 167) (N = 138) (N = 31) (N = 169) (N = 171)
(N = 21) (N = 39) (N = 132)
Mean Mean Mean Mean Mean Mean Mean Mean Mean Mean Mean
Source Source Source Source Source Source Source Source Source Source Source
TFRF TFRF TFRF TFRF TFRF TFRF TFRF TFRF TFRF TFRF TFRF
DE 0.008 DE 0.007 OC 0.009 DE 0.005 DE 0.007 DE 0.008 DC 0.001 DE 0.007 DE 0.011 DE 0.006 DE 0.007
OC 0.006 VE 0.004 DE 0.009 VE 0.003 OC 0.005 OC 0.007 DE 0.000 OC 0.006 DC 0.007 OC 0.006 OC 0.006
DC 0.002 OC 0.003 CE 0.006 OC 0.002 VE 0.003 DC 0.004 OS 0.000 DC 0.003 OC 0.006 VE 0.003 DC 0.003
VE 0.001 DC 0.003 DC 0.004 DC 0.002 DC 0.003 VE 0.003 CE 0.000 VE 0.003 VE 0.002 DC 0.002 VE 0.003
CE 0.001 CE 0.002 VE 0.003 CE 0.001 CE 0.002 CE 0.002 OC 0.000 CE 0.002 OS 0.002 CE 0.002 CE 0.002
CC 0.001 OS 0.001 OS 0.003 OS 0.001 OS 0.001 OS 0.001 VE 0.000 OS 0.001 CE 0.001 CC 0.001 OS 0.001
VC 0.000 CC 0.001 CC 0.003 CC 0.000 CC 0.001 CC 0.001 VC 0.000 CC 0.001 CC 0.001 OS 0.001 CC 0.001
OS 0.000 VC 0.000 VC 0.001 VC 0.000 VC 0.000 VC 0.000 CC 0.000 VC 0.000 VC 0.000 VC 0.000 VC 0.000
TE 0.000 TE 0.000 TE 0.000 TE 0.000 TE 0.000 TE 0.000 TE 0.000 TE 0.000 TE 0.000 TE 0.000 TE 0.000
Total 0.019 Total 0.020 Total 0.037 Total 0.015 Total 0.021 Total 0.027 Total 0.002 Total 0.022 Total 0.030 Total 0.022 Total 0.024
OC = owner change; DE = design error/omission; DC = design change; VE = vendor error/omission; VC
= vendor change; CE = constructor error/omission; CC = constructor change; TE = transportation error;
and OS = other source.
Table 7. Spearman Rank Order Correlations: Contractor Reported Projects
Industry Group Project Nature Project Size Project Location Work Type
Variable Heavy Infra- Light Add- Grass Moder- <$15 $15 - $50 - >$100 Inter- Design &
Buidings Domestic Construct
Industrial structure Industrial on Roots nization MM $50MM $100MM MM national Construct
Buidings 1.000 − − −
Industry Heavy Industrial 0.676 1.000 − −
Group Infrastructure 0.223 0.424 1.000 −
Light Industrial -0.055 0.667 0.492 1.000
Add-on 1.000 − −
Project
Grass Roots 0.850 1.000 −
Nature
Modernization 0.933 0.950 1.000
<$15MM 1.000 − − −
Project $15 - $50MM 0.900 1.000 − −
Size $50 - $100MM 0.883 0.850 1.000 −
>$100MM 0.900 1.000 0.850 1.000
Project Domestic 1.000 −
Location International 0.750 1.000
Work Construct 1.000 −
Type Design & Construct 0.900 1.000
Bold indicates statistically significant correlations at 0.05 level.
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4.3 Discussion
For owner projects, owner change (OC), design error/omission (DE), and other (OS)
were most frequently ranked as three of the greatest sources by cost impact through all
categories. However, the other (OS) category is a catch-all for rework sources not
properly addressed by the survey. If a more comprehensive tracking system is used or
more effort to track the origin and causes of rework are made, a much more accurate
impact of each source can be identified. Construction error/omission (CE) was also
found as a major source of rework in infrastructure, international, and those projects
costing greater than $100 million.
For contractor projects, owner change (OC), design error/omission (DE), design change
(DC), and vendor error/omission (VE) were most frequently ranked as the greatest
sources of rework by cost impact. Particularly, design change (DC) was one of the
higher cost impact sources on contractor projects, whereas it had relatively lesser cost
impact on the owner projects. In addition, construction error/omission (CE) is one of the
higher ranked sources on owner projects, but is less indicated by contractors. This
finding is of interest since it shows the different perspectives in the origin of rework
between owners and contractors. That is, owners tend to report rework by construction
error/omission more and contractors indicates rework by design error/omission more.
Table 8 summarizes the three greatest sources ranked by cost impact for owner and
contractor projects.
Table 11. Key Rework Sources Ranked by Cost Impact
Owner Contractor
Project Characteristics
st nd rd st nd rd
1 2 3 1 2 3
Buildings DE OC OS CE DE VE
Industry Heavy Industrial DE OS OC DE OC VE
Group Infrastructure OC CE DE OS DC DE
Light Industrial DE OC OS DC OC DE
Add-on DE OC OS DE OC DC
Project
Grass Roots DE OC CC DE OC DC
Nature
Modernization OC DE OS DE OC DC
<$15MM OC DE OS DE OC DC
Project $15 - $50MM DE OC OS DE VE OC
Size $50 - $100MM OC DE OS OC DE CE
>$100MM DE CE VE DE VE OC
Project Domestic DE OC OS DE OC DC
Location International DE OC CE DC DE OS
Work Construct Only NA NA NA DE DC OC
Type* Design and Construct NA NA NA DE OC VE
OC = owner change; DE = design error/omission; DC = design change; VE =
vendor error/omission; VC = vendor change; CE = constructor error/omission;
CC = constructor change; TE = transportation error; and OS = other.
The statistical test results for both owner and contractor projects revealed that the rank
orders of the greatest cost impact sources in the groups were not statistically different
from one another. This means that the sources having a relatively greater impact than
other sources in a group are not significantly different from those of other groups.
Therefore, design error/omission (DE) and owner change (OC), most frequently ranked
as two of the greatest sources by cost impact, can be considered to be the most
important root causes of rework for both owner and contractor projects. Furthermore,
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Bon-Gang Hwang, pp 138-149
construction error/omission (CE) for owner projects and design change (DC) for
contractor project can also be a major source of rework.
5 Conclusions and Recommendations
This paper explored how construction cost performance is affected by rework, based
upon sources of rework, and concluded that on both owner and contractor projects,
owner change and design error/omission appeared to be the root causes of rework
having a relatively greater cost impact than other sources. Construction error/omission
was indicated more as one of the greatest cost impact source on owner projects, whereas
design change was reported more on the contractor projects.
Based on the conclusions, it is recommended that project managers responsible for
those types of projects should be aware of the different cost impact of rework when
drafting pre-project and quality management plans. Furthermore, they should develop or
implement systems for tracking and controlling construction error/omission for owners,
design change for contractors, and owner change and design error/omission for both
owners and contractors in order to reduce rework by these sources. It is known that
design errors/omissions and owner changes may result from poor project definition,
inadequate pre-project planning, ineffective design, inadequate project change
management, poor communication among owners, designers and constructors, or
constructability ignored in the design process (CII, 2002; CII, 2003; Hwang, 2003;
Hwang et al., 2009). Therefore, implementing CII best practices such as pre-project
planning, project change management, design effectiveness, alignment, and
constructability would be an effective method for reducing the root causes of rework.
This paper provided a comprehensive relationship between rework and cost
performance.However, the analysis should be expanded to include data for total indirect
rework cost, so that an integrated impact caused by total direct and indirect cost can be
identified. Furthermore, studies on the impacts of rework on schedule performance
should be conducted because rework is one of the main causes of schedule overrun. A
final recommendation for future study is to quantify the influences of an organization’s
management practices and project management strategies on reducing rework cost and
also to identify the most effective practices for each root cause.
6 References
Abdul-Rahman, H. (1995). ‘The Cost of Non-Conformance during a Highway Project:
A Case Study’, Construction Management and Economics, 13(1), pp23-32.
Ashford, J.L. (1992). The Management of Quality in Construction. E & F Spon,
Londen.
Barber, P., Graves, A., Hall, M., Sheath, D., and Tomkins, C. (2000). ‘Quality Failure
Costs in Civil Engineering Projects’, International Journal of Quality and
Reliability Management, 17(4/5), pp479-492.
Bureau of Economic Analysis (BEA). (2007). ‘Gross Domestic Product by Industry in
Current Dollars’, BEA, http://www.bea.gov, viewed: 11/06/2009.
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Burati, J. L., Farrington, J. J., and Ledbetter, W. B. (1992). ‘Causes of Quality
Deviations in Design and Construction’, Journal of Construction Engineering and
Management, 118(1), pp34-49.
Construction Industry Development Agency and Masters Builders Australia (CIDA).
(1995). Measuring Up or Muddling Through: Best Practice in the Australian Non-
Residential Construction Industry, CIDA, Sydney, Australia, pp59-63.
Construction Industry Institute (CII). (1989). Costs of Quality Deviations in Design and
Construction, RS 10-1 (Jan.), CII, The University of Texas at Austin, Austin, TX.
Construction Industry Institute (CII). (2001). The Field Rework Index: Early Warning
for Field Rework and Cost Growth, RS 153-1 (May), CII, The University of Texas
at Austin, Austin, TX.
Construction Industry Institute (CII). (2002). CII Best Practices Guide, IR 166-3 (July),
CII, the University of Texas at Austin, Austin, TX.
Construction Industry Institute (CII). (2003). Benchmarking and Metrics Value of Best
Practices Repor, BMM 2003-4, CII, The University of Texas at Austin, Austin, TX.
Construction Industry Institute (CII). (2005). Making Zero Rework A Reality, RS 203-1
(Nov.), CII, The University of Texas at Austin, Austin, TX.
Davis, K., Ledbetter, W. B., and Burati, J. L. (1989). ‘Measuring Design and
Construction Quality Costs’, Journal of Construction Engineering and
Management, 115(3), pp385-400.
Fayek, A. R., Dissanayake, M., and Campero, O. (2003). Measuring and Classifying
Construction Field Rework: A Pilot Study, Research Report (May), Construction
Owners Association of Alberta (COAA), The University of Alberta, Edmonton,
Alberta.
Hwang, B. (2003). The Impact of Rework on Construction Cost Performance, Master’s
thesis, The University of Texas at Austin, Austin, TX.
Hwang, B., Thomas, S. R., Haas, C. T., and Caldas, C. H. (2009). ‘Measuring the
Impact of Rework on Construction Cost Performance’, Journal of Construction
Engineering and Management, 135(3), pp187-198.
Josephson, P. E., and Hammarlund, Y. (1999). ‘The Causes and Costs of Defects in
Construction: A Study of Seven Building Projects’, Automation in Construction,
8(6), pp681-687.
Love, P. E. D., Li, H., and Mandal, P. (1999a). ‘Rework: A Symptom of a
Dysfunctional Supply-Chain’, European journal of Purchasing and Supply
Management, 5(1), pp1-11.
Love, P. E. D., Mandal, P., and Li, H. (1999b). ‘Determining the Causal Structure of
Rework Influences in Construction’, Construction Management and Economics,
17(4), pp505-517.
Love, P. E. D., and Li, H. (2000). ‘Quantifying the Causes and Costs of Rework in
Construction’, Construction Management and Economics, 18(4), pp479-490.
Love, P. E. D., Mandal, P., and Smith, J. (2000). ‘Modeling the Dynamics of Design
Error Induced Rework in Construction’, Construction Management and Economics,
18(5), pp567-574.
Love, P. E. D. (2002). ‘Influence of Project Type and Procurement Method on Rework
Costs in Building Construction Projects’, Journal of Construction Engineering and
Management, ASCE, 128(1), pp18-29.
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Bon-Gang Hwang, pp 138-149
O’Conner, J. T., and Tucker, R. L. (1986). ‘Industrial Project Constructability
Improvement’, Journal of Construction Engineering and Management, 112(1),
pp69-82.
Appendix: Definitions of Rework Sources
• Owner Change: The result caused by the owner changing the project definition,
scope or requirements.
• Design Error/Omission: The result caused when necessary items or components in
the project design are erroneous or omitted.
• Design Change: The result caused when changes are made in the project design or
requirements.
• Constructor Error/Omission: The result caused by contractors' errors or omissions in
construction methods, procedures, activities or tasks.
• Constructor Change: The result caused by changing constructors, construction
methods or procedures.
• Vendor Error/Omission: The result caused when necessary items or components are
erroneous or omitted by vendors.
• Vendor Change: The result caused when vendors are changed.
• Transportation Error: The result caused by mistakes, accidents, or errors in
transportation.
• Other: The result caused by all other sources
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Oluranti et al, pp 150-164
Prevalence of theft and vandalism on building site
Farinloye Oluranti Olupolola1, Mafimidiwo Bamidele Adeniyi2
Adewunmi Yewande Adetoro3 and Ajayi Oluwaseyi Modupe4.
1&4
Department of Building, Faculty of Environmental Science,
University of Lagos, Akoka, Yaba, Lagos state.
2
Department of Quantity Surveying, School of Environmental Studies,
Yaba College of Technology, Yaba, Lagos state,
3
Department of Estate Management, Faculty of Environmental Science,
University of Lagos, Akoka, Yaba, Lagos state.
Nigeria.
Email : [email protected]; [email protected] ;
[email protected] & [email protected]
Abstract:
Construction sites are easy target for crime activities, which have brutally affected the
performance and the potential profitability of the project under construction. The effects
of theft and vandalism on construction jobsite are probably not predictable as they are
somewhat random occurrences.
The focus of this study is to examine the incidence of theft and vandalism on
construction jobsite and to know the effectiveness of partnering with security outfits.
Structured questionnaires were administered to construction professionals (Architects,
Builders, Quantity surveyors, Engineers, Suppliers, Project managers, Estate managers)
in small, medium and large construction firms, and security outfits and literatures were
reviewed, certain hypothesis concerning incidence of theft and vandalism and
partnership with security agencies influence on building sites crime prevention were
postulated. The study shows that incidence of theft is high than vandalism on building
sites. The study reveals that the average theft experience for companies that are not in
partnership is higher than those in partnership and also shows the effectiveness of
preventive measures against theft and vandalism to be less for companies that are not in
partnership to those that are in partnership with security outfits. Construction
companies/ contractors should pay special attention to the security of construction
materials, plants and equipment on site. Assume the primary responsibility and
commitment to reduce building crime as an addition to their primary role. The study
also encourages greater reporting of incidents of theft or vandalism to local law
enforcement and partnering with security outfits.
Keywords: Construction jobsite, incident, partnership, theft, vandalism
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Introduction
The Annual losses to the building industry as a result of criminal activities runs into
millions of dollars and, according to most industry stakeholders, losses are escalating
each year (BSCP 2002). Construction sites are easy target for crime activities, which
have brutally affected the performance and the potential profitability of the project
under construction. The safety and security of construction jobsite need not suffer from
theft and vandalism acts (Dumfries and Galloway, 2009)
Incidence of theft and vandalism on the jobsite trigger immediate and negative financial
impacts, valuable assets losses, work on site being interrupted for sometimes or total
closure. The effects of theft and vandalism on construction jobsite are probably not
predictable as they are somewhat random occurrences, but projects that are affected of
such, suffer major losses and it is a problem that affect productivity, performance and
less profits (Arho, 2008).
The drive to squeeze out intruders, thieves, and vandals and enforce measures to
improve jobsite security has been on the increase (Lang, 2008). It is paramount for
construction professionals and stakeholders of the built environment to advocate against
the incident of theft and vandalism.
The study intends to examine the incidence of theft and vandalism and its prevention
through partnering with security agencies. Hypotheses postulated for the study are; there
is no significant difference in theft and vandalism incident among levels of construction
firms and partnering with security outfit does not influence construction site crime
prevention.
Literature Review
The phenomenon of theft and vandalism on construction sites is not new and not limited
to a particular construction sector. It also occurs in other sector of the Nigeria economy
like the oil and gas sector which do suffer theft and vandalism on large scale. A
confidential report by shell in 2003 and 2005 estimated that between 275,000 and
685,000 barrels of oil are stolen each day, sums up to $ 1 to $ 4 billion annually and that
theft of oil was equivalent of one month’s production, 10% of annual output (Lubeck, P.
M., Watts, M. J. and Lipschutz, R. D. 2007). According to oxford advanced learner’s
dictionary 6th ed. (2000) theft is the crime of stealing something from a person or place
and vandalism is the crime of destroying or damaging something, property deliberately
and for no good reason. Vandalism is generally a nuisance crime on construction site,
broken glass, graffiti, destruction of in-place materials and damage to construction
equipment.
Instability in political struggle gives room for incidence of theft and vandalism. At
Warri, Nigeria a machine estimated to cost 1.8 million naira was dismantled &
vandalize and part of the machine were stolen rendering a lot of site workers for
example welders, supervisors, fitters, etc. jobless and the machine useless in the
company's premises (Libcom, 2006).
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The construction industry must take it upon itself to limit the incidents as much as
possible by making it difficult for the perpetrators to succeed.
According to recent Home Office figures reported in Ace consult (2007), Construction
site thefts are growing at a rate of 25%. The construction industry suffers an estimated
loss of over 40 million pounds a year through theft and vandalism. This is because
construction or building sites usually have thousands of pounds-worth of plant and
materials left virtually unprotected at night and weekends.
It was also reported that the biggest proportion of construction site crime is committed
by people working in the industry.
According (Berg, 2003) the study carried out in state of Florida reveals that out of one
hundred construction firms, eighty-eight firms responded to the number of thefts that
they experienced in the last three years. Forty-two of these reported that they
experienced two or less incidents of theft in the last year while the mean number of theft
incidents experienced by all 88 firms was 7. The companies that experienced more than
10 theft incidents in the last three years reported a wide range in the number of theft
incidents. Two respondents reported more than 150 incidents and one respondent
reported 192 theft incidents.
Figure 1: Number of thefts per year
(Adopted from Berg ,2003).
According to the findings, a significant number of responding firms have experienced
more than one to five incidents. This accounts for 62% of the respondents.
These responses are as follows;
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Figure 2: Theft incidents
(adapted from berg, 2003).
A 2003 survey conducted on the homebuilders in the state of Florida by Montealegre
(2003), indicates that vandalism is a major problem in many areas and adversely affects
the construction community in numerous ways. Repairing damaged property is
expensive and time consuming for residential contractors. A question was asked about
the approximate number of vandalism incidents each respondent had experienced in the
past three years. Based on 115 responses, the average number of vandalism cases in
three years was 9.14 or approximately three vandalism incidents per year. In addition,
the minimum number of incidents was one and the maximum was 700 incidents in three
years.
According to the findings, 44.3 % of the respondents reported no incidents of
vandalism. Also, 13.9% and 8.7% have experienced one and two incidents, respectively
(See Figure 3).
Figure 3: Number of vandalism incidents in the past 3 years
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Oluranti et al, pp 150-164
(Adopted from Montealegre, 2003)
The data was examined to determine the frequency of the types of vandalism acts in
residential construction. Based on seventy-six responses, the results are shown in the
following graph.
Figure 4: Vandalism by type
(Adopted from Montealegre, 2003)
Figure 5 illustrates the most frequent acts of vandalism. “Broken glass” accounted for
the largest percentage, 65.8% of the six types of incidents examined in this study.
“Destruction of in-place materials” accounted for 57.9% of the responses. “Graffiti”
was reported by 40.8% of the respondents.
This analysis includes a category called “other” that accounts for 15.8% of the
respondents. For example, destruction of framed walls, damage to toilets, stolen or
destroyed plans, and driving over graded site work were included in these acts of
vandalism. Damage to construction equipment and damage to vehicles accounted for
9.2% and 6.6%, respectively. These incidents are the least likely to happen, according to
this study. In summary, residential contractors not only should pay special attention to
protecting glass in windows, doors, and equipment, but also in-shielding in place
materials and fixtures.
DEWALT (2005) a leading manufacturer of power tool in North America surveyed
more than 1,500 construction professionals and found that jobsite security was the
number one concern among construction industry end users and buyers. The study
showed that 97 percent of construction professionals were concerned about jobsite theft,
which causes losses of more than $1 billion in the United States each year. More than
60 percent of those surveyed indicated that tool theft was their biggest concern, posing
the greatest financial threat to their job profitability. More than 50 percent of the
respondents reported that they had equipment stolen from a job site within the past 12
months, and more than 77 percent had experienced a theft up to five times each year
over the past three years.
Pfeffer (2001) cited in Berg (2003) stated that stolen tools are easy to resell because
there is no standard method for recording or registering serial numbers. In addition,
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contractors contribute to this problem because they do not take time to record the serial
numbers, and in terms of vandalism, numerous contractors consider an act of vandalism
to be “part of the job” if it is not of an extraordinary cost.
Prevention of theft and vandalism through security agencies partnership
Berg (2003) testify that reporting incident that involves theft on a construction project to
local law enforcement or security outfit is of beneficial to everyone involved, as well as
potential future victims. El Dorado county sheriff also encourages greater reporting of
incidents of theft or vandalism to contact local law enforcement (Crime Alart, 2006).
Some security outfits are known to install security devices on site to prevent site theft
and it would be important for construction companies to build partnership with these
security outfits to combat crime on site. Partnership for Crime Prevention could be
drawn from industry experts, consultants, and other key industry stakeholders,
specifically to include the insurance industry and Police agencies.
In most companies there appears no provision for the appointment of a crime prevention
agencies or similar position to coordinate action. Responsibility for losses generally
falls to the construction manager or building supervisor who has responsibility for
security as an addition to their primary role. Crime prevention principles identify that
everyone has a responsibility to take reasonable precautions to prevent crime and look
after their property. Partnering with security outfit to implement crime prevention
strategies to minimize the risk and incidence of building site theft and vandalism could
make considerable progress in providing co-ordinated action. A possible model for co-
ordinated action could be drawn to address various building security issues including
investigating, reporting, coordinating, implementing and evaluating a whole range of
crime prevention strategies for the building industry (BSCP, 2002).
City of Casey, crime prevention Victoria in partnership with Building Site Crime
Prevention Initiative suggests that any investment in a crime prevention partnership to
address building/ construction site crime should weigh the cost of implementing
strategies of curbing crime against the significance of the costs of theft and vandalism.
Although, it appears that most construction industry has not analysed the costs, both
direct and indirect, associated with building site crime. Builders and developers who are
aware of the true cost of crime on their sites are more likely to have taken pro-active
preventative approaches (BSCP,2002).
An essence of partnering reduces theft and vandalism on the job site offering immediate
and positive financial impacts. Valuable assets are in safe conditions, work remains
uninterrupted and insurance costs decline (DEWALT 2005).
A properly drawn-up building site security plan which includes partnering with a
professional site security company and installation of CCTV cameras cuts the level of
theft on that particular site by up to 90% (Ace consult 2007). Supervising a construction
site is a very demanding job and crime prevention through partnering is often not a top
priority in construction industry. Yet the losses from theft suffered by the construction
industry have been estimated at around £43 million a year - over £1 million every week
(The Home Office,2005) cited in (Dumfries and Galloway, 2009)
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To combat equipment theft Liberty Mutual Insurance’s Loss Prevention Department
recommends permanently etching an identifying mark on the equipment (spray paint
and initials on a piece of equipment), immobilize equipment when it is not in use; this
can be done by removing rotors, lowering blades and buckets, and disabling batteries
and electric starting systems where immobilization is not possible, then equipment
should be parked in a “wagon train” formation, using larger equipment to protect small
equipment (Bonesteel 1997) cited in( Berg 2005).
Due to recent activity concerning theft and vandalism to building sites, Crime Analysis
Unit of El Dorado County Sheriff came up with the following information to assist
those at risk (Crime alart 2006).
• Minimize the time that building materials and tools are left unattended.
• If expensive equipment is left on-site after hours consider hiring security
personnel.
• Plan to have appliances and materials delivered and installed on the same day.
• Install expensive "high risk" items as close to hand over as possible.
• Clearly display the lot number, the name of the builder and an after hours
contact
number on all construction sites.
• Erect warning signage about building site crime on housing estates and
individual dwellings.
• Identify and mark all materials and appliances.
• Liaise with surrounding neighbors and inform them about any development in
the
area.
• Distribute "open letters" to residents.
• Arrange with the local council for street lighting to be installed and operating on
the day that construction commences.
• Inform the police about the construction and provide them with after hours
contact details.
• Encourage construction workers to liaise with other builders and consider
establishing a reference group to address security issues.
Dumfries and Galloway Constabulary (2009); BSCP (2002) identifies relevant
strategies that are cost effective and can be used to help reduce and prevent building site
related crime as follows;
• Crime prevention awareness for construction industry staff
• On – site security
• Perimeter protection
- Temporary wire fencing
- Permanent fencing
• Site office positioning
• Access control
Improved coordination of plants/equipment deliveries on site
• Surveillance measures
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- Closed circuit television (CCTV)
- Security alarms
- Security lighting
- Security patrols
The building/ construction industry is the stakeholder with primary responsibility and
commitment to reduce building crime. Other key stakeholders such as the insurance
companies, Police agencies and the public can work with the building industry to
implement crime prevention initiatives.
Research Methodology
The focus of this study is to examine the incidence of theft and vandalism on
construction jobsite and to know the importance and effectiveness of partnering with
security outfits. A total number of 120 questionnaires were posted out to construction
professionals (Architects, Builders, Quantity surveyors, Engineers, Suppliers, Project
managers, Estate managers) in small, medium and large construction firms, and security
outfits. Most firms have been in operation for number of years. 68% of these companies
have been in operation for over ten years and 31% precisely have been in operation for
less than ten years. Method of analysis is mean, standard deviation, post hoc test and
independent sample test at predetermined alpha level of 0.05 (5%) at which any null
hypothesis could be rejected.
Table 1: Reponses to questionnaires
Company types Frequency Percentages Cumulative Percentages
Small construction firms 8 16.7 16.7
Medium construction firms 7 14.6 31.3
Large construction firms 10 20.8 52.1
Security outfits 23 47.9 100.0
Total 48
Incidence of theft and vandalism on construction jobsite
Respondents were asked the number of theft and vandalism they have experienced in
the past five years. Three of the respondents did not give an answer to theft occurrence
while four did not answer for vandalism.
Table 2: Number of theft and vandalism incident
Incident Theft Vandalism
Rate Frequency % Cum. % Frequency % Cum. %
Less than 10 16 35.6 35.6 38 86.4 86.4
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Between 10 9 20.0 55.6 4 9.1 95.5
and 20
Between 21 4 8.9 64.4 1 2.3 97.8
and 50
Above 50 16 35.6 100.0 1 2.3 100.0
Total 45 100.0 44 100.0
64.4% and 13.7% respondent had experienced substantial amount of theft and
vandalism cases between ten and fifty times while 35.6% and 86.4% experienced
minimal theft and vandalism incidents.
The study tested the postulated hypothesis to compare the incidence of theft and
vandalism among the company types.
Table 3: Post Hoc test of multiple comparisons of theft incidence among company types
Type of company Types of company (J) Mean difference (I - J) Std. Error Sig.
(I)
Small firm Medium firm .375 .667 .842
Large firm -.569 .601 .617
Medium firm Small firm -.375 .667 .842
Large firm -.944 .651 .336
Large firm Small firm .569 .601 .617
Medium firm .944 .651 .336
Table 4: Homogeneous subset of theft size
Types of company N Subset Sig. Harmonic mean size
Medium 6 1.500 .324 7.448
Small 8 1.875
Large 9 2.444
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It therefore means that there is no difference in the prevalence of theft occurrence in
large, medium and small construction firms and that they all have equal sizable
experience thus accepting that the null hypothesis.
Table 5: Post Hoc test of multiple comparisons of vandalism incidence among company types
Type of company Types of company Mean difference (I Std. Error Sig
(I) (J) - J)
Small firm Medium firm -.208 .212 .597
Large firm .013 .191 .997
Medium firm Small firm .208 .212 .597
Large firm .222 .207 .542
Large firm Small firm -.013 .191 .997
Medium -.222 .207 .542
Table 6: Homogeneous subset of vandalism size
Types of company N Subset Sig. Harmonic mean size
Large firm 9 1.111 .531 7.448
Small firm 8 1.125
Small firm 6 2.333
The same analysis on vandalism using multiple comparisons was carried out. Table 5
and 6 shows that vandalism amongst the types of construction firms when compared
does not really have any large difference. This also supported the acceptance of null
hypothesis that there is no significant difference in vandalism occurrence amongst the
different types of construction companies.
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Table 7: Firms/Security outfits partnership in preventing Theft and Vandalism
Partnership Frequency Percentages Cumulative
Percentage
Yes 43 89.6 89.6
No 5 10.4 100.0
Total 48
On the issue of preventing theft on construction site, there is likelihood that a
construction firm partners with security outfits or vice versa. This is usually done in
order to achieve best crime prevention practices. We gathered that about approximately
90% of these security outfits actually engage in partnership in order to prevent all sort
of crime, theft, and vandalism on construction sites. Only few signified that in their
quest to prevent theft and vandalism on construction sites, they are not in any way
engaged in partnership with security outfits.
To know the importance and effectiveness of partnering with security outfits on
construction firms and jobsite, the postulated hypothesis; Partnership with security
agencies does not influence jobsite crime prevention was tested.
Table 7 shows that about 90% of these companies are in partnership. The impact which
partnership has brought to the construction industry needs verifying. The study
investigates the theft experiences of both construction firms in partnership and
construction firms that are not in partnership. It also verifies the effectiveness of
preventive measures adopted by construction firms in partnership and those not in
partnerships. To test the hypothesis that states that partnership with security agencies
does not influence building sites crime prevention, we deploy independent T-test. The
following results (table 8 - 11) were generated from the test.
Table 8: Firms/Security outfits partnership in preventing Theft and Vandalism
Company partnering N Mean Standard Standard Error
with security outfit deviation
Theft experience Yes 40 12.975 2.465 .389
No 4 11.250 3.593 1.796
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The table above gives the average theft experience for companies in partnership and
those that are not. The score for those that are in partnership (12.98) is higher than those
that are not in partnership (11.25). These scores were tested for differences and the
following are the outcomes.
Table 9: Independent Sample Test
Levene’s Test t-test For equality Of Mea
Quality of for n
Variance
F Sig. T df Sig.(2taile Mean Std.
d) difference Error
Theft Equal variance 1.134 .293 1.284 42 .206 1.725 1.343
experienced assumed
Equal variance .938 3.288 .421 1.725 1.838
not assumed
There is no significant difference in partnering with other firms/outfits, M=12.975,
SD=2.465 and not partnering with other firms/ outfits, M=11.250, SD=3.594 for theft
experienced (table 4.15); t (42, 3.29) = 1.284, p>0.05. This result implies that whether a
company partners with security firms or vice versa, theft could also be experienced but
could be minimal on jobsite.
Table 10: Firms/Security outfits partnership in preventing Theft and Vandalism
Company partnering N Mean Standard Standard Error
with security outfit deviation
Preventive measures Yes 41 25.561 3.834 .598
No 5 27.400 5.594 2.502
The table above gives the average effectiveness of preventive measures for companies
in partnership and those that are not. Effect of theft and vandalism is less felt by
companies that are in partnership (25.56) than those that are not in partnership (27.40).
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Table 11: Independent Sample Test
Levene’s Test t-test For equality Of Mea
Quality of for n
Variance
F Sig. T Df Sig.(2tail Mean Std.
ed) difference Error
Preventive Equal variance 1.765 .191 -.964 44 .340 -1.839 1.907
measures assumed
Equal variance -.715 4.470 .510 -1.839 2.572
not assumed
There is significant difference in partnering with security outfits, M=25.56, SD=3.834
and not partnering with security outfits, M=27.40, SD=5.594 for effectiveness of
preventive measures (table 4.15); t (44, 4.470) = -.964, p<0.05. This result implies that
partnering with security firms or vice versa, partnership does influence crime prevention
on construction jobsite.
Conclusion
Theft and vandalism on construction jobsites is a considerable problem in the
construction industry and will continue to be a threat. The industry, in general,
recognizes that theft and vandalism are growing problems. From the findings, it shows
that the available preventive measure adopted by construction companies and security
firms have not been effective and that there has not been an appropriate strategy in
curbing theft and vandalism on building sites. According to the results, the incidence of
theft is high than vandalism on building sites, 64.4% said theft has occurred more than
50 times while 13.7% said that vandalism has occurred more than 50 times which
means that theft has a higher occurrence than vandalism in the construction industry.
The study reveals that the average theft experience for companies that are not in
partnership is higher than those in partnership and shows the effect of theft and
vandalism to be less for companies that are in partnership (25.56) to those that are not in
partnership (27.40).
Theft appears to be a greater problem in the construction industry than vandalism. As a
result, construction firms have a tendency to take theft more seriously than vandalism,
reporting nearly all the cases of theft that occur on their sites. On the other hand,
vandalism reports are significantly lower. The reason why the frequency of theft
reporting by construction firms/ contractors is higher than the reporting of vandalism
cases is because theft is a more damaging, costly phenomenon, losing equipment and
construction materials cost thousands of Naira.
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It is essential that construction companies/Contractors inform themselves about the
possible dangers and effects of theft and vandalism such as loss of time and money,
loosing plants & equipment worth of millions. There is need to design and install a
proactive preventive system against theft and vandalism to stem asset losses, to
eliminate of time and money and to enhance asset recovery. It is appropriate that
construction companies/ contractors report all losses due to vandalism or theft to the
local police department or Security Company. And on the part of the construction
companies/ contractors they should pay special attention to the security of construction
materials on site.
Further Research
The study tends to further its research on risk and cost implication on jobsite security.
References
Arho, E. O. (2008), ‘The prevalence of theft and vandalism on building site’,
Unpublished BSc. thesis, Department of Building, University of Lagos, Lagos, Nigeria.
Ace Consult. (2007), ‘Building site security/ Construction site security’,
http://www.securityguard.me.uk
Berg, R. (2003), ‘Jobsite security on commercial construction projects’, A master thesis
in Building construction, graduate school, University of Florida. Florida.
Bergs, R. and Hinze, J. (2005), ‘Theft and vandalism on construction site’, Journal of
construction engineering and management, 131(7), pp 826-833.
BSCP. (2002), ‘Building site crime prevention initiatives’, Final report, Author.
Bonesteel, M. (1997), ‘NUCA’ pp 15-17.
Crime Alert. (2006), ‘Preventing building site theft and vandalism’,
http://www.neighbourhoodwatch.com.au/building/publicationsmain.htm
DEWALT. (2005), ‘Bringing security to the construction jobsite. Numerex,
http://www.numerex.com
Dumfries and Galloway. (2009), ‘Protect your building site’, Crimestoppers.
Libcom. (2006), ‘The development of class struggle in Nigeria’, Africa ICG.
Lubeck, P. M., Watts, M. J. and Lipschutz, R. D. (2007), ‘Convergent interest: U. S.
Energy security and the “securing” of Nigeria democracy. A publication of the centre
for international policy. IPR. Nigeria
Pfeffer, S. (2001), ‘Mark tools to cut theft at construction sites’, Buffalo Business First.
- 163 -
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Oluranti et al, pp 150-164
Lang, R. (2008), ‘Health and safety on construction site – construction international’,
http://www.tag-guard.com
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Thomas Theodorakopoulos Christine Pasquire and Panos Fitsilis, pp 165-180
Investigating a new integrated cost management system
within Lean Project Delivery System
Mr Thomas Theodorakopoulos 1, Dr Christine L. Pasquire 2 and Prof. Dr Panos
Fitsilis3
1
eqm, Project & Construction Management firm,
Ippokratous 49, 26335 Patras,
Greece, EKPPT project.
2
Civil & Building Engineering Department,
Loughborough University, Leics, LE11 3TU
United Kingdom
3
Project Management Department,
Technological Education Institute of Larissa, TEI Larissa, 41110 Larissa,
Greece
Email: [email protected]; [email protected];
[email protected]
Abstract:
Construction projects have a specific set of objectives and constraints and project cost
management is listed as one of core areas in which a project manager should be
competent. Traditional methods of managing cost have been driven by the design of
product and process, rather than serving as criteria for acceptable designs. Cost
management has attempted to exert control after budgets are fixed and taking action to
recover to targets. Very often, the organization which controls the cost is different from
the organization which prepares the cost estimates, sometimes using different
techniques and/or software. Lean Construction offers a new way to design and build
that can finally release the traditional project team from the constraints of cost driven
management and permit a fully integrated cost management system to be developed.
The goal of this system will be to optimise performance across the whole process whilst
achieving significant cost reductions. This paper outlines the framework within which
the proposed cost management system will be developed using lean processes as a
platform. The paper will also highlight the need for behavioural changes to support the
system implementation
Keywords:
Cost management, Cost Control, Design management, Lean Construction, Lean Project
Delivery, Project management
1 Introduction
In construction projects, significant uncertainty exists throughout the projects. Weather
conditions, soil conditions, owner changes, and the interaction between multiple
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Thomas Theodorakopoulos Christine Pasquire and Panos Fitsilis, pp 165-180
operations can produce unique circumstances, which could be as critical as the planned
activities and have a significant impact on project cost. (Salem et al., 2006)
Cost management consists of cost estimation and cost control. Project cost estimating
involves developing an approximation of the costs of the resources needed to complete
project objectives. (Vojinovic et al., 2000).On the other hand cost control is the
continuing process to keep the project within cost objectives and satisfy client’s needs
In most construction projects cost management is related with traditional estimation
techniques and cost control procedures and mostly prepared by different people. It is
obvious that this traditional approach leads to greater cost of designs than estimated.
This inconsistency is wasteful and reduces the value of clients get for their money.
Traditional methods of managing cost have been driven by the design of product and
process, rather than serving as criteria for acceptable designs. Cost management has
attempted to exert control after budgets are fixed, by after-the-fact monitoring detection
of negative variances, and taking action to recover to targets. (Ballard 2006)
By keeping intense pressure for production of any activity because it is believed that
reducing cost and duration of each step there will be improvement, it is no longer
effective in delivering construction projects.
Thus if the cost management process is integrated within a Lean Project delivery system
that satisfies project objectives and clients’ needs, then it is generated a new approach of
managing projects’ cost.
Lean Construction sets principles including waste minimization, responsiveness to
change, effective relationships within the value stream, continuous improvement and
quality from beginning. Such a process can be applied to any construction project and
allows project cost management being more effective and reliable.
Lean construction principles are gaining popularity because they can affect the bottom
line of projects. Under Lean delivery system, design and construction put activities in a
logical sequence, estimating time, cost and resources required to complete each activity
and therefore the project. (Howell 1999)
Under Lean Project delivery system the problem of poor communication of information
linkages that traditional cost management methodology produces will be solved while
optimising the project by using less of everything in project execution.
Control is conceived as monitoring each contracts or activity against its budgets
projections. (Howell 1999)
Using an integrated cost management system within a Lean Construction platform, it is
required to develop target costing approach in initial stage of Lean Project Delivery
system. Target costing is a management process that seeks to make cost a driver of
design, thereby reducing waste and increase value. (Ballard 2006).
Current paper investigates the requirements of such an integrated cost management
system and this is a part of a broader research which aim to develop an integrated cost
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Thomas Theodorakopoulos Christine Pasquire and Panos Fitsilis, pp 165-180
management system under Lean Process. Therefore it is developed a framework which
will be used as a prototype to develop the integrated cost management system. Section 2
analyses the traditional cost management methods comparing with Lean Approach of
cost management
2 Literature Review
Traditional methods of managing cost do not serve the client’s needs and follow the
design rather than ensuring acceptable designs.
The focus of this paper is to highlight the shortcomings of traditional cost management
and present the Lean thinking as a new approach of managing projects and projects’
cost. The new process leads to an integrated cost management system that flows from
planning to control stage and vice versa through the four stages of Lean Process.
2.1 Cost Management-Traditional Approach
In general, a construction cost estimate is prepared to identify the costs required to
execute a project in accordance with its plans and specifications (Jrade and Alkass
2002). Throughout a construction project life cycle, many cost estimates have to be
prepared or revised, depending on the information and engineering drawings that are
available at any particular time.
The uncertainty in undertaking a construction project comes from many sources and
often involves many participants in the project. Failure to recognize and manage the
potential risks often leads to undesirable results for the project. The amount of
contingency, that the uncertainty generates, is based on historical experience and the
expected difficulty of a particular construction project. Socioeconomic factors,
organizational relationships and technological problems are the main areas where this
amount of contingency is classified. In most construction estimates, there is an
allowance for contingencies or unexpected costs occurring during construction.
Design development changes, different site conditions, inflation, communication,
general administration changes may variegate the initial estimate. This contingency
amount may be included within each cost item or be included in a single category of
construction contingency. Hence it is quantified and analyzed even if construction
starts.
In construction sector, it has been customary for architects to work with clients to
understand what they want, and then produce facility designs intended to deliver what’s
wanted. The cost of those designs has been estimated, and more often found to be
greater than the client is willing or able to bear, requiring designs to be revised, and then
recosted and so on. This cycle of design-estimate- network is wasteful and reduces the
value clients for their money. Cost has been an outcome of design. (Ballard 2006)
The integrated lean cost management together with target cost application provides a
proactive means for project control and seeks to make cost a driver for design, thereby
reducing waste and increasing value
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2.2 Cost Management-Lean Approach, Target Costing
Lean construction much like current practice has the goal of better meeting needs while
using less of everything. The lean approach is to assure we do not contribute to variation
in work flow and to decouple when we cannot get it under control. (Howell 1999)
Ballard (2000) divides the Lean Project Delivery system into four interconnected stages
which start from early planning stages and are completed with project turnover: project
definition, lean design, lean supply and lean assembly. Lean Project delivery system
does not separate the planning and control stage. Instead, integrates them to a cost
management system where planning ensures the control performance and control stage
ensures actions are taken for project efficiency.
A fundamental idea of the proposed cost management system under Lean approach is to
avoid cost overruns due to lack of planning and control stage integration. For this reason
it is proposed to use as primary target the target costing methodology especially in early
stages of design of projects. Adopting target costing for construction is very different
than manufacturing cause each product is typically designed and constructed for one
customer only and the customer usually be intimately involved in the project
development and delivery process (Ballard 2006)
The proposed integrated cost management system uses target costing in the very
beginning stage of Lean project delivery, the project definition stage, and is dynamically
used through all the stages of the project. The effective measurement process that the
proposed integrated system generates can provide early warning of problems associated
with risks, allow time to prevent problems and manage the cost of the contingency
effectively.
3 Research Methodology
This section explains the research methodology adopted to achieve the research aim and
objectives. Because of the importance to understand the research process and the need
to select the appropriate approach for this research, description of the research
approaches has been conducted. In order to make sure that the most suitable research
methodology was chosen and that every objective was achieved using the appropriate
method, the factors used for choosing the research methodology were established and
the relationship between the research objectives and research methods was portrayed.
The reason for conducting research can be classified into groups on the basis of what
the research is trying to accomplish and how it will be used. The first is answered
through exploration, description and explanation approach and the second is answered
through the basic and applied approach.
The principal aim of this paper is to investigate and design the framework of an
integrated cost estimation and cost control system within a Lean Project Delivery
System and highlight the fundamental requirements in each stage of the project’s life
cycle.
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This integrated framework will be used to identify and solve the problems of the
linkages that emerge by using traditional cost management methods.
In order to achieve this aim the following objectives were developed.
• Investigating and reviewing the existing approaches in cost estimation over the
projects’ life cycle and identifying their limitations
• Requirement analysis of an integrated system
• Investigating in depth Lean Construction delivery processes and indentifying the
necessity in project management.
• Exploring and analysing target costing as a management technique within an
initial stage of Lean Project Delivery System
• Developing a prototype cost management model
• Developing a prototype cost management requirements system
This paper and the whole research that is progressing adopted, as a main approach, the
description and applied approach to achieve and apply its aim and objectives. The
choice was driven by the nature of the subject and the intensive previous knowledge
required to present the problem or the situation. Even though for integrated cost
management field and Lean construction field, not much research has been done until
today, description approach is the most appropriate to use. On the other hand, because
of the need to explore all sources of information for many areas presented in this
research and before proceeding to integration part of cost management, the exploration
approach is used in early stages. The applied approach that has been adopted to answer
“how” this research will be used, attempts to solve specific problem to accomplish a
task.
The research attempts to solve a practical problem and improve the existing practice of
managing cost in construction projects. This requires collecting data from different
resources using different techniques, to identify the existing situation, formulate the
research problem, investigate opinions, other researches on the subject, and identify the
available models used to solve the problem and define their limitations.
By comparing the research aim, the objectives, the characteristics and the different
research approaches, the current research is mainly descriptive in nature and adopted the
applied approach to achieve its aim and objectives. Quantitative and Qualitative
techniques were used for data collection and analysis.
The research methodology adopted consisted of four activities, 1) data collection, 2)
data analysis 3) action required, 4) reliability and validity. These activities are a
concurrent process to achieve the aim and objectives rather than sequential steps.
• Data collection is a principal activity in this research process. Data are collected
from different sources, using different methods to achieve certain objectives.
This approach is also known as “triangulation” which increases the reliability
and validity by verifying findings of data from one source with other sources.
Different quantitative and qualitative methods are used in the current research
for data collection. Both methods are adopted as there is no quantification
without qualification and no statistical analysis without interpretation. At this
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stage of research, observation, literature review and case studies are used as a
main source for data collection. The current topic was identified and chosen by
the researcher’s observation and academic and working experience in this
specific field. During current investigation, literature review was considered as
on going process to collect data. Published and unpublished works are reviewed
to ensure that every work in this field was collected and reviewed. Textbooks,
professional journals and magazines, conference proceedings, dissertations,
internet, on line databases and technical reports are some of different sources of
information for data collection. No interviews and questionnaires are used in the
current stage of research but its contribution to the research is a subject of
investigation as the research is progressing.
• Data analysis is concerned with analysing and interpreting the collected data.
Two approaches have been adopted for data analysis, the quantitative approach
and qualitative approach. The first is dealing with numbers and second is dealing
with words. Both of them have their own nature and different analysis
techniques. In current paper emphasis is given to qualitative approach.
Quantitative approach is a subject of following research in current field.
• The action required in this subject of investigation is adopted after the data is
collected either by using other data sources to validate the collected data,
carrying out further investigation to thoroughly understand the data or by
selecting the appropriate analysis. Another option, which is under investigation,
is to adopt action required after the data analysis and during the development of
the integrated cost management prototype model.
• Reliability and validity is the last activity of the research methodology. Because
of their importance they are used to build the research methodology around
them. They play a key role in making sure that all the methods used and the
findings from data collection and data analysis are reliable and valid. By using
these techniques it is provided information in standard conditions of results by
any researcher or organization. Furthermore it is ensured if the methodology
adopted answers the question of really measuring what it is intended to measure.
4 Proposed Integrated Cost Management Framework Development
System - Findings and Discussion
It is important that the method used to develop the project budget is precise enough to
provide a basis for controlling and monitoring the desired building throughout the
detailed design process. A good budget should be supported by established design
parameters and quality levels and then priced on a conceptual basis in enough detail to
allow the control process to be effective. Target costing provides all the necessary
information and cost requirements to proceed in budgeting the designs. If the budget
used to seek the project financing cannot be used in this fashion, then control during
execution will be difficult or impossible to achieve. (Parker 1993)
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On the other hand a cost control system should serve a link between the cost estimate
and the actual construction or project cost. Its main objective is to maintain costs within
the restrictions of the cost estimate or construction budget
The control method investigated and chosen for this study is Earned Value Analysis
(EVA).The EVA cost control method calculates only three variables, the actual cost
performed on site, the dates of work performed (time sheet) and percentage of work
accomplished. The traditional cost control methods calculate only % complete estimate,
% budget spent, % work done and % time elapsed. This is a subjective and incomplete
approach and draws false conclusions. Instead, EVA is an industry way to measure a
project’s progress, forecast its completion date and final cost and provide variances
along way. With the integration of just three measurements, (BCWS: Budgeted cost of
work scheduled, BCWP: Budgeted cost of work performed, ACWP: Actual cost of
work performed), EVA provides consistent, numerical indicators with which projects
can be evaluated and compared.
In simply words it compares the planned amount of work with what has actually been
completed, to determine if cost, schedule and work accomplished are progressing as
planned, as shown in Figure 1.
120000
100000
80000
56000 BCWS
60000 BCWP
55000
49000 ACWP
40000
20000
0
Nov-03
Jan-03
Jun-03
Jul-03
Apr-03
Feb-03
Mar-03
May-03
Aug-03
Sep-03
Oct-03
Dec-03
Figure 1: Earned Value Analysis diagram
(Source: NOOA, 2003, www.cio.noaa.gov/itmanagement/evaslides.ppt)
Furthermore the cost estimation and cost control system must be designed within a
complete information system for the whole Lean project delivery system stages.. This is
called Project Information System (PIS) and cost management system is the one part
that this analysis investigates. PIS generates and transfer any information related to the
project needs.
Construction projects inevitably generate enormous and complex sets of information.
Effectively managing this bulk of information to ensure its availability and accuracy is
an important managerial task. Poor or missing information can readily lead to project
delays, uneconomical decisions, or even the complete failure of the desired facility.
With better information the problem could have been identified earlier, so that for
example alternative suppliers might have been located or schedules arranged. Both
project design and control are crucially dependent upon accurate and timely
information, as well as the ability to use this information effectively. At the same time,
too much unorganized information presented to managers can result in confusion and
paralysis of decision making. (Hendrickson 1998)
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Literature highlighted the need to prepare estimates with emphasis on managing the cost
and use of the information provided in the planning stage to control the construction
cost efficiently, yet not much research is carried out in this field.
The main idea of the integrated cost estimation and cost control system is that
estimation data are transferred automatically to the control process. A basic requirement
to succeed this transformation is to develop or generate a coding system that can ensure
the uniqueness of each activity and work package. Work Breakdown Structure (WBS) is
the basic input in such a system and can provide valuable information in many levels of
hierarchy.
The requirements are needed to prepare cost estimates in accordance with efficient cost
control are inherent in the proposed integrated cost management framework of Figure
2.These requirements are grouped in “inputs’, “outputs” and a “process” for each
project stage. The inputs start in very early stages with emphasis in client needs, target
costing and basic project specifications to proceed in planning process. It is important to
mention that outputs such as resources policy and cost control policy are presented in
planning stage before the construction starts. Hence, more action policies are developed
and more flexibility to manage cost before construction starts. The framework meets the
Lean Project delivery requirements providing information and feedback at any stage of
the project’s life cycle. Early planning is the key requirement of the current framework.
The four stages of Lean Project delivery start in early stages of the project with project
inception and are completed with control stage during construction. The cost
management system stages that are presented on Figure 2 follow the time process of
Lean Project delivery system.
• Project Definition: is the early beginning project phase which starts with
feasibility study, the purposes of the project and basic design concepts. Client
constraints usually are set in this project phase,
• Lean Design: follows the Project definition by using design concepts and other
project specifications to produce analytical designs with resources and other
project elements.
• Lean Supply: is the phase which the resources and other project specifications
are analysed further. By this stage a policy of how these resources and elements
will be used in construction process and indeed is the last action of the planning
process of each project just before the work starts and the resources arrive to the
site.
• Lean Assembly is particularly the phase beginning with the first delivery of
resources to the site and ending with project turnover. In other words is the
control stage of the project and in terms of cost is the project cost control phase.
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Figure 2: Development of cost management framework system requirements
(Source: Author’s proposed integrated cost management system)
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By defining the integrated system into four stages of Lean Project Delivery, the logical
framework dataflow requirements are developed. These requirements are referred to as
the inputs, the outputs and the processing of the system. The framework of system
requirements provides a common structure between planning and control parts in which
the outputs of the planning process are used as inputs in control process through the
uniqueness of the coding system. This framework is a great tool in developing an
information system and the requirements described are used to develop a prototype cost
management model. Its process time development is appeared in Figure 3. In horizontal
axis of figure 3 is presented the time process to develop the prototype model starting
with model analysis and requirements, continued with development of actual cost
management model and completed with final parameterization and applications on real
projects. On the other hand the vertical axis describes the time of model process by
using the inputs of the proposed management system and how these inputs are
processed and give final model approved. Important information is the revision
processes through time process and the feedback process always after the first analysis
of the inputs, as shown in Figure 3. This ensures the model efficiency and more reliable
cost information data.
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Figure 3: The integrated system model prototype in time process
(Source: Author’s proposed integrated system)
Below is analysed a case study which describes the integration of the cost estimation
and cost control stages. As described previously, the basic idea of the new proposed cost
management system is that estimation data are transferred to the control process
automatically. In this section is analysed a project activity in terms of resources by
generating a coding system for WBS levels. This analysis uses a generic algorithm
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which calculates the total project cost according to the cost estimation method chosen
and the various project features. This example describes an activity which is measurable
in terms of cost. Having estimated the cost at the analytical (cost measurable) level, it is
possible to calculate all the upper levels of the hierarchical structure and therefore the
whole project. The initial approach is to estimate the cost to the minimum possible
autonomous activity or element that is needed, to produce a specific amount of work.
i.e. slab concrete of first floor on a 6 storey building as given in Table 1
Table 1: Hierarchical cost level
(Source: Author’s proposed integrated system)
Level 1 Project Level 2 Level 3 Measured Level 4 Cost Basis Analytical ID CODE
Package Stage Activity Level
Concrete Works C
Slabs 02
Concrete Slab 1st 01
Floor
Materials 01
Labour 02
Plants 03
Sub Contractors 04
Overhead Costs/Other Costs 05
Table 2 describes the cost estimation process for the cost levels of the project activity
that is described above. In a hierarchical structure of a project it is needed to describe
not only the connection between the higher and lower levels, but also is vital to describe
how much of each activity is needed, in terms of measure units, to complete its package.
X1, X2 ....X5 are the different quantities of the analytical level (basis level). Hence the
cost is defined for each level of the project activities and then it is estimating the cost of
the whole project as well. The algorithm that is used to estimate this project cost
processes from the basic level up to the top level. The cost of an upper level is the
summation of the lower levels multiplied by the participation quantity.
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Table 2: WBS Cost estimation process
(Source: Author’s proposed integrated system)
Cost levels Cost level Measure units Measure Participation Cost Cost
ID code units ID Quantity per
code unit
Concrete C Percentage PC 1 1
works complete
Slabs C.02 Percentage PC 1 1
complete
Concrete C.02.01 Percentage PC 1 (X1*C1)+(X2*C2
slab 1st floor complete )+(X3*C3)+(X4*
C4)+ (X5*C5)
Materials C.02.01.01 Materials rates Kgr X1 C1 X1*C1
(i.e. Kg)
Labour C.02.01.02 Labour working HR X2 C2 X2*C2
rates (i.e. hours-
HR)
Plants C.02.01.03 Plant working HR X3 C3 X3*C3
rates (i.e. hours-
HR)
Sub C.02.01.04 Fixed price or €/m3 X4 C4 X4*C4
contractors price per unit
(i.e. €/m3)
Overhead C.02.01.05 Fixed cost (i.e. € X5 C5 X5*C5
expenses/ €)
other costs
The control process is the opposite procedure from estimation. In control stage the data
from the construction site are used and matched to the estimation data.
The major requirement in control stage of the integrated system is to use simple and
little entry information as possible, because complicated information may lead to
mistakes and wrong decisions. The only information regarding to the progress of any
project are the time sheet, the order records and the subcontractor contracts. The time
sheet must include among others: start time and time of inspection, percentage complete
(based on activity quantity measured), actual cost of activity up to the control date (this
cost may calculated from the combination of materials, sub contractors, plants, labour
working hours, other expenses).EVA uses these data and formulates an algorithm to
calculate the BCWS and BCWP.
SV: Schedule Variance (BCWP-BCWS): A comparison of amount of work performed
during a given period of time to what was scheduled to be performed. A negative
variance means the project is behind schedule CV: Cost Variance (BCWP-ACWP): A
comparison of the budgeted cost of work performed with actual cost. A negative
variance means the project is over budget. The flexibility of Cost control process is
related to the different formats that are able to derive cost reports. Therefore in this
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system there is an opportunity to compare costs in terms of various categories such,
materials, subcontractors, labour, time period, performance etc.
The framework described is the basis for the development of elemental and resourced
based analysis as well and ensures that information on cost held within the system
database, is reliable and relevant for re use and corrective action plans.
The fast and reliable use of cost information within the system allows the creation of
different portfolios to any user or project team. The access policy to the system is
divided in two categories, the entry and the control access. Each client or contractor has
the ability to parameterize the system and access levels according to their operation
needs. The friendly and simple environment to the users minimizes the human
interference omitting human errors within the project’s life cycle. The main idea of the
integrated cost management system is to entry the minimum information as possible
which provides quick response during project implementation, real time project control
thus a very small size of users team is desired to operate the system.
Further investigation and in depth analysis will take place for adopting the cost
management system under Lean project delivery and provide the target cost
methodology as a powerful tool of that process starting from project definition stage.
Each project programming and control policies are stored within the database, together
with cost indices and are available for re- use in future projects. The integrated cost
management system analyses the new project specifications and suggest budget
constitution scenarios, procurement policies, PIS procedures, WBS structures, time
scheduling activity plans and plenty of data reports related to the project. Hence less
effort is needed from managers and estimators programming the project and fewer
mistakes occur during construction stage. The application of the integrated system
premises the services of a PIS administrator and experience users to input the cost data.
Report system is available for any portfolio and managers are able to design the report
system either from design stage or during construction according to the project needs.
The iteration of two or three similar projects is adequate operation time for the system
to work efficiently.
Due to increase demand of using quick, flexible and reliable software to manage the
cost, Enterprise Resource Planning (ERP), Enterprise Product Planning (EPP) and
project management software are selected. ERP and EPP are more flexible to estimate
and have more powerful database than any other project management software. On the
other hand project management software is more flexible to calculate the EVA and they
use Gantt charts as well. ERP/EPP and project management software provide a
complete PIS
5 Conclusion and Further Research
This study is the starting basis for the final integrated cost management system
development. The following objective is an in depth analysis of integration system and
the development of a prototype model based on the current framework. The system will
be applied within PIS under the Lean Project delivery specifications and real project
tests will be made to ensure the system’s efficiency.
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The purpose of developing the framework of an integrated cost management system
under Lean Process is achieved and provides important information regarding the
system’s requirements.
Early planning procedures that are used in this framework, as target costing, mapping
resources and cost control policy, ensures the effectiveness of the cost management
system. Furthermore the time process to develop the integrated system based on this
framework requirements is based only on three steps as shown on Figure 3, model
analysis, model development and application, which ensures quick feedback in any
project that the system will be applied to.
In construction, work is released by an administrative act, planning. In this sense,
construction is directives driven and so measuring and improving planning system
performance is the key to improving work flow reliability.
Lean construction and specifically Lean Project delivery system aims to maximize
performance for the customer at the project level, concurrent design of product and
process, and the application of production control throughout the life of the product
from design to delivery. Lean process together with the integrated cost management
system supports the development of team work and a willingness to shift burdens along
supply chain. Partnering relationships coupled with lean thinking make rapid
implementation possible. Of course people manage systems and this integrated system
is not an exception but there is a need to focus on how these systems affect the projects
instead of trying to maximize their performance first.
The introduction of target costing methodology and its application in early stages of
Lean process reduces the waste of the cycle design-estimate-rework hence increases the
value clients get for their money.
The common structure of cost management system under Lean Process can ensure a
reliable comparison of estimating and real cost values. It is also achieved to identify the
needs of such a system within a complete information system and what are the benefits
of using PIS. The investigation of current cost management approaches and methods
highlighted the shortcomings of current methodologies used and is much more than ever
before the necessity to provide an alternative in cost management process.
The new integrated cost management system is able to provide any information relating
to project’s progress in terms of cost and schedule. It is a very powerful tool which if
combined with other features of the PIS and applied in a Lean Delivery basis, can
provide results related to the operation of the company, the performance of labour etc.
Finally prevents delays and cost overruns and stimulate action plans to keep the project
as planned and together with Lean thinking as a process to manage the projects ensures
to meet better customer needs and maximize their value within projects.
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6 References
Akintoye, A. & Fitzgerald, E. (2000), "A survey of current cost estimating practices in
the UK", Construction Management and Economics, Volume 18, (no. 2), pp.
161.
Ballard G. (2000a), “The last planner system of production control”. PhD thesis, Univ.
Of Birmingham, UK
Ballard G. (2000b). “Lean Project delivery system” LCI White Paper-8. Lean
Construction Institute
Ballard G (2006). Rethinking Project Definition in Terms of Target Costing,
Proceedings IGLC-14, July 2006, Santiago, Chile.
Cagle, R. F. (1991). Implementing an Owner’s Cost Control System, AACE
Transactions, O.7
Ferry J. D., Brandon S.P. & Ferry D.J. (1999), Cost Planning of Buildings, 7th edn,
Blackwell Science Ltd, Oxford.
Ferry J. D. & Brandon S.P. (1991), Cost Planning of Buildings, 6th edn, BSP
Professional Books, Oxford
Hendrickson C. (1998), Project management for Construction, 2nd edn, Prentice Hall
Howell A. G. (1999). “What is Lean Construction”, Proceedings IGLC-7, 26-28 July
1999, University of California, Berkeley CA, USA.
Jrade, A. & Alkass, S. (2002), "An integrated system for conceptual cost estimating of
building projects", Cost Engineering, Volume 44, (no. 10), pp. 28.
Kibler, B. E., (1992). “Integrated Cost and Schedule Control: a piece of cake”, Cost
Engineering, Volume 34, (No. 7)
Kinsella M.S., (2002). “Activity-based costing: Does it warrant inclusion in a Guide to
Project Management Body of Knowledge (PMBOK Guide)?” International
Journal of Project Management, vol 33, no 2, pp 49.
Parker, D.E. (1993), "Project budgeting for buildings", Transactions of AACE
International, pp. C.14.1.
Popham, K. (1996), "Cost estimating using historical costs", Transactions of AACE
International, pp. ES141.
Salem O, Solomon J, Genaidy A & Minkarah I (2006). Lean Construction: From
Theory to Implementation, Journal of Management in Engineering ASCE
Vojinovic, Z., Seidel, R. & Kecman, V. (2000), "Advanced cost estimating and strategic
planning", AACE International Transactions, pp. ES6A
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Ian Kennedy and Don Lee, pp 181-192
Working together for a collective culture of construction
safety
Ian Kennedy 1 and Don Lee 2
1
School of Construction, Economics and Management, University of the Witwatersrand,
Johannesburg, South Africa
2
Recovre, Melbourne, Australia
Email: [email protected]; [email protected]
Abstract:
In the Construction industry, there must also be a Collective Culture of Safety. One of
the challenges facing the construction industry is in determining what more can be done
about Occupational Health and Safety (OH&S). Stakeholders may appear to comply
with all OH&S legislation. However, what else should be done?
This paper therefore presents an analysis of the stakeholders responsible for a culture of
safe collective and individual behaviour in the construction industry and their potential
interactions.
Previously published models for the stakeholders involved in safety are three- and four-
party models involving five different stakeholders. This paper extended the models to
include ten stakeholders.
All the OH&S stakeholders should all be working together to implement safe, collective
and individual behaviour. The stakeholders that were identified from the literature
include educators, employers (professionals, contractors and sub-contractors),
employees (workers, foremen, tradesmen, labourers), clients, Trade Unions, Authorities,
such as Governments (e.g., Departments of Labour and Health). These are expanded in
this paper to include five additional stakeholders. It follows that the expanded group of
ten health and safety stakeholders results in there being one hundred potential
interactions involving stakeholder consultations and commitments.
The hundred potential interactions need to be considered in order to obtain safe
collective and individual behaviour.
Keywords:
Construction industry, safety culture, stakeholder’s behaviour.
1 The Need for a Collective Culture of Safety
Six km from the first-mentioned author's house was a tragic incident. The report on this
incident (Muragan, 2009) had the subcontractor insisting that the workers were covered
by the Workman's Compensation Act, and the workers claiming that they were forced to
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work under unsafe conditions. The subcontractor said in effect: "Our paperwork is
faultless", but the workers were saying (and sadly proving) that "The site was unsafe".
The theme of this paper is that it is not just one stakeholder doing the wrong thing
but that OH&S is collectively approached in a thoughtless, ill-organised and
unsystematic way. The challenge is to ensure that the stakeholder's culture is such that
all are fully committed to doing what is needed to achieve effective OH&S.
Unfortunately, the classical models for the stakeholders involved in safety are limited to
3- and 4-party models. For example, work by Clarke (1999) in the allied field of
transportation safety implies a 3-party model (operatives, supervisors and senior
managers).
We should be working together instead of talking past each other. But who is this
"We"? It is not just three parties. Nor is it just the four parties classified as role players
by Dingsdag, Biggs and Sheahan (2007) as being the "Occupational Health and Safety
Officers, Foremen / Supervisors, Trade Union Representatives and the workers
themselves."
Consequently this paper suggests that there ten stakeholders involved. Figure 1 is a
mesh, showing the ten role players in the culture of safety. Lines have been drawn from
each stakeholder to every other stakeholder to show that the number of interactions is
102 = 100, if internal interactions are counted, and directions are distinguished.
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Registered
employee
groups
Registered
employer Employees
groups
Insurance
Contractors Groups
Self- Education &
employed training
persons providers
Public Authorities
Suppliers of
products &
services
Figure 1. Stakeholders who have a role in achieving effective OH&S within the building industry sector
and their interactions
2 Review of a Collective Culture of Safety
A fundamental aspect of construction industry today is the need to ensure the right to
safety of construction workers and the safety of the subsequent occupants. Thus the
focus of modern safety management systems and methods includes SHE (Safety,
Health, Environment), QHSE (Quality, Health, Safety, Environment), OH&S
(Occupational Health and Safety) towards a culture of safety.
Nominal adherence to OH&S legal compliance in the constriction industry is not
enough. There must also be a Collective Culture of Safety. One challenge facing
employers in the construction industry is in determining what more they can do about
OH&S. They may have an effective OH&S system; they appear to comply with OH&S
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legislation, and performance indicators show that they have few lost-time injuries and
there are no reports of any incidents (Lee and Deery, 2006).
This paper uses the more modern phrase of a "culture of safety" rather than the older
term (Guldenmund, 2000) of a "climate of safety", although the older phrase persists.
The culture of safety is generally regarded as the common attitude and way that safety
is managed at the construction site or place of work. The culture of safety involves a
common system of shared beliefs, values and behaviour of those working within the
industry. This culture of safety determines how the industry goes about its work and
how it provides for the wellbeing of its workers.
2.1 Balanced Scorecard
Mahomed (2003) advocates using a balanced scorecard tool to benchmark the
organizational safety culture in construction. He argues that this tool has the potential to
provide a way to translate the organization's safety policy into a clear set of goals across
the four perspectives: management, operational, customer and learning, which he says
represent all stakeholders. The current work expands on these stakeholders from four,
with 16 interactions to ten stakeholders, with 100 potential interactions.
2.2 Safety Management Systems
Safety Management Systems, by themselves are not the answer. According to Marosszeky et
al., 2004:
"Safety and management systems have largely been developed in response to
statutory requirements. Thus reporting has focused mostly on mandatory
information related to accidents and injuries. Such measures suffer from three
drawbacks. Firstly, they measure what happens after the event and are reactive in
terms of management response. Secondly, in the absence of any proactive
measure, causal relationships cannot be established. Thirdly, they are negative in
nature and acknowledged as being unsuccessful as measures of safety
performance" (citing Trethewy et al. 2000, Mohamed, 2003).
2.3 Risk Perception
Risk perception is a fascinating aspect of safety. According to the Web site, Risktaking
(2009):
"Risk taking behaviours such as rock climbing, gambling and drug taking represent
one of the most perplexing problems in the field of psychology. The need for safety
is fundamental, are people who take huge risks therefore illogical or mentally ill?
Recent research findings shed an altogether different perspective on these
behaviours however, and it seems that normal people are motivated to take risks as
a result of their psychological makeup and the nature of the situation they find
themselves in."
People take risks when they do not or cannot do an accurate cost-benefit analysis of the
statistical odds. This can happen, when emotion rules over logic or the person suffers
from faulty logic or poor education or simply ascribes a low value to his life. A simple
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example is if a construction worker fears the loss of his job more than he fears the loss
of a limb from unsafe practices he is forced to follow. There is pressure to get job done
no matter what the risk is. The worker needs a job to put food on the table or remit
money home. Illegal gold mining of old shafts is another example of "calculated" risk-
taking. "I haven't had an accident doing this before" is the worker's voice-of-experience
speaking. Familiarity with the construction environment sadly breeds contempt.
2.4 Employee representatives
Employee representation (including trade unions) is an important factor in advancing
the culture of safety. According to Walters (1996), trade union representation in health
and safety plays an important role in effective health and safety, both through the role of
trade unions within the workplace and through their ability to provide support for
representation through training and information. In later work, Walters (1998) points
out that consultation regulation had very limited support for employee representation in
health and safety in small enterprises. Even having representation does not guarantee a
safe workplace.
2.5 Company size
Certain companies have a higher company risk profile. According to Hasle and Limborg
(2006), the employees of small enterprises are exposed to higher risks than employees
who are working in larger enterprises, and those enterprises have difficulties in
controlling risks. The most effective preventive approach seems to be simple, low cost
solutions, disseminated through personal contact. It also is argued (Mayhew and
Quinlan, 1997) that "poorer OHS is an important consequence of subcontracting."
2.6 Developing a positive safety culture
Developing a positive safety culture is important. Previous research by Mohamed
(2002) in the construction industry reveals "the importance of the role of management
commitment, communication, workers' involvement, attitudes, competence as well as
supportive and supervisory environments, in achieving a positive safety climate." An
important document in this field is by Dingsdag et al., (2006) a summary of which is
reproduced in Table 1.
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Table 1. The five sections of a Construction Safety Competency Framework and a brief explanation of their
content
(Source: Dingsdag et al., 2006)
The framework structure
1. Developing a positive safety culture — a definition of safety culture and the particular principal contractor
staff actions that lead to a positive safety culture.
2. Identifying Safety Management Tasks (SMTs) and safety critical positions — a definition of key staff
competency requirements, based on identifying the safety management tasks that safety critical position
holders must be able to complete effectively.
3. Defining competency requirements: The Task and Position Competency Matrix — the allocation of
competency requirements for the identified principal contractor’s safety critical positions, that is, “who needs
to be able to do what activities”.
4. Integrating the framework — guidelines for implementing the competency framework outlined in the
document.
5. SMT competency specifications and culture outcomes to be achieved — elements for each of the 39
identified safety management tasks.
Furthermore, a Safety Climate Index can be used to measure the climate of safety. See
for example Garcia et al. (2004). In the same year, project managers were researched by
Teo, Ling and Chong (2004). In particular, they found "that site accidents are more
likely to happen when there are inadequate company policies, unsafe practices, poor
attitudes of construction personnel, poor management commitment and insufficient
safety knowledge and training of workers."
According to Nahrgang, Morgeson, and Hofmann (2007), "the role of safety climate ...
is one of the most often studied antecedents of safety performance." We would therefore
specialize their generalization to argue that the culture of safety is a prerequisite to a
safe performance in the construction industry.
Earlier work by Biggs, Dingsdag, Sheahan and Stenson (2005) "indicated the strong
role that ... workplace collaboration had in influencing the ability of organisations to
develop and maintain a positive safety culture." We adopt their (2005) definition of a
culture of safety to describe the values, norms, attitudes and beliefs that are held
collectively towards safety within an organisation.
2.7 Conclusion to the review
It would seem that research has been done on some stakeholders, but not on their
combined contribution to a culture of safety. This paper now investigates the
stakeholders and their interactions.
3 Towards a Study of OH&S Culture
This section presents important factors in planning, designing, building and improving a
culture of safety in the construction industry, where people work together to implement
safe, collective and individual behaviour. The section therefore first identifies particular
strategies to achieve that culture.
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According to Cooper and Philips (2004), safety climate measures are useful diagnostic
tools in ascertaining employee's perceptions of the way that safety is being operation-
alized.
Other researchers have built a safety performance-measurement tool. Ahmad and Gibb
(2003) summarize its use:
"The safety culture of an organization is essentially a description of the attitude of
personnel about the company they work for, their perceptions of the magnitude of
the risks to which they are exposed and their beliefs in the necessity, practicality
and effectiveness of controls. Safety culture, a sub-set of the overall organizational
culture, is now believed to be a key predictor of safety performance. Organizations
with good safety cultures have employees with positive attitudes towards safety
practices. These organizations have mechanisms in place to gather safety-related
information, measure safety performance and bring people together to learn how to
work more safely."
This paper now outlines the foundation of behaviour-based safety management.
Behaviour-based safety is commonly defined as applying behavioural sciences to
change worker’s behaviour in real-world situations, such as on the construction site. It
concentrates on what workers are doing, it analyzes why they do it and then applies
interventions based on research results to improve what the workers are doing.
Safety Management Systems (SMSs) play an important role. This approach puts
increased reliance on the construction industry to cultivate a culture that will increase
safety. In a way, it is a type of performance-based regulation. Guidelines have been
developed for SMSs, as documented by Mitchison and Porter (1996) and hazards can be
minimized. One particular SMS documented by Quintana (1999) is Task-delineated
safety, which draws attention to the need for everybody to keep the areas safe.
Safety competency is an important issue that must be addressed and a Safety
Competency Framework is given by Dingsdag et al. (2006). This must be undertaken by
managing and collaborating with external stakeholders. According to Harrison and St
John (1996), an increasing management emphasis on "boundarylessness" has created a
new mindset concerning external stakeholders. It is our view that safety cannot be
successful without engaging all stakeholders to help in all the interactions.
Performance measurement is only one angle of the triangle of Safety Culture, Climate
and Performance Measurement. Mohamed (2004) makes the valid point that working
under pressure is the norm in the construction industry, leading to conflict between
production requirements and safety requirements. On a more positive note, Mohamed
(2004) points out that a "commitment and communication are prerequisites to creating
and sustaining a positive safety climate in construction site environments". A
"supportive environment" is important. Increased training in the valuable skill of
detecting hazards is suggested.
Amongst other things, management systems must be in place, as Bakri et al. (2006)
point out.
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4 Achieving a Collective OH&S Culture
The authors have defined the circle of ten interacting stakeholders in safe collective and
individual behaviour as being those shown in Figure 1. There are therefore 10 integrated
stakeholders (new ones shown below in bold), whose behaviour should collectively play
a role in achieving the desired health and safety outcomes. These are the:
1. Employee's behaviour
2. Education and training provider's behaviour
3. Authority's (Government’s and Institute’s) behaviour
4. Suppliers of products and service's behaviour
5. The public's (3rd party’s) behaviour
6. Self-employed person's behaviour
7. Contractor's (and supervisor’s) behaviour
8. Registered employer group's behaviour
9. Registered employee group's behaviour
10. Insurance group’s behaviour
1. The individual employee's behaviour involves what people in the organisation
do on a daily basis. Examples are maintaining suitable housekeeping and
orderliness at the workplace, complying with safe work procedures, reporting
incidents and hazards as required, being involved in risk assessment and control
and maintaining an awareness of health and safety needs at the workplace. In time,
a culture of being "my brother's keeper" should be actively encouraged to support a
culture of zero tolerance towards workplace injury. Such a culture means safety has
indeed become a shared value and responsibility. (Lee and Deery, 2006)
2 Education and training institution’s behaviour can involve promoting awareness
about OH&S principles, legal obligations as well as developing skills in applying
practical OH&S strategies at the workplace.
3 Government and other Authority’s behaviour involves the pursuit of a legal
structure and its compliance, as well as providing funding to promote OH&S
awareness. An important requirement would be that all duty-holders comply with
particular legal duties as far as is “reasonably practicable”.
4 The behaviour of suppliers can involve supporting OH&S by ensuring that they
actively comply with their legal obligations to ensure that their products / services
are safe and healthy, and that suitable information is supplied to the end user.
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5 The behaviour of the public involves playing an important role in demanding
that suitable OH&S laws exist and are adequately enforced.
6 Self employed person’s behaviour involves complying with their legal duties of
care by adopting particular safe work practices, and having the evidence to support
this.
7. The behaviour of the contractor must result in a developing of the OH&S vision,
framework and system. From within the contractor's organisation there must be a
structure of goals, objectives, leadership, expectations, resources, budgets and
specific tools. These are not merely beliefs and attitudes but entail tangible and
observable behaviour in the form of leadership, values, specific documents and
statements of what is required. (Lee and Deery, 2006)
8. and 9. The behaviour of registered groups involves the actual engagement of
people in achieving the practical OH&S objectives, where there is accountability,
quality and ownership of both actions and outcomes. This behaviour can also be
observed through means of audits, personal commitments, risk assessment tasks
and communication that should eventually be reflected in the improved injury and
incident data. (Lee and Deery, 2006)
10. The behaviour of various insurance groups involves providing practical advice
and guidance to their clients on a value-added or a fee-for-service basis concerning
OH&S strategies.
Lee and Deery (2006) also give 15 valuable "Key behaviour safety tools" — some
practical examples and suggestions on how to improve the safe collective and individual
behaviour.
In the present paper, the authors have presented the importance and application of what
they describe as "safe collective and individual behaviour" as a fundamental
requirement for achieving sustained success in OH&S in the Construction Industry.
According to Moura et al. (2007), clients blame poor task preparation, lack of specific
training and the lack of individual protection as main reasons for construction incidents,
while contractors (simply) attribute responsibilities to the high risk of the activity.
The key to successful OH&S lies in strengthening the delicate balance between legal
compliance, hazard management and organisational, managerial and individual
behaviour. Clarke (1999) correctly states that "accurate intergroup perceptions are
essential to the development of mutual trust and understanding between levels, which
forms the basis for a positive safety culture". To now extend Clarke’s (1999) idea, a key
feature of a company's safety culture is shared perceptions amongst all stakeholders on
the importance of safety.
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5 Discussion
Not all of the 100 interactions are of equal value. For example, the self-employed
worker may have no link to a Labour Union. It is therefore necessary to establish which
interactions will provide the greatest leverage in ensuring a safer Construction industry.
Surprisingly, little research has been done on reducing the two main causes of injuries
in the construction industry. See for example, Rivara and Thompson (2000). These two
causes are workers falling from heights and objects falling on workers. Perhaps the ten
stakeholders could start processes by concentrating on communicating with each other
in trust and with understanding to reduce these two main causes.
6 Recommendations
The interactions between various stakeholders should be minimally structured around:
• Contract arrangements to safely undertake building activities.
• Compliance with OH&S laws.
• Behaviour and consultation processes to maintain safety.
We emphasise that the law should require that stakeholders must comply with particular
duties that broadly require them to, so far as "reasonably practicable", eliminate or at
least reduce risk to health and safety of all persons affected by any construction activity.
However, the law is not the sole answer. Every stakeholder has to promote the need for
safety. We have to develop a "local culture of safety", which "reproduces itself". It
reproduces itself by the culture "rubbing off" from the stakeholders, who are tasked with
the double burden of ensuring that other stakeholders will also pass the message on to
those they meet, to ensure that the culture persists over generations. In essence, a safety
culture is "the right way that we do things around here and to do otherwise is not okay".
On site, all must immediately think when they see an unsafe practice: "But that's
wrong!" and do something reasonable about it.
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References (All Web pages last viewed 2/12/2009)
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Clarke, S. "Perceptions of Organizational Safety: Implications for the Development of
Safety Culture." Journal of Organizational Behavior, 20(2) Mar., 1999, pp 185-198.
http://www.jstor.org/stable/3100419
Cooper, M.D., and Phillips, R.A. (2004), "Exploratory analysis of the safety climate and
safety behavior relationship" J. of Safety Research. 35(5), pp 497-512.
Dingsdag, D.P., Biggs, H.C., Sheahan, V.L. and Cipolla, D.J. (2006), "A Construction
Safety Competency Framework: Improving OH&S performance by creating and
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Harrison, J.S. and St. John, C.H. (1996), "Managing and Partnering with External
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Hasle, P. and Limborg, H.J. (2006), "A Review of the Literature on Preventive
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Lee, D. and Deery, M., (2006), "Promoting a behaviour based safety culture within a
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Mayhew, C. Quinlan, M. (1997), "Subcontracting and occupational health and safety in
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Marosszeky, M., Karim, K., Davis, S., Naik, N., (2004), "Lessons learnt in developing
effective performance measures for construction safety management" Proc. 12th
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Godfaurd John, pp 193-203
A strategic perspective for managing socio-technical systems: the
missing link
G. A. John
School of Built and Natural Environment
University of Central Lancashire, Preston, Lancs. PR1 2HE
E-mail: [email protected]
Abstract
Most man-made systems around us are mainly socio-technical systems. As such it is imperative
that to manage such systems effectively we need to understand their properties at both the micro
and macro level and the holistic functioning of such systems. Such an approach is important in
understanding the emergent properties that are exhibited by such system. We already have been
delving into the micro level and the intricacies of the different subsystems without actually
having the broader view of the whole system. This current approach came from the fact that
reductionism is the ‘mantra’ of our scientific nature and endeavours, and dictates how a problem
is solved. In this paper a strategic approach is put forward, making use of the force field theory
as a necessary missing component for designing and managing socio-technical systems. With
this proposed strategic approach the true understanding of solving these emergent properties will
be reinforced with what we already know and also help in solving some disorder exhibited in
these systems, without creating more uncertainties. This paper sets out the framework and its
usefulness to understanding the socio-technical systems around us.
Keywords: Emergent properties, Force field, Management, Socio-technical systems
1 Introduction
The built environment is made up of several man-made systems, divided into sectors such as,
industrial, commercial and residential buildings. Added to that, you have the infrastructures such
as roads, and civic parks, interacting with the people to create socio-economic systems (STS).
Buildings, in particular under real estate umbrella, in this paper are one form of STS that is not
fully appreciated in the wider literature as a STS. This is because existing literature have not
fully appreciated that all the properties exhibited by these systems when in operation are within
those defined as a STS. Most of the existing literature on socio-technical systems (STS) is
mainly on the design of the system and an inadequate amount on the implementation of the
system. Those literatures that are available on implementation do not go far enough in addressing
the issues of operations, maintainability and support during the life of the STS systems. It is
almost impossible to foresee all or understand all the emergent nature of the STS when in its full
environment. As such, with all those emergent properties expected during it full operation, it
would be naïve not to think that something new would also emerge. How do we plan for such
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scenarios? How do we optimize working STS that would not compromise any of the
organisations or individuals that it is meant to assist?
The design of socio-technical systems have been around for quite a while. However, this paper
concerns not the project delivery (i.e. feasibility, design, and construction) as amplified in most
documents and literature within the STS, but rather on project operations, maintenance and
support. This is where majority of the emergence properties that were not envisage during the
design of the STS life are encountered and have to be dealt with. The is also the grey area
where the full understanding of those STS emergent properties that were also envisage may
exhibit properties that were not fully appreciated during the STS design. It is the long term view
of what the STS will propagate in its environment that is more of a concern here, despite the fact
that practitioners within the downstream ends would have been involved early in the
development and creation of the system.
It is believed that there are currently three kinds of identifiable socio-technical systems. They
• Large technical systems (e.g. railway infrastructure)
• Sectoral systems (e.g. banking systems)
• Computer systems (e.g. aviation systems)
Some of these STS systems also fall within self-regulating systems (i.e. economic systems –
stock exchange) that researchers have been studying by different methods for quite some time. In
this paper STS systems like real estate are considered. The aim of the paper is therefore an
attempt to develop a management support strategy for STS in its environment and future
developments of its implementation. In this paper some theories are closely examined that are
beneficial in understanding and developing better management approach to handling socio-
technical systems in their dynamic environment. The other sections of this paper include: a
methodology, a literature review, development of a management framework and discussion and
conclusions.
2 Methodology
Research and its methods can be seen as instruments for provoking a response from the world.
The nature of the response depends on both the world and the instrument (Mingers, 2001). There
are different approaches in studying and researching into different phenomena. Currently
researchers focus either on using the quantitative method or qualitative method, although recent
researchers are beginning to use a hybrid of both. Within these methods you have different
approaches to use. Qualitative research focuses on the process that is occurring as well as the
product or outcome. Researchers in the qualitative field are particularly interested in
understanding how things occur (Fraenkel & Wallen, 1990, Merrain, 1988; Minger, 2001).
Moreover meanings and interpretations are negotiated with human data sources because it is the
subjects’ realities that the researcher attempts to reconstruct.
In this study it is advantageous that interpretive approach be adopted. The reasons are that the
study is used in understanding most of the literature, frameworks, tools and techniques that are in
current usage in managing STS systems. Any meaningful understanding is sought from both the
literature and empirical materials (although few) that are available and accessible to the
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Godfaurd John, pp 193-203
researcher. Furthermore in the proposed study the research problem needs to be explored
because not much information is known on the topic. There is no known universally accepted
robust theoretical base to guide the study because those available are inadequate, incomplete, or
simply missing aspects that are may be relevant to the present study.
The interpretive approach is a method that is informed by a concern to understand the world as it
is. It seeks explanation within the realm of individual consciousness and subjectivity, within the
frame of reference of the participant as opposed to the observer. It sees the world as an emergent
social process, which is created by the individuals. Interpretive philosophers and sociologist
seek to understand the very basis and source of such social reality. They often enquire in the
depth of human consciousness and subjectivity in the quest for the fundamental meanings, which
underlie social life. Therefore on the basis of an extensive review of literature within this study,
the proposed research is considered exploratory in nature. This therefore also leads in inevitably
to the interpretive paradigm as the most appropriate approach within which to develop an
appropriate research methodology.
3 Understanding the Available Literature
In this study the working definition of a system is (Sommerville, 2003):
‘A system is a purposeful collection of inter-related components that work together to achieve
some objective’.
Hence a STS system is made up of socio-technical constituencies. Socio-technical constituencies
are dynamic ensembles of technical constituents (for example, machines, instruments) and social
constituents (for example, organizations, interests groups) which interact and shape each other in
the course of the creation, production and innovation of specific technologies (Molina, 1999,
Nicoll, 2000 ).
Essential Characteristics of socio-technical systems are (Checkland, 1998):
• They have emergent properties that are properties of the system as a whole rather than
associated with individual parts of the system. Emergent properties depend on both the
system components and the relationships between them.
• They are often non-deterministic. This means that it cannot be guaranteed that, when
presented with specific input, they will always produce the same output. The system’s
behavior depends on the human operators and people do not always react in the same
way. Furthermore, use of the system may create new relationships between the system
components and hence change its emergent behaviour.
• The extent to which the system supports organizational objectives does not depend on the
system itself. It also depends on the stability of these objectives, the relationships and
conflicts between organizational objectives and how people in the organisation interpret
these objectives. New management may reinterpret the organizational objectives that a
system is designed to support and a ‘successful’ system may then become a ‘failure’.
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There are two types of emergent properties (Checkland, 1998; Sommerville, 2003):
• Functional properties that appear when all the parts of a system work together to achieve
some objective.
• Non-functional emergent properties that relate to the behaviour of the system in its
operational environment. Examples of non-functional properties are reliability,
performance, safety, usability, and security. The success or failure of a system is often
dependent on these emergent properties.
The social constituencies of the systems involve human elements. Human organizational factors
such as organizational structure, management and politics have a significant effect on the
operation of socio-technical systems. These human, social and organizational factors are often
critical in determining whether or not a system successfully meets its objectives. Unfortunately,
predicting their effects on systems is very difficult for engineers who have little experience of
social studies. To help understand the effects on system on organisations, various methodologies
have developed such as Mumford’s socio-technics (Mumford, 1989) and Check land’s Soft
Systems methodology (Checkland and Scholes, 1990, Checkland, 1981). There have also been
extensive sociological studies of the effects of computer-based systems on work (Ackroyd,
Harper, Hughes and Shapiro, 1992). However, must of these studies are focused on the design
and implementation stages of the STS not so much on the operational environment of the
systems.
In the technical constituencies of the STS we are dealing with a pre-existing system, complete
with elements, relations and environment. Altered conditions on the level of the system can only
be caused by changes on the level of the elements and relations, the internal system structure.
This means that either the arrangement of the elements has changed, or the characteristics of at
least one element have changed. But changes in the structure dimension are not sufficient to
change the function of this structure; another qualitative jump is missing here (Fleissner, 1996).
Additionally, a change in the system state is not enough to change the action of the system or its
relationship to the environment; a jump in quality must also be assumed.
Hence the dynamics in STS systems involve a dynamic process of mutual adaptations and
feedbacks between technology and user environment. A focus on STS may form a bridge
between separate bodies of literature (Geels, 2004). Technical possibilities and scientific laws
constrain the degree to which interpretations can be made.
Human actors are not entirely free to act as they want. Their perceptions and activities are
coordinated (but not determined) by institutions and rules. Technologies have a certain
‘hardness’ or obduracy, which has to do with their material nature, but also economic aspects
(e.g. sunk costs).
Actors and organisations are embedded in interdependent networks and mutual dependencies.
People adapt their lifestyles to artifacts (e.g. mobile phones), new infrastructures are created,
industrial supply chains emerge, making it part of the economic system dependent on the artifact.
Thus technological momentum emerges (Geels, 2004).
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To understand transition from one system state to another the notions of tensions and
misalignment are useful. The different regimes have internal dynamics, which generate
fluctuations and variations. These fluctuations are usually dampened by linkages with other
regimes, thus providing coordination. At times, however, the fluctuations may results in mal-
adjustments, lack of synchronicities and tensions (Freeman and Louca, 2001, Nicoll, 2000). This
means that both stability and change of STS systems are the result of the actions and interactions
between multiple social groups as well as technological subsystems. This constant change and
uncertainties makes it rather difficult to manage an STS that is considered so dynamic. Given
this present scenario, what can we do? In the entire proposition, the key elements about STS are
the underlying human issues. These underlying human issues are variables that are difficult to
determine, or predict precisely, due to the underlying variability, in the humans, the
organizations and the environment in which they exist. Are the human issues, social only? If
they are, there are so many theories within sociology that we can draw from to help in bringing
some semblance to the STS. However, if the human elements are more than social, then we need
to widen our understanding to other literature involving human aspects.
4 Towards a Strategic Management Framework for STS
In summary, a STS is made up of two distinct subsystems (i.e. social and technical) that will
have to be managed, collectively but optimally. However, the approach in managing such a
system should take into effect broader issues of the subsystems as discussed above. One is
natural, the other is man-made. Using this premise, there are theories out there that have been
tried and tested in the two domains. One is the field theory as defined in Lewin’s work and
another is the fifth discipline. The fifth discipline developed by Peter Senge can also be used in
understanding, learning and managing collectively the two systems. The force field theory will
be summarized in the next section.
4.1 Field Theory
The study of psychology is a science centred on understanding and predicting human behaviour.
Throughout its history, distinct individuals have come along and dramatically impacted our
understanding and perception of this science with their thoughts, theories, and research, shaping
psychology into what it is today. One such person is Kurt Lewin. One of Lewin’s work is field
theory. Lewin research is directly purposed at understanding and generating practical
applications and solutions to real world problems (Reber & Reber, 2003). Field theory stems out
of the idea in order to explain human behaviour one must look at all pieces of the puzzle, all
dynamic interactions influence outcomes. In his theory Lewin defines the field as the totality of
coexisting facts which are conceived of as mutually interdependent (Lewin, 1951). The field
represents the complete environment of the individual. Behaviour, Lewin believed, resulted from
the tensions between individuals self-perceptions and environment encountered (Smith, 2001).
Ones ‘life spaces’, or total environment of the individual all significant others, had to be
understood and researched in order to understand behaviour. Lewin then concluded that as
individuals participated in many life spaces such as family, church, work, or school, behaviour
was represented as movements through life spaces that carry both positive and negative
influences and are driven by ones perceptions based off their underlying psychological needs
(Daniels, 2003). This theory has been in existence for the past fifty years.
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Daniels pinpoints three important summary points to Lewin’s theory. First that behaviour is
derived from the totality of all existing facts. Second that these coexisting facts make up the
dynamic field, and that in the dynamic field every part is dependent on every other part. And
thirdly that behaviour depends on the field, not on past or future encounters. Group dynamics
resulted out of Lewin’s work with field theory. Group dynamics are the collective interactions
that take place within a group. For further reading of field theory the reference material are
supplied in the references.
According to Kurt Lewin (1951), the behavior of a person is a function of the person and its
environment. This can be put in a mathematical expression as:
b = f(P, E)
Where b is the behavior of the person, P is the person and E is the environment. The person is
actually a sub-system in a STS. Also STS is a system, made up of other sub systems, some
human and others technological. An emergent property can actually be considered as the
behavior of a system as such; the same as formulated by Lewin, may be extrapolated to an STS
system, when the behaviours of the human elements are contributing to the STS in operation.
This theoretical framework has been used in different areas not including STS system – such as
environmental psychology (Moore, 2003). It has been used in understanding organisations as
well as environmental designs of housing for dementia patients for the past forty years.
However, the behavior of our STS system, I prefer to call it the availability of the STS system.
How the STS performance will be judged due to such emergent properties, in its everyday
environment.
There will be different states of availability of the system, depending on its reaction to the
changing external environment. However, holding the external environment constant, changes to
its availability will come from the internal subsystems reactions. These are the force fields that
produce the motion of change. The force field theoretical framework can be applied to an
individual, a group and also to an entire organisation, as long as the unit of analysis is consistent
to the environment and the person(s) in that environment. Appreciating the dynamics of the
complex force field theory and learning how to apply it in practice to our STS system is
paramount. This is shown in Figure 1 and 2. In Figure 1, the different properties of the person,
such as the physical state of the person, the psychological makeup and the person social
interaction will give different state of mind, as an individual also when in a social setting. The
different environmental conditions interacting with the technology will also pose different range
of properties impacting on the socio-technological properties, which exhibits itself as emergent
properties.
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Ec
S Ps Sc
State of
Person
Tech Ev
Ph
P E
Emergent property
State of State of
/Behaviour ‐influence
Person Person
Legend Legend
Productivity/
P ‐ Person Ec – Economic; Tec ‐Technical
Reliability
Ph – Physiological Ev –Environment
Safety & Health
Ps – Psychological Sc – Social
Figure 1: The relationship between the Person (P) and the Environment (E) –field theory expounded
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Technical Social
subsystem subsystem
Socio‐ Force field as shown
technical above ‐ the missing link
system
Figure 2: Conceptual application of the force field to STS systems
5 Discussion and Conclusions
The brief discussion above shows how some key tenets from the force field theory can inform
and encourage us to rethink the way we manage STS systems. What we see here is just one
example of how one emergent property of an STS emergent can be managed through its whole
life cycle. This same type of procedure can be applied to other kinds of emergent properties that
are exhibited by the STS should be understood and project managed effectively.
For example, in real estate such as social housing, as STS systems, a lot of thought process after
their designs and implementation lacks the coordinated efforts of the designers, the operators and
those social groups that are living in the STS systems. Most of the time what has been designed
usually is the effort of the designers, the councils and so-called clients’ representatives from
users. In a short while due to in lack of understanding of the dynamics in the social undertone in
the operating communities, the housing quickly becomes an eye-saw. Rather, when such projects
are in operation, there is a constant dynamics going on between the social and the technical as
well as those elements within each subsystem. This constant change in behaviours in the social
groups as well as the environments needs to be fully appreciated by those managing the system.
We will never be certain of all the consequences of a particular decision taken when we design
the STS because we never know what the future is going to require. Socio-technical factors that
can exert a major influence on decisions are the nature of the environment that will contain the
new system. As such, a successful design and management of the STS when in full operation
requires tools and techniques that would embrace all the stages of its life cycle. Such can be
found in using strategic methods that can be successfully applied in the field, such as found in
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force field theory. The application of the principles of force fields requires research in the STS
natural environment – which is the continued area of future research domain. The essence of
choosing the right unit of analysis for the research is paramount in ensuring better research
outcomes in this area.
6 References
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Schneider, S. C., and Barsoux, J. L., (1997), Managing across cultures. Prentice Hall
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Wasiu Bello and Koleola Odusami, pp 204-214
Project variables influencing contingency on construction
contract in Nigeria
Wasiu Adeniran Bello1 and Koleola T Odusami2
Department of Building, University of Lagos, Akoka Yaba Lagos, Nigeria
Email: [email protected] ; [email protected]
Abstract:
In most construction contracts, risk is either ignored or dealt with in an arbitrary way by
adding a percentage allowance in form of contingency sum for changes that experience
shows will likely be required without considering the project variables. Contingency is used
to cater for events that are unforeseen which threaten the achievement of objective within
the defined project scope. The aim of the study is to assess the influence of project variables
in determining the contingency sum applied to the construction cost estimate in Nigeria
construction industry. The study identifies correlation between contingency and project
characteristics and variables. In order to achieve the objectives, information of past projects
were collected from 21 organisations and included project variables of ninety-nine projects
of varying sizes and contract types. Correlation analysis was used to establish the strength
and direction of linear relationship between the project variables with special attention on
variation to determining future contingency. Analysis of variance (ANOVA) was also used
for the analyses of data in exploring relationships among variables and compare groups
respectively. There was a strong, positive correlation between variation and five of the
variables: consultant estimate, contingency sum, planned duration, gross floor area, and
lowest bid and also there was a strong positive correlation between contingency and five of
the variables including consultant estimate, planned duration, total variation, the lowest bid
and gross floor area with high value of the variables associated with high value of
contingency. The result of the ANOVA indicated that there is no statistical significant
difference in the contingency applied on project based on nature of project, type of project
and type of client. Therefore, contingency by cost expert is not really dependent on these
three variables.
Keywords: Contingency, variation, budget, correlation, factors, estimation.
1 Introduction
The aspiration and expectation of building clients and consultants is to keep the final
construction cost within the initial budget estimate or approved expenditure that include
a justified additional amount that caters for uncertainties and risk events which amounts
to variation. In construction and engineering projects plans and cost estimates are
usually drawn to ensure that the work is carried out to the desired quality, within
allowed time, and within budget. The construction industry is inherently uncertain
according to the nature of the industry itself- the competitive tendering process, the
company’s turnover, site production rates and the weather are all features that are
characterised by variability and a degree of uncertainty (Harris and McCaffer, 2001).
Invariably unforeseen items and events in the execution of any building project are
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inevitable. Most times the successful completion of any project is assessed on the basis
of three parameters, which constitute risks namely; time, money and performance which
according to Smith (1999) are the three types of contingencies. The relative magnitude
of these three types will be related to project objectives. In a construction project and
from the owner’s point of view, contingency is the budget that is set aside to cope with
uncertainties during construction. Touran (2003) posited that it is common to assign
contingency value to both cost and schedule because project uncertainties can affect
project schedule as well as cost. Contingency allocation has been the subject of various
research and various methods of contingency calculation and allocation have been
described in several sources. One of the more common methods of budgeting for
contingency is to consider a percent of estimated cost, based on previous experience
with similar projects.
According to Thomson and Perry (1992), all too often risk is either ignored or dealt with
in an arbitrary way; simply adding a ten percent contingency onto the estimated cost of
construction project is typical and unscientific. Argenti (1969) cautiously predicted that
model building will become a key technique for future generation managers. This has
manifest itself in the number of research reports in which models are developed to serve
as basis for construction cost estimate in order to achieve better level of accuracy and
reliability of cost estimate. Touran (2003) identified project size, type of construction,
difference between low bid and owner’s estimate among factors that affect project cost
overrun. Andi (2004) identified cost-risks factors influencing project cost elements.
Therefore, the objectives of the study is to assess the relationship between contingency
and project variables (consultant estimate, planned duration, total approved variation,
fluctuation, gross floor area and the lowest bid). Also to find out if there is correlation
between total variation and these project variables in order to predict contingency for
future projects. The effect of different types of clients, the nature of projects and types
of projects on the contingency applied to the construction contracts by cost experts was
also examined.
Assurance of a reliable construction contingency is sine qua non to client’s satisfaction
on the estimated final construction cost. Specifically, it will assist consultant quantity
surveyors in their estimating practice to know project variables that could affect their
decision on the contingency sum which is applicable to construction projects.
2 Literature Review
Virtually all authors and researchers acknowledge the fact that construction contract
delivery is a complex undertaking, which is characterised with uncertainties and risk.
According to Odeyinka (1987) risk is inherent in any construction project right from
inception through its completion. Ashworth (1999) posited that risk can be
mathematically predicted, whereas uncertainty cannot. Different authors and
researchers including Odeyinka (1987); Yeo (1990); Ramus and Birchall (1998); Mak,
Wong and Picken (1998); Ashworth (1999); Smith (1999); Harris and McCaffer (2001);
Picken and Stephen (2001) and Andi (2004) have written on construction risks and its
management. Thus, changes and risks are inevitable in construction contract and these
are the major cause of disruption, delay and dispute on construction contracts. Nworuh
and Nwachukwu (2004) asserted that experience on many projects indicate poor
performance in terms of achieving time and cost targets, thus many cost and time
overruns are attributable to unforeseen events for which uncertainties was not
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appropriately estimated. An amount of money used to provide for uncertainties
associated with a construction project is referred to as contingency allowance (Mak and
Picken, 2000).
Contingencies are crucial to achieving project objectives. Contingency funds are
included in development budgets to provide managers with flexibility required to
address uncertainties and deviations that threaten achieving objectives (Diekmann,
Sewester and Taker 1988). It is used to cater for events that are unforeseen within the
defined project scope. It is added to indicate likely total cost of the project, which
means that the estimate represents the total financial commitment for a project.
Contingency is used as a financial treatment in risk treatment strategies thus; it caters
for risk associated with a project.
According to Yeo (1990) the objectives of the contingency allocation are to ensure that
the budget set aside for the project is realistic and sufficient enough to contain the risk
of unforeseen cost increases. Therefore, any realistic contingency must serve as a basis
for decision making concerning financial viability of the variations, and a baseline for
their control (Akinsola, 1996).
2.1 Construction contingency
2.1.1 Types of construction contingency
In engineering projects, two types of contingencies are used to compensate for different
types of uncertainties. These are Project contingency and Process contingency (Parsons,
1999).
Project contingency is based on the degree of project definition available at the time of
making the estimate. It covers expected omissions and unforeseen costs caused by lack
of complete engineering. According to HM Treasury (1993) two major categories of
contingency can be identified for construction projects and these are Design and
Construction contingencies. Design contingency is for changes during the design
process for such factors as incomplete scope definition and inaccuracy of estimating
methods and data (Clark and Lorenzoni, 1985). Construction contingency is for changes
during the construction process.
Process contingency is based on the degree of uncertainty caused by use of new
technology. It is an effort to quantify the uncertainty in performance because of limited
technical data. It is important to note that project contingency is broader and could be a
determinant of process contingency, which could be a variable of construction
contingency in a construction project.
Traditionally, a contract is signed between a client and the contractor which according
to Staugas (1995) typically contains variation clauses to allow for changes and provide a
mechanism for determining and valuing them. Construction contingency exists to cater
for these variations Akinsola (1996), Mak et al. (1998), Mak and Picken (2000) and
Baccarini (2005).
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2.1.2 Contingency estimating
According to Bello and Odusami (2008) factors considered most important in making
provision for construction contingency are: size and complexity of project, assessed risk on the
project and adequacy of information. Andi (2004) identified cost-risks factors influencing
project cost elements, relationship among the risks themselves and proposes risk
analysis methodology for allocation of contingency. Touran (2003) identified project
size, type of construction, difference between low bid and owner’s estimate among
factors that affect project cost overrun. Project size, type of construction, type of client,
method of procurement, percentage of design completed before tender, adequacy of
information, and number of subcontractors used were identified by Akinsola, Potts,
Ndekugri and Harris (1997). In estimating for contingency, major project factor or
variables considered are project cost data and duration with their variabilities (Ahmad
1992; Ranasinghe, 1994; Moselhi, 1997; Chen and Hartman, 2000; Nassar, 2002;
Touran 2003; Baccarini 2005 and Rowe 2006). And significant risk factors (Mak et al.
1998; Mak and Picken 2000; Chen and Hartman, 2000; Bajaj 2001 and Sonmez, Ergin
and Birgonul, 2007 ). It becomes more difficult to determine overall estimate reliability
because some sections of a project may be completely defined at the time of estimate,
and others only sketchily defined.
2.1.3 Correlation of project variables in contingency estimation
In estimating for contingency, major project factors or variables considered are project
cost data and duration with their variabilities (Ahmad 1992; Ranasinghe, 1994; Moselhi
1997; Chen and Hartman, 2000; Nassar, 2002; Touran, 2003; Baccarini, 2004; Rowe,
2006; Sonmez, et al. 2007 and; Bello and Odusami, 2008) and significant risk factors
(Mak et al. 1998; Mak and Picken, 2000; Chen and Hartman, 2000; Bajaj, 2000 and;
Andi 2004). Different methods and techniques have been proposed for contingency
estimation in literature. The methods are primarily traditional algorithmic methods
(Moselhi, 1997). Some of the methods are deterministic and others are probabilistic
accomplished by either expert opinion or statistical methods. They range from a simple
crystal-ball-type estimate to elaborate Monte Carlo simulations (Moselhi, 1997).
Statistical technique used to analyse contingency can range from Monte Carlo
simulations to regression and variance analysis (Philip, 2001) but most cost experts and
practitioners in the construction industry are yet to explore the benefits of these
scientific methods as they are still glued to the conventional method of lumpsum and
percentage addition (Bello and Odusami, 2008).
Most research on contingency always treat cost data and duration as important factor in
contingency but not much is reported about the relationship between these variables.
Baccarini (2004) researched into correlation between project variables including project
size, project duration, location, bid variability and concluded that there was no
significant correlation between project variables and cost contingency. Andi (2004)
posited that relationships among risks could be identified in his risk analysis
methodology for allocation of contingency. Sonmez, et al. (2007) used correlation and
regression analysis to identify factors impacting cost contingency and present a robust
and practical statistical approach for determination of contingency.
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This study found that there was a strong positive correlation between contingency and
five of the variables considered in the study; consultant estimate, planned duration, total
approved variation, gross floor area and the lowest bid. Conversely, there was no
statistical significant correlation between contingency and fluctuation; there was a very
weak negative correlation. The research also revealed a positive correlation between
variation and some project variables which include consultant estimate, contingency
sum; planned duration; gross floor area and lowest bid.
3 Research methodology
The data for this study were obtained from records of past projects in government,
institutional and consulting organisations to get cost data variables required for research
analysis. Most of these organisations have projects across the country hence, are
representative of the entire population of the study area.
A data collection schedule was used for the generation of cost data of past projects from
the organisations. The schedule contains 14 variables extracted from the records of
completed projects or projects at completion. Computer based statistical tools such as
Frequency distribution of respondents; Mean Score, Descriptive statistics, Correlation,
Regression, and Analysis of Variance ANOVA were used for processing the research data
in order to achieve precision.
The analysis of the data was done using the statistical package for social sciences (SPSS).
SPSS is an enormously powerful data analysis package that can handle very complex
statistical procedures (Pallant, 2005). The information collected were summarized and
presented in form of frequency distribution tables for a total of 99 project cost data which
were generated from 21 organisations.
RESEARCH HYPOTHESES
H1: There is no statistically significant relationship between the project variables
(Consultant estimate, Contingency sum, Planned duration, Location of the project,
Nature of project, Type of project, Type of client, Gross floor area and the Lowest
bids) and Total variation.
H2: There is no statistical significant difference in the contingency applied on
project based on nature of project, type of project and type of client
4 Findings and Discussion
A total of 70 questionnaires were administered to quantity surveyors and or cost experts
in three different organisations; government, institutions and quantity surveying
consultancy firms in the construction sector. Fifty-three of the administered
questionnaires were returned, representing 76 percent response rates. Ten representing
18% of the sample were from government establishment such as Ministry and Housing
or Property Corporations, 8 representing 16% were from institutional such as
educational and banking institution while 35 are from consulting firms. Important
observation is that consulting firms represent 66% of the sample. The sample also
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sought for the age of the organisations in which 11 representing 21% of the respondents
were less than 10 years old, 19 or 36% were between 11 and 20 years old while about
19% were above 40 years in age. It is important to note that the age bracket of between
5 years and 20 years represent the vibrant and modern quantity surveying firms in
Nigeria and this is represented by 57% of the sample.
In order to assess the relationship that exists between the construction contingency and
project variables for any proposed project, correlation analysis was used to establish the
strength and direction of linear relationship between the project variables with special
attention on variation and the other variables. Any variables that are found to have
relationship with the variation might be used to develop a model within the acceptable
statistical limit to predict a more reliable project cost contingency. The first correlation
analysis carried out was to confirm the strength and the direction of relationship
between contingency and six variables from the project data. The variables include;
consultant estimate, planned duration, total approved variation, fluctuation, gross floor
area and the lowest bid. Table 1 summarises the result of the correlation analysis. Thus,
the relationship between contingency and consultant estimate, planned duration, and
total approved variation, fluctuation, gross floor area and the lowest bid was
investigated using Pearson product moment correlation coefficient. Preliminary analysis
was performed to ensure no violation of the assumption of normality, linearity, and
homoscedasticity.
There was a strong positive correlation between contingency and five of the variables
including Consultant estimate[r=0.837, N=99, p<.01], Planned duration[r=.64, N=99,
p<.01], Total variation[r=0.591, N=99, p<.01], the Lowest bid[r=0.839, N=99, p<.01]
and Gross floor area [r=0.526, N=75, p<.01]with high value of the variables associated
with high value of contingency. However, there was a very weak negetive correlation
between contingency and Fluctuation[r=-0.113, N=21, p<.01] that is not significant at
the traditional p<0.05 level of significance. Table 1 shows the details.
Table 1: Correlation between contingency and selected project variables
Dependent Variable: Contingency
Project Variables R Sig. Result, Reject p-value
(2-tailed) Ho?
Consultant's estimate 0.837 0.000 Yes Significant, <0.01
Planned duration 0.674 0.000 Yes Significant, <0.01
Total variation 0.591 0.000 Yes Significant, <0.01
Fluctuation -0.113 0.626 No Not Significant, <0.05
Lowest bid 0.839 0.000 Yes Significant,<0.01
Gross floor area 0.526 0.000 Yes Significant,<0.01
r = Pearson Product -Moment Correlation Coefficient; Ho = null hypothesis; p= probability that rejects
the null hypothesis wrongly, significant at the 0.01 level (2-tailed).
The second analysis was to obtain the correlation between variation and nine project
variables. The variables selected for analysis include: consultant estimate, contingency
sum, total variation, planned duration, location of the project, nature of project, type of
project, type of client, gross floor area and the lowest bid. all the variables were part of
data collected for each of the 99 projects. the relationship was investigated using
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Pearson product-moment correlation coefficient. Preliminary analyses were performed
to ensure no violation of the assumption of normality, linearity, and homoscedasticity. It
was revealed that five of the nine variables have significant correlation with total
variation at p< 0.01 level. Table 2 summarizes the result of the correlations.
Table 2: Correlation between total variation and selected project variables
Dependent Variable: Total Variation
Project Variables R Sig. (2-tailed) Result p-value
Reject Ho?
Consultant's Estimate 0.635 0.000 Yes Significant, <0.01
Contingency Sum 0.591 0.000 Yes Significant<0.01
Planned Duration 0.549 0.000 Yes Significant<0.01
Location of the Project -0.065 0.525 No Not Significant<0.05
Type of Client -0.003 0.980 No Not Significant<0.05
Gross Floor Area 0.566 0.000 Yes Significant<0.01
Lowest bid 0.613 0.000 Yes Significant<0.01
Nature of project -0.182 0.072 No Not Significant<0.05
Type of Project 0.129 0.202 No Not Significant<0.05
r = Pearson Product -Moment Correlation Coefficient; Ho = null hypothesis; p= probability that rejects
the null hypothesis wrongly, significant at the 0.01 level (2-tailed).
There was a strong, positive correlation between variation and five of the nine variables:
Consultant estimate [r=0.64, N=99, p<0.01]; Contingency sum [r=0.59, N=99, p<0.01];
Planned duration [r=0.67, N=98, p<0.01]; Gross floor area[r=0.53, N=75, p<0.01] and
Lowest bid [r=0.61, N=99, p<0.01].
Impact of nature of project, types of project and types of client on contingency
The study further assessed the impact of the different types of clients, the nature and
types of projects on the contingency applied to the construction contracts perhaps this
could have significant effect on the result of findings.
Therefore, a one-way between-groups analysis of variance was conducted to explore the
impact of the three variable groups; (1) types of clients, (2) the nature and (3) types of
projects on contingency. There was no statistically significant difference at the p< 0.05
level for the three groups. Table 3 shows the results.
Table 3: Test of Agreement on Contingency by three project groups variables:
types of clients; the nature and types of projects.
Project Variables F Sig. Remark
Nature of project 1.483 0.084 Not significant
p< 0.05
Type of project 1.019 0.469 Not significant
p< 0.05
Type of client 1.141 0.319 Not significant
p< 0.05
The result of the ANOVA indicated that there is no significant difference in the
contingency applied on project based on nature of project, type of project and type of
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client. Therefore, contingency by cost expert is not really dependent on these three
variables. It would have been expected that the consideration of these three project
attributes in contingency allocation by quantity surveyors is significant. Despite not
reaching statistical significant the Sig. value of 0.08 for nature of project is considerable
which indicated that the consideration given to the nature of project (new or
refurbishment) is relatively important.
5 Conclusion and further research
Changes and risks are inevitable in construction contract thus, many cost and time overruns
are attributable to either unforeseen events for which uncertainties was not appropriately
estimated. The study revealed statistical relationship between some project variables which
could be used to develop models for contingency. The effectiveness of contingency
management can strongly influence project success. The study revealed that there was a
strong, positive correlation between variation and five of the variables: consultant estimate,
contingency sum, planned duration, gross floor area, and lowest bid and also there was a
strong positive correlation between contingency and five of the variables including
consultant estimate, planned duration, total variation, the lowest bid and gross floor area
with high value of the variables associated with high value of contingency. The result of the
ANOVA indicated that there is no statistical significant difference in the contingency
applied on project based on nature of project, type of project and type of client. Therefore,
contingency by cost expert is not really dependent on these three variables.
Contingency is proportional to the risk present in a project, and this risk diminishes as
the design advances, construction contracts are awarded, and construction is completed.
Total project contingency decreases over the life cycle of a project.
The importance of forecasting an accurate and effective construction contingency is
essential to client’s satisfaction on the estimated final construction cost and hence, the
construction contract delivery. Developing estimating models should be encouraged in
organisations where quantity surveying (or cost engineering) is being practiced having
established relationship between contingency and some project variables, and similarly
between variation and project variables as found in this study. The established
relationship could be scientifically analysed to develop a more confident forecast for
construction contingency.
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Ian Jay and Paul Bowen, pp 215-226
Modelling client values with utility curves
Ian Jay1 and Paul Bowen1
1
Department of Construction Economics and Management,
University of Cape Town, Private Bag, Rondebosch 7701, Cape Town,
South Africa
Email: [email protected] ; [email protected]
Abstract:
This paper documents part of a research agenda exploring potential for the application
of value management in the local government services sector. The specific research
target is the identification of stakeholders values where relevant to the design and
delivery of local government services. The paper presents the problem of modelling
(stakeholder) values. The authors argue that utility functions are a way of modelling
these values. Two approaches to modelling utility curves are described. The first
approach uses conventional decision analysis methods whereby the utility function of
each criterion is built up individually. The second approach combines the criteria into
unified concepts which respondents are asked to rank in order of preference. The rank
ordered concepts are then analysed using conjoint analysis to establish what the
individual utility functions are. The paper then describes the scope of work and work
plan for the research. It concludes that understanding of client values in terms of utility
functions will enable local government service providers to better tailor their offerings
to meet the needs of recipients and citizens at large.
Keywords:
local government service, value management, conjoint analysis, multiattribute utility
theory, new public management.
1 Introduction
Value management originated in the manufacturing sector where it was applied to
engineering design problems relating to single devices or artefacts (Thiry, 1997). It
evolved in use within the construction industry to address more complex problems
arising from the needs of multiple stakeholders in building and construction projects
(Kelly and Male, 1993). The opportunity to apply value management in local
government was highlighted by doctoral research conducted by K. Hunter (Hunter and
Kelly, 2006; Hunter, 2006), in which ten factors supporting the application of value
management in the UK public service were identified. More recently, value
management was promoted as a means of improving the delivery of public services by
local government organizations in South Africa (Bowen et al., 2007). The research
discussed in the current paper is intended to add to these earlier studies. The public
sector presents a different problem to construction insofar as the ‘client’ is not part of
the project definition process. In fact, the client is the municipality acting for the
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eventual users of the product or service. The problem to be addressed is finding a means
of identifying and incorporating the service beneficiary’s needs and values into the
design of the project.
The focus of the work presented examines public value from a citizenry perspective, by
identifying what is of value to citizens it is possible to then decide how best to meet
their needs (Smith, 2004). The public sector value chain involves competing, and at
times contradictory, ideas of public good (Heintzman and Marson, 2005). However,
service delivery needs to meet expectations because trust in government arises primarily
from satisfaction with perceived service delivery.
There is a global trend towards more participative local government which requires
local government to understand and deliver on the values of citizens (Sanderson, 1998;
Beierle and Konisky, 2000; Kelly and Swindell, 2002; Abelson et al., 2003; Brown et
al., 2006; O' Flynn, 2007). Multi-attribute utility theory has been used in this regard in a
variety of public service contexts (Edwards, 1977; Green and Srinivasan, 1978; Watson
and Buede, 1987; Keeney and Raiffa, 1993; Green and Krieger, 1996) . In addition,
simple forms of multi-attribute utility theory have been used as a framework for value
management interventions (Green, 1992; 1994). This research is intended to add to this
body of knowledge by adapting the methods described by these authors to construct a
model of the value systems of the citizens of Cape Town with particular regard to the
services provided by the City.
2 Literature Review
2.1 Value Management
Value Engineering is a method that facilitates the clear definition of objectives and
development of the means to achieve them (Park, 1999). The method has been
described as ‘of prime importance to improving value’ (Younker, 2003: 1). It was
developed by Lawrence D. Miles as a means of finding substitute materials for making
engineering components without compromising the functional capability of the
component (Thiry, 1997). The method was applied in the manufacturing and
construction industry to develop new designs, to contain or reduce costs, and to align
the value an item offered with customer requirements (Thiry, 1997).
Value Engineering evolved from its beginning in the 1940s, into a well developed
method by the late 1980s (Thiry, 1997). Its application as a tool for project management
then began to evolve (Thiry, 1997). A service called Value Management, based on the
Value Engineering method, but applied to the overall project, emerged in the
construction industry at this time (Kelly and Male, 1993).
Some researchers have made a distinction between Value Engineering and Value
Management (See Green, 1994; Standing, 2001; Kelly and Male, 2002; Male, 2002). Of
these, Green (1994) makes the distinction between Value Engineering and Value
Management on the basis of hard and soft systems thinking (Green, 1994). Green (1994:
51) describes Value Engineering as a hard systems approach ‘directed towards the
achievement of the required function at least cost’. In contrast, he describes Value
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Management as ‘a structured process of dialogue and debate among a team of
designers and decision makers during an intense short term conference’ (Green, 1994:
51). The view of Value Management as a team approach in a structured setting is
echoed by the other authors who distinguish it from Value Engineering (See Standing,
2001; Kelly and Male, 2002; Male, 2002).
The use of Value Management has also been advocated for use in programme
management where the specific problem being addressed is poorly understood (Thiry,
2002). Programme management involves various actors who are trying to build a
collective understanding of the problem through social interaction or sensemaking
(Thiry, 2001). The use of Value Management in such a setting has to be tailored to the
situation, and its use may not adhere to the conventional framework. The prime
objective is to assemble novel combinations of ideas or objects (Thiry, 2001). Value
Management teams can deal with the complicated issues that arise in these settings due
to their multidisciplinary make-up. This allows them to account for all relevant aspects
of the problem (Fong et al., 2007).
The application of Value Management to government service delivery in the USA has
resulted in it being advanced as a way to facilitate service improvement in other parts of
the World (Bovaird and Halachmi, 2001). This idea has also been suggested as a
solution to service delivery problems in South Africa (Bowen et al., 2007).
2.2 New Public Management
Many countries have restructured their government services in recent years in order to
make them more efficient and responsive to citizen needs (Binns et al., 2005). In South
Africa, poverty, evidenced by the Gini coefficient, is a pressing issue and the reason for
low economic growth rates (Bhorat and Cassim, 2004). Local government in South
Africa is expected to ‘take a leadership role in the development process’ (Binns et al.,
2005: 28). The Municipal Systems Act (No.32 of 2000) (RSA, 2000) encourages local
government to engage with the population at grassroots level, for instance, through
residents’ and ratepayers’ organizations (Cameron and Tapscott, 2000). However, the
poor have not been the main beneficiaries; rather, municipalities have been influenced
by motives of profit or interests of business (Binns et al., 2005).
Improvement of local government service delivery has been on the agenda of many
nations in recent years (Kelly and Swindell, 2002; O' Flynn, 2007). These reforms have
been labelled ‘New Public Management’ and represent an attempt to use competition,
by competitive tendering, as a way to improve services (O' Flynn, 2007). By
contracting-out services in this manner, planners are able to specify services and
performance measures (Andrew and Goldsmith, 1998). A problem with the outcome of
this arrangement was that resource allocation decisions were made by the planners and
not the citizens or beneficiaries (O' Flynn, 2007).
Other problems also arose with the new model of service provision, particularly in
relation to the change from a single government service to a number of different service
providers (Andrew and Goldsmith, 1998). In some cases the added complexity of the
new approach meant that some intended beneficiaries found services inaccessible
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(Smith and Huntsman, 1997; Andrew and Goldsmith, 1998), and the intentions of the
equitable distribution of benefits were not realized (Andrew and Goldsmith, 1998).
The problem faced by the users and intended beneficiaries of services lies in the
homogenous nature of services on offer (Andreassen, 1995). This gives rise to
dissatisfaction when users expectations are not met (Andrew and Goldsmith, 1998). One
suggested cause of the problem is a need to specify a suitably heterogeneous service to
match the range of needs of intended beneficiaries (Andreassen, 1995). The perceived
value of a service to a beneficiary is determined by the individual’s marginal utility for
that service, not the actual economic benefit derived (Smith and Huntsman, 1997). In
addition, some services are intangible in nature, for instance, fire or police protection,
conservation or land-use control, which makes their value difficult to calculate or
articulate in economic terms (Smith and Huntsman, 1997). As a result of these factors,
where the perceived value differs from the delivered economic value, beneficiaries may
not believe that value has been delivered as promised by the service provider (Smith and
Huntsman, 1997; Kelly and Swindell, 2002).
The problem faced by the planners is that they have to manage a number of different
value sets in relation to public service contracting (Sanderson, 1998; Brown et al.,
2006). Managers tend to favour quantifiable, ‘hard’, performance measures such as cost
or efficiency, whereas citizens are more interested in less tangible, ‘soft’ outcomes
(Sanderson, 1998; Kelly and Swindell, 2002). Identification of these varied value sets
requires managers to actively identify preferences of users using methods such as focus
groups or interviews (Brown, 1984; Sanderson, 1998). The kind of information needed
is more qualitative in nature and more difficult to collect or interpret (Sanderson, 1998).
This approach replaces ‘aggregating up’ individual choices made by users; it represents
a need to assess the collective preferences of the citizens who elected the political
groupings responsible for the programme (O' Flynn, 2007).
2.3 A Definition of Value
There are three basic senses in which the term ‘value’ is used (Najder, 1975). The first
sense refers to axiological values. These are the moral ideas that inform the way we see
the world and attribute value to what we perceive. The second sense is used to describe
attributive value. This is the specific value assigned to objects as a result of perceptions
of its usefulness, and is influenced by axiological values. Finally, usage refers to
quantitative values which are tangible and physical measures of the qualities regarded as
defining the value of an item (Najder, 1975).
Evaluation is performed by considering the characteristics regarded as valuable in the
object under consideration (Rescher, 1969). The use of the value term in this paper
refers to the evaluation of an item in terms of its perceived potential and adequacy to
address the needs of the evaluator (Brown, 1914). The evaluation process draws on, and
it influenced by, axiological, attributive and quantitative values (Najder, 1975).
2.4 Measuring Values
Surveys are a popular method of obtaining information from citizens, ‘but they are
limited in their ability to communicate or obtain in-depth views about complex issues’
(Abelson et al., 2003: 243). The problem faced by administrators of public services is
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that citizen survey information does not indicate the criteria used by respondents to
evaluate the particular service (Kelly and Swindell, 2002). Discrepancies between
citizens’ evaluations and reality arise under two conditions (Kelly and Swindell, 2002).
The first condition arises when citizens are dissatisfied with a service that the local
authority is not responsible for delivering. The second source of problematic evaluations
can arise if the survey respondent uses criteria that contradict an objective, ‘hard’
measure used internally for the operational management of service quality.
The shortcomings of surveys have led to the introduction of more deliberative
approaches that emphasize two-way interaction between decision makers and the public
(Abelson et al., 2003). The drive for more participation arises from the belief that it will
improve the substantive and procedural quality of decisions (Beierle and Konisky,
2000). In the UK and New Zealand, decisions regarding priority setting and resource
allocation in the highly politicised health-care sector have been facilitated using citizen
juries (Abelson et al., 2003). Citizen panels and focus groups have also been used in the
UK to incorporate citizen values into local decision-making processes (Abelson et al.,
2003). Research into thirty cases of participatory environmental planning in the USA
showed that participation generally led to positive results (Beierle and Konisky, 2000).
2.5 Multi-attribute Utility Theory
Multi-attribute utility measurement can identify explicitly what values an individual is
applying to a specific decision (Edwards, 1977). Numerical measures that describe the
value of alternative states are called utility functions (Watson and Buede, 1987). These
measures can also show how much values differ between individuals (Edwards, 1977).
By working from measured values, local government can operate from a set of ground
rules that remove the uncertainty inherent in planning (Edwards, 1977). Policies can be
defined and implemented with greater efficiency and less ambiguity. Moreover, they are
easier to change in response to new circumstances or changing value systems (Edwards,
1977).
The decision-making value structure of individuals is made up of two components: an
attribute, and an objective (Buede, 1986). The attribute is a dimension of measurement
and the objective a direction of preferred movement along the measured attribute
(Buede, 1986). In many cases the criteria relevant to a decision can be sorted into a
hierarchy of objectives (Keeney and Raiffa, 1993). Ideally the objectives hierarchy thus
defined should exhibit five desirable properties. These are; complete, operational,
decomposable, non-redundant, and minimal (Keeney and Raiffa, 1993).
The inclusion of multi-attribute utility theory in value engineering and value
management is described by a number of authors (See Fallon, 1980; Green, 1992;
Green, 1994; Thiry, 1997; Younker, 2003; Kelly et al., 2004). However, its application
appears limited to the early stages of the project and its usefulness requires all key
stakeholders involvement (Shen et al., 2004). In China, widespread use of quantitative
methods is reported (Liu and Shen, 2005).
Green (1994) advocated an approach to value management based on multi-attribute
utility theory. The method he adopted was originally devised by Edwards (1977) and is
known as SMART. SMART is a simplified approach to modelling the value structure of
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stakeholders and was recommended as a suitable framework for value management
(Green, 1992). The approach can ensure that key decisions are made in a way that is
both explicit and rational. The approach addresses clients requirements for value for
money, by framing the choice in terms of a multi-attribute decision problem (Green,
1992).
An improved version of SMART, known as SMARTER, overcame deficiencies of the
earlier version by using swing weights (Edwards and Barron, 1994). Psychologists have
established that care must be taken to ensure that elicited weights vary as the ranges of
outcomes vary. The correct procedure is to rank the attributes first, and then elicit the
swing weights (Barron and Barrett, 1996).
The application of problem structuring methods presumes all key stakeholders are
involved in the process (Shen et al., 2004). A similar planning method, the logical
framework approach, which is used in development aid projects, is based on the same
assumption (Smith, 2000). The problem in Third World public projects is that target
groups are hard to identify and there may be direct conflict between project goals and
the interests of some stakeholder groups (Gasper, 2000). These kinds of situations,
involving a variety of potentially competing interests characterise the setting of
‘wicked’ problems which are not amenable to optimisation oriented problem solving
techniques (Rosenhead, 1996).These methods are also time consuming to apply (Thiry,
1997). This drawback is apparent in a case where the approach required extensive
interviewing and two workshops to set planning objectives (Keeney and McDaniels,
1999).
There are two principal ways of constructing multi-attribute utility functions. These
methods involve either compositional or de-compositional models (Green and Krieger,
1996). Data collection for de-compositional models, which are built using conjoint
analysis, is considerably less complex than methods, such as SMART, which are
compositional approaches (Green and Srinivasan, 1978).
Compositional models require the decision-maker to rate the desirability of each
attribute on a scale. Then, in a second step, the decision-maker has to rank the attributes
against one another (Green and Krieger, 1996). In comparison, the de-compositional
model uses ANOVA or regression techniques to identify the value of each attribute
(Green and Krieger, 1996).
To deal with the problems traditional methods such as compositional models cannot
address, a systematic understanding of the decision space has to be developed
(Rosenhead, 1996). Lay people are quite capable of selecting alternatives that reflect
their ideas of solutions to their problems (Rosenhead, 1996). This can be formally
achieved using a survey instrument that requires that respondents compare, rank or
select alternatives from a set of hypothetical scenarios (Phillips et al., 2002). Conjoint
analysis can be used address public sector problems (Green and Rao, 1971; Green and
Srinivasan, 1978). Research in public health applications confirms its usefulness in this
setting and in dealing with substantial numbers of survey respondents (Parker and
Srinivasan, 1976; Gyrd-Hansen and Slothuus, 2002).
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The conjoint methodology is based on the de-compositional approach in which
respondents react to a set of ‘total’ profile descriptions (Green and Srinivasan, 1978).
The analyst then has to find a set of values for the individual attributes (Green and
Srinivasan, 1978).
A study comparing conjoint methods with survey instruments that use Likert scales
indicated that conjoint analysis was a superior method for service evaluation (Phillips et
al., 2002). The conjoint method provided greater depth of understanding of valuation,
levels of required attributes, overall preference where a trade-off was required, and it
enabled estimates of willingness to pay.
3 Research Method
3.1 Research Aims
The aim of the research is to construct a framework that is representative of client
values. The target group comprises the clients of local government services, both direct
beneficiaries of service delivery, and the broader citizen population that has mandated
the services. It is argued that utility curves are a suitable means of modelling client
values.
The research aim can be expanded into the following set of goals: identification of the
criteria used by client and stakeholder groups, to assess the benefit to them of local
government services; elicitation of the utility models applicable to each of the criteria
applied by clients; and, grouping or clustering of utility models by similarity of features
to develop a classification of the client values.
The output of a framework of this nature is that services and projects can be classified
according to the criteria applied to their outputs. Such a classification has a number of
advantages. Firstly, it enables appropriate resource allocation decisions to be made with
due regard to the different needs of recipients. Secondly, the information represented by
the utility models provides a basis for setting performance-measures for the service
delivery teams.
An understanding of the needs of stakeholders will better equip service providers to
negotiate constructively with disaffected stakeholder groups.
3.2 Scope
The scope of the research is restricted to the public sector in the Western Cape of South
Africa. The intention is to focus on the Cape Town City Council and its stakeholders.
Services and projects provided by the city will be screened and representative examples
selected from them. The selected examples are intended to provide the following.
• The examples need to serve as a source for details of criteria used by clients;
they will therefore be selected for their potential as a rich source of data.
• To build up into a larger overall picture, the examples will cover a representative
range of services and projects.
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The examples will be investigated sequentially so that the learning points from one can
be incorporated into subsequent investigations. It is anticipated that the methods and
tools used will evolve over the course of the research as each example adds to the
overall knowledge base.
Data collection methods are anticipated to vary. A typical investigation is anticipated to
involve an initial round of interviews and focus group meetings. The key characteristics
of services are expected to be identified in these meetings. A follow-up survey or
workshops will be conducted to confirm the initial findings and to obtain the
information needed to construct suitable utility models.
To derive utility models from the survey, the data will be captured into a software tool
that performs conjoint analysis (Hensher et al., 2005). The workshops will be facilitated
to develop the utility model directly from participants. Workshop procedures for
developing utility curves are described in the literature (See Watson and Buede, 1987;
Edwards and Barron, 1994; Kelly et al., 2004).
To identify patterns in the data, it is anticipated that a combination of qualitative and
quantitative approaches will be used. Qualitative methods allow different data sources
to be used (Corbin and Strauss, 2008). The data collection process described includes
interviews, surveys, focus groups, and workshops as some of the sources of data. Once
data have been coded, quantitative methods can be applied to test and confirm the
presence of patterns identified by qualitative means (Miles and Huberman, 1994).
3.3 Work Plan
Work to date has focussed on the literature review. In this regard, five principal areas
are being explored.
• Value Management provides a means of rendering the research findings useful
in an operational environment. Once the value structure has been identified, it
can be used as a part of value management projects by any government service
or agency to enhance service delivery.
• Utility theory provides a basis from which to model stakeholder values. It offers
a representation of characteristics which enables them to be compared with one
another. Its quantitative nature also lends itself to mathematical analysis
techniques. Finally, it can be derived directly from an individual face-to-face, or,
it can be obtained from large numbers of stakeholders by means of a survey.
• The service quality literature describes service assessment tools in the private
and public sectors. It represents a large body of knowledge relevant to the
provision and measurement of service delivery.
• Devolution of decision-making in other countries. An example is New Public
Management that describes issues related to local government service delivery in
a variety of countries. This is a rich source of information relating to citizen
participation in service delivery issues.
• Literature about devolution of power to local authorities in South Africa
provides context to the research. The issues are pertinent and the selection of
examples for study in this research will be informed by the local context.
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Whilst the literature review proceeds, the intention is to pilot value identification and
ranking methods as described by Edwards and Barron (1994), and Kelly et al. (2004).
The intention of the pilot programme is to obtain practical experience in using some of
the techniques described in the literature. In addition, results from pilot studies provide
supporting evidence for arguing the benefits that can be reaped by undertaking the
overall research project.
4 Conclusion
The literature indicates that a key part of stakeholder participation is the involvement of
citizens in local government policy and service design. Value management has been
proposed as a suitable means of achieving this (Bowen et al., 2007). The key is to
provide citizens with value they perceive to be worthwhile. Focus groups, citizen groups
and public meetings have been suggested as ways of obtaining inputs from citizens.
Value management offers the prospect of processing those needs into improved service
delivery.
The contribution of this research is envisaged to be the identification of the values of
stakeholders in local government services. A greater understanding of client values will
benefit stakeholders at large.
For the City and its contracted service providers, a client value model would provide the
basis for deciding on appropriate service levels. In cases where services may be more
than required, changes may lead to material savings. Alternatively, in cases where
dissatisfaction is being expressed, the model provides input for setting appropriate
service levels and performance measures.
With regard to disaffected groups in the community, the literature reports cases of
workshop participants becoming more aligned during the value elicitation process.
From this perspective, the methods employed may serve to reduce civil tensions and
disagreement between the city and some of the community it serves. The proposed
modelling framework can provide negotiators with insight into the underlying source of
disagreement between parties. This may be useful in dealing with disputes about
resources such as land and subsidised housing. For the citizen, the proposed framework
provides a means of communicating service needs to the city planners. It enables the
communication of priorities and identification of key aspects of the service.
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Farinloye Oluranti et al, pp 227-243
Construction professional’s perception of risk impact on cost
of building projects in Nigeria construction industry
Farinloye Oluranti Olupolola1, Salako Olukemi Agnes2
& Mafimidiwo Bamidele Adeniyi3
1&2
Department of Building, Faculty of Environmental Science,
University of Lagos, Akoka, Yaba, Lagos state.
Department of Quantity Surveying, School of Environmental Studies,
Yaba College of Technology, Yaba, Lagos state,
Nigeria.
Email : [email protected];
[email protected];[email protected]
Abstract:
The purpose of this paper is to study various risk elements that affect the contract sum
of building projects in Nigeria construction industry in order to allow for incorporation
of whole process of risk management for building projects to be completed as budgeted.
The paper via questionnaire survey investigated construction professionals (architects,
builders, engineers & quantity surveyors) perception on risk inherent in building
projects. An extensive literature review was carried out to provide background
information on risk impact on cost of building projects in the construction industry.
Data collected were analysed using mean score & Anova. Findings of the study revealed
that out of 28 risk factors identified from reviewed literatures, 8 risk factors had critical
impact on construction cost; these are under estimation, inadequacy of cash flow,
completion delay, poor site investigation, and change in scope of work, non availability
of funds, defective construction works and under valuation of works. As such risk
management should be evolved for projects to be actualised as budgeted.
Keywords: Building projects, construction industry, construction professionals, risk
elements, risks impact
Introduction
All the costs to be expended for the implementation and the achievement of projects’
objectives are to be incorporated in the budgeted cost obtained from bill of quantities.
Findings emanating from researches of various researchers (Odeyinka, 1999; Odeyinka
and Iyagba, 2000; NIQS, 2003) show that variation exists between the budgeted and the
actual construction cost. Jagboro and Ojo (2003) point out that it is very difficult to find
a project in which the initial contract sum is not exceeded at the completion and
therefore, serious action must be taken by building project estimators to ensure strict
budget compliance, in order to control the amount of capital invested.
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Perry and Hayes (1984) cited in Keith (2003) attributed the variation to some risk
elements inherent in construction such as, physical risks, environmental risks, logistic
risks, financial risks, legal risks and construction risks among others. Risks are inherent
in construction activities and when not dealt with leads to non-actualization of the initial
budgeted cost (Nworuh and Nwachukwu, 2004).
Odeyinka and Iyagba (2000) explain that risks are inherent in construction from the
inception to the completion of the project in order to effectively manage these risks, the
integration of risk management techniques into estimation of construction projects’ cost
other than purely common sense and instinct becomes necessary to curb cost overrun.
However, this study focuses on assessing the risk impacts on the costs of traditionally
procured building projects. With the objectives of identifying and assessing various risk
factors influencing variation between budgeted and actual cost and to evaluate the
perception of construction professionals on the probability of risk occurrence and their
impacts on construction projects’ costs. For the study two hypotheses were postulated;
there is no significant difference in the perception of construction Professionals on the
probability of occurrence and impact of risk factors in construction projects.
Review
Risk in construction
According to Baloi & Price (2003) risk has different meanings to different people; the
concept of risk varies according to viewpoint, attitudes and experience. Engineers,
designers and contractors view risk from the technological perspective; lenders and
developers tend to view it from the economic and financial side; health professionals,
environmentalists, chemical engineers view risk from safety and environmental
perspective. According to Oxford Advanced Learner’s Dictionary (1995) defines risk as
the ‘chance of failure or the possibility of meeting danger or of suffering harm or loss.
Cooper and Chapman (1987) cited in John and Peter (1997) define risk as exposure to
the possibility of economic or financial loss or gain, physical damage or injury, or
delay, as a consequence of the uncertainty associated with pursuing a particular course
of action. Risk can also be defined as the uncertainty that exists as to the occurrences
of some events (Odeyinka, 1999). Odeyinka (2006) describes risk in construction as a
variable in the construction process whose variation results in uncertainty as to the final
cost, duration, and quality of the project. In the lights of these definitions he views risk
as a psychological phenomenon that is meaningful in terms of human reaction and
experiences and as an objective phenomenon that may or may not be recognized in
terms of human reaction and experience.
According to Smith (1999) risks specific to a project are inter active and sometimes
cumulative that they affect cost and benefits associated to the project. He submitted that
risks in construction projects arise from a variety of sources; Environmental/ political;
Hazard/safety; Market; and Technical/functional. Fong (1987) and Odeyinka (2005) as
cited in Odeyinka (2006 ) asserts that those generally recognized within the construction
industry are continually faced with a variety of situations involving many unknowns,
unexpected, frequently undesirable and often unpredictable factors that include timing
schedule slippage of the project tasks, technological issues, people-oriented issues,
finance, managerial and political issues (Lockyer and Gordon, 1996). Ossama (1996)
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also highlights three kinds of construction risks they are financial where project exceeds
its budget and endangers the financial health of the company. The second type of risks
has to do with time and third type of risks in construction is design related. It has been
generally established that in the execution of building project, the final contract sum
often varies from the budgeted sum of the contract. This could either be a decrease or an
increase to the original contract sum and sometimes it is due to the complex nature and
time span required for the execution of building construction.
Nworuh et al (1999) in their contribution, identifies the following sources of risks as
predominant in construction projects; risks of error in estimating, risks of delay caused
by client, his representatives, nominated subcontractors as nominated supplier; risks due
to inclement weather, risk of clients, financial failure, risk associated with cash-flow
problems and risk associated with industrial relation.
Since this risks and uncertainties are invariable present in most projects irrespective of
their size, location and scope, a need has arise for a risk management approach as a
prudent step to evaluate such risks and to stem their negative impacts on predefined
projects objectives. Nworuh et al (2004) places the responsibility of an adequate and
proper evaluation of these risks on both the client and design advisers.
Construction cost is conceived in this study as either initial contract sum or tender sum
or as actual construction cost or the final account sum. According to Odeyinka (1999)
initial contract sum comprises of site labour cost, material cost and contractor cost, plant
and establishments charges. He concludes that initial and final contract sum are never
the same due to inherent risk factor such as fluctuation, variation, re-measurement of
provisional quantities, adjustment of provisional and prime cost and some other risk
factors. Nworuh and Nwachukwu (2004) deduce that construction projects are expected
to be actualized at budgeted costs because of their inclusion of all the foreseen and
unforeseen costs inherent in construction projects.
Smith (1999) and Chapman and Ward (1997) submitts that generally, risk is view
within the context of the probability of different outcomes and that the general attitude
towards risk is its identification, evaluation, control and management.
Odeyinka and Iyagba (2000) and Nworuh and Nwachukwu (2004) in same vein,
therefore concluded that, the integration of risk management techniques into the
estimation of construction projects’ cost other than purely common sense and instinct
would considerably curb cost over run.
Sources / Classification of Risks
Perry and Hayes (1985) identify the risk sources central to construction activities as
physical, environmental, design, logistics, and financial, legal, political, construction
and operational.
Physical: Loss or damage by fire, earthquake, flood accident, landslip
Environmental: Ecological damage, pollution, waste treatment, public enquiry.
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Design: New technology innovative applications, reliability, safety, detail, precision and
appropriateness of specifications, design risk arising from surveys, investigations,
likelihood of change, interaction of design with method of construction
Logistics: Loss or damage in the transportation of materials and equipments,
Availability of specialized resources-expertise, designers, contractors, suppliers, plant,
scarce construction skills, materials.
Financial: Availability of funds, adequacy of insurance, adequate provision of cash
flow, losses due to default of contractors, suppliers exchange rate fluctuations.
Legal: Liability for acts of others, direct liabilities, local law, legal differences between
home country and difference of suppliers’, contractors and designers
Political: Political risk in countries of owner and suppliers, contractors war, revolution
Change in law
Construction: Feasibility of construction methods, safety Industrial relations Extent of
change Climate Quality and availability of management and supervision
Operational: Fluctuations in market demand for product or service Maintenance needs
Fitness for purpose Safety of operation
Partrick & Guomin (n.d) identify the following twenty key risks as risks that influence
objectives of project.
• Tight project schedule
• Design variations
• Excessive approval procedures in administrative government departments
• High performance/quality expectations
• Inadequate program scheduling
• Unsuitable construction program planning
• Variations of construction programs
• Low management competency of subcontractors
• Variations by the client
• Incomplete approval and other documents
• Incomplete or inaccurate cost estimate
• Lack of coordination between project participants
• Unavailability of sufficient professionals and managers
• Unavailability of sufficient amount of skilled labour
• Bureaucracy of government
• General safety accident occurrence
• Inadequate or insufficient site information (soil test and survey report)
• Occurrence of dispute
• Price inflation of construction materials
• Serious noise pollution caused by construction
RISK MANAGEMENT IN CONSTRUCTION
Odeyinka and Iyagba (2000) define risk management as the act of planning, organizing,
directing and controlling an organization’s assets and activities to minimize the adverse
operational and financial effects of accidental losses upon that organization and as a
system that aim to identify and quantify all risks to which the business or project is
exposed to, so that a conscious decision can be taken on how to manage the risks.
According to them the system includes the identification & assessment of risks together
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with the development of strategies to minimize them, and when they do occur, to
mitigate any adverse effect or take advantage of the beneficial ones.
Nworuh and Nwachukwu (2004) also define risk management as a systematic approach
which evaluate the propensity of risk occurrence in construction system, especially its
direct impact on time and cost commitments in terms of their negative effects to
properly safeguard initial project strategy, thus reducing failures in the performance of
parameters. Baloi & Price (2003) conclude that risk management is a process
comprising the following main steps: risk management planning, risk identification, risk
assessment, risk analysis, risk response, risk monitoring and risk communication.
In order to evolve sound and effective strategies that will assist risk management and
control on building projects, numerous studies have been made by various researchers,
Nworuh et al (2004) their research lead credence to the imperatives of risk management
approach in overall construction projects planning, control process, implementation and
delivery. Daniel (2001) pin point that risk management requires an identification of risk,
examination of engineering and legal responses to allow the risk to be redirected or
avoided or transferred to a particular project participant. Risk management covers the
whole process of “dealing with risk” these involves three stages; identification &
classification of risk, analyse of risk and responds to risks.
Figure 1. The three stages of risk management
(Source: John and Peter, 1997)
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Risk identification
According to Odeyinka and Iyaba (2000) the identification and critical assessment of
risk associated with a project or contract is a necessary first step before analysis and
response. John Amos (1997) explains that Risks can only be measured and controlled
once they have been identified. There are a number of recognized methods which can be
employed in risk identification, the one most suitable to the industry concerned and the
task in hand should be the ones to be chosen. Tar and Carr (2000) implies that this stage
represent the initial stage of the risk management process - the birth of a new risk. The
process by which risk are initially identified will vary between organization but will
usually involve input from managers within the organization. Various methods put
forward by researchers (Smith, 1999; Odeyinka and Iyaba, 2000; Ashworth & Hogg,
2002) to identify risks are:
• Brainstorming
• Interview project personnel / using experience and lessons from past projects
• Historical data
• Checklist
• Attendance at conferences and seminars
• Examination at legislation
• Case studies
• Research, surveys, questionnaires
• SWOT analysis
• Flowcharts, fault/event tree analysis, etc.
• Other information e.g. the internet.
•
There are a number of recognized methods which can be employed in risk
identification; the ones most suitable to the industry concerned and the task in hand
should be the ones chosen. The general rule is that the task of matching method to
perceived risk should be the first priority. Tools of analysis used in the general business
environment can be readily adapted for use to assess specific risks on construction
projects. Amos (1997) also sets out a simple but effective tool for the assessment and
prioritization of project risks.
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Figure 2. Prioritization of project risk
(Source: John and Peter, 1997)
A) Indicates intolerable risk which must be removed or reduced immediately.
B) Indicates risk which is not altogether intolerable but which should be removed or
reduced at the earliest opportunity. Normally, target dates should be set for
implementing the counter measures so that unacceptable delays do not occur.
C) Indicates risk which is tolerable but which should be removed or reduced when time
allows.
D) Indicates risk which may be accepted as it is.
Risk Analysis
According to Odeyinka and Iyagba (2000) risk analysis is a means of quantifying risk in
order to be amenable to management. In addition to this they submitted that the
common principle behind any technique for the analysis of risk is to allow a range of
values to the input data within which the decision maker believes they are likely to lie.
Smith (1999) further explains that the process of analyzing risk is very important
because it provides an understanding and awareness of the impact of risk on decision
problems. According to Odeyinka and Iyagba(2000) there is a range of risk analysis
tools that may be used to evaluate the identified risks. Among the techniques commonly
used are;
• Sensitivity Analysis
• Probability
• The Monte Carlo Simulation
• Decision Tree Analysis
• Utility Theory
• Risk Adjusted Discount Rate
• Decision matrix
• Decision Analysis
• Bayesian Theory
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• Stochastic Decision Tree Analysis
Risk Response
Since all projects are unique the risk responses which are found to be suitable for
handling risk in construction as offered by Odeyinka and Iyagba(2000) are;
1. Avoidance or reduction: Risk avoidance or reduction is an obvious first step. Once
the risks, particularly the sources of risks, have been identified and analyzed, it may be
possible to formulate methods of avoiding certain risk whilst making only minor
changes to the project.
2. Transfer: Risk transfer involves transferring risks from one party to another, without
changing the total amount of risks in the project. Risk transfer can occur between the
parties involved in the project.
Client
Contractor
Designer
Contractor
Insurer
Figure 3. Transfer of project risk
(Source: Kwakye, 1999)
3. Retention: In some situations the only option available is to retain a risk. The party
that is holding a risk might be the only one that can manage the risk or accept the
consequence should the risk be realized (Smith, 1999).
The specific contribution of risk management is as follows:
• Projects are improved by reducing expenses from efficiency of operations
• Quality of management decisions pertaining to business are improved
• Identification and evaluation of exposures to loss
• Reducing total liability of management
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Research Methodology
Data were collected from Lagos metropolis using opinion-based questionnaire survey
self-administered. Lagos was chosen for data collection because it is a major hub of
construction activities in Nigeria. The study employed stratified sampling of 100
professionals that are involved in the practice of traditional procurement method.
Construction professionals included practising quantity surveyors, architects, engineers
and builders.
Table 1.Construction Professionals’ company/firm types
(Source: Field survey)
Types of firms Frequency Percentage(s) %
Contracting service 28 50.9
Consulting firm 21 38.2
Employer’s representative 1 1.8
Other organization types 5 9.1
Total 55 100
Table 2.Designation of Respondents
(Source: Field survey)
Professionals Frequency Percentage(s) %
Architects 27 10.9
Builders 6 14.5
Quantity surveyors 14 49.1
Engineers 8 25.5
Total 55 100
Table 1 & 2: shows that these professionals were in the employment of contracting
companies 50.9%, consulting firms 38.2%, employer’s representative1.8%, and other
type of organization 9.1% whilst 49.1% of the respondents were Quantity surveyor,
10.9% were Architects, 25.5% were Engineer, and 14.5% were Builder respectively.
Work experience, 45.5% of the respondent have a working experience of 1 – 5 years,
34.5% have working experience of 6 – 10 years, 7.3% have working experience of 11 –
15 years, 9.1% have working experience of 16- 20 years , while 3.6% have working
experience of more than 20 years. Academic Qualification(s) of respondent reveals that
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18.2. % of the respondents were M.sc holder, 29.1% were B.Sc holders, 41.8% were
HND, 9.1% were OND holder and 1.8% was MBA holders. 21.8 % of the respondents
belong to NIQS, 5.5 belong to NIOB, 5.5 belong to NIA, 1.8% belong to QSRBN, 1.8%
belong to CORBON, 9.1% belong to MNSE, 1.8 to COREN while 41.8 does not belong
to any profession body. Thus the respondents are capable of providing the required
information for the study.
Data analysis and result
The perception of risks in construction is connected to project objectives (time, cost,
quality). The perception of risks is the occurrence of something unforeseen that would
have adversely affected the successful completion of the project (Kajsa 2006).
Probability and impact must be considered at all times, in precept of Odeyinka (2006),
Williams (1996) and Charette (1989) this study measures respondents’ perception of
risk using two-dimensional approaches measurement of risk, in which case the
likelihood or probability of risk occurring and the impact in case of occurrence have
been considered.
Analysis of Perception of Construction Professionals on Probability of Risk
Occurrence/ Impact Assessment of Risk Factors on Construction Cost
Perception of construction professionals is examined using two-dimensional scaling.
The first dimension asks respondents about the probability of risk occurrence while the
second asks about the impact of occurrence.
Null Hypothesis (Ho):- There is no significant difference in the perception of
construction professionals on the probability of risks occurrence in construction
projects.
Alternative Hypothesis (Hi):- There is significant difference in the perception of
construction professionals of the probability of occurrence of risk factors in construction
projects
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Table 3.Construction Professionals’ Perception on Probability of Risk Occurrence
(Source: Field survey)
Risk Factors Rank Surveyors' Rank Builders' Rank Architects' Rank Engineers' Rank
Overall Sign.
Mean Mean Mean Mean
mean P
score score score score
Score value
Completion delays 3.20 1 3.26 1 3.13 2 3.50 4 3.00 1 0.864
Inadequacy of cash flow 2.95 2 3.19 4 3.25 1 2.83 10 2.36 15 0.225
Default of contractors 2.91 3 2.96 8 2.50 7 4.00 1 2.57 5 0.086
Delay in payment 2.85 4 3.00 6 2.63 6 2.33 17 2.93 2 0.692
Under-estimation 2.84 5 3.26 3 2.13 13 3.00 5 2.36 14 0.047
Default of sub-
2.82 6 2.81 13 2.50 8 3.83 2 2.57 6 0.098
contractors
Change in scope of
2.78 7 3.26 2 1.50 23 3.00 7 2.50 9 0.003
work
Poor site investigations 2.78 8 3.00 7 1.88 17 3.83 3 2.43 12 0.016
Defective construction
2.76 9 2.85 12 2.50 9 2.67 15 2.79 3 0.897
works
Fluctuation in market
demand for product or 2.76 10 2.93 10 2.50 10 3.00 9 2.50 10 0.574
services
Delay in material supply 2.71 11 2.85 11 2.13 15 2.83 12 2.71 4 0.321
Inadequate specification 2.56 12 2.93 9 1.63 20 2.83 13 2.29 16 0.041
Foreign exchange
2.55 13 2.56 15 2.63 5 2.67 14 2.43 11 0.978
fluctuation
Defective design 2.55 14 3.07 5 1.75 18 2.33 18 2.07 21 0.029
Labour shortage 2.42 15 2.26 18 2.25 12 3.00 6 2.57 7 0.624
Under-valuation 2.38 16 2.70 14 1.63 19 2.5 16 2.14 19 0.153
Non-availability of fund 2.36 17 2.41 17 2.75 4 2.00 20 2.21 17 0.709
Use of inappropriate
2.22 18 1.96 27 2.13 14 2.83 11 2.50 8 0.193
plant
Damage in the
transportation of 2.15 19 2.15 23 1.38 25 3.00 8 2.21 18 0.087
materials and equipment
Third party delays 2.15 20 2.22 21 2.38 11 1.83 22 2.00 22 0.804
Labour strikes 2.15 21 2.44 16 1.63 21 1.83 23 2.00 23 0.248
Feasibility of
2.13 22 2.00 26 2.88 3 2.17 19 1.93 26 0.217
construction methods
Delay in resolving
2.11 23 2.22 20 2.13 16 2.00 21 1.93 25 0.888
disputes
Civil disorder 2.05 24 2.04 25 1.63 22 1.83 24 2.43 13 0.498
Revolutionary changes
1.93 25 2.19 22 1.00 26 1.67 26 2.07 20 0.121
in law
Legal impossibilities 1.82 26 1.96 28 1.50 24 1.67 25 1.79 27 0.769
Loss or damage by fire 1.80 27 2.26 19 0.50 28 1.33 27 2.43 28 0.022
Loss or damage by flood 1.78 28 2.07 24 1.00 27 1.00 28 2.00 24 0.040
Significant at 5% level
Table 3: list the 28 identified risk factors potentially thought to impact construction cost.
It also ranks the professionals’ perception of the probability of occurrence of the risk
factors collectively and separately. From their collective perception completion delay
with the mean value of 3.20 has the highest probability of risk occurrence and is the
only factor above 3 point, above average and this indicated that other factors are either
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low in occurrence or very low or will not occur at all. From the quantity surveyors’
perception alone, the completion delay as well is one of the risk factors with the highest
probability of occurrence with the value of 3.26; others are under estimation and change
in scope of work. Other risk factors with the mean value above average indicating high
probability of occurrence are poor site investigation defective design, delay in payment
and adequacy of cash flow. The architects’ perception reveal that the risk factors with
high probability of occurrence are completion delay, under- estimation, default of
contractors, default of sub-contractors, labour shortage, change in scope of work, poor
site investigation, damage in the transportation of materials and equipments and
fluctuation in market demand for produce product or services. This engineers’
perception revealed only completion delays as the only factors with the high probability
of occurrence. This builders’ perception revealed that completion delay and inadequate
of cash flow are the risk factors with high probability of occurrence. The above
observation indicated completion delay as the only factors with the highest probability
of occurrence as revealed from the perception of the construction professionals.
Hypothesis Testing
In ordesr to test the equality of group means of the construction professionals’
perception, the probability of occurrence of risk factors in construction projects was
tested using the ANOVA at 5% level of significance. Table 1 summarizes the result of
the analysis Risk factor; under estimation, change in scope of work, defective design,
inadequate specification, poor site investigation, loss of damage by fire and loss or
damage by flood as risk factors were shown to have statistical significant difference
(p<0.05) and this indicate that there is significant difference in their perceptions. For the
other 21 risk factors; there is no significant difference in the perception of construction
professionals on the probability of risks occurrence in construction projects was upheld.
Analysis of the Perception of Construction Professionals of the Impacts of Risk
Factors on Construction Cost
Null Hypothesis (Ho):- There is no significant difference in the perception of the
construction professionals of the impacts of risk factors on construction cost.
Alternative Hypothesis (Hi):- There is significant difference in the perception of the
construction professionals of the impacts of risk factors on construction cost.
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Table 4. Construction Professionals’ Perception on Impacts of Risk factors
(Source: Field survey)
Risk Factors Over Quantity
Builders' Architects' Engineers'
all Ra Surveyors' Rank Rank Rank Rank Sign.
mean mean mean
mean nk Score p value
score score score
score mean
Under-estimation 4.05 1 4.26 1 4.00 1 4.17 1 3.64 1 0.210
Completion delays 3.16 2 3.30 7 2.88 9 3.67 3 2.86 3 0.450
Inadequacy of cash flow 3.13 3 3.37 6 3.13 4 3.67 2 2.43 9 0.110
Poor site investigations 3.09 4 3.52 4 3.00 7 3.17 9 2.29 14 0.057
Change in scope of work 3.02 5 3.70 2 3.00 6 3.00 12 3.00 2 0.062
Defective construction works 3.02 6 3.41 5 2.63 14 3.17 8 2.43 11 0.142
Non-availability of fund 3.00 7 3.26 8 3.38 3 2.50 17 2.43 8 0.300
Under-valuation 3.00 8 3.19 12 2.63 12 3.17 7 2.5 6 0.280
Default of contractors 2.96 9 3.11 14 2.88 8 3.50 4 2.50 7 0.248
Defective design 2.84 10 3.26 9 2.38 19 2.67 15 2.36 12 0.216
Delay in payment 2.84 11 3.04 15 2.63 13 2.83 13 2.57 4 0.779
Inadequate specification 2.80 12 3.22 10 2.88 10 2.17 22 2.21 16 0.072
Labour strikes 2.78 13 3.19 13 3.50 2 2.17 23 1.86 26 0.007*
Loss or damage by fire 2.78 14 3.59 3 2.63 17 1.50 27 1.86 28 0.001*
Default of sub-contractors 2.67 15 2.85 18 2.38 18 3.33 6 2.21 15 0.137
Delay in material supply 2.67 16 2.93 17 2.13 23 3.00 11 2.36 13 0.259
Fluctuation in market
demand for product or 2.65 17 2.93 16 2.25 22 3.17 10 2.14 18 0.173
services
Loss or damage by flood 2.65 18 3.22 11 2.75 11 1.17 28 2.14 19 0.004*
Civil disorder 2.56 19 2.85 19 3.13 5 2.17 24 1.86 27 0.033*
Foreign exchange fluctuation 2.49 20 2.59 22 2.13 25 3.33 5 2.14 17 0.271
Use of inappropriate plant 2.44 21 2.67 20 1.88 28 2.17 21 2.43 10 0.427
Labour shortage 2.44 22 2.48 24 2.00 27 2.50 19 2.57 5 0.808
Delay in resolving disputes 2.44 23 2.67 21 2.63 15 2.33 20 1.93 22
0.232
Loss or damage in the
0.315
transportation of materials 2.35 24 2.56 23 2.25 21 2.67 16 1.86 24
and equipment
0.633
Revolutionary changes in law 2.25 25 2.30 25 2.13 24 2.83 14 2.00 20
Feasibility of construction 0.653
2.16 26 2.26 26 2.00 26 2.50 18 1.93 21
methods
Third party delays 2.09 27 2.19 27 2.63 16 1.50 26 1.86 25 0.188
Legal impossibilities 2.09 28 2.19 28 2.38 20 1.67 25 1.93 23 0.696
* Significant at 5% level
Table 4: shows the list of the risk factors impacting construction cost, using a criticality
cut-off point of 3.00 on a 0 - 5 likert scale determine the significant risk factors because
some risk variables can be low in occurrence but high in impact. The first 8 risk factors
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with overall means scores of 3.00 and over are shown to have critical impact on
construction cost. These 8 risk factors with critical impacts are the significant risk
factors and thus require greater attention from the list of the identified risk factors.
These significant risk factors are under estimation, completion delay, inadequacy of
cash flow, poor site investigation, change in scope of work, defective construction
works, non-availability of fund and under-valuation. From these 8 factors, under -
estimation will have very critical impact on construction cost as revealed by the result of
the analysis, the remaining 20 identified risk factors will have either fairly critical
impact or little impact or no impact on construction cost.
From the perception of quantity surveyors alone added to the significant risk factors are
other 4 risk factor they are; delay in payment, defective design, inadequate damage by
fire and loss or damage by flood.
The architect opinion concerning non-availability of fund was contrary to the foretasted
but the remaining 7 factors were regarded as significant risk factors having critical
impacts. Added to this lists are foreign exchange fluctuation, default of contractor,
default of subcontractor, delay in materials supply and fluctuation is market demand for
product or services.
The engineers opinion shows under-estimation, change in scope of work as the factor
with critical impacts but it further showed that majority of the risk factors have fairly
critical impact. Also, the remaining 6 risk factors considered as having critical impacts
from the general perception are highly ranked risk factors from the mean value of their
opinion.
The builders’ opinion indicated that non-availability of fund, under-estimation,
inadequacy of cash flow, poor site investigation, labour strike, civil disorder and change
in scope of work as the factors with critical impacts and with under-estimation as having
very critical impact. The result of the analysis of both the combined and separate
opinion of the professionals indicates under-estimation as the risk factor with the
greatest impact on construction cost and the impact was revealed as a very critical
impact.
Hypothesis Testing
Perception of construction professionals of the impacts of risk factors on construction
cost was tested using ANOVA at 5% level of significance (p<0.05). The results of the
analysis is summarized in table 4.7 this analysis indicates that there is no statistically
significant difference in the perception of construction professionals regarding the
variables identified as impacting construction cost except for four variables that are;
labour strike, loss or damage by fire, loss or damage by flood and civil order. These 4
risk factors are not part of the significant risk factors identified from the result of the
combined perception of all professionals.
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Conclusions and Recommendations
From the 28 risk variables identified from the result of the combined perception of all
professionals, the risk variable found to have the highest probability of occurrence is
completion delay and this risk has the second highest impact on construction cost.
Meanwhile the quantity surveyors’ perception alone showed 7 risk variables as having
high probability of occurrence; these are completion delays, change in scope of works,
under estimation, inadequacy of cash flow, defective construction work, delay in
payment and poor site investigation. From the architects’ opinion 9 variables were
found to have high probability of occurrence they are; default of contractors, default of
sub-contractors, poor site investigation, completion delays, under-estimation, labour
shortage, change in scope of work, damage in transportation of materials and equipment
and fluctuation in market demand for product or services.
The engineers’ opinion shows only completion delays as the only factor with high
probability of occurrence while the builders’ opinion shows inadequacy of cash flow
and completion delays as the factors with high probability of occurrence.
From the stipulated hypothesis; there is no significant difference in the perception of
construction professionals on the probability of risks occurrence in construction projects
was upheld except for seven risk factors; under estimation, change in scope of work,
defective design, inadequate specification, poor site investigation, loss of damage by
fire and loss or damage by flood.
Further analysis on impacts of risk on construction cost shows 8 risk factors with
critical impacts. These are under-estimation, completion delays, inadequacy of cash
flow, poor site investigation, change in scope of work, defective construction work,
non-availability of fund and under-valuation. Other identified risk factors other than
these 8 risk factors are therefore regarded as having non-critical impacts and therefore
are non-significant risk factors while the 8 risk factors having critical impacts are
regarded as significant risk factors.
Result of hypothesis testing shows that, generally construction professionals’ opinion
were not significantly different except for four factors and these are; labour strikes, loss
or damage by fire, loss or damage by flood and civil order.
The study has been able to identify the significant risk factors impacting construction
cost. The knowledge of these significant risk factors therefore requires greater attention
and thus the incorporation of the whole process of risk management for projects to be
completed as budgeted. The construction professionals should be aware of these
significant risk factors and follow the procedure of risk management for their proposed
project to be actualized as budgeted. It is therefore suggested that further research
should be carried out to establish the causes of these significant risk factors and thus
curb them.
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References
Ashworth, A. and Hogg, K. (2002), Willis's Procedure for the Quantity Surveyors,
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Boloi, D. and Price, A. D. F. (2003), ‘Modeling global risk factors affecting
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Charette, R. (1989), Software Engineering Risk Analysis and Management, McGraw
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Odeyinka H.A, Oladapo A.A, and Akindele, O. (2006), ‘Assessing risk impacts on
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construction projects: life cycle and stake holder perspective.
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Hemanta Doloi and Brendan Young, pp 244-255
Achieving cost performance from the client’s, consultant’s
and contractor’s perspectives
Hemanta Doloi1 and Brendan Young2
1, 2
Faculty of Architecture, Building and Planning
The University of Melbourne, Victoria 3010
Australia
Email: [email protected]
Abstract:
Cost performance is a generic, yet one of the most commonly used indicators for
measuring success acorss most projects. However, this measure varies significantly
among stakehoders within projects. While the cost performnace is a widely published
reseach topic, the driving and impdending factors behind the sources of cost overruns
from client’s, consultant’s and contractor’s viewpoints remains unexplored. Accurate
understanding of these factors potentially improve the project manager’s ability to
integrate the upfront cost estimation with downstream cost performance in projects.
Based on a thorough literature review and industry input, 73 client releted and 82 each
contractor and consultant related attributes were identified for investigation. Based on
statistical methods, these attributes were analysed under three seperate categories as
well as in combination and criticality on cost impacts were studied. The analysis
suggest that robust quality control procedures and adequate programming are the most
critical factors influcing cost performance in projects. The finding of this research is
expected to fill a significant knowledg gap in cost estimation practice across all industry
sectors.
Keywords:
Cost overrun, cost estimation, cost performance
1 Introduction
The factors influencing cost during the conception and design phases within the
construction process have been widely investigated based on mainly the contractor’s
cost estimating practices (Akintoye, 2000; Cheng et al 2008). The importance of a cost
estimate as this early stage on cost overrun is emphasised no better than ‘without an
accurate cost estimate, nothing short of an act of God can be done to prevent a loss,
regardless of management competence, financial strength of contractor, or know how’
(Hicks, 1992). Factors influencing cost performance based on initial estimates have
been widely published highlighting the issues mainly around project complexity,
technology requirements, vagueness in scope and finally project team requirements. In
many instances, the factors found during these early stages of the construction process
are described as uncontrollable risks (Akinci and Fischer, 1996). The uncontrollable
risks should be considered during these initial stages of construction process throughout
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the estimating phase, as the chance of rectifying the mistakes demises rapidly over
construction phase. While identifying the risks associated to cost performance, the roles
of three key stakeholders, namely clients, contractors and consultants must be clearly
understood and assessed in regards to their understanding, competence and willingness
to achieving the target performance in the projects.
This project aims to determine the factors affecting cost overruns in construction
developments through a questionnaire based on possible attributes to affect cost
performance during a projects development lifecycle. The estimation of project costs at
the early stages of the building design process and of equal importance, the ability to
manage these costs throughout the construction phase of a development is paramount to
a projects overall success. Recent research literature illustrates significant cost overruns
and subsequent cost performance issues attributed to a lack of understanding by all
participating team members in the construction industry and of key mention the Project
Managers ability to manage these costs.
2 Literature Review
Over last few decades, there has been much research into the factors affecting cost
performance at the construction phase of projects. Usually the vast majority of project
cost overruns occur during the construction phase, where many unforeseen factors are
conceived over conception/design stages (Chan and Kumarasway, 1997). However, the
general consensus across all research literature at the construction phase highlights that
‘poor site management and supervision’, ‘low speed of decision making involving all
project teams’ and ‘client-initiated variations’ are the key factors significantly causes
project cost overruns (Trost and Oberlender 2003; Iyer and Jha, 2004). These factors
primarily relate to the project manager who overseas the whole construction process by
managing the potential factors affecting project costs during this period. The tools and
techniques implemented to control these factors play an important role in the effective
organisation of projects. Project management involves managing resources which
includes the workers, machine, money, materials and methods used (Frimpong et al,
2003). Based on the case study data on completed projects in Ghana, Frimpong et. al.
(2003) identified five key factors impacting cost performance in projects. These factors
are namely, monthly payment difficulties from agencies, poor contractor management,
material procurement, poor technical performance and escalation of materials prices. A
general consensus of the impacts of these factors on cost performance was found among
clients, contractors and clients. Based on the data collected from 84 contractors firms in
the UK, Akintoye (2000) reported the main factors relevant to cost estimating practice
as complexity of the project, scale and scope of construction, market conditions,
methods of construction, site constraints, client’s financial position, buildability and
location of the project. However, exclusion of investigation on how such factors would
be perceived by clients and consultants and potential impacts on overall cost
performance of projects made such research incomprehensive. Poor project
management during the construction phase produces not only the deficiencies in the
projects plan and cost control, but also jeopardises the target outcomes expected by
clients, contractors and consultants in the overall development process (Mansfield et al
1994). While the technical ability of project managers is an important element to the
project’s success, the contribution of contractors and consultants in the process of cost
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monitoring and controlling is equally important in achieving the overall success in
projects (Iyer and Jha, 2004).
While it can be seen that the factors affecting cost performance of construction projects
appear to be well understood in the literature, a holistic and integrated approach
combining the viewpoints of clients, consultants and contractors to managing these
factors over the whole of construction process is not quite widespread. As cost overruns
is a function of the set of continuous factors spreading over entire lifecycle of projects,
their constant management over all project phases is critical (Baloi and Price, 2003). In
order to exercise such practices, proactive engagement of all three parties from concept
phase over to implementation, commissioning and handover phases is a fundamental
requirement in achieving success in overall projects (Semple et al 1994).
This research is important due to the fact that currently no research has been found in
public domain focusing the whole development phase (from initial project conception to
handover) using the perceptions of clients, consultants and contractors impacting cost
performance. There is a need to re-think and ‘re-engineer’ the existing or normal cost
estimating process incorporating emergent diversity and complexity especially in
project delivery approaches. Based on the results, the research should benefit the
construction community by highlighting the key factors to impact on the projects costs
and additionally will provide guidance for further research in developing practical steps
that can be implemented to reduce cost overruns during the whole development process.
3 Methodology and approach
Research into cost performance of projects and the management of these cost overruns
in Australia is an ongoing assignment. There has been much research into the causes of
cost performance issues in the initial design/development stages and within the
construction/handover stages, however little research across the whole development
incorporating all stages. This research paper therefore aims to examine the cost
performance across the whole development process. Managing the performance of any
construction project in terms of project costs may appear to be black and white at first,
but in fact is a very complex task. Modern construction projects, of varying sizes are
commonly multidisciplinary in nature and require the contribution of designers,
contractors, subcontractors, specialists, construction managers, and consults during the
overall construction process (Iyer and Jha, 2005). Due to this complex nature of
managing multiple participants and varying contributions to a project, construction
projects tend to have a less than perfect reputation in terms of managing time and cost
overruns during the overall project phase (Raftery, 1994).
The research project aims to expand the current understanding of cost performance
issues and management methods in Australia through a questionnaire of the current
construction industries experiences. Over 100 construction contractors, consultants and
clients are selected for their diverse backgrounds, industry experience and current
participations in the industry. The objective of research is to identify most critical
factors to impact cost performance across the design consultants, contactors and client
perspectives by:
• identifying the most critical attributes by rank using Relative Importance Index
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• identifying the latent properties of each factor extracted by performing Factor
Analysis
The research uses three different questionnaires (exclusively designed as Contractor,
Consultant, Client Questionnaire) to explore a variety of possible causes of cost
overruns during a project, and analyses these results to identify those that are
considered from industry feedback to most significantly call for heightened awareness
and action when managing costs across the whole development process. 40
Construction contractors, consultants and clients will be asked to voluntarily complete
their particular questionnaire using a 5 point scale. The results from the participants’
responses will be statistically analysed to determine these ‘most critical’ factors. This
research is most relevant as there continues to be considerable cost performance issues
among the majority of the construction projects found within the research which
therefore means that the overall success of a project cannot always be achieved.
4 Data Collection Process
A total of 90 questionnaire survey were distributed to the three major groups namely
contractors, clients and consultants within the Victorian Construction Industry
comprising residential, commercial and industrial buildings. The selection of those
firms and individuals from either the contractor, client or consultant background was
critical to the success of this research. As the target outcome of this research entirely
relies on the representative population sample, a simple random sampling was adopted
to provide a broad spectrum of the three key groups in both government and private
organisations within the industry. The selection of the firms/individuals had therefore
been selected from industry body websites. The contractors were mostly sourced from
Master Builders of Australia (MBA) website. The consultants were sourced from
specific industry websites which include quantity surveyors from Australian Institute of
Quantity Surveyors (AIQS) and architects from Australian Institute of Architects. The
clients firms were identified mostly from property development companies available
from both contractor’s websites as well as Australian Property Institute.
A total of 64 responses were received which consisted 24 contractor, 18 clients and 22
consultants. Therefore a response rate of approximately 27% of contractors, 20% of
clients and 24% of consultants from the overall respondents deemed acceptable for this
study (Flyvbjerg, 2004; Doloi, 2008). Table 1 shows the profile of the respondents in
terms of their experience and size of projects.
Table 1: Summary of respondents’ profile
Respondent’s category Experience Typical project
(years) budget (in Millions)
Clients 37.5% <1 2% <$5m 2%
Consultants 28.1% 1-5 16% $5-$25 8%
Contractors 34.4% 5-10 36% $25-$75 20%
>10 46% $75-$150 59%
>$150 11%
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As seen in Table 1, among 64 respondents across the clients, contractors and
consultants, 46% had a minimum of 10 years experience in the construction industry.
As seen in the last column, 59% respondents were involved in project in the range of
$75 millions to $150 millions with 11% over $150 millions. This statistics provides the
basis that the research feedback has been based on medium to large construction
projects.
5 Data Analysis and Findings
The research utilises two separate methods to analyse the respondent’s data to identify
the critical attributes among all three categories, client, contractor and consultant
affecting the cost performance in projects. The first is a descriptive approach with direct
interpretation of the survey results to identify the ‘most critical’ based on the relative
important index (RII) (Doloi, 2008). The second method, using Statistical Package for
Social Sciences (SPSS), intends to explore and detect underlying relationships among
the cost performance attributes by using three methods namely Bivariate Correlation,
Multiple Regression and Factor Analysis. Due to sake of brevity, results of only
Regression and Factor analysis are presented in this paper.
5.1 Descriptive analysis
Various methods can be used in order to rank and subsequently identify the relative
critical attributes out of the raw data analysis. According to a number of researchers, the
mean and standard deviations are not a reliable statistics for assessing overall ranking of
the attributes. However, Relative Importance Index (RII) is one of the most widely used
measures to determine the relative significance of the attributes (Doloi, 2008). The RII
is evaluated using the following expression:
Relative importance index (RII) =
∑w
AxN
Where, w is the weight given to each attribute by the responded and ranges from 1 to 5,
A is the highest weight (i.e. 5 in this study) and N is the total number of respondents in
the sample.
The questionnaire presented each participant an opportunity to identify any factor that
was likely to significantly affect a project’s cost performance by indicating the response
‘strongly agree” or “agree”. Tables 2 , 3 and 4 show the five top relative ranking
attributes under consultant’s, client’s and contractor’s categories respectively.
Among all three categories, the five most significant sources of cost overruns as
perceived by the consultants, clients and contractors are 1) extent of completion of pre-
contract design, 2) escalation of material prices, 3) mistakes and discrepancies in
contract documentation, 4) client initiated variations and 5) shortage of materials.
Among these, two factors namely escalation of material prices and shortage of materials
were found be supported by the findings by Akintoye (2000). However, the other three
factors were found to have emerged among all three industry groups considering the
complete lifecycle of projects. All three industry groups highlighted the ‘extent of
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completion of pre-contract design’ as the most significant in affecting the cost
performance of projects. Whilst a review of previous literature indicated a strong focus
in management of the construction phase of a project in order to supervising project
costs, the design phase should not be overlooked. This finding suggests that complete
drawings and specifications, detailed investigation of site dynamics and a thorough
understanding of the client’s requirements of the project at the pre-contract design stage
will help in reducing cost overruns at the latter stages of projects.
Table 2. Top five attributes under Consultant Category
Attribute Description RII Rank
CN6 Extent of completion of pre-contract design 0.94545 1
CN13 Poor tender documentation produced 0.94545 1
CN12 Deficiencies in cost estimates prepared 0.90000 2
CN63 Lack of communication between client and contractor 0.90000 2
CN44 Escalation of material prices 0.89091 3
CN58 Inadequate managerial skills 0.89091 3
CN66 Delays in subcontractors work 0.89091 3
CN20 Inaccurate estimates 0.87273 4
CN1 Ability to aligning goals and expectations between various 0.86364 5
consultants and architects
Table 3. Top five attributes under Client Category
Attribute Description RII Rank
C54 Necessary variation of work 0.94444 1
C66 Effective monitoring and feedback 0.93333 2
C3 Tender period and market conditions 0.91111 3
C39 Difficulties in supply of construction materials and price variation 0.91111 3
C20 Availability and supplies of labour and materials 0.90000 4
C43 Mistakes and discrepancies in contract documentation 0.88889 5
C40 Escalation of material prices 0.88889 5
Table 4. Top five attributes under Contractor Category
Attribute Description RII Rank
CT6 Extent of completion of pre-contract design 0.93333 1
CT50 Mistakes and discrepancies in contract documentation 0.91667 2
CT15 Design changes within development periods 0.90833 3
CT44 Escalation of materials prices 0.88333 3
CT18 Complexity of design and construction 0.85000 4
CT38 Frequent breakdowns of construction plants and equipment 0.85000 5
CT40 Shortage of materials 0.82500 5
5.2 Multiple Regression Analysis
Multiple regression modelling was performed based on the top ranked attributes from
each industry group’s RII results. Three regression models were developed for all three
categories. Amongst the regression models, the attribute ‘extent of completion of pre-
contract design’ was considered as constant for both consultant and contractor groups
and the attribute ‘necessary variations of work’ was considered constant for the client
group. In general, models that have a R2 >0.6 are considered to have high predictive
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power. Tables 4, 5 and 6 shows the final models for consultants, client and contractors
respectively.
From Table 4, it can be seen that the fifth model that achieved a R2 =0.664 comprises
five different attributes as listed at the bottom of the table. This model indicates that
poor procurement programming of materials, non adherence to contract conditions,
improper control over site resource allocation, project teams experience in development
stages and anticipate frequency of variations can account 64.4% of the variation in
extent of completion of pre-contract design. Further analysis of this model can also be
performed to provide a better understanding of its predictive power (F-ratio) and
significance (Sig. F change). A good model should have a large F-ratio (greater than 1)
which is a measure of how much the model has improved the prediction of the outcome
compared to the level of inaccuracy of the model. For the presented model in Table 5,
the F-ratio is 6.332 which is very significant (p<0.002). As a comparison to the first
four models developed (not shown), it can therefore be seen that although the initial
model s significantly improved the ability to predict the outcome attribute, model 5 was
even better based on higher F-ratio.
Table 5. Consultants Regression Models output
Consultant (Dependent variable - Extent of completion of pre-contract design)
Model R R2 Adjusted Std. Change statistics Dublin
R2 effort of R2 F df1 df2 Sig. F Watson
the change change change
estimate
5 0.815 0.664 0.559 0.303 0.664 6.332 5 16 0.002 1.448
5: Predictors; (constant), CN70 (poor procurement programming of materials), CN59 (Improper control
over site resource allocation), CN7 (Projects teams experience in development stages), CN27
(Anticipated frequency of variations).
Table 6 shows the final regression model for contractors out of the two potential models
in the analysis. Unlike the results from consultants regression models which produced a
mode with a R2 value greater than 0.6, both of these models have a low R2 values closer
to 0.38. This suggests that the two models developed are not considered to have high
predictive powers. The outcomes from Model 2 in Table 5 account nearly 38% of the
variation in the attribute ‘extent of completion of pre-contract design’. It means that
62% of the variation in extent of completion of pre-contract design in Model 2 cannot
be explained by two independent attributes, project teams experience in development
stage and delays in work approval waiting for information. This neither of these model
has been found be provide good predictive method for managing cost overruns in
contractor’s context.
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Table 6. Contractors Regression Models output
Contractor (Dependent variable - Extent of completion of pre-contract design)
Model R R2 Adjusted Std. Change statistics Dublin
R2 effort of R2 F df1 df2 Sig. F Watson
the change change change
estimate
2 0.614 0.377 0.317 0.593 0.377 6.346 2 21 0.007 2.203
2: Predictors; (constant), CT7 (Project teams experience in development stage), CT28 (Delays in work
approval waiting for information)
Table 7 shows the final regression model for clients out of the five potential models in
the analysis. Of the 5 models created, 4 of them achieved a R2 value greater than 0.6
indicating that they all have reasonable predictive powers. Model 2 achieved the highest
F-ratio values of 14.468 as a significance p<0.001. Based on this result, model 2, which
found that ‘late delivery of materials and equipment’ and ‘extent of completion of pre-
contract design’ account for 66% of the variation in the attribute ‘necessary variations
of work’. Although it can be seen that increase of R2 value in Model 2 over Model 1
depicts significant predictive ability of the outcomes attribute ‘necessary variation of
work’.
Table 7. Clients Regression Models output
Client (Dependent variable – Necessary Variations of Work)
Model R R2 Adjusted Std. Change statistics Dublin
R2 effort of R2 F df1 df2 Sig. F Watson
the change change change
estimate
2 0.812 0.659 0.613 0.574 0.659 14.468 2 15 0.000 2.026
5: Predictors; (constant), C33 (Late delivery of materials and equipment), C4 (Extent of completion of
pre-contract design).
From the above analysis, it can be seen that the two models are quite significant in order
to predict the dependent attributes by appropriate management of independent
attributes. By determining such models, project managers could exercise appropriate
skills in controlling and managing these independent attributes to limit the impact of
critical dependent attributes and thereby limit the possibility of cost overruns in
projects.
5.3 Factor Analysis
While relative importance indices and regression models provide some meaningful
interpretation on the respondent’s perceptions, such measures are not quite convincing
for leading to an objective outcome for managing cost overruns in project. Thus, Factor
analysis is performed on all three respondent groups to determine the most critical
factors across all three individual categories. Tables 8, 9 and 10 shows top five critical
factors and underlying attributes for consultant, client and contractors groups
respectively.
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Table 8. Five critical factors extracted under consultant category
CONSULTANT Factor Loading Variance
explained
1 2 3 4 5
Factor 1: Project type and location
Type of structure 0.854
Scale and scope of construction 0.731 12.4%
Location of project -0.670
Buildability issues 0.617
Factor 2: Incomplete budget planning and design
Deficiencies in cost estimates imposed by client 0.824
Preparation and approval of drawings 0.816
Quality of information developed and flow requirements -0.806
Effective monitoring and feedback by PM 0.718 12.4%
Factor 3: Project time planning and scheduling control
Unrealistic contract durations imposed by client -0.882
Preparation and approval of drawings 0.714
Quality of information developed and flow requirements 0.664 10.0%
Effective monitoring and feedback by PM 0.610
Factor 4: Owners financial position and competence
Clients financial difficulties 0.783
Off/on site operations sequencing and limitations 0.624 10.0%
Complexity of design and construction 0.472
Factor5: Project time participation & input
Consultation with all consultants involved & the client in
design stages 0.815 9.2%
Scope and nature of work well defined in the tender -0.799
Fraudulent practices and kickbacks -0.738
Table 9. Five critical factors extracted under client category
CLIENT Factor Loading Variance
explained
1 2 3 4 5
Factor 1: Project schedule control and time planning
Shortage of materials, plant/equipment parts 0.898
Quality of information developed and flow requirements 0.875 12.4%
Effective monitoring and feedback by the project team
members 0.723
Positive attitudes of PM and project participants 0.632
Low labour productivity 0.589
Factor 2: Contractors experience and competence
Inadequate contractor experience 0.901
Form of procurement and contractual arrangements 0.842
Construction control meetings -0.752
Labour and management relations 0.635 12.0%
Late delivery of materials and equipment 0.633
Shortage of materials 0.557
Factor 3: Project team participation and input
Number of project team members 0.842
Low speed of decision making involved all project teams 0.761
Coordinating ability and rapport of PM with other 11.6%
contractors at site -0.668
Training the human resources in the skill demanded by
the project 0.560
Factor 4: Project complexity
Complexity of design and construction 0.930
Delays in work approval waiting for information -0.739 10.2%
Planning and scheduling deficiencies 0.652
Inaccurate estimates -0.586
Factor5: Reluctance in timely decisions
Inspection and testing of completed portions of work 0.915
Lack of communication between client and contractor 0.735 10.0%
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In addition, factor analysis was also performed by combining all the attributes across all
three categories in order to establish the critical factors impacting cost overrun across
the construction industry. For the sake of brevity, the results of the combined analysis
have not been included in this manuscript.
As shown in Table 8, the top five critical factors under consultant category are 1)
project type and location, 2) incomplete budget planning and design, 3) project time
planning and scheduling control, 4) owners financial position and competence, and 5)
project team participation and input. The reliability of the attributes under these factors
was evaluated by determining Cronbach Alpha value. The Cronbach Alpha (α) was
found be to 0.779 which is above the acceptable limit of 0.70 for a satisfactory level of
reliability in the given data set. The criticality of project type and location and owners
financial position and competence was found to be similar to the findings by a few
research (Akintoye, 2000; Iyer and Jha, 2005). However, importance of appropriate
budget planning, higher emphasis on planning and schedule controlling and proactive
participation of project team and their relevant input was reportedly being revealed
among all three groups.
Table 10. Five critical factors extracted under contractor category
CONTRACTOR Factor Loading Variance
explained
1 2 3 4 5
Factor 1: Project team selection and capabilities
Number of project team members -0.812
Selection of PM with proven tract record at an early stage -0.705 15.6%
Effective monitoring and feedback by PM 0.706
Shortening of contract periods 0.679
Method of construction/construction techniques 0.595
Fraudulent practices and kickbacks -0.591
Factor 2: Ignorance and lack of knowledge
Inaccurate estimates 0.865
Poor contract management 0.789
Inspection and testing of completed portions of work 0.744
Site constraints access and storage limitations -0.699 14.2%
Off/on site operations sequencing and limitations 0.549
Factor 3: Managing unforeseen risk
Unexpected geological conditions 0.844
Insurances -0.841
Scope and nature of work well defined in the tender 0.588 12.9%
Design changes within development periods -0.546
Factor 4: Client financial situation and budget
Financing and payment of completed works 0.850
Clients financial situation and budget 0.591 10.3%
Understanding of responsibilities by various project
participants -0.485
Factor5: Establishment of project control
Construction control meetings 0.736
Training the human resources in the skill demanded by 10.3%
the project 0.642
Table 9 depicts the top five critical factors under the client category. They are 1) project
schedule control and time planning, 2) contractors experience and competence, 3)
project team participation and input, 4) project complexity, and 5) reluctance in timely
decisions. The Cronbach Alpha (α) was found be to 0.633 which is slightly below the
acceptable limit of 0.70 for a satisfactory level. However, dataset with α>0.60 is
considered still good for performing the factor analysis (Doloi, 2008). While importance
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of effective time planning and schedule control was found to be one the underlying
factors among the contractors, significance of the rest of the other four critical factors
had been revealed by a number of research in the past (Cheung et al, 2008, Frimpong et
al, 2003).
Table 10 shows the top five critical factors under the consultant category. They are
namely 1) project quality control procedures, 2) programming and sequencing of work,
3) completion of project scope and design, 4) contractors experience and competence,
and 5) reluctance and delays in timely decisions. The Cronbach Alpha (α) was found be
to 0.719 which is above the acceptable limit of 0.70 for a satisfactory level. The first
attribute, project quality control revealed under the consultant category highlights the
fact that an appropriate quality planning and controlling helps managing risks and
uncertainties over every phase of project development. Mistakes during construction not
only delay the overall programme of the project due to rework but could also result a
significant overrun in the project budget. The second attribute, programming and
sequencing relates to the ability of a contractor to successfully utilise the resources in
order to effective sequencing of construction activities onsite. This attribute is also
found to be critical under client category. Avoidance of variation for effective control of
scope somewhat closely related to contractor’s competence and thus both of the factors
are found to be critical for managing costs in projects (Akinci and Fischer, 1996, Hick,
1992, Akintoye, 2000; Mansfield, 1994).
6 Conclusion and Further Research
Focusing on the three major industry groups namely, consultant, client and contractors,
this research investigated the critical factors affecting cost performance across the
lifecycle of projects. Based on the three methods namely, descript analysis, regression
and factor analysis, the critical factors were identified and their quantitative impacts
were analysed in the cost overrun context.
It was found that quality control measures have a significant role in overall cost
performance in projects. Implementing appropriate QA/QC procedures, a common
standard can be established for managing onsite construction works which potentially
reduces numerous mistakes and errors in the construction phase of projects.
Programming and sequencing of work during the onsite construction stages need to be
regularly updated and forecasted in order to limit changes of delays and subsequent cost
overruns throughout the project. Adequate time and resources at the initial stage of
project creation is found to be highly necessary in order to produce a complete project
scope and design plans. Failure to provide a complete detailed scope and design for the
project will result in discrepancies in contract documentation and the likelihood of
mistakes during construction.
Selecting a contractor with adequate experience and competence is a vital requirement
for controlling costs in projects. An experienced contractor with sound workforce can
provide a significant expertise to better control the project. The coordination between all
project participants is found to be one of the most important factors to achieve
successful project outcomes. Communication and persona rapport between all project
participants can lead to a reduction in unnecessary paper work and therefore greatly
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Hemanta Doloi and Brendan Young, pp 244-255
reduce the time and overall cost in project. Financial difficulties and delays in payment
to project participants potentially affect the overall cost performance in project. It is
therefore important to implement a streamline procedure in relation to payments in
order to reduce the possibility of delays and problems stemming from financial
difficulties in projects. Contractors’ leadership skills and ability to coordinate the
numerous activities onsite is found to have significant impact on cost performance in
projects. Good understanding of the contractors on the project design and onsite
constructability issues upfront potentially enhances the chances to achieving positive
cost performance in projects.
7 References
Akinci, B. and Fisher, M (1998) Factors affecting contractors' risk of cost overburden.
Journal of Management in Engineering, 14, 67.
Akintoye, A.(2000) Analysis of factors influencing project cost estimating practice.
Construction Management & Economics, 18, 77-89.
Baloi, D and Price, A.D.F (2003) Modelling global risk factors affecting construction
cost performance. International Journal of Project Management, 21, 261-269.
Chan, D.W. M and Kumaraswamy, M.M. (997) A comparative study of causes of time
overruns in Hong Kong construction projects. International Journal of Project
Management, 15, 55-63.
Cheung, F.K.T, Wong, M.W.L and Skitmore, M. (2008) A study of clients' and
estimators' tolerance towards estimating errors. Construction Management and
Economics, 26, 349-362.
Doloi, H. (2008), Analysing the novated design and construct contract from the client’s,
design team’s and contractor’s perspectives” Construction Management and
Economics, 26, November, 1181-1196.
Flyvbjerg, B., Holm, M.K.S. and Buhl, S. R. L. (2004) What Causes Cost Overrun in
Transport Infrastructure Projects? Transport Reviews, 24, 3-18.
Frimpong, Y., Oluwoye, J. and Crawford, L. (2003) Causes of delay and cost overruns
in construction of groundwater projects in a developing countries; Ghana as a
case study. International Journal of Project Management, 21, 321-326.
Hicks, J. C. (1992) Heavy Construction Estimates, with and without Computers.
Journal of Construction Engineering and Management, 118, 545-560.
Iyer, K. C. & Jha K. N. (2005) Factors affecting cost performance: evidence from
Indian construction projects. International Journal of Project Management, 23,
283-295.
Mansfield, N. R., Ugwu, O. O. and Doran, T. (1994) Causes of delay and cost overruns
in Nigerian construction projects. International Journal of Project Management,
12, 254-260.
Semple C., Hartman, F. T. and Jergeas, G. (1994) Construction Claims and Disputes:
Causes and Cost/Time Overruns. Journal of Construction Engineering and
Management, 120, 785-795.
Trost, S. M. and Oberlender, G. D. (2003) Predicting Accuracy of Early Cost Estimates
Using Factor Analysis and Multivariate Regression. Journal of Construction
Engineering & Management, 129, 198.
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Mark Massyn, Lesego Mosime and John Smallwood, pp 256-266
Construction management graduates – do they have the
competencies that industry need?
Mark Massyn1 , Lesego Mosime1 and John Smallwood2
1
Department of Construction Economics and Management,
University of Cape Town,
South Africa
2
Department of Construction Management,
Nelson Mandela Metropolitan University,
South Africa
Email: [email protected], [email protected]
Abstract:
Academics at teriary institutions are required to provide an education programme that
both meets the expectations of industry and balances sound academic principles. One
problem that teriary institutions face is that these programmes are dilevered in a period
when industry is facing rapid changes in tehnological development and it is not always
possible to included these changes.A second problem is that industry expects graduates
to immediately intergrate into the industry, and are not always concerned with the
broader education aims. Research undertaken by the Centre for Research into Quality at
Birmingham City University has identified that industry’s needs have changed and that
they now place more emphasis on human and contextual skills than on technical skills
when recruiting graduates. This paper reports on findings emanating from an
exploratory survey, which will provide the basis for further research. An electronic
survey, was conducted among the contractors registered at level 9 on the Construction
Industry Development Board (cidb) register. The survey was conducted in the Guateng
Province; the rationale being that most recruiting of graduates is managed by head
offices of national contractors, which are based in the Guateng Province. The key
findings are that contractors in the South African construction industry rate technical
and contextual skills as very important, however they also consider additional
characteristics such as enthusiasm, personal values, and commitment to work. Although
this is an exploratory survey, key indications are that in future, when tertiary institutions
undertake curriculum reviews they will have to consider including the subject areas that
are not currently included in their programmes if they want their graduates to be
marketable.
Keywords:
Construction management graduates, skills, competencies, knowledge areas
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Mark Massyn, Lesego Mosime and John Smallwood, pp 256-266
1 Introduction
In many construction companies, a degree in construction management is a requisite to
any management capacity (Caupin, 2005). It is therefore important for companies that
recruit graduates to view the education given to graduates not as an education teaching
individuals about their work place but as a foundation from which industrial experience
will build into (Love et. al., 2001). Institutions should also try to accommodate the role
that industry can play in developing the quality of graduates that can be produced
(Cheung Lo, 1998).
Traditionally construction management undergraduate programmes focus on
management and more specifically the management of resources within defined
parameters such as cost, environment, health and safety, productivity, quality and time,
(Smallwood, 2000). From a contractor’s perspective, such skills enable graduates to be
more competent in executing their duties within the company. Current research
however indicates that industry is focusing on more than just the technical skill set when
recruiting new graduates.
There are currently 19 tertiary institutions in South Africa offering a degree in
construction management. At six of the institutions a honours degree (four years full
time study) in construction management is offered and at the other thirteen, a three year
National Diploma (two and half years full time study plus six months in service
training) and a one year Bachelor of Technology in construction management is offered.
This paper focuses on the competencies required by graduate construction managers
who are normally appointed at site management level. The site manager being the
person normally responsible for the day to day running of the site, and which under
normal conditions does not interact with most of the external stakeholders (Harris and
McCaffer, 2001).
2 Construction Management skills, knowledge and competencies
2.1 Background
Students graduating with professional degrees expect to join a particular profession and
have a clearly identified career path mapped out for them and in turn industry expects
students to be instantly able to be fee generators (Davies et. al., 1999). Industry seems
to have a different set of values and opinions on building professional education (Arditi,
1984; Cheung Lo, 1998). The dilemma is that graduates enter industry when their level
of competency is very limited and they are unable to fully utilize their skills for at least
the first six months of employment, and in most instances industry fails to realize that
their role is to bridge the gap between what institutions teach, and what is required to
get the job done Love et. al., (2001).
The second point to consider is that academics involved in these professional courses
have to balance the expectation of the employer with broader educational aims that will
equip the student with the skills required to adjust to changing work practice and market
demands in the future (Davies & Csete, 1998). Industry is facing rapid changes in
technology and the tertiary institutions find it difficult to remain abreast of these
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changes, and consequently industry thinks that institutions are producing graduates who
are inadequate professionally, and are only equipped with the basic skills and concepts
academically (Cheung Lo, 1998).
The third factor to consider is that employers expect graduates to possess a deeper
understanding and knowledge of a number of technical and managerial issues, however
Harris as cited by Love et. al., (2001) states that these skills can be found in master’s
degrees or post graduate courses.
A fourth factor that must also be considered is that a good professional qualification is
no longer a guarantee of employment and that students must have the skills required by
industry prior to graduating (Davies et. al., 1999). The Centre for Research into Quality
at Birmingham City University identified that employers seek employees that are quick
to learn, who can adapt to change and work on a range of tasks simultaneously (Harvey
et. al., 1997). The report further identifies that graduates need to be able to work in
teams, exhibit good interpersonal skills, have good communication skills and have an
understanding of work ethic. The United States (US) Department of Labour’s (DOL)
Occupational Outlook Handbook identifies good oral and written communication skills,
ability to work with other people, ability to be flexible and the ability to adapt to
changing working environment as additional skills required by industry (DOL, 2009).
An added skill in America is the ability to speak Spanish as this is the first language of
many workers in the construction industry. Davies, et. al. (1999) conclude after
reviewing a number of similar surveys that the key skills employers seek when
recruiting graduates are the ability to work in teams, the ability to communicate
effectively, the ability to solve problems and the ability to manage self. The main
question therefore is what are the key skills employers look for when recruiting new
graduates within the South African construction industry and what are tertiary
institutions doing to meet these demands?
2.2 Literature review
Woodruffe as cited by Hayes et. al., (1998) argues that competencies should be the
common language of any human resource department which will allow the enterprise to
match the resources within the enterprise with those required to complete the tasks at
hand. However Borgoyne as cited by Hayes et. al., (1998) cautions that organisations
should steer away from producing lists of competencies that may have universal
application but which might not be applicable to the organisation in question. Katz
(1974) identified three broad classes of skills required for construction management
which are:
• Human skills: The skills required by a manager to work as a group member,
both internal and external to the organisation, build cooperative effort in the
team, communicate clearly and persuade members to carry out their tasks.
• Technical skills: The skills required to carry out the key functions required by an
department, division or the organization.
• Conceptual skills: The skills required to adopt a holistic perspective relative to
the organization by using both the technical and human skill sets.
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Love et. al. (2001) identified that construction management courses should produce
graduates that have a degree of specialist knowledge, who understand communication
and information technology can be used to improve business practice, who can
communicate effectively (both written and oral) and who have problem solving skills.
Watson (2000) identified that of the seven key activities undertaken by site managers in
the United Kingdom, site administration, planning, meetings and quality control took up
73% of the site agent’s time. The study also revealed that site agents were not utilising
the IT technology available to manage site activities. Planning and valuations
accounted for 73% of time spent on IT utilisation. Farrell and Gale (1999) reviewed
twenty different sources of literature relative to the tasks performed by site managers
and evolved a list of forty eight such activities. These forty eight activities were
summarised into ten categories and tested on new building projects of medium size,
projects in the range of GBP1 million to GBP10 million, and on projects where the Joint
Contracts Tribunal Standard Form of Contract was used. Findings include that role
ambiguity existed in seven of the functions identified and that the site manager should
only be responsible for planning and site administration.
A survey undertaken in South Africa amongst contractors, which entailed ranking skills
required at the three operational levels within a construction entity revealed that at site
management level the top ten skills required were decision making, controlling,
communicating, planning, organising, coordinating, site administering, leadership,
interpersonal and written communication( Smallwood,2000). From this list it is
significant to note that all five functions of management are represented.
Construction management skills involve people relationships, which is why most of the
skills relate to direct human and project interrelationship. Relative to social skills, site
managers and contracts managers stressed the need for keeping people informed, getting
them involved in tasks, fostering cooperation and teamwork, communicating clearly,
dealing with people as individuals and showing an interest in people (Smallwood,
2000). Smallwood adds that from his investigation in terms of interpersonal skills,
construction managers ranked human skills highest during a study conducted to
investigate the development of managers in the construction industry.
2.3 Statutory requirements
The Department of Education (DOE), in responding to the globalization agenda of
education introduced the national qualification framework (NQF) as a means to
standardize the outcomes of the education system in South Africa (CHE, 2002). The
South African Qualification Authority (SAQA) is responsible for the implementation of
the principles of the NQF and have established structures to oversee the development of
the relevant qualifications and to ensure that the institutions that deliver these
qualifications meet the standards (SAQA, 2002). There are three construction
management qualifications currently registered on the NQF, namely a level five
(National Diploma), a level six (Bachelor’s degree), and a level 7 (Honours degree)
(SAQA, 2008). The outcomes specified for the level 7 qualification in construction
management states that on completion of the degree a graduate will be capable to:
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• Communicate effectively with the built environment audiences and the community
at large using both oral and written skills, establish and maintain relationships with
construction role-players as well as showing leadership potential;
• Show critical awareness of the impact of built environment activity on society and
the environment, exercise appropriate judgement in the provision of professional
services and display awareness of the need to act professionally and ethically;
• Manage a construction organisation as a business enterprise within its macro-
economic environment and evaluate economic issues concerning the construction
and property sectors at both national and international levels;
• Demonstrate competence (in the general areas of construction as well as areas of
specialization which might, for example, include mining, civil engineering, etc.)
when working as an individual, in multi-disciplinary, multi-project environments;
• Demonstrate competence in the use and application of appropriate problem-solving
methods, skills and tools and the handling of information to solve complex,
unfamiliar and ill-defined problems within the context of the built environment;
• Prepare and manage contractual documents for construction projects in a multi-
disciplinary project environment taking into account issues relating to different
procurement options, financial and operational risk, productivity, occupational
health and safety, quality, and the environment, and
• Manage and administer construction projects in a multi-disciplinary, multi-project
environment with reference to scheduling, supply chain management, estimating,
and cost control.
The South African Council for the Project and Construction Management Professions
(SACPCMP) is the statutory body that regulates the construction and project
management professions in South Africa and one function of the Council is to ensure
that tertiary institutions that offer a qualification in construction management meet the
standards set by the NQF (SACPCMP, 2008). The Council is in the process of
concluded a memorandum of understanding with the Chartered Institute of Building
(SA) in which the CIOB will provide the accreditation function for the Council. The
main reason for this being that the CIOB has an educational framework which identifies
the competencies their members need to acquire to meet the registration criteria for the
different levels of membership within the Institute (CIOB, 2007).
3 Research Methodology
Two data collection methods, namely an electronic questionnaire and a follow up
telephonic interview were used. The questionnaires were sent to the human resources
department of all contractors registered at level 9 on the cidb register of contractors in
the Gauteng Province. The motivation for this being that the contractors registered at
grade 9 include predominately the national or international contracting entities operating
in South Africa and all graduates recruitment is carried out by the human resources
department based at head office. The telephonic interviews were only used in cases
when respondents failed to return the follow up questionnaire which was sent after the
initial survey.
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4 Findings and Discussion
4.1 Recruitment practice
All the respondents indicated that they predominately recruit National Diploma (ND)
diplomats, the reason given for this practice being that student’s enrolled at a University
of Technology are required to work in industry for a period of between six and twelve
months during their second year of study. This therefore affords the student the
opportunity of acquiring relevant work related experience and at the same time it
affords the employer the opportunity to assess the student. They also indicated that
when a construction management orientated ND student showed promise they would
normally sponsor the student to complete the Bachelor of Technology qualification.
80% of the respondents indicated that they also recruited students who had completed
the honour’s programme in either construction management or quantity surveying. All
the respondents indicated that they showed no interest in graduates with a Master’s or
Doctoral qualification when recruiting first time construction management graduates.
All the respondents indicated that they rated technical (ability to get the job done) and
behavioural skills (ability to work with people) as very important. 20% of the
respondents indicate that they rated contextual skills (ability to work with external
stakeholders) as very important. The likely reason for this is that the graduate
construction manager is normally appointed as the site agent or site manager on a
project and therefore is normally responsible for the day to day running of the site and
under normal conditions does not interact with most of the external stakeholders.
Table 1 Additional characteristics rated as important when recruiting graduates
Characteristic Response (%)
Enthusiasm 100
Personal Values 80
Commitment to work 80
Professional Values 60
Professional Drive 40
The respondents indicated that in addition to the technical and contextual skills they
also considered the characteristics shown in Table 1 when recruiting graduates. All the
respondents indicated that enthusiasm was an important characteristic, while 80%
indicated that personal values and commitment to work were important. Professional
values and professional drive were not seen to be that important. This is in line with the
research undertaken by the Centre for Research into Quality at Birmingham City
University. It is important to note that graduates who have a track record with a
contracting organisation will have an added advantage during the interview as the
employer would have had the opportunity to assess the above mentioned characteristics.
80% of the respondents indicated that they would not employ a student with no
qualification and rather provide in-house training. 20% of the respondents however felt
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differently and indicated that they would prefer to form and direct the direction and
level of training of a graduate in their organisation.
4.2 Importance of knowledge areas
Respondents were asked to rate the importance of the key knowledge areas identified in
the honours in construction management qualification (SAQA, 2008). The respondents
were also asked to indicate the graduate’s level of understanding of these knowledge
areas.
Table 2 The importance of knowledge areas
Response (%)
Knowledge areas for carrying out tasks Rated very Rated Rated not
important important important
Managing construction projects 100 0 0
Leading internal teams 100 0 0
Administering construction projects 66 34 0
Understanding construction technology 66 34 0
Managing a business unit 66 0 33
Understanding engineering technology 33 34 33
Managing construction procurement 0 66 34
Managing environmental issues 0 100 0
Managing construction projects and leading internal and external teams were rated by
all the respondents as being very important. Administrating construction projects and
understanding building construction technology were rated by 66% of the respondents
as very important or important. Managing a business unit was identified by 66% of the
respondents as very important. Managing construction procurement was rated as
important by 66% of contractors and the main reason for this could be that most
contracting organisations have a separate procurement department that handles all site
procurement. What is interesting is that environmental issues were only rated as
important. Arditi (1984) when determining industry requirements for construction
management graduates operating within the civil engineering disciple observed that
industry felt that construction methods and construction technology skills could only be
developed in industry.
Table 3 The level of understanding of knowledge areas; university of technology and traditional
universities
Response (%)
Knowledge areas Level of understanding Level of understanding
(university of technology) (traditional university)
Average Good Average Good
Managing construction projects 66 34 66 34
Leading internal teams 66 34 66 34
Administering construction projects 100 0 100 0
Understanding construction technology 34 66 100 0
Managing a business unit 100 0 66 34
Understanding engineering technology 66 34 100 0
Managing construction procurement 100 0 100 0
Managing environmental issues 100 0 100 0
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None of the respondents rated the level of understanding of the knowledge areas
discussed as being exceptional. The level of understanding of the key knowledge areas
by graduates from traditional universities or universities of technology seems to be
average to good. 66% of the respondents did however agree that the graduates had the
relevant knowledge to carry out their tasks, but that they lacked relevant site experience.
4.3 Importance of subject areas
Respondents were asked to rate the importance of the key subject areas in the domain of
carrying out the tasks and working with other people.
Table 4 The importance of subject areas to carry out tasks and working with people
Response (%)
Subject areas Very Important Not
important important
Carry out tasks
Leadership 100 0 0
Construction methods 100 0 0
Strategic planning 66 34 0
Communication 50 50 0
Forecasting and planning 50 50 0
Construction materials 0 100 0
Construction innovation 0 100 0
Site organisation 0 100 0
Project planning and scheduling 0 100 0
Costing and estimating 0 0 100
Information technology 0 0 100
Procurement management 0 0 100
Surveying 0 0 100
Environmental management 0 0 100
Tunnelling 0 0 100
Labour intensive construction 0 0 100
Civil engineering construction 0 0 100
Design management 0 0 100
Mechanical engineering construction 0 0 100
Work with people
Leadership 100 0 0
Team building 100 0 0
Negotiation 0 100 0
Conflict resolution 0 100 0
Decision making 0 100 0
Initiating 0 0 100
With respect to the issue of carrying out the tasks required by the construction manager
all the respondents rated leadership and construction methods as very important, 66%
rated strategic planning as very important, and 50% rated communication and
forecasting and planning as being very important. Construction materials, construction
innovation site organisation and planning were rated as important by 100% of the
respondents. It is notable that all the respondents .rated costing and estimating,
information technology, procurement management and surveying, information,
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environment management, communication technology, tunnelling, labour intensive
construction, civil engineering construction, design management and mechanical
engineering construction as not relevant. The main reason for this could be that these
tasks are normally carried out by other individuals on a construction project. A second
point to take into account is the differences shown between the site management and the
human resource practitioners when identifying skill requirements.
With respect to the issue of work with others, leadership and team building were rated
as very important by all the respondents. Negotiation, conflict resolution and decision
making were rated as important by all contractors. Initiating though was the only one
rated as not important by 100% of the respondents.
4.4 Level of co-operation between industry and educational institutions
When asked about the co-operation between industry and tertiary institutions in defining
the relevant knowledge areas and skill required by construction managers the
respondents indicated that at local level this could be improved and did not rate it as
exceptional. They indicated that other then the one on one interaction with specific
lecturers when they were called on to be external examiners, the only other time they
had an opportunity to interact was at the annual industry liaison meetings. They
indicated that they would be prepared to be more involved in the presentations to the
students, arranging site visits and assisting in the preparation of teaching material.
5 Conclusions
The debate on which skills tertiary institutions should include in their programme in
construction management is not a new debate. It is also clear that the needs of industry
are constantly changing and whereas in the past the focus might have been on the
technical skills of the graduate, the current focus seems to be focused on the human
skills, such as the ability to work in teams, the ability to solve problems and the ability
to adapt to the environment they are required to operate in. It is also clear that tertiary
institutions cannot always make the changes to the programme in the timeframe
required by industry, one reason being that academic institutions prepare graduates with
medium to long term objectives in mind where as in some instances industry is more
concerned with short term solutions. This can result in instances were in some instances
graduates will need to hit the ground running whereas in some instances they will be
given time to make the adjustment from academia to industry.
The respondents surveyed indicated that characteristics such as enthusiasm, personal
values and commitment to the working environment were factors they considered when
recruiting over and above the technical skills acquired. The respondents surveyed
indicated that the graduates and diplomats they had recruited demonstrated an
understanding of the key skills they listed as important but felt that the depth of
knowledge in areas such as environmental factors, procurement systems and managing a
business unit could be improved. Although this is an exploratory survey, key
indications are that in future, when tertiary institutions undertake curriculum reviews
they will have to consider including the subject areas that are not currently included in
their programmes if they want their graduates to be marketable.
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6 References
Agapiou, A., Price, A.D.F., McCaffer, R. (1995). Planning for construction skill
requirements: understanding labour resource issues. Construction Management and
Economics, 13(2) pg 149-161.
Arditi, D. (1984). Graduate education in construction management, Construction
Economics and Management, 2(1), pp192-199.
Caupin, C. (2008) Certification of PM competencies in the Mediterranean area,. In
John-Paris Pantouvakis, Editor, 4th SCPM & 1st IPMA/mednet Conference “Project
Management Advances, Training and Certification in the Mediterranean, Centre for
Construction Innovation, Natural Technical University of Athens, Greece.
CHE (2002). A new academic policy for programmes and qualifications in higher
education, Council for Higher Education, Pretoria, South Africa.
CIOB (2008) Education Framework, Chartered Institute of Building, Engelmere.
Cheung Lo A.A.C. (1998) The partnership of universities and building/construction
industry – A bridge for the professional development in the building education,, In J,
Yang and W.P. Chang, (Eds.), Building Education and Research: Proceedings of
the CIB W89 International Conference on Building education and Research
(BEAR’98), E &FN Spon, Brisbane, Australia, 8 -10 July 1998, pp 126-153.
Davies, A.H. and Csete, J. (1998). Matching employer and graduate competency and
skills expectations: construction and real estate professional degrees, In J, Yang and
W.P. Chang (Eds.), Building Education and Research: Proceedings of the CIB W89
International Conference on Building education and Research (BEAR’98), E &FN
Spon, Brisbane, Australia, 8 -10 July 1998, pp 126-153.
Davies A.H and Csete J & L.K. Poon. (1999). Employer’s expectations of the
performance of construction graduates, International Journal of Engineering
Education, 15(5), pp 191-198.
DOL, (2009), Department of Labour Occupational Outlook Handbook,
http://www.dol_gov./Occupational Outlook handbook.htm, viewed on 02/06/2009.
Farrell, P. and Gale, A. (1999). The need to remove ambiguity from the role of
construction site managers, In Ruddock, D. B.( Ed.), Proceedings of Construction
and Building Research (COBRA) Conference, 1-2 September 1999, University of
Salford, UK. RICS Foundation.
Harris, F., and McCaffer, R. (2001). Modern Construction Management, 5th Edition.
Blackwell Science , London.
Hayes J., Rose-Quire A., and Allinson, C.W. (1998). Senior manager’ perceptions of the
competencies they require for effective performance: implications for training and
development. Personnel review, 29(1), pp 92–105,
Katz. R. (1974). Skills of an effective administrator. Harvard Business Review, 52(5),
pp 90-102.
Love, P.E.D, Hayes,N.S. & Zahir, I. (2001). Construction manager’s expectations and
observations of graduates. Journal of Managerial Psychology. 16(8), pp. 579 -593.
SACPCMP (2008) “Guideline for the scope of service and tariffs of fees for the
registered Construction Project Manager”, http://www.sacpcmp.org.za/, viewed on
1st June 2008.
SAQA (2002), Implementing the National Qualification Framework: criteria and
guidelines for ETQAs, South African Qualification Authority, Pretoria..
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SAQA (2008), Bachelors Degree in Construction Management – NQF Level 7, Physical
planning and Construction, http//2008 www.saqa.org.za, viewed on 15th July 2008.
Smallwood J.J. (2000). Practicing the discipline of construction management:
knowledge and skills, Proceedings of the 2nd International conference of the CIB
Task Group 29(TG29) on Construction in Developing Countries, Gaberonne,
Botswana, 15 -17 November 2000.
Watson P. (2000). Managing people – the key activity for site managers, Construction
Manager pp 48–49, January 2000.
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Cynthia Lee and Keith Hogg, pp 267-277
Early career training of quantity surveying professionals
Cynthia ChinTian Lee1 and Keith Hogg1
1
School of Built Environment,
Northumbria University, Newcastle Upon Tyne, NE1 8ST,
United Kingdom
Email: [email protected]; [email protected]
Abstract:
This research project addresses the issue of learning and development for new graduates
in their early career. It is recognized that early career experience can play a significant
part in lifelong professional capability and the support and knowledge gained during the
early years of post graduate employment can influence future career direction and
success. As a consequence, there is a need for stakeholders, including employers and
professional bodies, to contribute to the transition from university to workplace so that
the construction industry can benefit from the improved application of a more relevant
set of graduate skills. Whilst there are prescribed models of graduate development
relative to the surveying professions, for example, those relating to the Assessment of
Professional Competence, there has been little evaluation in terms of their relative
contribution to career success. Based on a research project which is focusing upon the
early career development of quantity surveying professionals, this investigation
employed the use of a questionnaire survey to explore the extent to which new
graduates perceive themselves to be competent in various major quantity surveying
tasks and correspondingly, the range of graduate training provided by the employer.
The main conculsions drawn from the study are that: new graduates exhibit a high level
of self-doubt in professional competence; task competence is influenced by frequency
of application, and; employer type has an impact on levels of employer support.
Keywords:
Assessment of professional competence (APC), early career training, new graduates,
quantity surveying (QS)
1 Introduction
A particularly challenging task for someone who is ‘starting out’ in their professional
life is to assemble and integrate several kinds of knowledge gained from general
experience, education and work. Literature on early professional learning is largely
restricted to medicine, nursing and teaching (Eraut, 2005), although Eraut (2005) also
looked at early professional learning for graduate civil engineers. Also, whilst there are
well prescribed models of graduate development relative to the surveying professions,
for example, those relating to the APC or from a wide variety of training programmes
established by major employers, there has been little evaluation in terms of their relative
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contribution to career success. Highlighting the potential difficulties of early career
learning, research (Charnley 1999, Godinez et al 1999, Greenwood 2000) has shown
that the transition from student to newly qualified nurse is stressful and demanding.
In the construction arena, research conducted by Love et al, (2001) indicated that there
is a need to improve the skills levels of construction graduates. As learning in the
university environment is, in the main, limited to classroom activity, the burden of
work-based training for new graduates, recognised as essential to developing full
professional competence, would naturally fall upon practitioners. The importance of
employer involvement in enhancing professional capability and career satisfaction is
clearly central.
Since the support and knowledge gained during the early years of post graduate
employment is a contributing factor that can impact upon a new graduate’s decision to
continue to stay in their chosen profession or not (Eraut, 2003), and, linking this to the
probability that dissatisfaction with career advancement opportunities has the largest
effect on deciding to quit a profession (Gardner, 1992), a better understanding of the
factors influencing early career development is of great relevance to the QS profession.
This project aims to contribute to the improvement of early career development within
the QS profession through the following specific objectives:
To explore the various types of support needed by graduates in their early career
learning;
To evaluate the current practices used in the management and implementation of early
career learning in the QS profession;
To analyse the impact that a range of factors may have upon the progress of learning,
including; method of graduate entry; employer type; employer workload, corporate
ethos and mission, client base; size of employer, location of employer, workplace
environment.
In attending to the above objectives, the project will also improve our understanding of
issues relating to graduate retention and identify factors which may influence graduate
participation within the RICS.
The overall strategy of the research is to adopt the concepts of ‘learning’ and
‘knowledge transfer’, amongst others, to investigate the issues associated with the early
career learning of QS graduates.
This paper presents the research findings on the work that has been undertaken to date
by developing the said methodology through the use of a questionnaire survey of recent
graduates in quantity surveying. It also informs the direction of future research activity.
2 Early Career Development
Previous research has provided some understanding of the meaning and significance of
the ‘career’ as a fundamental part of personal development. The concept of the ‘career’
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Cynthia Lee and Keith Hogg, pp 267-277
as suggested by Arthur et al., (1999) is to explore individual identity and social
institutions, work and other experiences. Extending this, as careers unfold, there will be
a change in the way we present ourselves to others, are treated by others and interact
with others (Barley, 1989). The process by which individuals pick up or cultivate a certain
set of capabilities, connections, confidence, and cognition due to their work experiences at a
particular employer is called career imprinting (Higgins, 2005), the focus of this research.
That a challenge exists in matching academic provision with professional needs is well
versed and employers have expressed concerns, for example, on the apparent gap between
engineering education and professional practice (Dillon, 1998; Florman, 1997; Pascail,
2006). In accepting this position, a better understanding of the needs of new graduates in
the workplace will help employers in their provision of training and also educators in an
improvement of programme design. This perspective is supported by research
conducted by Coupland (2004), who identified that the company career structure has
been described by some participants as lacking in explicit stages, suggesting that the
company should take on a larger role in the individual’s career.
As opposed to the traditional image of a linear and organizationally bound journey where
graduates expect employers to play a larger role in an individual’s career development
(Coupland, 2004), the career has also been conceptualised as boundary less (Arthur and
Rousseau, 1996; Arthur et al., 2005). In this alternative view, individuals are expected to
self-manage their own careers rather than rely on organisational direction (Hall and
Chandler, 2005; Hall and Mirvis, 1995). According to the Social Cognitive Career Theory
(Lent, 2005), the model proposes that people are more likely to take actions to achieve their
goals if they have access to environmental (organisational) support and resources relevant
to the pursuit of these goals. However, the model of proactive behaviour (Crant, 2000)
indicates that an individual’s disposition or personality will influence the extent to which
they take the initiative to engage in career management behaviours and achieve career
satisfaction. Thus, the onus of developing one’s career is on the individual; to take up a
range of activities outside work that are geared towards personal development or on-going
employability. However, the provision of opportunity for career imprinting should still lie
with the employer.
The ‘career’ is linked to learning “in a virtuous cycle” (Arthur et al., 1999). Learning is
represented as an on-going individual process, driven by the life-long learning imperative
and focused on the development of learning and career meta-skills (Hall, 2002; Waterman
et al., 1994) and is treated as an unquestioned value in itself (Gherardi, 1999). Learning is
unequivocally identified as a proxy for career success (Weick, 1996). Organisational
support for career development is also called “organisational career management” or
“organisational sponsorship” and refers to the programs, processes and assistance provided
by organisations to support and enhance their employees’ career success (Ng et al., 2005;
Orpen, 1994). Training refers to formal provision of learning experiences at work (Mallon
and Walton, 2005). In this research, participants were asked to indicate the extent to which
various types of training were provided by their employers.
Competency is defined in this study as an identifiable aspect of prospective work behaviour
attributable to the quantity surveyor that is expected to contribute positively and/or
negatively to organizational effectiveness in the construction industry. In a study by
Meretoja et al., (2004), the authors found a positive relationship between competency and
frequency of use. The assessment of new QS graduates provides a good opportunity to
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explore this relationship further by incorporating other factors which may bear upon
competence gain.
3 Research Methodology
Prior to deciding on the method of collecting data, it is necessary to consider the choice
of participants. In this study, the sample population is quantity surveying professionals.
Sample design in qualitative research is usually purposive (Walker, 1985). Rather than
taking a random cross section of the population to be studied, “small numbers of people
with specific characteristics, behaviour or experience are selected to facilitate broad
comparisons between certain groups that the researcher thinks likely to be important”
(Walker, 1985). Non Probability Sampling, whereby the research subjects are chosen
for specific attributes rather than from a random selection, is adopted in this study as the
research primarily looks at the early career of quantity surveying graduates. In order to
gain insights to the research area, make inferences and draw conclusions from the
research, a mix of quantitative and qualitative research approaches were adopted.
Survey research methodology is adopted in this research to investigate a particular
phenomenon, i.e. the training of quantity surveying graduates in their early careers. The
research questionnaire was designed using variables identified during exploratory
studies. Tick boxes were used to find out the profile of the respondent. Likert scales
were provided in the questionnaire as instruments for measuring varying degrees of
respondents’ opinion about their extent of competence and involvement in quantity
surveying skills and the types of quantity surveying training given by their employers.
As Likert scales with odd number response points are arguably empirically more valid
than forced-choice scales (Ray, 1990); a 5-point Likert scale was used, being more cost
and time effective than a seven-point scale (Munchi, 1990).
4 Findings and Discussion
A survey was conducted which targeted early career quantity surveyors. From a total
population of 4430 recent graduates between 2006 and 2008, 425 surveys were
completed online. The level of work experience of the sample is indicated in the
analysis of the distribution below.
Table 1: Number of questionnaires received from various groups of respondents
No of years of experience No. of response
Less than 1 year 102
1 Year 42
2 Years 93
3 Years 54
More than 3 years 134
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Of the 425 respondents, 58% are working as consultant quantity surveyors, 31% in
contracting, whilst the remaining 11% are working in a range of organisations including
local authorities and client bodies.
The following analysis and discussion considers the findings relating to: QS activities
and corresponding perceptions of competence, and; the types of training support and
their extent of use.
3.1 QS Activity and Perceptions of Competence
A list of quantity surveying skills were listed in the questionnaire survey which
incorporated a wide range of QS activities, identified from recognised professional
practice and procedure. Respondents were asked to indicate their own perception of
competence and also the frequency of engagement with regard to each of the following
tasks:
preparation of schedules of works or Bills of Quantities invloving measurement and
estimation
cost management to ensure budget compliance
recommendation of a suitable procurement route
management and preparation of variation accounts
preparation of feasibility studies
interim valuation of construction work
application of value management
preparation of life cycle costing data and advice
preparation of tender reports
advising clients and negotiation with contracting parties in contract administration
preparation of final accounts
From the survey results, the five QS activities which respondents carry out most
frequently and perceived themselves to be most competent at are:
interim valuation of construction work
preparation of final accounts
cost management to ensure budget compliance
preparation of tender reports
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management and preparation of variation accounts
The association between the respondents’ self perception of competence and frequency
of carrying out the range of QS activities was investigated using Spearman correlation
coefficient. The strength of correlation of r = 0.811 indicates that there was a large
positive correlation (>0.5), suggesting a strong relationship between competence and
frequency of use.
Table 2 provides a summary of the analysis. The “competence” column reflects the
percentage of respondents who perceive themselves to be fully competent; the
“frequency” column shows the percentage of respondents carrying out such activities on
a regular basis. Gibbons et al. (1994) affirmed that the creation of knowledge is through
practice. Also, as illustrated by Graham and Mckenzie (1995), the best learning occurs
in real life and for the majority of new graduates, learning will be achieved by ‘doing’.
That ‘practice makes perfect’ is widely recognised and in applying this tenet in this
situation, we are able to assume that frequency of use will result in improved
competence. Conversely, activities such as life cycle costing, value management and
giving procurement advice to clients, in that they are not frequently carried out by
recently graduating quantity surveyors, will suffer from reduced levels of competence.
It is also recognised that the development of new graduates is influenced by factors such
as the job content, timing of projects, the attitude of the individual and relationship with
line manager (Graham and Mckenzie, 1995). Thus, this reduced exposure to aspects of
practice could contribute to underdevelopment of certain knowledge and skills which
may be reflected in future hesitance in application.
The data also indicates relatively low levels of confidence amongst the recent graduate
population. For early career quantity surveyors to feel other than fully competent in
dealing with core QS tasks, as they advance toward professional qualification, is worthy
of reflection and further examination.
Table 2: Self Perception Of Competency Of Respondents And Frequency Of
Application
Quantity Surveying Skills Expression of Frequency
full of use
competence %
%
preparation of life cycle costing data and 1 2
advice
application of value management 15 8
recommendation of a suitable procurement 17 8
route
prepartion of feasibility studies 17 11
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advising client and negotiating with 19 15
contracting parties in contract
administration
preparation of schedules of works or ‘Bills 21 12
of Quantities’ invloving measurement and
estimating
management and preparation of variation 30 31
accounts
preparation of tender report 32 21
cost management to ensure budget 34 36
compliance
preparation of final account 42 28
interim valuation of construction work 53 49
3.2 Provision of training support
Respondents were requested to indicate the extent of training support provided by their
employer. This infomation was obtained from the use of a Likert scale relating to a pre-
determined list based upon recognised practice. The outcomes of this analysis, shown in
Table 3, have been ascertained by the use of weighted averages and indicate the relative
importance of each type of support.
The importance of coaching is outlined by Kalinauckas and King (1994) for enhancing
the performance of new graduates. From the survey results, mentoring, as defined by
Provident 2005, ‘whereby a more experienced person helps a less experienced person
develop in some capacity’, is shown as a preferred approach for employers in the
training of new graduates.
Table 3: Training Support Provided by Employer
Training Support Provided by Employer Levels of Employer Support
Senior colleague advice on specific 74
projects
Structured Continuing Professional 67
Development
Regular help from an assigned mentor 66
Time allowance for attending CPD events 65
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In-house seminars 64
Bulletins to inform of the latest 61
developments
Using the same methodology, consideration was also made of the potential impact of
employer type on training. A comparison between the extent of training provided by
consultants and that provided by contractors / subcontractors is shown in Table 4. This
indicates some disparity which is of interest since graduates, adhering to a prescribed
competence development programme, would be expected to have similar levels of
support, irrespective of employer type.
Table 4: Comparison between the Types of Training Support Provided by Consultant
and Contractor
Training Support Provided by Employer Levels of Levels of
training by training by
consultant contractor
Senior colleague advice on specific 77 73
projects
Structured Continuing Professional 73 65
Development
Time allowance for attending CPD 71 62
events
Regular help from an assigned mentor 69 62
In-house seminars 69 62
Bulletins to inform of the latest 65 57
developments
Totals 424 381
A comparison was also made between the years of experience of new graduates with the
amount of training they received from their employers as shown in Figure 5. The survey
results indicate that training provided by employers is rather consistent throughout the
first 3 years of a new graduates’ career. However, there seems to be more emphasis on
the third year, which could be due to the fact that most new graduates are close to their
APC for Chartered Surveyor status.
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Figure 5: Comparison between the years of experience of graduates and the exent of
various types of support received from their employer
45% Regular help from as s igned
mentor
40%
35% Senior colleague advice on
Extent of various types of support
s pecific projects
30%
received by respondents
25% Structured Co ntinuing
P ro fes s ional Development
20%
15% Bulletins to inform of the lates t
development
10%
5% In-hous e s eminars
0%
<1 yr 1yr 2yrs 3yrs >3 yrs
Time allowance fo r attending
Ye ars of Experience CP D events
5 Conclusion and Further Research
The findings of the present study show that (i) there is a relatively low level of
confidence in skills during the early career years which is influenced by frequency of
application in the workplace (ii) employers utilise a range of support methods with a
preference for mentoring (iii) there is disparity between the extent of support given by
consultant and contractor employers (iv) the development of new graduates is subject to
opportunity and timing of projects.
This initial survey has identified a number of issues which are worthy of further
exploration, which is being undertaken through extended analysis of the data obtained
for this research and additional survey activity.
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6 References
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Subashini Suresh, Stephanie Jane Roden, Amir Wadi Al-Khafaji and Suresh Renukappa, pp 278-288
The key drivers for leadership skills development practices in
the UK construction industry: An empirical study
Subashini Suresh1, Stephanie Jane Roden1 , Amir Wadi Al-Khafaji2 and Suresh
Renukappa3
1
School of Engineering and the Built Environment
University of Wolverhampton, Wulfruna Street, Wolverhampton, WV1 1LY
2
Civil Engineering and Construction,
Bradley University, Peoria, IL 61625, USA
3
School of the Built and Natural Environment, Glasgow Caledonian University,
Glasgow, Scotland, G40BA
Email: [email protected]; [email protected]; [email protected];
[email protected]
Abstract:
The pace of change experienced by the construction industry in the early part of the 21st
century is phenomenal. Global competition, economic turbulence, rising materials costs,
the knowledge economy, and the renewed emphasis on sustainability, pose profound
strategic challenges for the construction industry in the UK and beyond. To address
these challenges, today’s construction organisations have to modify many of the
principles that have guided generations of managers, and develop new objectives and
policies that will enable them to successfully manage change. However, the key to
successfully embracing these changes and guide them to transform into twenty-first
century organisations would require visionary, innovative, creative, and dynamic form
of leadership. Although featuring strongly in the popular media, trade, professional, and
academic journals, the very concept of ‘leadership’ is elusive for the construction
industry. Therefore, there is a need to facilitate the development of leadership skills for
construction industry professionals.
This paper primarily draws from an on-going research project entitled “construction
leadership skills development”. The findings are in the main, based on semi-structured
interviews with eleven professionals from ten UK construction organisations. The
research focused on the general understanding of the construction industry in the UK of
the concept of leadership, key qualities of a leader, and unique drivers for developing
leadership skills. As revealed from this study, general understanding of the UK
construction industry of the concept of leadership varies and nine key drivers have
fuelled the need for developing leadership skills. This paper concludes that there is a
lack of awareness on the concept of leadership within the UK construction industry.
Also, there is a need to re-assess the leadership qualities and skills required by the
construction industry. Therefore, there is an urgent need for developing and deploying
industry-wide awareness raising programmes with focus on the leadership.
Keywords: Awareness, leadership, leaders, practices, quality, skills
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1 Introduction
The pace of change experienced by the construction industry in the early part of the 21st
century is phenomenal. Global competition, economic turbulence, rising materials costs,
the knowledge economy, and the potential offered by emerging information and
communication technologies along with commitment to the principle of sustainability,
pose profound strategic challenges for the construction industry in the UK and beyond.
However, when businesses face such considerable changes in their environment, they
often fail to respond effectively. Unable to defend themselves against competitors
armed with new processes, technologies, and/or strategies, they watch their profit
margins erode, their best employees depart, and their stock valuations tumble (Charan,
2009). Therefore, to address these issues and challenges, today’s construction
organisations have to modify many of the principles that have guided generations of
managers, and develop new objectives and policies that will enable them to successfully
manage change. The key to successfully embracing change and to guide them to
transform into 21st century organisations would require visionary, innovative, creative,
and dynamic form of leadership.
Leadership is all about coping with change. The more change then the more leadership
is required (Charan, 2009). Although featuring strongly in the popular media, trade,
professional, and academic journals, the very concept of ‘leadership’ is elusive for the
construction industry. As leadership skills are so vastly different from the traditional
technical skills required by construction professionals these are often over looked or
difficult to promote.
The construction industry is unique with many exclusive departments and professionals
to organise, and particularly rigid time and budgetary constraints. The sector is
developing at such a rate internationally that the UK sector is struggling to compete.
Within the UK construction industry there seems to be two major problems: the
increasing failure of organisations to compete on a global scale, and the lack of quality
leadership within the sector. It could be argued that the first issue is a result of the latter,
and as such it is leadership (or rather, the lack contemporary leadership) that is a
fundamental problem of the construction sector in the early part of 21st century. It is
thought that increased and improved professional development could reform the
leadership skills of industry professionals, enhancing their performances, and those of
their teams.
The UK construction industry needs to improve it’s reputation in order to attract quality
employees (either with the required skills, or the ability to learn the skills), and in turn,
therefore, become more organised in terms of budgets and schedules, more efficient,
more productive, and as a consequence, more competitive. In order to improve its
reputation in the first place, the sector needs to work with the staff and structure
currently in place, strengthening personal, leadership and technical skills in employees
and developing the sector in this way. The majority of this is most effectively done
through leadership skills development training and programmes.
Leadership is defined as a process whereby an individual supports other group members
in learning processes needed to attain group or organisational long-term business goals
(Stogdill, 1974). As Stephen Timms, a former UK Minister of State for
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Competitiveness, and Sheila Hoile, Skills Strategy Director at CITB-ConstructionSkills
noted, effective leadership is vital for long-term business success (BERR, 2008).
Effective leadership can improve an organisation’s economic, social and environmental
performance, develop trust with stakeholders, and ultimately, enhance reputations
(Neef, 2003).
Several key government reports including; The Department for Business Enterprise and
Regulatory Reform (BERR 2008); The Leitch Review (2006); and Skills for Business
(2004), reveal that better leadership skills will be needed to embrace industry wide
change. Furthermore, the British Chambers of Commerce (2006) suggested that the
government must continue to support the improvement of leadership and management
skills to ensure that UK businesses are more effective at all levels. A critical and
thorough review of the four government reports stated above reflects the voice of the
UK businesses, which clearly indicates there is a need to facilitate development of
leadership skills in the UK construction Industry. In addition, over the past few decades
there has been abundant literature on leadership (styles, models, theories, index, to name
a few) in general, however, there seems to be a paucity of collaborative investigations to
review the effective leadership skills required for enhancing UK construction industry
competitiveness at the global level.
This paper primarily draws from an on-going research project entitled “construction
leadership skills development”. The findings are mainly based on semi-structured
interviews with eleven professionals from ten UK construction organisations. The
findings section of the paper discusses the general understanding of the concept of
leadership within the UK construction industry; the key qualities of a leader within the
sector; and the key drivers for developing leadership skills. Prior to it, the research aim
and objectives are discussed along with the research methodology aspects.
2 Research Methodology
Teijlingen et al (2001) referred to the term ‘pilot studies’ as mini versions of a full-scale
study (also called ‘feasibility’ studies), as well as the specific pre-testing of a particular
research instrument such as a questionnaire or interview schedule. This is supported by
Polit et al (2001) suggests “small scale version(s), or trial run(s), done in preparation for
the major study”. A pilot study can also be the pre-testing or ‘trying out’ of a particular
research instrument. In this research, a pilot study was adopted to test the research
instrument as well as being a feasibility study. The initial time frame for the pilot study
allowed the researcher to develop and solidify a rapport with the participant and
establish effective communication. The pilot study was qualitative research in nature.
The aim of the research project is to facilitate the development of leadership skills for
construction professionals – a pilot study. Based on the underlying aim, the research
project seeks to achieve the following objectives:
• To undertake and publish a critical analysis of the existing gap of leadership
development training programmes in the UK.
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• To complete a benchmarking exercise that compares practices of construction
leadership against those in other sectors.
• To develop a demand-led training framework for the leaders of the UK
construction industry.
• To organise a series of training events for leadership capacity building tailored
to the needs of the Small and Medium Enterprises (SME’s).
As part of the first objective a general understanding of the UK construction industry on
the concept of leadership and key drivers that have fuelled the need for developing
leadership skills were explored and reported in this paper.
Qualitative research is typically used to answer questions about the complex nature of
phenomena which may include knowledge, trust, with the purpose of describing and
understanding the phenomena from the participants’ points of view. The qualitative
approach is also referred to as the interpretative (Schwandt, 1994), ‘naturalistic’ (Guba
and Lincoln, 1994), constructivist, or post positivist approach. In contrast, quantitative
research is used to answer questions about relationships between variables; for example
annual turnover and number of employees. This has the purpose of explaining,
predicting and controlling phenomena (Leedy and Ormrod, 2005). This approach is
sometimes called the traditional, experimental, or positivist approach. Methodological
scholars agree that an explorative qualitative approach is better suited to study a nascent
research field and gain valuable initial insights, rather than large scale surveys (Gable,
1994). Therefore, given the relatively new and unexplored nature of the leadership
issues in the construction industry, it is addressed in this study through a primarily
qualitative research method.
The collected field data was interview-based and semi-structured in format. Semi-
structured interviews provide some flexibility to obtain a realistic picture of an
individual’s view (McCormack and Hill, 1997). The empirical study reported in this
paper is based on the results from 11 interviews from 10 UK construction organisations.
The Standard Industrial Classification (SIC) for the construction sector incorporates a
variety of business areas including site preparation, building of structures, building
installation, building completion, and renting of construction or demolition equipment
(ONS, 2008). For this stage of the research, the interviews have been conducted with
overarching construction companies that include departments specialising in a range of
construction processes and stages. Given the variability in leadership related issues and
practices, the decision to identify the most suitable person to participate in the study was
left to the discretion of each organisation. Those who participated in this research
included directors and managers responsible for leadership development in their
organisations. The participating executives were from large, medium, and small sized
organisations.
The semi-structured interviews were held between 1st and 30th of October 2008. All the
interviews were carried out by the project researcher and ranged from twenty to thirty
minutes in length. The interviews were recorded with permission and later transcribed.
As part of the analysis of the interviews, content analysis was employed. Using content
analysis enabled the researchers to include large amounts of textual information and
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systematically identify its properties. For example, the frequencies of most used
keywords in context were used in detecting the more important structures of its
communication content (Silverman, 2004).
3 The general understanding of the UK construction industry on the
concept of leadership
Hamel (2009) defined leadership as a process in which a superior attempts to influence
his or her followers to establish and accomplish a goal. In the current turbulent business
environment, leaders will no longer be seen as grand visionaries, all-wise decision
makers, and ironfisted disciplinarians. Instead, the leader’s job is to create an
environment where every employee has the chance to collaborate with key stakeholders,
innovate, and excel. The leader’s influence takes the form of motivation, facilitation,
reward and consequences, it is a continuous, cyclical process during which working
relationships should emerge and evolve. The leader is in a position of ultimate
responsibility for the performance of their team and the accomplishment of their goals,
and a good, highly skilled leader can amend and adjust their approach to overcome
obstacles and ensure prosperity.
In this study, during semi-structured interviews, interviewees were asked to explain
what the term “leadership” meant to them and their organisation. There were a variety
of responses which includes references to individuals or groups of people in high social
or business positions, in a role of influence and command over other people. Others
include the interactions between an individual within the capacity of a leader, and their
team, or followers. However, most interviewees agreed that there is a lack of
understanding of the concept of leadership for the construction industry. Leadership is a
dynamic process and should not be defined in a static manner, more in terms of the
relationship between the leader and their team than simply the position of power
awarded to the individual leader.
For instance, in this study, one of the interviewees in particular set out very clear
outlines of what the term “leadership” meant for their organisation. “For us, leadership
have to address four particular areas. One of them is about understanding the business
landscape, being able to take a different point of view, and being open to change with
markets. The second area was customer focused, delivering value for customers, so
that’s all about understanding what the customer’s business is, collaborating with them
and maintaining partnerships, and also about sustainability, how to work effectively on
our agenda, but also supporting customer’s needs. The third area focussed on engaging
people, collaboration, influencing, communication skills, and also the way in which
people manage others. The organisation was also introducing a coaching culture to
identify people as leaders who can then coach and develop their teams. Then finally,
delivering on commitments, so it’s all about driving performance, delivering results,
having continued improvement and also good quality decision-making, and commercial
judgement”.
The above definition reflects this collaborative and supportive process, encouraging,
motivating and rewarding team members through personal professional development
opportunities, as well as ensuring that goals are achieved and targets met. This is the
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nature of leadership that might be expected from a participative leader, and a
management style that will encourage a motivated and happy workforce, and attract
suitable and high calibre employees to the organisation.
4 The key qualities of a successful leader
Snee (2005) summarised several key leadership skills: business acumen; strategic
planning and deployment; process and system thinking; stakeholder building;
communication (clear, concise and continuous); reviewing and coaching; structured
improvement methods; learn to deal with teams and group dynamics; meeting design
and facilitation; project planning and management; and understanding human
behaviour. Hartman (2003) based on his observation highlights “4-E’s” of General
Electric leadership: the personal Energy to welcome and deal with the speed of change .
. . the ability to create an atmosphere that Energizes others . . . the Edge to make
difficult decisions . . . and the ability to consistently Execute.
In this study, during semi-structured discussions, interviewees were asked to list key
qualities of a successful leader. The remainder of this section highlights qualities of
leaders, as revealed through industry interviews.
A quality leader needs to be proactive and have the ability to see the big picture,
preferably having had experience as both a team member and leader within the industry.
A leader leads by example and is an integrated team member with a positive outlook.
This is highlighted as extremely important to the performance of a team by two
responding organisations; one in particular stressed the importance of demonstrative
leadership.
For instance, in this study, one of the interviewees noted that the construction industry
needs to incorporate more leaders rather than managers. Construction is a collaborative
process, requiring meticulous attention to detail throughout the planning and
implementation stages of a project. Constant and accurate communication between
teams and departments, and impeccable teamwork, and cooperation are fundamental
ingredients for quality organisation and exemplary leadership. Furthermore,
interviewees highlighted this issue as essential to their current development plan, and as
a fundamental aspect of their training programmes; “at the moment there is a shift from
management to leadership in this industry that needs to happen, requiring an
understanding of the roles and responsibilities of a leader as opposed to managing a
project, and a shift of focus from the technical aspects to the people”.
Another interviewee identified the need for leaders to be able to develop and maintain
partnerships. “It’s important that when we work in partnership with people we need to
let our clients know that as part of good leadership skills you need to learn from other
people in order to lead properly. We don’t know everything and you can learn a lot
from working with other people. We encourage our staff to work closely with our
clients rather than in a traditional approach. We would much rather make our clients
feel comfortable and relaxed with us, so that if a problem does come along we can work
it out together rather than wasting time working individually. Clients are looking for
that kind of leadership, it’s a quieter approach where you can finish and develop things
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by working closely and in collaboration with all the stakeholders”. An essential role of a
leader is to ensure they delegate successfully and efficiently. This was highlighted in
the interview process, but is also echoed in literature where the dynamic combination of
people and business strategy is underlined as the fundamental key to success (Grice,
2007).
Another interviewee noted that a good leader (or potential leader) will possess the
propensity and desire to develop their skills. “The only differentiator in construction is
the quality of people you have. Everybody can purchase resources and products at the
same price; therefore it’s the efficiency of how our people use that that makes the
difference. There’s a generally belief that to survive and be a winner in the market
place that investment in our people is very important”.
The above elicited qualities determine the leadership style an individual may adopt and
can influence the success of an organisation, as not only will it impact upon efficiency
and effective staff and time management, but also the calibre of employees attracted to
the industry in the first place. The participative leadership style, involving a
collaborative relationship between employers and employees, is widely accepted as the
most conducive manner of leadership to business success in the twenty-first century as
it generates results and appeals to potential employees.
5 The key drivers for developing leadership skills
The “key drivers” refer to the motivations that businesses find for investing in
leadership training. Figure 1 illustrates the nine reasons cited and shows proportionally
which are most frequently cited. The percentages represent the number of individual
citations of each driver in relation to the total number of motivations cited.
It is clear, then, that the main motivations for organisations to invest in leadership skills
development programmes are to facilitate the growth of the company and retain staff.
Also frequently cited was the need to motivate staff to ensure they perform to their best
of their abilities, followed by the continued professional development of staff, and the
desire or need to equip them with new skills due to changing or increasing demands put
upon them. This final motivation includes the shift from management to leadership and
the need for training in the new skills required to make that transition. Other drivers
cited less frequently were the development of future leaders, increased efficiency in the
organisation, to strengthen teams, increase competitiveness, and motivate staff.
It seems that these drivers divide fairly neatly into two categories- those drivers that
serve to improve the performance of the staff and leaders within the organisation, and as
such make the organisation more efficient and competitive in the short-term; and those
drivers that secure longevity for the organisation and are focussed on the long-term
future of the business. These former mentioned drivers that primarily serve the future
prosperity of the organisation (developing future leaders, retaining staff, the growth of
the company, equip staff for change, and continued professional development)
constituted 66% of all drivers cited. The remaining drivers that are more concerned
with short term employee performance and its impact upon the business output were
cited less frequently, but still comprise a third of all drivers mentioned.
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It will be interesting to see at a later stage in the research project, whether the
organisations that focus on the shorter term drivers have significantly different training
programmes. At this initial stage, there is only one organisation that cites solely short-
term drivers for the leadership skills development training, and this is also a company
that seems to provide a more generic management and leadership programme, provided
only by external courses and usually by universities. These courses were indirectly
criticised by other interviewees for being difficult to relate to the construction industry
and it’s employees, “one of the gaps in the market is that generic programmes don’t
make the theory construction relevant or use sufficient detail to enable them to relate”.
Figure 1: The nine key drivers for leadership development within the construction
industry as cited by interviewees
Although there are citations of both long and short-term drivers, and there were several
citations in both categories, the nature of the drivers mentioned do all appear to
ultimately link together to contribute to the continued growth and successful overall
business development. In the UK construction industry, this continued and increasing
performance depends greatly upon the investment in employees, and the short term
improvements in teamwork and efficiency, plus the longer term professional
development and retention of staff all serve the greater purpose and growth of the
organisation as a whole.
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6 Conclusion
It is the development of a successful relationship between leaders and their team that is
most effective at motivating and organising a group of individuals to work together
efficiently. Leadership is a collaborative and supportive process, encouraging,
motivating and rewarding team members through personal professional development
opportunities, as well as ensuring that goals are achieved and targets met. A true leader
is someone who leads by example and inspire the team to achieve specific goals and
objectives. Leaders are mission oriented and ensure the survival of the organisation and
are motivated by the welfare of the team. Leaders must articulate the ethical
expectations necessary to maintain the devotion of the team, as well as the individual.
Leaders provide a constant source of inspiration and understand the difference between
passion for excellence and passion for power. The dynamic of authority dictates that
successful leaders delegate authority and know that all delegated authorities are
themselves subject to authority.
The ideal qualities of a leader as highlighted by the industry representatives include
being proactive; seeing the bigger picture; being an integrated team member; leading
not managing; efficient and effective delegation; collaborative; a demonstrative and
participative approach to leadership; and a desire to grow professionally. There were
long and short-term drivers for investment in leadership development, the most
frequently cited factors being to facilitate the growth of the company and retain staff.
The long-term drivers (developing future leaders, retaining staff, the growth of the
company, equip staff for change, and continued professional development) constituted
66% of all drivers cited. As revealed from this study, general understanding of the UK
construction industry on the concept of leadership varies and nine key drivers have
fuelled the need for developing leadership skills. This paper concludes that there is a
lack of awareness on the concept of leadership within the UK construction industry.
Also, there is a need to re-assess the leadership qualities and skills required by the
construction industry. Therefore, there is an urgent need for developing and deploying
industry-wide awareness raising programmes on the concept of leadership.
The research work highlighted in this paper can be extended to USA based construction
companies many of which have a global presence including the UK. In the USA,
succession planning and knowledge management are becoming vital to a broad range of
construction companies. With the “baby-boomer” generation retiring in significant
numbers, businesses are desperately seeking new ways to develop leadership through
in-house training, grow-your-own tactics, and incentives to attract new talents during
these difficult economic conditions. The struggle to identify quality leaders requires
more research into the special qualities expected of a leader that will be necessary to
effectively compete in the future. The credibility of the process used to promote
leadership from within requires that teams have clear standards, have confidence in the
arrangements, feel the process to be fair, and believe that those who make the critical
decisions can be trusted. In the case of large family owned businesses this task may be
difficult to execute and implement. This is the case with highway construction
companies and contractors many of which are family owned. The researchers believe
that the broad qualities that define a successful leader are universal in nature but are
influenced by cultural, social, customs, and long-established traditions.
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7 References
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Grice, Ian (2007), Constructing Excellence: Leadership in Construction Pod cast 2.
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Hamel, G (2009), Moon shoots for management: What great challenges must we tackle
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Hartman A (2003), “The Competitor: Jack Welch's Burning Platform”, Financial Times
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Skills for Business (2004), “The UK skills and productivity agenda: The evidence base
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Snee, Ronald D (2005), “Leading business improvement: a new role for statisticians and
quality professionals”, Quality and reliability engineering international, Vol. 21, pp.
235-242.
Stogdill, R.M (1974), Handbook of Leadership: A survey of theory and Research, Free
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Teijlingen van, E., Rennie, A.M., Hundley, V., Graham, W. (2001), “The importance of
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The British Chambers of Commerce (2006), “Building a skilled nation: the business
perspective on education and skills”.
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Chris Cloete, pp 289-301
What should the educational requirements be for property
valuers in South Africa?
C E Cloete 1
1
Department of Construction Economics
University of Pretoria
South Africa
E-mail: [email protected]
Abstract
The purpose of this paper is to propose a framework for assessing the future training
requirements of property valuers in South Africa. Factors to be taken into consideration
include, inter alia, the competencies required of valuers for practice both locally and
internationally, professional registration requirements of related professions in the
property industry, relevant professional registration requirements elsewhere in the
world, the formal tertiary academic structure in South Africa and international
transportability of South African qualifications. Recommendations are made re the
educational qualifications professional property valuers in South Africa should have in
order to properly fulfil their role in the future in South Africa as well as internationally.
Keywords: Valuers, educational requirements, training, South Africa
1 Introduction
The level of and degree of specialization in the training of valuers is a moot question
world-wide, in need of regular revision in the light of new developments in the legal,
economic and technological environment. The S A Council for the Property Valuers
Profession of SA (SACPVP) has expressed its concern about the provision of training
on two counts: the main provider of training of valuers (Unisa) has recently (2009)
decided to discontinue provision of its qualifications in property valuation, and the
SACPVP is the only professional council under the aegis of the Council for the Built
Environment which does not require an honours-degree as minimum academic
qualification for professional registration. In addition, local authorities have a severe
shortage of valuers in their employ who are required to do valuation for municipal
purposes.
The purpose of this paper is to propose a framework for assessing the future educational
requirements of property valuers in South Africa. Factors that should taken into
consideration include, inter alia, the competencies required of valuers for practice both
locally and internationally, professional registration requirements of related professions
in the property industry, relevant professional registration requirements elsewhere in the
world, the formal tertiary academic structure in South Africa and international
transportability of South African qualifications. These factors are addressed below. (A
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number of factors that influence the valuation profession are enumerated by Smith and
Kruger, 2008).
2 Competencies required of valuers
It would be useful to provide a matrix of competencies required for registration criteria
at different levels. This necessitates addressing the key issues that differentiate the
demand for different types of valuers, with different levels of competency and skills.
It is therefore necessary to consider the framework in which property valuers are
operating, as well as describe the functions of the property valuer’s profession.
2.1 What is a valuer?
A property valuer is seen as a person that needs to determine the open market value of
fixed real estate, that is the value that a property would realize if sold on the open
market between a willing buyer and a willing seller.
2.3.1 Professional registration
The council currently differentiate between 4 classes of registration as Property Valuer:
(i) Candidate (Student) Valuer;
(ii) Professional Associated Valuer with restrictions
(iii) Professional Associated Valuer without restrictions
(iv) Professional Valuer
As mentioned earlier, the SACPVP is the only professional council under the aegis of
the Council for the Built Environment which does not require an honours-degree as
minimum academic qualification for professional registration.
The various types of registration, apart from Candidate Valuer, are differentiated mainly
on the basis of experience. This provides the basis that the wider the experience of a
valuer in terms of purpose and type of properties valued, the higher the class of
registration will be allowed.
It is interesting to compare the above with, for example, the Australian situation, where
Valuers are defined as persons who “assess land, property and other items such as
commercial equipment and objects of art, and provide advice on the administration and
commercial use of land and property”, and the personal requirements deemed desirable
are that a valuer
must be of good character and reputation;
good communication skills;
reasonable ability in mathematics;
sound judgment and good analytical skills. (my emphasis)
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Comparing the above with the South African situation, two aspects are especially
noteworthy: (a) that, in common to the British situation, Australian valuers are not
confined to the valuation of land and property but also include for example the
valuation of commercial equipment and art, and (b) the importance of a reasonable
ability in mathematics. The latter requirement is an entry barrier to many aspiring
valuers in South Africa, as a very low percentage of matriculants take mathematics as a
subject to university entry level.
3 The National Qualifications Framework (NQF)
It is commonly held in a number of countries (including the USA and SA) that a
differentiation between different classes (levels) of registration is desirable and even
essential. There is, however, a view that differentiation between different classes of
registration should be based on more than just experience. For alternative options on
this, the framework set by the National Qualifications Authority can be considered. The
current minimum requirement for registration for Professional Associated Valuer with
or without restrictions or Professional Valuer, is inter alia a National Diploma in
Property Valuation, which is listed as a NQF level 5. It is therefore not considered
necessary to assess Levels 1 – 4, while level 8 is considered to be too advanced as entry
criteria, and is therefore also not considered.
At NQF level 5, a candidate should have the ability to apply knowledge in at least one
field or discipline. This aligns with a typical Professional Associated Valuer with
restrictions. The Professional Associated Valuer must have the ability to perform
valuations on at least one type of property for one purpose. Such a valuer can ultimately
become an expert within that specific environment, i.e. residential valuations for
financial institutions. The other abilities developed at this level also enable the valuer to
apply the different theories surrounding his specialist field, such as the typical
requirements for performing a property valuation instruction, but within a familiar
context. The candidate should also be able to apply and evaluate changes to his specific
problems as is typically experienced during valuations when comparing different
properties and other variables to each other, using comparable information as evidence
for decisions taken. The ability to efficiently gather information, analysing such and
evaluate the synthesis of the information is an important role of the property valuer.
Transactions and market information is gathered for each instruction, which should be
analyzed in order to evaluate the synthesis of the information into a single value for the
property under question. Presentation skills are required to properly present a valuation
report with all the required info as motivation for actions taken, in such a way to
coherently communicate information on a reliable standard. The valuer should also have
the capacity to take responsibility for his actions and learning, which could be in a
supervised environment. The candidate at this level should be sufficiently equipped to
perform valuations on his own, but within his restriction or field of expertise and in a
familiar context, and subject to some form of supervision, i.e. line manager or
supervisor.
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At NQF Level 6, the candidate should be able to have a more solid knowledge of his
field or discipline. In addition to the previous level, the candidate should be able to have
a more sound knowledge of concepts, principles and theories, in order to also solve
unfamiliar problems, by applying the correct procedures with appropriate evidence. The
candidate should be able to more critically analyze information in order to present the
synthesis thereof. He should also be able to take more responsibility for own learning,
within a structured environment, while taking own initiative to address specific needs as
well as the ability to assist others in identifying needs. The property valuer at this level
should therefore be able to perform instructions on his own, with emphasis on more
complex or unfamiliar instructions, with the ability to solve these problems from the
applicable theory. He should also have the ability to assist others and therefore be
equipped to act at supervisory level such as a line manager.
The candidate on NQF Level 7 should have a well-rounded knowledge of his field of
expertise and should have therefore the ability to identify the synthesis of the different
disciplines on his own. He should be able to identify the different approaches to a given
problem, with an understanding and explanation of the different results coming from the
different approaches to solve a problem. He should be able to operate in an unfamiliar
learning context and apply initiative to solve complex situations. He must have the
capacity to accurately self-evaluate and address own learning needs, while interacting
effectively in a learning group. The valuer at this level should be a specialist in his field,
which can solve a complex and unfamiliar instruction by applying theories that could
come from another discipline. He should also be able to critically evaluate the work of
others, by measuring it to existing and un-explored theories. The candidate at this level
should have the ability to act at managerial level, such as HOD, and identify what the
influence of own actions, including subordinates have on other disciplines, while
motivating the synthesis between different disciplines.
In order to distinguish the above levels clearly, it is proposed that qualification on Level
5 allows the use of the term “assessor”; e.g. “Single Residential Property Assessor”.
Qualification on Level 6 would allow use of the term “Associate Valuer”, while use of
the term “Professional Valuer” should be restricted to those persons who have achieved
a Level 7 qualification.
Unit Standards
Some progress has been made with the development of property valuation unit
standards, mainly under the auspices of the Property / Quantity Surveying Standards
Generating Body, but this initiative has stalled in 2007 due to a lack of funds. A
number of unit standards have been developed, however, and the unit standards of e.g.
New Zealand can serve as a useful departure point.
4 Professional registration elsewhere in the world
4.1 The USA
4.1.1 The Appraisal Institute of America (AIS)
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In order to evaluate the ideal registration levels in order to be comply with international
standards, the registration options for the Appraisal Institute of America provide some
guidelines.
The Appraisal Institute of America differentiates between 3 categories of registration:
• Trainee Associate Membership
• General Residential Associated Member
• General Associated Member
• SRA Member
• SRPA Member
• MAI Member
The Trainee Associate Member is a candidate that is still under training, and in the
process of qualifying as an Associated Member. In the South African context, this
would be similar to the registration as Candidate Valuer.
The General Residential Associated Member is a candidate who performs work
identified by the Standards of Professional Appraisal Practice, but limited to residential
properties, while the General Associated Member can perform work on other types of
property.
The SRA membership designation is a specialist registration held by appraisers who are
experienced in the analysis and valuation of residential real property, while the SRPA
membership designation is a specialist registration held by appraisers who are
experienced in the valuation of commercial, industrial, residential and other types of
property. The entry requirements for this registration are an Associated degree, which is
similar to the BSc, BCom or BTech degrees of SA, ie NQF level 6.
The MAI membership designation is held by appraisers who are experienced in the
valuation and evaluation of commercial, industrial, residential and other types of
properties, and who advise clients on real estate investment decisions. The entry
requirements for this are a four year degree, which is equivalent to the NQF level 7
degrees of SA.
4.2.2 The American Society of Appraisers (ASA)
In 1992 the ASA International Professional Development and Education committees
expressed concern about problems arising between advocates of “short courses” and
proponents of degree-based academic studies; the College of Fellows was asked to
review the issues and suggest possible solutions. The following Opinion of the College
of Fellows addresses the issues and alternatives and illustrates a reconciliation of views:
• ASA has long advocated a “wide-perspective multiple-discipline concept
of valuation.” This concept, although seldom acknowledged by other
appraisal groups, has been understood and recognized in academia.
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• The ASA College of Fellows has described the Valuation Sciences
Degree Program by stating: “a specific degree for the specialty of
appraising will best provide recognition for this emerging profession; ...
such a degree must embrace the full spectrum of appraising in all its
disciplines, concepts and functions.”
• Appraisers have but to look at their presumed compeers: qualifying
educational precedents established in such professions as law,
engineering, and accounting attest to the recognition of the need for
academic achievement formally documented by accredited colleges and
universities.
.
.
The following criticisms may be leveled at the valuation sciences degree
concept:
• Few appraisal practitioners see the need for formal academic
recognition via a valuation sciences degree conference.
• Appraisal practitioners have long accepted their role as members of “the
industry.”
• Achievement of a degree in the appraiser’s area of expertise—valuation
—is time consuming, expensive, and not mandated for designation or
licensing.
..
.
The two educational concepts embraced in the terms “short courses” and
“Valuation Sciences Degree Program” have both positive and negative aspects.
One has the power of immediacy and marketplace practicality; the other offers
the discipline of academia and the resultant status enjoyed by the professions.
There is no reason for the American Society of Appraisers to opt for one to the
exclusion of the other. Both concepts have enormous potential. Both approach
the task of educating with the goal of strengthening the student’s perception and
grasp of the fundamentals and complexities of appraising/valuing.
Both pathways should be open to the student and the practitioner.
It should be noted, however, that in a 1975 commentary entitled “The Occupational
Status of the Appraiser: Pseudo-Professional or Professional,” author Bartlett
concludes: Before we can attain the status of a profession, we must turn over to the
universities all of the fundamental appraisal education. (ASA 1996)
4.2 The UK
With more than 146 000 members in 146 countries, the Royal Institution of Chartered
Surveyors (RICS) is the world’s leading professional body in the property sector. It
accredits more than 250 educational courses world-wide. It recognizes different
pathways to qualify as an RICS member at APC (Chartered) and at ATC (Technical)
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level. Among the pathways in the Property group are “Residential Survey and
Valuation” and “Valuation”..
The RICS Red Book includes global valuation standards and guidance applicable to all
RICS members worldwide, along with standards and guidance for valuation in the UK.
The 6th edition of the Red Book is effective from March 2009.
The RICS Valuation Professional Group has been conducting a public consultation
since 31 March 2009 on proposals for the introduction of a new accreditation and
regulatory framework for those members undertaking valuations under the Red Book.
A summary of the consultation results in a report will be available to all members of
RICS.
4.3 Europe
4.3.1 The European Group of Valuer’s Associations (TEGoVA)
1.1 TEGoVA represents the leading professional bodies in Real Estate trans Europe.
The Group has recognised the responsibility of each Member Association to
require educational requirements of its members and introduced its Minimum
Educational Requirements (MER) for every valuer elected to practice from 1
January 2003. The educational requirements of many Associations are more
stringent than those identified in this document.
1.2 The TEGoVA educational strategy is aimed at ensuring that the highest
standards of professional competence in valuation are delivered and to this end
the MER are regularly reviewed and updated. The first revision was proposed at
a meeting in Madrid in October 2004 and adopted by the General Assembly of
TEGoVA at its meeting in May 2005 in Greece.
1.3 This document sets out the requirements, which are equivalent to and consistent
with the Second Diploma Directive relating to the Mutual Recognition of
Professional Qualifications (92/51/EEC). Member Associations outside the EU
must translate the requirements of the Second Directive and develop a syllabus
that matches the criterion of the Directive.
1.4 The subject areas are in one of three sections, namely, understanding, general
knowledge and In-depth knowledge.
4.3.2 Outline Syllabus of TEGoVA
4.3.2.1 Valuers require an understanding of:
Principles of economic theory
Environmental protection
Statistical analysis
Corporate finance
4.3.2.2 Valuers require a general knowledge of:
The Real Estate market
Building construction
European and International Valuation Standards
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4.3.2.3 Valuers require an in-depth knowledge of:
Land Law *
Statutory valuation *
Professional practice
Valuation standards *
Principles of valuation
Applied valuation
Land use and Real Estate planning
. * Denotes in-depth knowledge required relative to the country of practice
4.3.2 International Federation of Surveyors (FIG)
The Report to the 31st General Assembly of the FIG Working Week in Stockholm,
Sweden, June 2008 summarized the progress of two working groups relevant to the
valuation profession, namely
WG 9.3 – Diagnostic Tools and Prescriptive Practices for the Valuation
Profession
WG 9.3 is preparing a diagnostic tool for analyzing the practices of the
valuation profession in different countries, being in the phase of
acquainting oneself with the existing systems around the world and
selecting case countries.
WG 9.4 – Review of Valuation Methods and Standards Worldwide
WG 9.4 is collecting valuation report examples from different countries
to prepare the review of valuation methods and standards.
4.4 Australasia
4.4.1 Australia
The Australian Property Institute (API) endorses, in addition to undergraduate degrees
and postgraduate degrees, some advanced diplomas (2 years course duration) and
graduate diplomas (typically one year full-time).
4.4.2 New Zealand
See section 5 below.
4.4.3 Malaysia
The Board of Valuers, Appraisers and Estate Agents Malaysia recognises a number of
qualifications for registration as a valuer. In addition to a number of specified academic
degrees in Malaysia, Singapore, Canada, Australia, New Zealand and the UK, some
professional qualifications (mainly diplomas) are also recognised
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5 Internationalisation of qualifications of valuers
The need for the internationalisation of qualifications in the various facets of property or
real estate has been repeatedly expressed by a number of authors (e.g. Schulte and
Schulte-Daxboek, 2003; Chikafalimani and Cloete, 2006; Tryhou 2008; Smith and
Kruger 2008) and has become essential if South African valuers are to participate in the
global economy.
Articulation between the different levels is essential. Examples of professional routes
include those formulated by the SACQSP (figure 1) and the Valuers Registration Board
of New Zealand. (figure 2).
Figure 1 Registration routes for candidate quantity surveyors in South Africa
Any process for the comparative evaluation of valuer’s qualifications in different
countries should possess the following key features (Boyd 2004):
the evaluation of prior academic learning
a score awarded to determine additional education requirements for
each individual
a transparent framework that is clear and simple to apply, understood by
regulators, education providers and applicants
consistency across international boundaries
certainty of acceptance for registration as a valuer, subject to
compliance with the practical experience requirements and passing an
oral examination before the Board.
Guidelines for the comparison of non-New Zealand valuation qualifications were
accepted by the Valuers Registration Board of NZ. (NZ 2008:4).
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Figure 2 Flowchart of evaluation process for the comparison of non-New Zealand valuation
qualifications (NZ 2008:4).
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7 Conclusions
From the above it is evident that there is a necessity for different levels of registration in
three levels of professional status is a general Appraiser or Valuer, a specialist
Appraiser or Valuer and a third more superior registration for someone that could
provide advice that goes beyond the scope of Valuation itself, but based on Valuations
performed, i.e. analyse a valuation report and make further recommendations from it.
A possible structure is presented in Table 1.
Table 1. Possible structure for qualifications for valuers and assessors
Level Qualification Designation Specialisation
Level 7 Hons Professional valuer Commercial
Post-grad Diploma Multiple residential
Agricultural (Rural)
Level 6 BSc (Real Estate) Candidate valuer
Any other appropriate
B-degree, e.g.
BCom
Etc
Level 5 Certificate Assessor Single residential
Municipal
If this is aligned with NQF standards as listed above, a NQF level 5 should equip a
general valuer sufficiently, a NQF level 6 qualification could provide the valuer with
specialist knowledge, while an NQF level 7 qualification would equip a valuer to offer
professional services that range to recommendations such as purchase and sale or
investment advice which is based on valuations performed.
The international context also indicate that horizontal specialisation is common. An
appraiser or valuer could perform instructions on, for example, residential property,
commercial property or rural property (see e.g. Valuers Registration Board of
Queensland, 2007). In the light of the effort it takes to specialise, it is recommended
that valuers in South Africa should also have the option to become specialists in one or
more types of properties, i.e. Agricultural properties, Residential properties, Income-
producing properties, etc., but should have a sound understanding of the fundamentals
of valuation principles and practice.
The necessity for various classes of registration is based on the requirement for different
levels of problem solving skills. The higher the position occupied, or level of
specialisation, the more complex problems could be solved, as it is more and more
based on the synthesis of different theories that leads to the problem solving, rather that
performing recurring activities drawn from different data.
To summarise, it is proposed that current minimum registration requirements of
property valuers in South Africa do not provide valuers with enough specialist
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knowledge to be truly effective professionals. International standards suggest that there
should be a differentiation also in education, and not only in experience, to produce
these different categories of registrations. Registration should be aligned with existing
unit standards to provide professionals that can stand up to the challenges of the global
economy in the twenty-first century. A horizontal differentiation is also suggested,
which could combine some generic theories with other technical specialist areas in order
to provide true specialists in the Valuations Profession.
Acknowledgement:
The author gratefully acknowledges the written inputs from Mr Douw Boshoff, as well
as the various inputs resulting from discussions with a number of valuation
professionals and academics.
References
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Educational Academic Achievement, and Professional Status”. Valuation, 40(1),
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Urban Land Institute.
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“Behavioural research in real estate: A search for the boundaries”, Journal of
Real Estate Practice and Education, 6(1) pp 85-112.
Black, R.T. and Rabianski, J.S. (2003), “Defining the real estate body of knowledge: A
survey approach”, Journal of Real Estate Practice and Education, 6(1) pp 33-
54.
Black, R.T.; Carn, N.G.; Diaz J.; and Rabianski, J.S. (1996), “The Role of the American
Real Estate Society in defining and promulgating the study of real property”,
The Journal of Real Estate Research, 12(2) pp 183-193.
Boyd, T. (2005), ‘Stakeholder Impact on Property Education Programs’, in Proceedings
of the 11th Pacific Rim Real Estate Conference, Melbourne.
Boyd, T. (2007), ‘Bridging The Gap: A graduate Training Program for the Property
Institute in Australia’ in Proceedings of the 13th Pacific Rim Real Estate
Conference, Fremantle, Western Australia.
Carn, N.G. and Rabianski, J.S. (1986), “Real Estate and the AACSB’S common body of
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Chikafalimani, S.H.P. and Cloete, C.E. (2006), “Postgraduate real estate education in
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11-13 April 2006, Kuala Lumpur, Malaysia.
Cloete, C.E. (2002), “Progress in real estate education in South Africa”, Journal of
Property Management, 20(5) pp 369-382.
Elliot, P. and Warren, C.M.J. (2005), “The valuation profession in Australia: Profile,
Analysis and Future Directions”. Paper presented at the 13th Pacific Rim Real
Estate Conference, Fremantle, West Australia.
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FIG Commission 9 – Valuation and Management of Real Estate. Report of Activities
2007-2008. Report to the 31st General Assembly. FIG Working Week in
Stockholm, Sweden, June 2008.
Finch, J.H. and Weeks, H.S. (2003), “An analysis of real estate curriculum at AACSB
International – Accredited Institutions”, Journal of Real Estate Practice and
Education, 6 (2) pp. 257 – 268.
Galuppo, L.A. and Worzala, E. (2004), “A Study into the important elements of a
Masters Degree in Real Estate”, Journal of Real Estate Practice and Education,
7(1) pp 25-42.
Newell , G. (2007), ‘Challenges and opportunities for property academics’, Keynote
address at the 13th Pacific Rim Society Conference, Fremantle, Western
Australia.
Page, G.M. (2008). “Australian graduates’ perspective of their professional
socialization”. Paper presented at the 14th Pacific Rim Real Estate Society
Annual Conference, Kuala Lumpur, Malaysia, 20-23 January 2008.
Pearson, T., (1998). Education for Professionalism: A Common Body of Knowledge for
Appraisers Part I: Background and Historical Trends, The Appraisal Journal,
October, pp 435-50.
Roulac, S.E. (2002), “Requisite knowledge for effective property involvements in the
global context,” in monograph of “Real Estate Education Throughout the
World: Past, Present and Future,” Schulte, K.-W. (editor) (2002). Kluwer
Academic Publishers.
Schulte, K.-W. and Schulte-Daxboek, G. (2003), “Internationalisation of Real Estate
Education”, paper presented at the Pacific Rim Real Estate Society Conference,
19th – 22nd January 2003, Brisbane, Australia.
Smith, N. J. and Kruger, A. (2008), “The future of property valuers education in South
Africa”. Paper presented at “Developing Sustainable Property Markets in
Africa” 8th African Real Estate Society Conference 13-15 August 2008.
Reprinted in The SAPOA Real Estate Research Yearbook 2008, pp 528-541.
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Tryhou, R. and Cloete, C.E. (2007). “Implementation of International Valuation
Standards in South Africa”. The SAPOA Real Estate Research Yearbook 2008:
164-176.
Valuers Registration Board of Queensland (2007). Added Value . Official newsletter of
the Valuers Registration Board of Queensland, Summer 2007.
Weeks, H. S. and J. H. Finch, An Analysis of Real Estate Requirements at AACSB
Accredited Institutions, An Analysis of Real Estate, Paper presented at the
Eighteenth Annual Meeting of the American Real Estate Society, April 2002, 10-
13, Naples, Florida.
Weinstein, M., Examination of Top Real Estate MBA Programs: Implications for
Improving Education for Practitioners, An Analysis of Real Estate, Paper
presented at the Eighteenth Annual Meeting of the American Real Estate Society,
April 2002, 10-13, Naples, Florida.
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Keneilwe Ntshwene, Charlotte Tumwine, Pasis Mselle and Dean Kashiwagi, pp 302-313
New project management education curriculum
Keneilwe Ntshwene1, Charlotte Tumwine1, Pasis Mselle1 and Dean Kashiwagi2
1 2
Faculty of Engineering and Technology Del. E Web School of Construction
University of Botswana, Gaborone Arizona State University, Tempe, AZ
Botswana United States
Email: [email protected]; [email protected];
[email protected]
A group of lecturers are proposing changing traditional education based graduate project
management courses to a new research based project management program. The
transformation is being tested on the Risk Management course, the Assessment,
Monitoring, and Evaluation course, the Quality Control/Safety course, and the Procurement
course. The new model will propose the following changes: 1) use construction industry
structure to differentiate between efficient and non-efficient environments, 2) use deductive
logic, simplicity, and dominant information to supersede traditional education on current
practices, 3) utilize the graduate students as a resource instead of a traditional student, 4)
integrate research proposals/results into the class material to provide continuity; 5) turn the
program into a proactive value added program instead of a reactive educational program; 6)
have a strategic plan to assist industry organizations to change.
Keywords: research based graduate education; research based course design
1 Introduction
The University of Botswana Project Management (PM) Section and the Masters of Project
Management (MPM) graduate program is investigating using a “research based” approach
to the graduate program to increase the number of graduates to the MPM program, increase
the research activity of the staff (publications, research tests, and research funding), and to
be more efficient in a perceived resource starved environment of the University of
Botswana (Mselle et al., 2009).
2 Literature Review
The MPM program has been in existence for four years, and has had a total enrollment of
85 students in the four generations of the program. The number of graduates of the class
totals 6 from the four generations, leaving 79 students in the system, the majority of them
with uncompleted masters thesis work. The education based program at the UB MPM
program has the following format:
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1. Students enter the program to get a degree.
2. The objective of the program is to educate the student that they become a better PM,
who is better equipped to do project management work.
3. The students take textbook based courses on project management subjects.
4. A course is included that is on research methods, how to do a research based thesis.
5. At the end of the program, they are required to do a thesis, a creative work that applies
concepts that they have learned to a real life problem.
6. The program is managed, controlled and directed by the MPM program faculty.
7. If the students meet the expectations of the faculty, they graduate from the program.
There are many constraints of the UB education based MPM program (Figure 1) (Adeyemi
et al., 2009). First, it forces the educators to be experts in the subject matter. Because the
faculties are required to have a masters degree, many of the faculties are education
professionals, and not industry experts. It is difficult for them to be experts in an area
where they have minimal industry experience. In the UB MPM program, none of the
faculty has extensive project management industry experience.
Figure 1. Education Based Graduate Program
Secondly, each course is text book based. The information taught may be outdated, and at
best is the current industry practice. When the students are finished with their coursework,
they will be asked to apply the concepts to improving the current industry practice.
Learning industry practice and changing industry practice are two different requirements.
In education based programs, they emphasize what is currently being practiced. Therefore,
a program that requires a creative, research based thesis application for graduation should
be offering courses that assist students to change the industry. Teaching current practices is
done in undergraduate education, and proliferates the status quo. It also teaches a reactive
behavior, instead of a proactive, changing behavior. An education based course does not
prepare a graduate student to do a research based thesis. This is validated by the very low
rate of graduation of the UB project management program (less than 10%), the major
constraint being the research based thesis.
The third shortcoming is that the student participates much as an undergraduate student and
not as a resource. The student is given material in lectures and in homework assignments,
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and is tested on the material. In this environment, the student is much like a contractor in a
low bid environment, reactive and being directed, managed, and controlled. After passing
the coursework, the graduate students are then being requested to change from a reactive
approach to a creative visionary approach to do their thesis. This approach has not been
successful at the MPM program.
The fourth shortcoming is that the MPM program structure is not being designed to
increase research activity, nor increase the number of graduates of the program, and neither
assists the faculty to become research based. The major risk of not graduating has been
identified as the completion of the thesis requirement. Figure 1 shows the education based
approach. The risk event is at the end of the event. There is no proactive method to
minimize the risk. By structure it becomes a reactive approach.
The research based approach is to identify the student as the critical element, the student’s
environment’s issues, and a potential solution based on the expertise of the faculty at the
beginning of the program (Figure 2.) Each course is then used to assist the graduate student
to do their thesis by introducing and using deductive logic to problem solve, identifying
differences between traditional practices and cutting edge concepts, and developing
potential solutions in their own workplace. A research based approach is more interested in
creating change than identifying student’s ability to react to traditional class work. The
objective is to create research work, to create small differentials in practice, to create
change agents, and to transform the students into permanent partners with the research
program.
Figure 2. Research Based Graduate Program
2.1 Problem Statement
Current graduate education based programs teach students traditional project management
practices. Faculty, usually do not have the required experience to be experts and are
teaching from a textbook. Graduate students are taught to be reactive, and respond to the
instructors with responses that match the instructor’s presentations. The graduate students
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are then expected to present a creative thesis. There is a misalignment issue (Mselle et al.,
2009).
2.2 Hypothesis
A graduate class can be designed to meet the requirements of a research based graduate
program that will identify the capability of a graduate student and their organization to
improve the industry practice and assist the graduate student to prepare their thesis through
constant testing, analysis, documentation/publication, and retesting the thesis hypothesis.
3 Research Methodology
The question to be answered is “Can courses be designed and developed which can quickly
identify the potential contribution of a graduate student and their parent organization, and
can the graduate program courses be integrated to meet the following requirements of a
proactive research based program? The requirements include:
1. Identify the student’s thesis subject and design at the beginning of the graduate program
instead of at the end.
2. Identify the student’s potential contribution and value to the program, the student’s
organization, and the industry at the beginning of the program and align with thesis.
3. Assist the student throughout their course education to continually test, document, and
modify their hypothesis of their thesis.
4. Assist students to publish their work before defending their thesis.
5. Have the student’s organizations contribute a grant to cover the faculty’s efforts to
assist the graduate student and the student’s organization’s research effort.
6. Ensure that a high percentage of graduate students finish and graduate the program, and
keep their organizations continually involved in the university’s research effort.
Methodology of this research effort includes the following steps:
1. Quantify the initial testing and results at the UB MPM program by Fulbright Scholar
(FS) Dean Kashiwagi will be the starting point of the design.
2. Design a research based graduate course that can identify the capability of a student and
their organization, capture a potential thesis topic, and outline the thesis from beginning
to end on one page.
3. Design how the courses will interlock with other courses in the MPM program.
4. Design how courses will assist the graduate student address their thesis.
5. Create a survey to graduate students who have been introduced to the research based
philosophy and faculty in the program to identify the feasibility of the design.
6. Design actual courses using the research based course design.
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4 Findings and Discussion
4.1 Design of New Research Based MPM Course
The initial starting point of the design is from the case study of the FS transformation of the
MPM 655 class from an education based to a research based class. The results of the class
assisted graduate students to think about their thesis, run or design tests in their
organizations, and identified the students who had a more difficult time accepting the new
philosophy of changing their current work environment. Each student was measured based
on their:
1. Capability to increase their understanding of the deductive logic concepts.
2. Capability to understand the industry structure and environment that was causing the
problems of project nonperformance.
3. Ability to use dominant information.
The results of this test class showed that the average graduate student would have to be
helped by the faculty to clearly plan out their thesis to create change in their workplace
environment. Without the faculty member’s help, the students would have difficulty
finishing their thesis due to the inability to use deductive logic and follow the scientific
method to identify current problems and identify how to solve the problems. This is
verified by the following measurements on the research based theoretical class conducted at
the University of Botswana (Mselle et al., 2009) (number of students (percentage of
students in the class)):
1. Did not pass with a 60% mark after the second time of getting the same multiple choice
theoretical exam: 9 (33%)
2. Did more poorly the second time on the same exam: 2 (7%)
3. Failed to increase by at least 10% on the second exam: 8 (30%)
4. Did more poorly on the logic based/theoretical industry questionnaire on the second opportunity
after attending the class for a semester: 3 (11%)
5. Total of students in the above four categories: 16, (60%)
6. The second exam average mark compared to the Arizona State University (ASU) class mark
(the exact same course given at ASU) : UB: 64 ASU: 77 differential: 13 points (20% lower than
ASU score)
7. The average increase in percentage compared with the ASU mark: UB: 16% ASU: 15% (1.3%
higher differential for UB)
8. The average score on the industry concepts when compared to industry professionals in the US
who were exposed to the concepts for a conference presentation: UB: 6.95 US: 6.88 (many of
the US participants were exposed to the deductive logic for only two hours, while the UB
students received instruction/discussion for 14 weeks.
This is also supported by the current graduation rate of less than 10% of the Masters of
Project Management program have graduated. However, the same case study also showed
that students could be used as a resource to bring the faculty into their organization to
convince their organization to test the technology (PIPS/IMT) to increase their efficiency in
delivering projects. A large percentage (based on the FS’s previous classes and
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presentations) of students introduced the technology to their organizations, with
outstanding results. The students showed that they and their organizations could assist in
research activity, creating tests of the PIPS/IMT technology, and thus result in changing
industry practices.
The MPM 655 Assess, Monitor, and Evaluation class had the following purposes:
1. Identify the capability of the post graduate student population.
2. To identify the potential of having the students participate in research activity as a part
of the class.
3. Increase the level of research activity.
4. To identify if the students would design their thesis during or after the exposure to the
research based approach in one course.
5. Identify if the UB PM staff could understand the approach.
The course returned the following results (Powder et al., 2009; Mselle et al., 2009; PBSRG,
2009):
1. Funding grants of $25K from two research partners.
2. 21 refereed conference submittals and potential of 5 journal submittals.
3. Six tests of PIPS/IMT with the potential of many more.
4. Training of three faculties in the process.
5. Implementation of the research based approach in four MPM classes (Assessment,
Monitoring, and Evaluation, Procurement, Risk Management, and Quality Control and
Safety.)
6. The submitted PhD proposal of two of the three lecturers who are targeted for PhD.
All of the above objectives were met as the Dean of the Faculty of Engineering and
Technology (College of Engineering) proposed to continue the effort based on the
successful results. The direction was to increase the knowledge of the technology by
having two of the faculty mentored in the PIPS/IMT technology and the research based
approach by making the FS a visiting professor and acting mentor for the faculty members
PhD work, implementing the research based approach, and continuing the effort to increase
the level of research activity.
The FS took the following approach in the MPM 655 class:
1. The first five classes were used for the introduction of conceptual theory of IMT,
industry structure, and leadership/management concepts.
2. The second five classes were used for encouraging research activity, review of the
deductive logic based models, and the introduction of the PIPS and Performance
Information Risk Management System (PIRMS) technology.
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Because the students were used to the education based approach (instructor giving textbook
lectures/assignments which students can respond to in exams), they had a very difficult
time with the following research based concepts (Kashiwagi and Kashiwagi, 2009):
1. No strict deadlines on assignments, as they were in charge of shaping their work.
2. The importance of the graduate student applying the research based concepts in their
work environment becoming much more important than the course grades or markings.
3. The learning of concepts of Information Measurement Theory (IMT) which explained
the predictability of human behavior, the use of dominant information that minimized
the need for subjectivity and decision making, the measurement of performance that
helped transfer risk and accountability, the need to have more efficiency by minimizing
management functions, and the use of alignment to replaced decision making, direction,
and control.
4. Homework assignments which were conceptual in nature.
5. Challenging them to take the new concepts to their organizations.
6. Changing their thought patterns.
However, when the course finally ended, the results of the course were impressive, and
even students who had complained, were beginning to see the wisdom of the research based
approach.
There are two major requirements of the research based graduate program (Mselle et al.,
2009):
1. Redesign the course to assist the faculty instructor, the student, and their organization to
quickly identify the student’s capability and issues in the workplace environment, and
assign them a thesis that is within their capability. Because they will be viewed as a
resource, the faculty mentor and the student become a much closer knit team. The
objective is to assist the student run research tests that have an impact on industry
practices (their work environment in their parent organization.)
2. Hooking the program’s courses together, that the student can continue their thesis
development from one course to the next.
3. Minimize the effort of the faculty and the graduate students by eliminating inefficient
practices and paradigms.
The authors propose the following course design for all the courses in the MPM program
(Figure 3). There will be four major segments of the 16 week course:
1. Segment 1: Introduction to the deductive logic of IMT, industry structure, leadership vs.
management, alignment of resources rather than management, direction, and control.
2. Segment 2: introduction by the major two environments (management vs. leadership
alignment.) Identify the major dominant practices which have documented
performance information showing that the practices have been validated as successful
industry practices.
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3. Segment 3: Presentation of concepts into the graduate student’s organizations.
Identification of problems in the delivery of projects in their organizations. The
creation of surveys which are used in their organizations to verify the validity of the
existence of issues. Collection of data in organizations on project delivery. The
creation of potential solutions, and the surveying of organizational participants to see
the viability of such a proposed solution.
4. Segment 4: Documentation of the graduate student’s individual designed test in their
sponsoring organization. The student will be required to use the thesis approach:
problem, hypothesis, methodology, value added research based work, and conclusion.
The test can be either an implementation of research concepts or a survey to their
organization. The documentation would also be worked on by the faculty member and
the student and submitted in refereed conferences and journals.
The second requirement of the research based courses would be the integrating of all the
courses. Normally to integrate two silo based courses, the direction would be toward
generalized concepts that cover both classes. The integrating mechanism in the research
based program becomes the student’s thesis objective and the theoretical deductive logic
which applies to the solution to the graduate student’s thesis. Figure 4 shows the faculty’s
workload from the education based to the research based approach. The faculty members
instead of being responsible for preparing for the full class, is now required to prepare only
half of the classes in the course (the deductive logic and the dominant existing practices in
the industry in that functional expertise.) The second graduate course requires far less
preparation (deductive logic does not change), only to present the dominant practices in a
simple overview presentation showing strengths and weaknesses of the practices. The
Figure 3. Detailed Course Breakdown
research based faculty member’s expertise is the deductive logic and the non-technical
methodology of doing research activity: surveys, running the tests, and documenting the
results. And since the deductive logic never changes, so if a faculty member taught two
graduate MPM courses they would save of 75% of their normal preparation time. Exams
would now be based on the students understanding the logic to identify the existing
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practices, the new practices, and their data to show the potential differences. They would
become more expert in the presentation of the existing conditions, the potential problem, a
potential solution, their data showing how to accomplish the solution, and the potential
conclusions. Each course would teach the graduate students how to do research.
Figure 4. Faculty Instructor’s Efficiency from the Education Based to the Research Based
4.2 The Ability to Quickly Identify Graduate Student’s Capability and Impact on
Their Work Environment
The most critical requirement of the RBA is the faculty’s ability to understand IMT,
PIPS/PIRMS, and be able to identify the graduate student’s capability and work
environment issues that can be optimized. The FS recognized that the faculty’s
understanding of deductive logic and IMT was critical in assisting the students. The FS
identified that if the faculty did not understand, the graduate students would not be able to
have an impact on their workplace practices. The faculty member and not the graduate
students was the limiting factor. The current education based program was similar to the
low price award environment and the faculty and students were in the same position as the
client/buyers and the contractors (Adeyemi et al, 2009). Very similar to the construction
industry low price environment, the client and their delivery system was the greatest source
of construction nonperformance, the faculty and their teaching approach was the major risk
of nonperformance in the graduate program (graduate students not having impact on the
industry, and not graduating.)
The Fulbright Scholar spent a semester doing the following:
1. Teaching the MPM 655 Assessment, Monitoring, and Evaluation graduate class to 27
students.
2. Mentoring four lecturers on the UB PM Section staff.
3. Exposing the research based approach (RBA) to the graduate students at the UB and
organizations in the city of Gaborone through presentations and emails.
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The FS held a thesis writing session in the second semester, where the FS worked with 15
graduate students to accomplish the following:
1. Identify what they wanted to improve in their work environment.
2. Identify how that could be done.
3. Identify the problem, hypothesis, methodology, and value added of their thesis.
4. Identified how their organization would work with the graduate program and donate a
grant.
5. Documented it on two pages.
The FS attempted to use two of the mentored lecturers to assist with the graduate students.
In both cases, the mentored faculty could not successfully assist the graduate students. This
is the major constraint in the RBA and more mentoring has to be done in this area. The
authors propose that the faculty must be mentored in the new RBA because the problem is
not a student problem or a faculty problem, but a systems problem (Deming, 1982.)
4.3 Impact on Faculty Who Have Been Introduced to Research Based Approach
The four faculty who have been introduced and involved with the research based approach
were asked the following questions. Their responses are listed along with the questions (10
being dominantly agree, 5 being they don’t know, and 1 being dominantly disagree):
1. Research based approach (RBA) would save 50-75% of the faculty's preparation time:
9.67
2. The RBA will allow the identification of student thesis in the beginning of the program:
9.0
3. The RBA would be very beneficial for students: 10.0
4. The RBA would prepare students for completing their thesis requirement: 10.0
5. The RBA tremendously increases research activity of the faculty: 10.0
6. The RBA minimizes the faculty preparation by what percentage: 53%
7. The RBA would increase research activity by what percentage: 50%
8. The RBA would minimize preparation time and transactions: 9.67
9. Everything that is done in the RBA classroom assists overall research effort:9.67
10. The effort increases the faculties research capability, promotability, and be an expert:
10.0
11. The RBA give us hope of becoming researchers and help the industry: 9.67
The results show the enthusiasm of the faculty who have been involved in the RBA. The
graduate students who have been exposed to the RBA will also be questioned on the
following questions in a follow-up meeting in Sept 09:
1. The new research based approach (RBA) would save 50 percent of the student’s
preparation time if homework was focused on the student’s actual work environment
issues and potential solutions.
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2. The RBA would allow the identification of student thesis in the beginning of the
program.
3. The RBA is much for beneficial to the students.
4. The RBA prepares the students for their thesis requirement.
5. Graduate students want to solve workplace problems.
The results will be compiled and published in a follow-on paper.
5 Conclusion and Further Research
A design of a research based course has been created from the initial testing of the concept
in the MPM 655 Assessment, Monitoring, and Evaluation course at the University of
Botswana (UB) in the fall of 2008. The course is designed in four segments. The first
segment is the deductive logic segment which includes Information Measurement Theory
(IMT), the construction industry structure model (CIS), and the management vs. leadership
approaches and ramifications. The second segment is the traditional management,
direction, and control traditional practices and functions in each technical area of project
management, and the leadership based Performance Information Procurement System
(PIPS) / Performance Information Risk Management System (PIRMS) solutions. The third
segment is the organizational testing period where students create surveys to confirm the
existing practices, or run tests testing the new PIPS/PIRMS concepts. And the fourth
segment is the documentation/publication of survey or testing results. The courses are
interlocked using the students’ thesis subjects and the deductive logic. The following
changes are made in the transformation from education based to research based approach:
1. The graduate student and their work environment become the focus of the education.
2. The faculty change from the expert to the researcher, the facilitator of change.
3. The education changes from textbook based to deductive logic/theory based and data
collection/documentation.
4. The research based graduate program must identify a strategic plan.
5. The focus changes from education to research.
6. The impact to the industry becomes far more important than graduate students ability to
answer exam questions based on textbook education.
7. The relationship changes from a teacher/student relationship to a partnership between
the faculty and the student.
The students will become change agents, and will form as their new base, deductive logic
instead of current industry practice. The research based designed course will most likely
drive industry research into the MPM program. Testing of the RBA courses will continue
into the fall semester of the MPM courses. Performance information will be collected on
both the faculty instructors and the students.
The authors propose that this new research based model is the key to linking academic
research with the industry. It also shortens the research testing cycle, forces researchers to
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be more accountable, and maximizes the return to post graduate masters degree students.
This model will be introduced in other African universities as well as in universities in the
Pacific Rim (Australia, Malaysia, and Pakistan.) The deductive logic approach has
tremendous potential value as it will integrate industry with academic research, requires
less but more focused testing, and test results show more efficient and dominant value that
minimize the need for endless testing and data collection which is neither realistic or
supportable in today’s environment.
6 References
Adeyemi, A., Kashiwagi, J., Kashiwagi, D. and Sullivan, K. (2009), New Procurement
Approach in Graduate Education, Manuscript submitted for publication, Association of
Schools of Construction of Southern Africa. Livingstone: Zambia.
Adeyemi, A., Mselle, P., Kashiwagi, D. and Sullivan, K. (2009), Challenges of a Graduate
Project Management Student, TG592009-22 International Conference on People in
Construction, Port Elizabeth, South Africa, July 12-14, 2009, Manuscript submitted for
publication.
Kashiwagi, D. and Kashiwagi, J. (2009), Botswana MPM Graduate Students Research,
Unpublished raw data.
Mselle, P., Kashiwagi, D. and Sullivan, K., (2009), Graduate Risk Management Research
& Education Program in Botswana. Manuscript submitted for publication. Fifth
International Conference on Construction in the 21st Century (CITC-V) “Collaboration
& Integration in Engineering, Management, and Technology”. May 20-22, 2009.
Istanbul: Turkey.
Mselle P., Muatjetjeju, M., Sullivan, K. and Kashiwagi, D. (2009), Developing a Research
Based MPM Graduate Program, The Fourth Built Environment Conference, Zambia,
(17 - 19 May 2009).
Mselle, P., Kashiwagi, J., Kashiwagi, D. and Sullivan, K. (2009), How to Jumpstart a
University of Botswana Project Management Group, Fifth International Conference on
Construction in the 21st Century, Istanbul, Turkey (May 20-22, 2009).
Mselle, P., Muatjetjeja, M., Kashiwagi, J. and Sullivan, K. (2009), US Embassy Botswana:
Research Test of Best Value Procurement, TG592009-20 International Conference on
People in Construction, Port Elizabeth, South Africa, July 12-14, 2009, Manuscript
submitted for publication.
Performance Based Studies Research Group (PBSRG) (2009), Journals and Publication
documentation, Unpublished raw data.
Powder, N., Mselle, P., Muatjetjeja, M., Kashiwagi, J. and Sullivan, K. (2009), Bank of
Botswana Design and Construction Best Value Delivery, TG592009-21 International
Conference on People in Construction, Port Elizabeth, South Africa, July 12-14, 2009,
Manuscript submitted for publication.
313
COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Rosemary Placket and Mike Hoxley, pp 314-331
Surveying education and training in the UK: a cross profession
comparison
Rosemary Plackett and Mike Hoxley1
1
Professor of Building Surveying
School of Architecture, Design and the Built Environment
Nottingham Trent University
Burton Street
Nottingham NG1 4BU
United Kingdom
Email: [email protected]
Abstract:
The impact of previous United Kingdom (UK) recessions on the recruitment of graduate
surveyors has been detrimental. Numbers opting to study on built environment courses have
fallen as opportunities to work in the construction and property professions have declined.
Indeed, in the past, some excellent qualified surveyors have been entirely lost to the industry
as they have moved into other areas of work that are less affected by down-turns in economic
activity. Competitor professions, such as those in the law and finance, have been more
successful in retaining numbers in practice and on their qualification routes. The research
reported in this paper aims to compare the qualification processes from school to professional
status of a number of UK professions – surveying, law, accountancy, civil engineering and
architecture. The main aims are to see whether the entry process is appropriate in maintaining
current and future high standards in the profession and to see if the Royal Institution of
Chartered Surveyos (RICS) can learn anything from the entry processes of these other
professions. The research is timely since as the UK comes out of the current recession there is
likely to be increased competition from rival professions to attract graduates and school
leavers. The surveying profession needs to learn the lessons of the past and not be in a
position of under-supply of good quality graduates when the demand for the services of
surveyors returns. A literature review of the history of the RICS qualification process is
followed by a web-based investigation of the arrangements used by these other professions.
An interview with a senior RICS training advisor on the findings of this investigation lead to
recommendations to the surveying profession as to the future direction that their entry process
could follow.
Keywords: Education, surveying, professions, training, UK
1 Introduction
Whilst entry processes for every industry and for each professional body are distinctive, the
entry processes for all institutions share common purposes. Entry processes allow a
profession to flourish by producing high calibre new members who are good ambassadors for
their professional body. They demonstrate that the members of the professional bodies are
qualified professionals and this in turn provides peace of mind to clients when soliciting their
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services. Furthermore, entry processes educate new members and this additionally gives new
members a sense of personal worth and pride in their profession.
RICS professional membership (MRICS) entry routes consist of two elements: university
education and practical experience. Candidates are required to have an accredited
Undergraduate (UG) or Postgraduate (PG) Degree, taken part-time, full-time or through
distance learning. Additionally, candidates must undertake the Assessment of Professional
Competence (APC): this involves a period of approved structured training based on
competencies and a final assessment interview (RICS, 2009).
With the RICS Education Policy Reform in 2001 and the recent review and subsequent
revision of the APC in 2006 some may suggest that further research regarding the RICS entry
process is superfluous at present. Nevertheless, Wilkinson (2006, p.x) suggests that in fact
entry processes require constant review so that RICS can continue to adequately prepare
candidates for the ever changing nature of the surveying profession. This process will ensure
that high standards are maintained.
The research reported in this paper undertakes a holistic review of the entry processes of
RICS, from the point of entry onto an RICS accredited course through to the final assessment
stage of the APC. Furthermore, this research makes a contribution towards the subject area of
the education and qualification of new surveyors through taking an outward looking focus. It
compares and contrasts RICS entry processes with the processes of its peer professionals
namely Chartered Accountants, Lawyers and, the more closely related professions of Civil
Engineering and Architecture. The entry processes of these professions can be used as a
comparison for the entry process of the RICS. This research will provide meaningful
recommendations regarding the future of the RICS entry process within the UK; with
reference to the entry routes of other professions.
Melvin (2009, p.29) suggests that whilst the RICS has a robust entry process in place, of
which the profession should be proud, it should not be complacent. Entry processes play a
significant role in the continuing success of the RICS. Wilkinson (2006, p.x) explains that at
present proposals for changes to the APC are developed by subgroups of the Education and
Membership Committee, with extensive consultation from stakeholders. Any proposals
regarding the APC are then approved by the Education and Membership Committee.
Additionally, where these changes affect competencies they are also approved by the
appropriate faculty board. Consequently, this research will be of interest to the Education and
Membership Committee, and will be beneficial to the surveying profession as a whole
through contributing towards maintaining the highest standards required of newly qualified
Chartered Surveyors. It will be of value to those bodies with interests in education of new
surveyors such as the Centre for Education in the Built Environment (CBEE). Furthermore,
regulatory bodies of the other professions studied may consider the research to be of
significance when undertaking reviews of their individual entry processes.
2 Literature Review
Whilst the origins of RICS date back to 1792, when the Institution of Surveyors was formed,
RICS have only self regulated the membership of new surveyors in the UK since 1881.
Moreover, it was not until 1891 that membership through examination became fully
compulsory (Thompson, 1968, p.181). This was a key moment for the profession as
“Members could now enjoy the benefits of being respected as qualified professionals, thereby
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establishing surveying’s first general benchmark for proficiency and guarantee of quality”
(Anon, 2006, p.51).
The original 1881 entry process consisted of two stages: the Preliminary and the Proficiency.
The Preliminary was a test of general education. Thompson (1968, p.186) suggests that “Only
with the establishment of the G.C.E did it become possible to abolish the Preliminary, and
insist on five Ordinary level passes (including English and Mathematics) as the minimum
standard for entry to the professions”. The Proficiency Test was a technical and professional
exam. Thompson (1968, p.187) suggests that the RICS used the Civil Service examination as
a model, with the concepts of dividing the profession into specialisms and using a
combination of compulsory and optional competencies having originated from the Civil
Service model. In 1913 the Proficiency exam was divided into two parts: Intermediate and
Final, with the Intermediate exam being further split into two sections (the First examination
and the Intermediate) later in 1932. Therefore in 1932 a candidate was required to pass three
examinations; the Preliminary, Intermediate and Final before they could become an RICS
member.
The concept of an approved training programme as a key element of the RICS entry process
was devised in 1939 when the Healing Report (cited in Thompson, 1968, p.189)
recommended “That future candidates for the Final Examination must have been engaged in
approved training for four years prior to sitting for the examination, of which period two years
at least must have been spent in the office of a surveyor approved by the council”. Thompson
(1968, p.189) suggests whilst practical training had been compulsory before this date, the
quality and length of this experience had not been regulated.
During the 1970s the entry requirements into the profession changed. Where, previously a
candidate had needed five GCSE passes they now required 2 A Levels. Plimmer (2003)
explains that surveying diploma courses in Polytechnics and technical colleges expanded
during the 1960s and 1970s. “Courses were monitored and accredited by the RICS’s
Surveying Courses Board, a sub-committee of the RICS’s Education and Membership
Committee” (Plimmer, 2003).
In 1973 Tests of Professional Competence (TPC) were introduced (RICS, 2008). Anon (2006)
describes the TPC as the fore-runner to the present day APC. The TPC attempted to recreate
the workplace in an assessment situation (Melvin, 2009). Melvin (2009) explains that
candidates were set a task which they used their knowledge and judgement to complete. In
exceptional circumstances, where candidates received borderline pass/fail marks they were
interviewed by RICS members to decide whether they should qualify of fail. Later, all
candidates were interviewed; candidates took the TPC in the morning and were interviewed in
the afternoon.
In 1997 the theoretical assessment system of the TPC was replaced with the current APC
system. Candidates were now required to undertake a period of structured on the job training
through which they would obtain an instruction of a number of competencies and then sit a
final assessment. Melvin (2009, p.29) proposes the view that by introducing the APC
members of the RICS took control of the process “Candidates can only present themselves for
final assessment when Members are satisfied that competence had been achieved, rather than
because the clock said so” (Melvin, 2009). Finally, in July 2006 RICS launched a revised
APC which “incorporated many improvements to the competencies templates and suites of
guidance” (Small, 2006, cited in Wilkinson, 2006, p.vii).
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The RICS accreditation of university degrees indicates high standards of education and
demonstrates that the degree will provide students with a superior level of industry specific
knowledge. The university education phase of the Entry Process must lay the foundations for
students to build upon at APC level and prepare the candidate for the professional
environment. Wilkinson and Hoxley (2005), and Parsons and Hoxley (2007) have raised
concerns regarding the adequacy of Building Surveying courses in preparing students for
working in industry. Wilkinson and Hoxley (2005) stated that ‘Core’ content such as
construction technology and contract administration in the curriculum was limited and further
suggested that employers view Building Surveying graduates as lacking sufficient levels of
construction technology. Parsons and Hoxley (2007) further emphasised this point by
suggesting that BS students “are not taught Building Regulations, Specification Writing and
Contract Administration in sufficient depth to prepare them for the professional
environment”. Despite these words of caution Hoxley and Wilkinson (2006) suggested that
the employability of students entering the market is of a very high quality.
A common issue of debate in recent published research has been the innovation of PG
conversion courses in surveying education. RICS statistics suggest that in 2003 there were
seven more accredited UG courses than PG accredited courses, whereas in 2008 there where
98 more PG courses within the UK than UG courses. RICS statistics for the UK also illustrate
that 54% of student starters in 2007 on accredited courses enrolled on PG courses. Tooth
(2007) suggests that “RICS has reached a point which would have been unthinkable 10 years
ago, in which most people come into the profession at post-graduate level”.
There is a general consensus among recently published literature that the MRICS entry
process could benefit from increased interaction between academia and industry. There are
two aspects to this argument. Firstly that industry could do more to ensure that candidates are
being exposed to relevant topics and are being prepared for the industry. And, secondly that
academia should take the lead in ensuring the learning outcomes of modules correspond to
APC Competencies. The key issue here is: should academia lead industry or industry define
academia?
Melvin, (2009) argues that efforts should be made by both academia and industry “The
faculty could do more to define the knowledge base and collaborate with academia to ensure
students are being exposed to relevant ‘technical knowledge’. In the spirit of partnership,
academia should also be telling practitioners about new developments and create closer links
between the faculty and the final assessment process”.
“Just like many other professionals - doctors, lawyers and accountants - the need to obtain
qualifications doesn’t end on leaving university. There is a period of structured training when
you start work” (Lord, 2005, p.48). Following graduation, candidates must undertake a
structured training period known as the APC if they are to qualify as MRICS.
Research which critically analyses the APC phase of the entry process is certainly limited
when considering the importance of the system to the future of the Institution. Instead
literature on this topic is largely of a descriptive nature or else has focused on advising
candidates on how to successfully complete the APC (RICS, 2009). This could suggest that
candidates are being taught to ‘pass the test’ rather than to become competent professionals
and it could be asked: Is the APC just a tick box exercise? Where literature has evaluated the
APC stage of the Entry Process a number of core issues have been highlighted.
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Wilkinson (2006, p.x) suggests that the APC process should have a symbiotic relationship
with industry because an out of date entry process would inevitably lead to an out of date
profession. The APC must develop and change together with the property and construction
industry as this will ensure that newly qualified surveyors can efficiently deal with even the
most recent advances within the market.
From the review of literature it is apparent that there is much debate at present among the
industry regarding both the education and APC stages of the MRICS Entry Process. The
Literature Review has identified a shortage of published research focussing on a holistic
approach to entry processes (university education and APC). Instead literature has
concentrated on either the education stage or the APC stage. This is concerning because the
foundation stone of every profession is the entry process by which its members become
qualified: for it is a quality assurance tool used to ensure that new members have reached the
level expected of an average member within their profession. Without holistic research no
effective assessment can be made of the quality of the entry process or the calibre of newly
qualified surveyors. Criticisms have also been voiced regarding the conversion rates from
accredited degree holders to Chartered Surveyors and of the low pass rates of some Faculties.
This research has addressed and expanded upon published research through undertaking a
holistic review of the entry processes into RICS, from the point of entry onto an RICS
accredited course through to the final assessment stage of the APC. Furthermore, this research
will make an original contribution towards the field of RICS education and qualification
through appraising MRICS entry processes with reference to the entry processes of other
professions. In addition the outward looking focus of this research should aid the development
of new and innovative strategies for the improvement of RICS entry processes.
3 Research Methodology
This research has focused on entry routes for professional membership of the RICS in the UK
and the aims of this research are to answer the following questions:
• Is the entry process appropriate in maintaining current and future high standards
within RICS?
• Can RICS learn from the entry processes of other professional bodies in improving the
current process?
The objectives of this research are to:
• Establish how the RICS entry process developed since its inception.
• Identify the current entry process available for those wishing to become a Chartered
Surveyor.
• Identify the entry processes of other professions within the UK: Chartered
Accountants, Solicitors, Civil Engineers and Architects.
• To compare and contrast the different RICS qualification routes alongside those of the
other professions above.
• To analyse the current RICS entry processes, with reference to other professions.
• To propose meaningful guidance on the future of the RICS entry process.
The initial stage of the research focussed on gathering factual secondary information
regarding the MRICS entry process and the entry routes of four other professional institutions.
It was decided that a mixture of built environment and non-built environment professions
should be considered as this would allow for the cross-comparison of the RICS entry
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processes with those of professional institutions practicing within the same industry, as well
as the opportunity to compare the RICS entry process with the practices of professional
institutions generally.
Data published by RICS, Institution of Civil Engineers (ICE), Royal Institute of British
Architects (RIBA), Institute of Chartered Accountants in England and Wales (ICAEW) and
the Law Society (LS) was collated along with information from career focussed journals such
as Elevate Surveying, Prospects and Target publications. The information was categorised
into four sub-sections of the entry process: Entry Requirements, Academic Stage, Practical
Stage, and Final Assessment. This enabled comparisons to be made between each of the
different institutions’ entry process.
Primary research was conducted in the form of a semi-structured interview to obtain
attitudinal qualitative information regarding the issues highlighted by the literature review and
secondary research. The interview consisted of open-ended questions focussed around a set of
specific topics. The interview was designed to focus around the four distinct stages of the
entry process already identified at the secondary research stage. This approach ensured that
the primary research findings could be compared and contrasted with the secondary research
findings.
The interview focussed on gaining an understanding of why the RICS take the current
approach to each of the elements of the entry process and whether, where the approaches of
the other professions differ to those of RICS, these approaches could be utilised to improve
upon the RICS entry process. Additionally, the final section of the interview focussed on
gaining an understanding of how effective the current RICS entry process is in maintaining
high standards of newly qualified surveyors.
The interview was conducted by the first named author with Jon Lever, a Fellow of the RICS
who is a prominent figure within the field of RICS training. Since late 2006, Jon Lever has
been entrusted by the RICS to undertake the role of UK Final Assessment Assessor Trainer.
Through this role Jon Lever is heavily involved with developing and implementing the
training of all UK Final Assessment Assessors. Jon Lever’s position extends further, to that
of Chairman of the RICS Final Assessment Auditors. As Chairman, Jon Lever has the
responsibility of receiving the feedback from the Auditor team and then utilising this
information to devise ways of improving the final assessors’ training.
Jon Lever is also an RICS Training Advisor (RTA) for the East of England and East Midlands
Region. There are three fundamental aspects to this role. Firstly, as RTA Jon Lever supports
employers to develop and operate Structured Training Agreements. Secondly, where a
candidate at final assessment appears to have been provided with a low quality of structured
training Jon Lever may be asked by the Final Assessors to visit the candidate’s employer to
assist them in improving upon the implementation of the Structured Training Agreement.
Thirdly, as part of his role as RTA, Jon Lever runs RTA Surgeries. These surgeries are aimed
at employers and candidates in need of APC/ATC related guidance including for example
queries regarding educational routes and requirements or enquires regarding various routes
through the APC/ATC (DeLever, 2008).
4 Findings and Discussion
The findings of the secondary data collection and analysis are summarised in Table 1 below.
Each stage of the qualification processes will be discussed alongside the consideration of the
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results of the primary data collection, i.e. the interview with Jon Lever (conducted by the first
named Author in April 2009). All views expressed are Jon’s personal opinions and do not
reflect official RICS policy.
4.1 Entry Requirements
One key issue highlighted by the secondary research stage has been the different approach
taken by the RICS in the setting of minimum entry requirements onto degree programmes in
comparison to the other professional bodies being considered. Currently, the RICS are the
only institution to adopt an aggregate entry system which, to some extent, means that RICS
accredited degrees are available to a limited number of candidates with no formal A Level
qualifications. Furthermore, the Universities & Colleges Admissions Service (UCAS) scores
required appear to be pitched lower than those set by the other institutions considered. These
findings have prompted further exploration of the issues at the primary research stage.
When questioned regarding the importance of academic success for candidates in becoming a
successful surveyor, Jon Lever suggested that school and college qualifications are very
important in demonstrating that a candidate is of the correct quality that the profession is
seeking to allow to commence the process of becoming Chartered. However, Jon Lever did
explain that the importance of academic success may vary from candidate to candidate and
that where a candidate has increased levels of practical experience the importance of
academic success may decrease. Additionally, as a candidate progresses through their career
the importance of the academic base will decline in significance as the level of practical
experience is increased.
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Table 1. Summary of Qualification Processes of the Professions Studied
Built Environment Professionals Non Built Environment Professionals
RICS RIBA ICE ICAEW LS
Academic Entry Minimum aggregate entry Entry requirements set by Entry requirements set by Entry requirements set by Entry requirements set by
Stage Requirements requirements set by RICS individual university individual university individual university individual university
Individual universities can Undergraduate – Part 1 Undergraduate Undergraduate Undergraduate
set higher standards than • 523 UCAS points at • Three GCSE passes • Three GCSE passes • Ranging from 545
RICS minimum Cambridge University including Mathematics including Mathematics UCAS points at Oxford
to 178 UCAS points at and English Language and English Language University to 165
Undergraduate London South Bank And (with most employers UCAS points at
• GCSE Mathematics University (Times, • Ranging from 536 UCAS asking for A or B Bedfordshire
and English C 2009). points at Cambridge grades in the above University (Times,
Grade. University to 215 UCAS subjects) 2009).
• 75% of student Postgraduate – Part 2 points at Leeds • UCAS points of 220 or
cohort must achieve • Accredited UG degree metropolitan (Times, more with two A Postgraduate
230 UCAS points 2009). Levels (many • UG Degree
between them or 270 • Some institutions may employers ask for a OR
points each request Physics and minimum of 280 • Certificate of Academic
Mathematics A Levels. UCAS points) Standing
Postgraduate • First or a 2.1 in any
• Any UG Degree Postgraduate subject Legal Practice Course
• Accredited UG degree • Qualifying UG or PG
which fulfils Part 1 of the Law Degree
Education Phase of the
membership route
Degree • RICS Accredited UG • RIBA Accredited BA or • Accredited UG Degree • Any UG Degree • Qualifying Law Degree
Degree BSc UG Degree fulfilling Part 1 of the or Approved PG
Or And Education Phase and conversion course
• RICS Accredited PG • Further Accredited PG further learning And
Degree Degree (BArch, MArch Or • Legal Practice Course
or Diploma) • Accredited UG Degree (Vocational Stage).
fulfilling Part 1 and 2 of
the Education Phase
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Built Environment Professionals Non Built Environment Professionals
RICS RIBA ICE ICAEW LS
Practical Training • RICS Approved • Candidates undertake • ICE Approved Training • ICAEW Approved • Law Society and SRA
Stage Contract Training Scheme paid professional Scheme Training Contract approved training
experience in an contract
• Contract between architecture firm • Contract between • Contract between
employers, employee employers, employee and employers, employee • Contract between
and RICS • Work Place Supervisor ICE and ICAEW employers, employees
and Professional and LS
• Supervisor and Studies Advisor • Supervising Civil • Training contract
Counsellor appointed Engineer overseen by a Partner • Supervision of
candidate overseen by
Partner
Training Duration Duration Duration Duration Duration
• Minimum 2 years • Minimum two years – • Usually takes between 2 to • Minimum 450 days • 2 years
including minimum divided between Stage 4 years usually over 3 years
of 400 days practical 1 and Stage 2 Format
relevant experience Format Format • Minimum of 3 areas of
Format • Development Objectives • On the job work English Law
Format • Not specified experience And
• Competency based Documentation • Financial Training • Contentious and non
(Mandatory, Core Documentation • Development Objectives College contentious law
and Optional) • PEDR Diary Sheets • Structured training in
ethics Documentation
Documentation • No documents
• Diary and Log Book Documentation
• Maintain Training
Records
Professional • 48 hours CPD for • None specified • 5 days minimum per year • Financial Training • Professional Skills
Development each 12 months of but at least 30 days prior College Course- 20 days
structured training to professional review
Assessment • By Counsellor and • PEDR diary monitored • Assessed on a scale of • 12 Professional Exams • 3 Compulsory Reviews
Supervisor by Workplace Mentor achievement by (Application and throughout the two year
and Professional Supervising Civil Knowledge Modules) training contract
• Competencies Studies Advisor Engineer over the first two years
assessed in terms of of the training contract
levels reached • Development Objectives And
Based • 3 Advanced Stage
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Built Environment Professionals Non Built Environment Professionals
RICS RIBA ICE ICAEW LS
Practical • Progress Reports • Training Review • Examinations (which
Stage Cont. cannot be taken before
• Achievement Record two years of
experience is obtained
• Interim and Final and prior examinations
Assessment passed)
And
6 monthly reviews and
completion of appraisal
forms
Final Stage Eligibility to • Completed Education • Completed Part 1, Stage • Proof of academic • Completed education, • Completed education,
progress to and APC stage 1, Part 2, Stage 2 and qualifications and and professional stages vocational and practical
final Stage 3 completion of IPD stages
assessment • Critical Analysis • Training record
• Curriculum Vitae • Supported by three
• Final Assessment sponsors and submission • Appraisal forms
Record • Professional Experience of Sponsor Questionnaire
Evaluation Form • Proof of completion of
• Achievement Record all examinations
• Case Study • ICE candidates names
• Logbook published in press
• Examination, assessed
• Interim and Final coursework, scenario • Summary of Experience
Assessment based form
• Project Report
Final Final Interview Final Interview Final Interview Final Interview Signing Off
Assessment • 60 minutes including • To establish knowledge • Including a short • Office Managing • Signed off by partner
10 minute and experience presentation Partner signs off the
presentation training records to
Final Interview state that they are
• 120 minute written satisfied the training
assignment experience is complete
and the individual is fit
and proper
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The minimum entry requirements set by each institution were conveyed to Jon Lever
using Table 1. Jon Lever expressed surprise at the lower UCAS points required by the
RICS in comparison with the other institutions considered but was unable explain such
a discrepancy between the RICS and the other institutions. Jon did however offer a
couple of possible reasons why the RICS entry requirements may have been set at their
current level. Jon suggested that the ‘hands on’ nature of surveying may explain why
the RICS have set lower UCAS point requirements in comparison to the other
professions considered. Jon Lever suggested that the professions of accountancy, law
and architecture may have a more academic prowess than the Surveying profession.
Although, Jon did recognise that this theory may be flawed because whilst surveying
may be considered to be practical in nature there is still a demand for academic ability:
for instance a Quantity Surveyor will be required to have a high level of mathematical
ability. Additionally, Jon Lever acknowledged that this theory may not account for the
significantly different approaches taken by ICE and RICS. One could take the view that
of all the professions investigated, the occupations of surveying and engineering are the
most similar in nature with both being ‘practical’ professions. Nonetheless, ICE as with
the other institutions appears to require a higher number of UCAS points than the RICS.
Jon Lever also proposed that the varied nature of the RICS, with 21 different pathways
ranging from Minerals and Waste Management to Valuation, may make it complicated
to set an entry level benchmark which is suitable across the board. The RICS can be
said to encompass a wide variety of vocations and whilst there are some RICS pathways
such as Building Control and Building Surveying which are similar in nature there are
also a number of pathways such as Arts and Antiques and Geomatics which can be said
to be no more related than the careers of Accountants and Solicitors. Consequently,
RICS entry requirements may be set at a lower level to allow for the wide range of
differing academic abilities required by each separate pathway. If this is concluded to be
the case then could the RICS set different entry requirements for different pathways?
Jon Lever was also questioned regarding the effectiveness of the RICS aggregate entry
requirements in ensuring candidates at entry level are of a high quality. Interestingly,
despite the lower entry requirements set by the RICS in comparison to those set by other
professions, Jon Lever did state that from his experience as a RICS Training Advisor
that he was on average quite happy with the level of candidates who he has had contact
with at UG and PG level and that therefore the system must be working effectively.
4.2 Academic Stage
From the secondary research it was noted that all the professional institutions
considered require candidates to achieve a university degree before they are eligible to
progress to the practical stage of the entry process. Interestingly, all the professional
bodies considered (with the exception of the ICAEW) require that degree to be
accredited or approved by their institution. Whilst candidates can complete an ICAEW
accredited degree, it is not a requirement that the UG degree be accredited; as long as an
ICAEW candidate has an UG degree in any subject they are eligible to progress to the
practical level of the entry process.
The accreditation of degree programmes by professional institutions is a tool to ensure
that academic education is undertaken to the level required. Jon Lever was questioned
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with regard to the effectiveness of the RICS accreditation system in maintaining high
standards. Whilst Jon Lever professed to have had limited involvement with the actual
accreditation of Degree Courses, he did explain that through his role as a RTA he
interacts with universities and candidates on a regular basis. From this experience Jon
Lever suggested that he felt the strength of the accreditation system to be the
collaboration of a wide range of contributors such as industry professionals, policy
makers, external assessors and academics. These participants are then able to monitor
and improve different elements of the course from the quality of teaching, to the
syllabus and research.
One issue which Jon Lever highlighted was that ultimately university education must
have some effect on the outcome of the final assessment. This therefore could mean that
any improvements in final assessment pass rates are a reflection of the successes of the
education system. Jon Lever explained that he has been involved with the RICS since
1998 when he began assessing and that since this time there has been no significant
improvement of the final assessment pass rate. Jon Lever suggested that “Somewhere
along the line things are potentially not being improved or they are at their optimum and
therefore they won’t ever improve”. Despite this Jon Lever stated that in his opinion the
current partnership system is very effective and that accreditation of courses by the
RICS is a quality statement which is respected by industry.
Jon Lever was asked whether the RICS entry system could benefit from taking a similar
approach to ICAEW where an UG degree is required, but it is not subject specific and
does not have to be accredited by a professional body (although where candidates have
achieved an ICAEW accredited course they may be eligible for exceptions in the
knowledge based examinations). Jon Lever explained that a similar concept entitled
‘adaptation’ is already being considered for the future by RICS. This would be where
candidates with no degree or no accredited degree, but with experience, could be
considered on an individual basis. Candidates may be required to undertake some form
of distance learning and an ethics module to allow them to reach a certain academic
level before being eligible for assessment.
Jon Lever suggested that consideration should certainly be given to not excluding
candidates purely because they do not have a specific accredited degree. However, if
candidates are accepted onto the entry route without a degree or accredited degree it will
be necessary for them to undertake further learning, alongside their practical experience
for them to reach the required level (as with the ICAEW system). Jon Lever explained
that as a general rule the correct sort of education in the right areas will get the
candidate Chartered quicker however whichever route a candidate takes they will
always have to reach the same level of competency to pass the final assessment.
The secondary research has identified that Architecture and Civil Engineering along
with Law insist on a longer period of academic study than the RICS. Jon Lever was
asked whether the RICS could benefit from insisting on a longer period of university
education like these institutions. Jon Lever did suggest that a student who voluntarily
undertakes a Masters degree on top of an undergraduate degree may be a more
academically switched on. However, Jon did express the view that ultimately there
would be little benefit to the RICS entry process through extending the academic stage.
Jon Lever explained that he personally thinks the key thing, in terms of the final
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assessment, is the ability of the candidate to apply knowledge and as such he suggested
that perhaps the length of study is not the thing to increase but instead, if anything, the
length of practical experience.
As an alternative option to extending the academic stage of the entry process, the
interviewer enquired whether more could be done to encourage candidates to make the
most of the academic phase. The example given was that minimum degree result
classifications could be introduced, where for instance all candidates must achieve a 2:2
at degree level to progress to the practical stage. Jon Lever stated that he felt that this
would be a very beneficial action. Furthermore, Jon Lever suggested that employers
should be further encouraged to engage with candidates earlier in the entry process
especially within the current market circumstances where many companies may shy
away from investing in students.
The choice of full-time or part-time undergraduate degree or post-graduate conversion
courses was discussed and Jon had a preference for part-time degrees. Despite this he
did emphasise that the opportunity to achieve ultimately sits with the candidate and
whether they are willing to learn and to commit to the process. Jon Lever explained that
the variety of educational options available to candidates is a benefit for the profession
because it encourages diversity. Jon Lever suggested that ultimately it doesn’t matter
how you get there, you still have to get through the final assessment benchmark and the
final interview doesn’t alter depending on the route it takes the candidate to get there.
Where one route may be suited to a candidate it may be equally as unsuited to another
candidate.
4.3 Practical Stage
Currently, the RICS Practical Stage of the qualification process consists of candidates
undertaking an approved training scheme where they complete a minimum of two years
relevant practical experiences (Graduate Route 1) to achieve competencies at the
required levels.
When asked to consider whether the current minimum period of practical experience
(Graduate Route 1) is appropriate in preparing candidates for the final assessment Jon
Lever suggested that if the candidate commits to the training completely then generally
the current minimum period is realistic to prepare candidates to sit the final
examination. However, Jon explained that from his experience many candidates will
take longer than the minimum required time to prepare for final assessment.
Jon suggested that the length of practical experience required to prepare candidates for
final assessment may vary depending on the candidate’s pathway. The current minimum
period may be more realistic for the more specialised pathways like Quantity Surveying
as opposed to the broader pathways such as Building Surveying. Jon suggested that
where a candidate requires a broader knowledge base the candidate will consequently
need additional time before final assessment to gain knowledge and experience of these
wider issues. Furthermore, a lot can depend on the quality of the experience of the
candidate and the commitment to the process by the candidate.
The RICS practical stage is based on a competency system where candidates achieve a
certain level in a number of competencies to demonstrate that they have reached the
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level to progress to final assessment. Jon Lever was asked to consider how effective the
competency based system of assessment is in preparing candidates for final assessment.
Jon Lever defined the competency based system as being super as long as the candidate
has the full appreciation of the appropriate guidance documents. Jon cited the ability of
the competency based system to cope and adapt to the diversity of the industry as its
strength. RICS is an institution which represents surveyors with a wide range of skills.
The ability of the competency based system to deal with 21 different pathways, and also
further specialisms within each of those pathways, is its strength. The example given by
Jon Lever to demonstrate this point was the variety of opportunities available to a
Building Surveyor. A Building Surveyor can work within a surveying firm, an
architectural practice or as a surveyor in an in-house estates department for a corporate
firm such as Boots.
Currently, the ICAEW use examinations, which run alongside the practical experience,
to formally assess candidates. Jon Lever was asked to consider whether it would be
beneficial to incorporate paper-based or online assessments into the practical assessment
stage of the entry process. Jon Lever expressed the opinion that the assessment of
candidates to level one through online examination, which candidates would then be
required to achieve before sitting the final assessment, would work well. Additionally,
this would mean that the assessors could then focus on levels two and three (the ‘real-
life’ experiences) at the final assessment. Jon Lever stated that he thought this may
reduce the number of candidates going forward to final assessment but additionally this
could increase the pass rate. Jon Lever felt that if these online tests were introduced the
RICS may look to universities to implement them through online modules or distance
learning.
As part of the analysis of the practical stage of the entry process, Jon Lever was asked to
consider the importance of the roles of Supervisor and Counsellor in assisting
candidates to meet the levels required to progress to final assessment. Jon Lever
explained that these two roles are paramount in providing the candidate with the
opportunities to succeed. Jon Lever elaborated on this point through suggesting that he
believes the “Final Assessment Pass rate is directly proportionate to the quality of
Counsellor and Supervisor”. Jon additionally emphasised that whilst these roles are
important the candidate must also take control of their own career through setting up
meetings and providing the Supervisor and Counsellor with all the relevant
documentation with which to aid the decision of whether a candidate is competent or
not.
When questioned as to whether these two roles are equally as important Jon Lever
explained that the Supervisor was potentially less important as demonstrated by the fact
that they are not required to be Chartered, whereas the Counsellor is required to be
Chartered. However, the Supervisor does have a unique role as the candidate’s closest
mentor and understanding of what the candidate does day to day.
Jon Lever highlighted that there are currently no requirements for Supervisors and
Counsellors to be formally trained. Instead the assumption is made that a Chartered
Surveyor, who is bound by the RICS Rules of Conduct, will not undertake work where
they are not competent to do so. As such, it is supposed that Surveyors will complete
training to ensure that they are competent in the role of Supervisor and Counsellor.
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However, Jon Lever explained that currently the RICS do not run any formal training
for Supervisors and Counsellors and although other commercial training companies do
supply this kind of training, there is little take up by RICS Supervisors and Counsellors.
Jon Lever stated that “I have been doing the RTA job for seven years and 15-20% of
Supervisors and Counsellors I meet know what they are doing, now from a professional
Chartered Surveying perspective I find that horrendous”.
Jon Lever explained that currently it is not a mandatory requirement for a Counsellor to
be from the same pathway as the candidate. However, Jon Lever explained that where
the Counsellor is not of the candidate’s pathway they may be less effective to help
prepare the candidate for final assessment because they may not fully understand the
breath and depth of each competency required of the candidate to achieve Chartered
status. Jon Lever explained that whilst there could be cross over of Counsellors from
some similar pathways such as commercial property, residential and valuation he would
never condone a commercial property practice surveyor in signing off a Quantity
Surveyor or vice versa because they are too different in nature.
Furthermore, Jon Lever explained that where a Counsellor or a Supervisor signs a
candidate off on a competency which they do not fully understand themselves this is
again a potential breach of the Rules of Conduct and they are potentially putting their
professional status on the line because the Surveyor should not undertake work which
they are not competent in.
Jon Lever explained that currently the only verification that a Supervisor or Counsellor
is performing appropriately is at final assessment where, if a candidate performs
severely below the required standards, the assessors are able to request that a RTA visit
the Supervisor or Counsellor to work with them to improve their performance.
Jon Lever was asked whether he thought introducing mandatory training for Supervisors
and Counsellors could be of benefit to the current entry process. Jon expressed the view
that yes it could be a possible area of improvement although there may be some
reduction in the number of volunteer Supervisors and Counsellors. Furthermore, Jon
emphasised that this may lead to Supervisors or Counsellors offering their services as a
commercial entity, not just to their own company but to other individuals which is a
very different ethos to that which is currently practised within the institution. Jon Lever
also highlighted that if training became mandatory then the RICS would have to either
provide that training or licence other companies to undertake it on their behalf.
4.4 Final Assessment
Currently, all the built environment professions considered use a final assessment
interview to ensure candidates have reached an acceptable level to achieve chartered
status, whereas the law and accountancy professions studied, do not. Jon Lever was
asked to consider the effectiveness of the final assessment in maintaining high standards
in newly qualified surveyors.
Jon Lever suggested that whilst he would like to say that the process is 100% perfect, he
does acknowledge that this may not be the case because in reality there is always a
human factor involved. One aspect of the final assessment process which Jon Lever
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highlighted as being crucial in maintaining high standards is the RICS audit process.
The RICS currently audit 30-40% of all final assessments.
Jon Lever explained that he currently chairs the auditors and works with them very
closely to constantly review and improve the training of assessors and the final
assessment process. Jon explained that his role is to train the assessors; the quality of
this training is then checked by the auditors to ensure that it is right and that the process
is working. Where the auditors identify issues and problems, these can then be
communicated back to assessors and also to Jon, and they can be improved through
incorporating them into the training over time. Jon Lever explained that he has been part
of this process for two and a half years and within this time there have been
improvements made with positive feedback given.
Jon Lever did acknowledge that there are still minor improvements required, for
instance where assessors do not follow the standard process which can compromise the
continuity the profession would like to see. However, Jon Lever did state that “On
balance there is a very effective process which does maintain the quality and standard
required”.
The LS and ICAEW do not use a final interview to assess whether candidates are ready
to achieve chartered status. Instead, candidates are signed off by their Supervisor or
Managing Partner at the end of their training contract. Jon Lever was asked whether he
felt that the RICS entry process could be improved though adopting a similar approach
to the LS and ICAEW.
Jon Lever was clear in his opinion that he would be greatly concerned if the RICS
adopted the approach taken by LS and ICAEW. Jon Lever felt that with no final
assessment there may be a lack of continuity in the assessment process. Additionally,
since currently an assessor would not assess a candidate they know the system may lose
its current balanced and unbiased nature and additionally there would be potential for
the process to become market led or affected by commercial pressures.
Currently, ICE is the only institution out of those considered which incorporates a
written assessment into the final assessment. Jon Lever explained that previously the
RICS has incorporated written assessments into the final assessments. However, he
believes that the institution had found that there was insufficient time for the assessors
to review a candidate’s answers before conducting the interview assessment. Jon Lever
concluded therefore that the process could not be significantly improved through
incorporating examinations at final assessment stage.
4.5 General Questions
In the concluding part of the interview, Jon Lever was asked to explain where he
perceived the RICS to be currently situated, and where they should aim to be positioned
when compared to other professional bodies in terms of their entry process.
Jon Lever stated that in his opinion the RICS, in the context of other institutions, is one
of the market leaders in terms of their entry processes. Jon Lever described the RICS
system as being of a very good quality and which is also simple for candidates to
understand and follow if they read the guides. Furthermore, where candidates do require
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assistance there are the opportunities available for them to receive this. Jon Lever did
consider that whilst the guides are sufficient, there is always room for improvement
Jon Lever expressed the view that from his experiences as a member and as someone
who sees how the institution works he does feel that across many institutions like CIOB
and ICE the RICS is seen as the benchmark. Jon Lever stated that the RICS should aim
to be market leaders in terms of their entry process.
5 Conclusion and Recommendations
The qualification process for UK Chartered Surveyors has its roots in the Civil Service
examination process and has developed into an academic stage, examined, mainly, by
universities and a practical stage where surveying organisations provide training and the
candidate’s competency level is assessed by a panel of experienced qualified surveyors.
The secondary research has identified the following principal differences between the
RICS qualification model and those operated by peer professions both within and
without the built environment:
• The RICS is the only institution to operate an aggregate UCAS points system and
generally the points required are at a lower level than those of other professions.
• All of the professions (apart from Chartered Accountancy) have an accredited
degree system.
• Law and Accountancy have a post-undergraduate degree academic stage and rely
upon the training firm to sign off the candidate’s competency level.
• The built environment professions studied have a formal interview process at the
end of the practical stage but the other professions studied do not.
The interview with a senior surveying training advisor has suggested that generally the
RICS qualification process is fit for purpose and that the slightly lower academic entry
standards and shorter period of study can be justified because of the more practical
nature of surveying and the difficulty of specifying a single higher entry standard that
would be appropriate to all specialisms.
The research suggests that the adoption of some or all of the following
recommendations could improve the process:
• There is a possible case for having different entry standards for different types of
surveying degree.
• Requirement for a minimum level of achievement on a qualifying degree (e.g. a
lower second on an undergraduate degree).
• Recognition that some candidates are likely to take longer than the minimum
periods of practical training. Of course the problem with openly declaring such a
fact may deter some candidates from embarking upon the process .
• Level 1 competencies could be assessed by an on-line test that may stream-line
the final assessment process and improve its pass rate.
• Training of candidates would undoubtedly be improved if there was a
requirement for formal training of APC Supervisors and Counsellors.
• Counsellors should be of the same specialism as the candidate who they counsel.
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The authors are grateful to Jon Lever for his input into this research.
6 References
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Hoxley, M & Wilkinson, S, (2006), ‘RICS Education Reform and Building Surveying:
The Employers’ View’. In E., Sivyer, ed. COBRA 2006, Proceedings of the Annual
Research Conference of the Royal Institution of Chartered Surveyors, University
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Lord, (2005), ‘The Road to RICS’, Elevate Surveying, 2005/2006 Edition: p.48-55.
Melvin, A D (2009), ‘The Evolution of the APC’, Building Surveying Journal, January-
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Parsons E & Hoxley M (2007), Trends in Building Surveying Education: A
Longitudinal Study, ed. COBRA 2007, Proceedings of the Annual Research
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Thompson, F M L (1968) Chartered Surveyors the growth of a profession, Kent:
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http://extras.timesonline.co.uk/tol_gug/gooduniversityguide.php (Last accessed
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331
COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Keneilwe Ntshwene, Jacob Kashiwagi and Dean Kashiwagi, pp 332-343
Sustainable Research Platform at the University of Botswana
Keneilwe Ntshwene1 , Jacob Kashiwagi2 and Dean Kashiwagi2
1 2
Faculty of Engineering and Technology Performance Based Studies Research Group
University of Botswana, Gaborone, Arizona State University, Tempe, AZ
Botswana United States
Email: [email protected]; [email protected];
[email protected]
Abstract:
The Project Management Section at the University of Botswana has been undergoing a test
to transform the section from an education based faculty to a research based faculty. The
test was initiated by a Fulbright Scholar (FS) from the Performance Based Studies Research
Group (PBSRG), bringing a new research model, a new risk management (RM)/project
management (PM) model, and a concept of a research based graduate education that had
been very successful at PBSRG. They proposed increasing the level of research activity of
the UB PM section by merging the graduate MPM program and the industry research
effort. They proposed using a research based graduate program, treating the graduate
students from industry as a resource instead of a student, and their organizations as a
potential testing laboratory. The mechanism to make the effort a success is the very
powerful technology of the Performance Information Procurement System (PIPS) and the
deductive logic of the Information Measurement Theory (IMT). This paper captures the
case study results and future potential of the concept, highlighting the operational model to
sustain the research platform in an underdeveloped country in a resource starved
environment.
Keywords: research based graduate education, increased research activity
1. Introduction
The University of Botswana (UB) project management (PM) section staff is in a reactive
mode as a result of seemingly high workload requirements. The majority of staff is
lecturers and senior lecturers without research experience (Mselle et al., 2009). The UB
PM section has difficulty in attracting additional qualified staff. There is no current
strategic plan for research development of its staff. The PM section staff is required to
support the Masters of Project Management (MPM) program. After four years, and four
generations of MPM program students, one of the difficulties has been the graduation rate
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(Adeyemi et al., 2009). The thesis requirement is proving to be insurmountable to a large
number of MPM students.
2. Literature Review
The MPM program coordinator, through the sponsorship of the U.S. Fulbright Scholar
program of the U.S. State Department, brought a Fulbright Scholar (FS) Dean Kashiwagi
from one of the most successful research based project management programs in the world
(the Performance Based Studies Research Group/Council for Research and Innovations in
Building and Construction (CIB)W117 Performance Measurement in Construction)
headquarted at Arizona State University, Tempe, Arizona (Kashiwagi et al., 2008). The FS
is also the editor of the CIB Journal for the Advancement of Performance Information and
Value. The FS brought a research based education and strategic plan for research. He also
brought the dominant PIPS/IMT technology that uses deductive logic to improve PM
project delivery. He proposed to the UB staff that they should focus on their entire
education system and not the limited financial and human resource constraints (Muatjetjeja
et al., 2009). He proposed that they may have a systemic problem which continually
constrained their already resource constrained environment. He proposed to optimize the
entire system (staff, graduate students, and potential industry research partners) by using a
proactive research based model instead of reactive transaction based model (Adeyemi et al.,
2009).
The FS proposed a strategic plan. The UB PM section and MPM program should:
1. Be research based.
2. Considered graduate students as resources.
3. Consider their industry organizations as research laboratories.
4. Make the technology a part of the graduate student’s curriculum (weekly risk reports of
risks that the students did not control, would bring transparency and accountability
while teaching the students project management skills.)
5. Have a research based strategic plan with a timeline and goals.
6. The technology should be implemented to monitor deviation from the strategic plan.
7. Strategic planning would bring transparency and help the PM section to work together,
to plan ahead, and to use resources wisely.
8. The PM section, CE department, and MPM program would become the research model
and example of Africa, as well as the expert in PM project delivery, PIPS/PIRMS
expert in Africa, and African platform for CIB W117/PBSRG.
2.1 Problem
The UB MPM program is an education based program. The faculty are not trained
researchers. The structure is setup for education, and not research. The majority of the
staff has the perception that they are being overworked teaching classes and doing
administration, and there is no time to do research work. The FS also perceived that the
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research skills (writing papers, doing research tests, managing and minimizing risk,
coordination) are weak and the faculty may not know how to do research based research
work (research that changes systems, environments, and industry processes.) It is unknown
whether the FS can implement the same concept from the most progressive research based
unit at Arizona State University, and increase the level of research effort in the
undermanned PM section. It is different from anything the MPM program, the PM section,
CE department and FET have ever seen. There is a natural reluctance to change, and to use
a nontraditional model which has not been proven in Africa. The problem is twofold: the
first phase is to prove it can work. The second phase is to identify if the existing faculty
can make the change.
2.2 Hypothesis
The FS can accomplish the first phase: run a scaled test of the research based graduate
education, and show dominant results that prove the UB PM section can move from an
education based to a research based graduate program, increase research activity, and create
a sustainable research platform by copying the PBSRG research based model. The test will
use the technology of PIPS, PIRMS, industry structure and IMT based on previous test
results from PBSRG testing. The FS will then setup the second phase.
3. Research Methodology
The methodology to test the hypothesis will have the following steps:
1. Identify differences between PBSRG and UB PM Section
2. Identify philosophy/model of PBSRG
3. Identify constraints of UB PM section
4. Run a scaled down test on a MPM course using the PBSRG model
5. Mentor PM section faculty who want to participate in the new model
6. Capture results
7. Theoretically design the education based and research based programs
8. Correlate the results of the scaled down tests with the research based program
9. Give a presentation to the graduate students of the program to identify if they can
understand the model and get their reaction
10. Present the model results to the graduate students who are still in the program, but have
not graduated, and to the Dean of the Faculty of Engineering and Technology (FET)
11. Create an operational model to support the research based program that includes
continued mentoring of PM section faculty
4. Findings and Discussion
4.1 Differences Between PBSRG and UB PM Section
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Table 1 shows the major differences between PBSRG and UB PM Section. PBSRG has the
following advantages:
1. Experience in doing the research (number of years), research grants, tests, and
publications.
2. Support staff (internet/video staff, marketing staff)
3. Annual strategic plan.
4. Operate as a business (not dependent on government funding.)
5. All components are aligned.
6. Minimized transactions.
7. Greater percentage of post graduate students graduating.
Table 1. Differences Between PBSRG and UB PM Section
Characteristic PBSRG UB PM Section
Staff 15 7
PhD 2.5 2.5
MS 6 4
Marketing/Admin 2 0
Research PMs 6 3
IT/Video/Internet 2.5 0
Aligned 15 4
Research Experience (YRS) 15 1
Research Tests 600+ 6
Research Budget/contingency funding $1M/$.7M 0
Publications 160 20
Research Laboratory 50 US States Gaborone, Botswana
CIB W117
CIB Journal
International Connections COBRA
CITC
PBSRG
Graduate students MS (program/graduated) 50/20 80/4
Research partners 20 3
Number of classes taught/per person 2 3
Number of undergraduate classes taught/per person 0.5 2
Presentations/Year 75 10
UB PM staff has the following advantages:
1. MPM graduate program is cross disciplinary.
2. Number of graduate students.
3. The dominance of the PIPS/IMT technology vs. existing technology in the industry.
4. The potential of the staff getting their PhD at the UB.
5. The mentorship of the FS.
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The methodology of the test is shaped by the dominant differences. The test will be run by
the FS. The FS will be responsible for all planning, running the small scale test, generating
the research, and be the main component in generating publications. The FS would then
transfer the responsibilities of managing the transformation to the UB Staff. In the
transformation the UB staff would have to minimize their current amount of transactions.
The FS proposes that the current number of transactions may be caused the reactive nature
of their business, and the lack of alignment between themselves.
4.2 Philosophical PBSRG Research Based Model
The engine behind the PBSRG success has been the understanding of the Information
Measurement Theory (IMT) and dominant (simple, easy to understand, deductive logic
based) models including the Construction Industry Structure (CIS) models, the
Performance Information Procurement System (PIPS), Performance Information Risk
Management System (PIRMS), and Leadership Based Alignment Model (LBAM.) These
deductive logic based models that go against current industry practices, eliminate
transactions and help PBSRG minimize the risk of failure and maximize the value of their
effort (J Kashiwagi, 2007; J. Kashiwagi et al., 2008; Goodridge et al., 2007; Kashiwagi et
al., 2009; Sullivan and Kashiwagi, 2007; Kashiwagi, 2009). These models have minimized
the need to do endless literature searches, minimized the use of inaccurate or unproven
concepts, and maximized the success (worldwide leadership of research based efforts in
CIB W117, 15 years, $7.5M of research grants, 600+ tests, 98% success, application of PM
models in many different industries, penetration into organizational optimization tests, and
simultaneous concurrent basic research, prototype testing, and implementation projects.)
Other dominant results are the accomplishment of having the technology used and tested
continuously as the procurement/contract administration model/operations of the largest
university in the United States, the only university based licensed technology being used by
a European Union (EU) country to deliver construction projects, and the only university
licensed technology being used by a U.S. federal agency to transfer the risk of
documenting/justifying project deviation caused by risk that they do not control to the
vendor. Other major characteristics of the PBSRG model include (Kashiwagi, 2009; Pauli
et al., 2007; Sullivan et al., 2009):
1. Win-win overtakes leveraging position and authority.
2. Alignment model as assessment tool and as business placement.
3. Measurements overcome false expectations, identify actual capability.
4. Strategic planning overcomes transactions.
5. Accountability overcomes relationships.
6. Control over future replaces “being controlled” syndrome.
7. Proactive instead of reactive.
8. Weekly Risk Report (WRR) and Risk Management Plan (RMP) integrate project
management into doing the research based program, teaching the research based
program, and doing the research activity.
9. Constraints are now defined as risk that can’t be controlled, and managed by the staff.
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PBSRG faced the same or worse constraints that are faced by the UB staff (Kashiwagi,
2009; Kashiwagi et al., 2008). The authors are proposing that the only constraint UB staff
will have is in the understanding and implementation of the technology.
4.3 Constraints of the UB PM Section
One of the major constraints of the UB staff is the fear of change, of being in control, and
being accountable to manage the transformation. Due to the current education based
program, the state is a perception of being managed and being reactive. It also places staff
members in silos, forcing short range planning, and creating inefficiency due to a loss of
synergy. There are fewer cooperative efforts, staff members are caught uninformed of
events that they should know, and the loss of synergy causes duplication of efforts and
transactions. The largest constraint is the inexperience in managing and controlling a
research based program.
4.4 Scaled Down Test of the Research Based Model at UB
The FS was assigned a graduate course (MPM 655 Assessment, Monitoring, and
Alignment) and transformed the class into a research based class (deductive logic,
processes, transfer of technology to student’s organizations/other organizations, research
testing, and documentation.) Organizations involved were the US Embassy, Bank of
Botswana, UB IT/Finance, Botswana Development Corporation, and (DBES.) The
philosophy of the research based course is that the students do their best to do research tests
and documentation. If they cannot for any reason, the faculty member/instructor ensures
that based on the class effort, research is conducted. The FS in this test also did the
assignment of the students into turning the class into a research test with the objective of
making the next research based class easier. The FS also went out to organizations and
presented, attempting to convince the clients to use the technology in research tests. The
FS also used the class to introduce/train the UB staff on running the course and doing the
research. The course was very successful, and the test results are documented in another
conference paper (Mselle et al., 2009)
4.5 Results of Scaled Down Test
The objective of research based program is to produce research, significant impact on
industry, increase research funding and activity (publications), and ensure students are
recognized as resources and as experts. Although academic rigor is required, it should not
fully supersede program results. The results of the scaled down test included 21 peer
reviewed conference papers, potential of 5 journal papers, 6 research tests, and the securing
of a $25K research grant from two users to guarantee the extension of the overall research
test to transform the UB PM program into a research based program. There were profound
changes in two UB PM staff members. The first UB staff member became an expert in a
new risk model, was approved in a PhD program, and has a great potential to be promoted
to senior lecturer after being a lecturer for 16 years. Another UB staff member was
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mentored on how to teach a research based course, found a PhD topic using the research
based technology, and has committed to changing his vision using a strategic plan. A third
faculty member has incorporated the research based technology into the MPM procurement
class. In total, the research based technology has been implemented in four MPM courses,
by three faculty members, and has affected many of the graduate students in the program.
4.6 Initial Response of Participating Faculty
Of a preliminary faculty group who were educated on the research based approach (three
lecturers), the following responses were collected. Their response were from a range of 1 –
10, 10 being dominantly agree, 5 being don’t know, and 1 being dominantly disagree:
1. Research based approach (RBA) would save 50-75% of the faculty's preparation time:
9.67
2. The RBA will allow the identification of student thesis in the beginning of the program:
9.0
3. The RBA would be very beneficial for students: 10.0
4. The RBA would prepare students for completing their thesis requirement: 10.0
5. The RBA tremendously increases research activity of the faculty: 10.0
6. The RBA minimizes the faculty preparation by what percentage: 53%
7. The RBA would increase research activity by what percentage: 50%
8. The RBA would minimize preparation time and transactions: 9.67
9. Everything that is done in the RBA classroom assists overall research effort:9.67
10. The effort increases the faculties research capability, ability to be promoted, and be an
expert: 10.0
11. The RBA give us hope of becoming researchers and help the industry: 9.67
12. The RBA gives us a new vision in which we can control our own destiny instead a
career of constant reactive transactions: 9.33
From their responses, it can be seen that the RBA has the potential to increase research
effort, and provide an opportunity to have an impact on industry practices.
4.7 Creation of the Strategic and Operational Model
The Dean of the UB Faculty Engineering and Technology (FET) identified the research
based graduate program approach as the way to:
1. Assist graduate students finish their thesis.
2. A method to integrate the industry with the MPM program and increase research
activity.
3. A method to do research with less effort.
4. A method to impact industry practice.
The Dean of the FET put the following plan in motion:
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1. Identified the FS as a potential visiting professor to mentor the lecturers to gain their
PhD to increase the number of PhDs from two to five and be a continual foundation of
the research based program.
2. The PhD thrust will be to implement efficient PM practices that will apply to
technology and the development of the research based programs.
3. PhD candidates will stay in place at UB, and integrate their dissertation with the
graduate classes and the research effort.
4. Implement the research based approach to the graduate program.
The FS recommended to the MPM program coordinator to implement the Information
Measurement Theory (IMT) and Performance Information Risk Management System
(PIRMS) on each graduate student. The FS also recommends the following:
1. Identify every student who has not completed their thesis to sit down with their mentor
and outline their thesis from beginning to end (problem, hypothesis, methodology, and
conclusion. If the graduate student could not see how to accomplish a component, the
faculty would fill in the unknown area.
2. Encourage the graduate student to identify the thesis topic as improving or solving an
ongoing problem at their workplace.
3. Have the graduate student to outline their thesis before starting any work.
4. Identify the value of the thesis before starting.
5. Present the thesis work to the student’s organization, convince the client of the value of
the thesis, and if substantial school resources are required, charge the organization a
research grant fee.
6. The graduate program coordinator should track the progress of all graduate students
through a scope, monthly risk reports and a risk management plan. There should be a
director’s report that gives the performance information on the graduate program and
the graduate students who are at risk.
7. Information should also be kept on research organization, type of research, the mentor
and the students.
The performance measurements of the program should include:
1. The maximum, minimum, and average length of time of thesis or dissertation work.
2. The number of total students, students who completed, and number who are not
completed, number who are over the two year period, and average time over the two
year period.
3. The ten riskiest graduate students based on not being completed on time.
4. Percentage of student did the outline before starting, used a monthly risk plan, risk
management plan, and one page scope statement.
5. Graduate student satisfaction with their thesis subject, mentoring, and progress.
These actions are moving the MPM program from an education based to a research based
program, treating the student as a resource instead of a student seeking a degree, with the
objective of changing the industry practices. This is a huge step and is based on the relative
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success of the small scale test, the deductive logic of increasing the level of research effort
with minimal resources, and perceiving the objective of the graduate MPM program as
producing research, research results, and impact in the industry instead of a program with
classes that are based on textbook education and training. Graduate students are now
viewed as a valuable asset that is the mechanism of change.
4.8 Continuing Effort to Transform Graduate Students into Research Resources
Over the next quarter, the FS will continue to work with MPM graduate students to:
1. Test the new research based approach model.
2. Work with 15-20 graduate students in the new approach.
3. Measure their status to confirm the perceptions of this paper.
4. Measure the performance results of the new approach.
In order to get a preliminary glance at their understanding of the new approach, the
following questions will asked and their responses will be quantified:
1. The objective of the graduate students who entered the MPM program was to get a
degree.
2. The objective of the graduate students who entered the MPM program was to change
and improve their work environment.
3. Students were required to return the information taught by instructors through exams
and homework.
4. The classes were much like undergraduate courses, with lectures, homework, and
exams.
5. Students were more reactive than proactive, trying to pass the coursework.
6. The coursework was closely tied into the thesis work at the end of the program.
7. Students finished the coursework and found themselves unprepared for the thesis work.
8. Students integrated their work environment with the coursework requirements.
9. Students tested what they learned in courses in their workplace.
10. Courses introduced concepts, and allowed the students to use their creativity to solve
workplace problems.
11. The majority of the students used the courses to do their thesis.
12. Each class helped the students finish a part of their thesis.
13. Students would start doing their thesis work without knowing the end.
14. It is common that students would start, stop, and start on a new thesis topic.
15. The students were treated as a resource that brought contribution instead of a student
who would be tested on how well they listened to the instructor.
16. Each student had a strategic plan from the very beginning of the program on the value
they would bring to themselves, the organization they worked at, and to the program.
17. After passing the coursework, the majority of the students became bogged down with
the thesis.
18. Students tried to attack the thesis by writing volumes of work, and by collecting as
much data as possible.
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19. Students sometimes were doing thesis work without realizing the objective of their
thesis.
20. Many students simply quit doing their thesis because they didn’t know what to do.
21. The thesis seemed like a mystery to many students.
4.9 Major Challenges to Overcome in the Attempted Transformation
The FS has identified numerous challenges in attempting to facilitate the transformation in
the UB PM section environment. In discussions with other lecturers from other African
universities, the environment seems not to be unique to the UB. The challenges include:
1. Changing the paradigm of the lecturers from reactive to proactive.
2. The difficulty of faculty to set a strategic plan and follow the plan, despite the numerous
transactions created by the resource starved environment.
3. The difficulty for faculty to coordinate and respond in a timely manner.
4. The inadequate internet and email access due to limited connectivity and band width in
the African continent.
5. Lack of business acumen regarding the use of research funding.
6. The inability of the university to fund the presentation of papers, forcing faculty to pay
a large share of any conference presentation.
7. The lack of research experience and maturity of the faculty.
The transformation from an education based to a research based approach to graduate
education will be a tremendous and a bold move. The success of the transformation will
depend on the alignment of resources, the cooperation of the key decision makers at UB,
and the changing of the paradigm of the participating UB faculty. What makes the effort
possible is the research technology being used and its dominant impact on one of the most
critical industry problems. Without the alignment of all the pieces, this effort will not be
successful. The financial support of PBSRG and the U.S. State Department ($60K U.S.)
has been critical thus far in sustaining the effort.
5. Conclusion and Further Research
The scaled down test results show that there is a potential to transform the UB project
management section and the graduate MPM program to research based program. The
transformation will place the graduate students as resources, their organizations as the PM
laboratory, and increase the number of MPM program graduates. The faculty will work
with students to set their thesis topic at the beginning of the program, and courses will
become more conceptual, allowing students to apply the theory to their organizations. Each
class will assist the students to complete their thesis by giving them the opportunity to do
hypothesis testing to change their work environment. Students will do outlines of their
thesis, see the beginning to the end of their thesis work, and publish before defending their
thesis. This will transform the faculty from educators to researchers, or research based
faculty. Research activity will become focus of graduate program. The research test to
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change the graduate program from an education based program to a research based program
is in its inception stage. As the test continues, the results will be published in future papers.
The results of this test will immediately be published in the CIB W117 journal, and be
implemented in the next test scheduled for the fall of 2009 at RMIT in Melborne, Australia
and at the University of Science Malaysia in Penang, Malaysia. For more information, see
pbsrg/botswana, or email [email protected] or [email protected].
6. References
Adeyemi, A., Mselle, P., Kashiwagi, D. and Sullivan, K. (2009), Challenges of a Graduate
Project Management Student, TG592009-22 International Conference on People in
Construction, Port Elizabeth, South Africa, July 12-14, 2009, Manuscript submitted for
publication.
Adeyemi, A., Kashiwagi, J., Kashiwagi, D. and Sullivan, K. (2009), New Procurement
Approach in Graduate Education, Manuscript submitted for publication, Association of
Schools of Construction of Southern Africa. Livingstone: Zambia.
Goodridge, S., Sullivan, K. and Kashiwagi, D. (2007), Case Study: Minimization of Best
Value Issues in the Procurement of Construction Services at the City of Miami Beach,
COBRA 2007 - Construction and Building Research Conference, Georgia Institute of
Technology, Atlanta, GA, USA, CD-T68 (September, 6, 2007).
Kashiwagi, D. (2009), Risk Management Model: How to Implement one, Unpublished
manuscript.
Kashiwagi, D., Sullivan, K. and Badger, W. (2008), Case Study of a New Construction
Research Model, ASC International Proceeding of the 44th Annual Conference, Auburn
University, Auburn, AL, CD 4:2 (April 2- 5, 2008).
Kashiwagi, D., Sullivan, K. and Ssegawa, J. (2008), Movement of the Latest Cutting Edge
Project Management/Delivery Systems to the University of Botswana, First
International Conference on Construction In Developing Countries (ICCIDC–I
“Advancing and Integrating Construction Education, Research & Practice” August 4-
5, 2008, Karachi, Pakistan.
Kashiwagi, J., Sullivan, K., Kashiwagi, D.T. and Badger, W. (2008), Simplification of
Projects Using Deductive Models and Dominant Information, 4th Scientific Conference
on Project Management (SCPM) & 1st International Project Management Association
(IPMA) / Mediterranean Network (MedNet) Conference on PM Advances, Training &
Certification in the Mediterranean, Chios Island, Greece, pp. 192-197 (May 29, 2008).
Kashiwagi, J. (2007), Leadership is alignment not influence, Arizona State University.
Tempe, AZ: United States of America. Master Thesis.
Mselle P., Muatjetjeju, M., Sullivan, K. and Kashiwagi, D. (2009), Developing a Research
Based MPM Graduate Program, The Fourth Built Environment Conference, Zambia,
(17 - 19 May 2009).
Mselle, P., Kashiwagi, D. and Sullivan, K., (2009), Graduate Risk Management Research
& Education Program in Botswana. Manuscript submitted for publication. Fifth
International Conference on Construction in the 21st Century (CITC-V) “Collaboration
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Keneilwe Ntshwene, Jacob Kashiwagi and Dean Kashiwagi, pp 332-343
& Integration in Engineering, Management, and Technology”. May 20-22, 2009.
Istanbul: Turkey.
Muatjetjeja, M., Mselle P., Kashiwagi, D. and Sullivan, K. (2009), Development of a
Professor in the Project Management Academic Profession, ASOCSA2009-63 The
Fourth Built Environment Conference, Zambia, (17 - 19 May 2009).
Pauli, M., Sullivan, K. and Kashiwagi, D. (2007), Utilization of Risk Management to Show
Value and Increase Competitiveness, COBRA 2007 - Construction and Building
Research Conference, Georgia Institute of Technology, Atlanta, GA, USA, CD-T59
(September 6, 2009).
Sullivan, K., Kashiwagi, J. and Kashiwagi, D. (2009), The Optimizing of Design Delivery
Services for Facility Owners, Unpublished Manuscript.
Sullivan, K. and Kashiwagi, D. (2007), Implementing Best Value Concepts into the Low
Bid Environment, 2007 ASCE Construction Research Congress, Grand Bahamas
Island, CD Track 110 (May 6-8, 2007).
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Kate Carter, pp 344-355
Research and teaching linkages: do they lead to better
graduates?
Kate Carter
School of the Built Environment,
Heriot-Watt University, Edinburgh, EH14 4AS,
United Kingdom
Email: [email protected]
Abstract:
Research and Teaching Linkages (RTL) have been the focus of an Enhancement
Themes project funded by QAA Scotland, UK. The project has been exploring the way
in which RTL are embedded in the curriculum in the Built Environment and
Engineering subject area. It builds on earlier work carried out by Jenkins (2007) and
seeks to identify emerging practice in the Scottish, UK and International Higher
Education sector. Workshops were held with academics to explore how research and
teaching are integrated with the aim of enhancing the student experience. The variety of
response suggests that RTL is difficult to define and yet more difficult to evaluate.
The professional bodies, including the RICS incorporate RTL as a requirement for
course accreditation. It is not yet clear what ‘shape’ this may take and what benefit it
may bring to the professions. The paper explores the role that RTL has to play in
developing the graduate attributes that employers seek in students who have undertaken
built environment degrees.
Keywords:
Research; Teaching; Accreditation; Graduate Attributes
1 Introduction
Research and teaching are central to the higher education sector. The balance between
research and teaching and the emphasis placed on each within organisations;
departments; teams; individuals all adds to the rich character of the university sector.
The relatively new overt interest in the relationship between research and teaching has
led to a heightened sense of interest in the link between them. Ramsden and Moses
(1992) were writing about the dynamic of research and teaching in Australian higher
education in the early 1990s. The body of research that has emerged over the last fifteen
years has explored this dynamic and the term Research Teaching Linkages (RTL) has
become widely recognised.
An exploration of the Built Environment subject discipline enables a better
understanding of how the relationship between research and teaching exists in this area.
The field of built environment is largely a vocational one, with the majority of degrees
leading to a professional qualification in the direct area of study. This has led to
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Kate Carter, pp 344-355
significant influence on the curriculum from professional bodies. A series of workshops
and interviews with academics were used to examine the link between research and
teaching and how it might lead to the development of ‘graduate attributes’. These
workshops provided rich qualitative data which was interpreted using a framework of
RTL developed by Healey (2005).
A second strand to the research involves examining the position adopted by the
professional bodies with regard to RTL. The role that RICS (The Royal Institution of
Chartered Surveyors); CIOB (the Chartered Institute of Builders); and ARB (the
Architectural Registration Board) play in determining how RTL is incorporated into the
provision of courses provides the position of the accrediting bodies for the majority of
built environment courses in the UK. This perspective is analysed in the context of the
workshop findings.
It is evident from the workshops that a broad range of approaches exist and RTL is not
readily defined. The Built Environment subject disciplines, by their very nature
incorporate an inquiry led education model that correlates closely to a research teaching
linked curriculum. There is general consensus that knowledge is developed from
participating in research type activities, whether or not they lead to the development of
new knowledge.
The relationship that exists between research and teaching take place in a dynamic
environment that Brew (1999) referred to as a ‘turbulent’ and where ‘ideas about
knowledge are seriously challenged’. Later work by Brew (2003) suggest that in order
to develop a better relationship between research and teaching a ‘re-negotiated
relationship’ is needed between students and academics. This concept underlies much of
the research on RTL that followed.
2 Research and Teaching Linkages in the Built Environment
The link between research and teaching has been debated over the last fifteen to twenty
years. The link was recognised by the UK Government as vital for the higher education
sector (Jenkins et al. 2007). However, Marsh and Hattie (2002) had conducted research
that suggests there is no correlation between ‘teaching effectiveness and research
productivity’. This poses the question of what RTL is aiming to achieve if there appears
to be no significant correlation between the two. It is possibly the definition of research
that causes the most difficulty in understanding the concept of RTL. Jenkins et al.
(2007) explored the understanding of research and found that the RAE definition of
research ‘original investigation undertaken in order to gain knowledge and
understanding’ did not necessarily fit with the understanding of research in terms of the
Research Teaching Linkages concept. New knowledge is clearly a central concept of
research but the definition of research as ‘scholarship’ used by Boyer (1990) provides a
broader term that can be applied to research activity as much to the product of research.
The scope of this project is to determine how RTL could be used to enhance student
achievement of research-type ‘attributes’ by linking research strategies with learning
activities (Enhancement Themes 2007). The LINK project (Durning and Temple 2004)
had already explored RTL in the built environment context. The project reinforced the
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importance of research skills to graduate employability. This was recognised as
particularly important for built environment professions who would have to problem
solve in a quickly changing environment. Amaratunga et al. (2006) stated that research
transfer was not enough to link research and teaching. It had to be supported by
‘activities’ described as student ‘absorption and use’ of the research.
2.1 A model of Research Teaching Linkages
The work of Healey (2005) resulted in the development of a conceptual model of RTL.
The quadrant model conceptualise RTL into four areas that allowed the different facets
of RTL to be understood. The model has two axes: Student – Academic; and Content –
Process. Each quadrant then takes on a character based on where it sits on the axes.
STUDENTS AS
PARTICIPANTS
Research-tutored Research-based
EMPHASIS
EMPHASIS ON
ON RESEARCH
RESEARCH PROCESSES
CONTENT AND
PROBLEMS
Research-led Research-oriented
TEACHER-FOCUSED
STUDENTS AS AUDIENCE
Figure 1: Healey RTL Model (2005)
An academic, school or department and institution will respond to these approaches in
different ways and emphasis on one approach will result from the culture of the
organisation and the pressures on an individual. Webster (2007) argues that while a
balance of research and teaching is desirable in terms of politics, management and
pedagogy, there is difficulty in sustaining both. His study of 140 UK academics (Built
Environment and Physical Sciences) suggests that teaching does enhance research and
research enhances teaching but trade-offs are inevitable with a finite resource. Durning
and Jenkins (2005) had already raised the issue of a disjuncture between teaching and
research and that failure in policy within institutions was preventing or limiting the
synergy between the two activities.
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The conceptual model has been used in this study as a framework to understand the
teaching approaches adopted in the built environment. The problem with the model
seems to be with the definition of the word ‘research’ as discussed above. The model
while useful in simplifying the concept of RTL has been criticised for its narrowing
affect on the understanding of the problem. One issue is the overlap in definition and the
continued lack of clarity in what is meant by the term research. Reference to ‘inquiry’
(Brew 2003) and ‘scholarship’ (Boyer 1990) have shifted the emphasis away from the
confusion surrounding what is meant by research in RTL.
Research conducted by Spronken-Smith et al. (2007) suggests that the definitions of
inquiry based learning and problem based learning are often confused, but essentially
inquiry based learning leads to the development of new knowledge while problem based
learning is often based on existing knowledge and therefore focuses on the process
rather than the outcome. This distinction can be usefully applied to teaching approaches
in the built environment and helps to soften the distinction between what is research and
what it not.
2.2 Professional Bodies
Many of the courses found in the Built Environment are accredited by professional
bodies. This has resulted in what Webster (2002) refers to as ‘curriculum creep’ caused
by prescription of course content. The need to fulfil the requirements of accreditation
has led to less time to devote to the development of research skills. The irony here is
that the employers, representatives of the professional bodies require the very ‘graduate
attributes’ in their employees that are associated with the Research Teaching links.
Developing these attributes may be sacrificed in order to satisfy the specific skills
required in the workplace.
In recent years the professional bodies have recognised the value of research in the
education system and have started to acknowledge this through their accreditation
process. Research and research type activities are becoming more evident in the criteria
for courses at both postgraduate and undergraduate levels.
The RICS has launched a pilot project in 2007 to evaluate research and innovation in
the courses it accredits. The participating institutions are required to demonstrate how
students are exposed to research and innovation. There is recognition that this should
move away from an evaluation based on Research Assessment Exercise (RAE)
performance, towards a teaching environment that encourages innovative approaches.
Following extensive consultation, RICS has decided that the threshold
standard should no longer be based solely on the RAE. Instead a portfolio
approach is being introduced to allow universities to demonstrate the many
ways in which innovation through teaching can be delivered.
Figure 2: RICS Guidance note on the threshold standard for research and innovation
Research does not dominate the accreditation criterion of the CIOB, which reflects a
more vocational nature to the courses accredited by this organisation. However there is
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clear reference to some of the ‘graduate attributes’ believed to emerge from research
teaching linkages. A failure to link these attributes to research type activity perhaps
exposes a gap in the accreditation process. The CIOB mentions ‘research’ in relation to
postgraduate degree accreditation and only briefly for undergraduate courses.
The prescription of architectural courses is determined by the ARB and there is an
emphasis on ‘Design’ in course structures. It is encouraged that students are given the
opportunity for specialised study and within this an element of ‘research’. The
following paraphrased statement clearly identifies a requirement for research prioritises
it below the core skills of design.
Students must also be given the opportunity to pursue related, specialised, or
optional studies studies,…that, …. link architecture with other subjects,
emphasise research, develop specialisms and promote advanced degrees.
However, such initiatives must not compromise the key requirement that all
students receiving a qualification must meet all the criteria.
Figure 3: Note from ARB prescription of qualifications
There is an emerging interest from the professional bodies in research skills within the
accreditation process. The RICS has clearly stated the intention to recognise a wider
interpretation of research within the threshold standard for accreditation of courses. The
ARB has always had an expectation that research is integrated into the delivery of
courses of architecture. The CIOB does incorporate a set of graduate attributes that
suggest a development of RTL within curriculum, but underplays explicit reference to
research. Nevertheless, research is an expectation of all these professional bodies within
their specific accreditation of built environment courses.
3 Research Methodology
This research is part of a higher education sector project conducted in Scotland over the
last two years. This particular study, which was one of nine, focused around the
exploration of research and teaching linkages within the Engineering and Built
Environment subjects. The qualitative approach adopted sought to explore the ways in
which research and teaching are integrated throughout undergraduate and taught
masters’ programmes. Four workshops were held with academics, representing research
active and teaching oriented individuals from across the discipline. The workshops were
designed to elicit the form that RTL takes in the Engineering and Built Environment
subjects. One of the workshops, held at the BEECON (Built Environment Education
Conference) was attended solely by built environment academics and provided the
opportunity to focus on built environment subject issues.
A background understanding of the issues particular to Engineering and Built
Environment was explored through these workshops and an academic perspective of
RTL was developed. The ‘student voice’ was considered important, but due to the
nature of the events where the workshops were hosted it was not possible to include
significant representation from the student body. Nevertheless, the role that students
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played in enacting some of the RTL propositions was regarded as important to the
successful implementation of RTL.
Further to the workshops, the accreditation by professional bodies and an understanding
of the expectation and requirement of integrating RTL was established. The approach
adopted involved evaluating the documentation on course prescription and accreditation
provided by the RICS; CIOB and ARB. This evaluation provided an understanding of
the current expectations to incorporate RTL, and helped explore the academic
perspective within the framework that shapes much of the curriculum in the built
environment.
4 Findings and Discussion
4.1 Developing the Academic Perspective
Four workshops explored the meaning of Research Teaching Linkages (RTL) from the
Engineering and Built Environment perspective. At each of these workshops 'Research
Type' activities were discussed in terms of what they ‘looked like’ and their relevance to
improving the student experience and the development of ‘graduate attributes’. The
following issues emerged from the workshops.
4.1.1 Definition of Research
There is contention around the definition of research in Engineering and the Built
Environment. Freestone and Wood (2006) assert that inadequate attention is given to
‘consultancy’ and ‘practice’. They argue that more importance should be given to
developing industry-academic links [in the built environment] and this must be
considered central to scholarly activity in the vocational subjects. The definition of
research for this project includes a wide range of activity and many academics (and
students) have opposing views on what constitutes research. The implementation of
research teaching linkages and the enhancement of graduate attributes will be hampered
if there is a persistent view that ‘proper’ research is isolated from curriculum delivery.
4.1.2 Research Type Activities
The definition of research prompted a wide ranging discussion. It is evident that
‘research’ in engineering and the built environment subjects has a broad definition. It is
also evident that it forms an integral part of many courses. Research was recognised to
exist or develop in the following areas:
• Critiques of earlier years
• Group/Collaborative projects
• 'Design' as an integral part of learning
• Identifying criteria for assessing the student's work
• Learning approach - Assessment - Reflection as an iterative process
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• Research feeding directly into the curricula how is this achieved? A wide range
of approaches from informal transfer of 'snippets of research outcomes' to formal
integration of research projects and their outcomes into the curricula.
The wide range of activities identified as ‘research’ demonstrates the broad
understanding of what research is. This is reflected in the case studies that are presented
in this report.
4.2 Issues associated with Research and Teaching Linkages
4.2.1 Early Years of a Degree
The integration of research and the development of research skills in the early years of
an undergraduate degree were considered important to enhance research teaching
linkages. The following approaches were considered good practice:
• The introduction of research activity in the first and second year of a student’s
course. This can be a simple enquiry based coursework or activity.
• ‘Teaching’ research methods to the first years, instead of leaving this to the third
or final year of a course.
• Involving students in evaluation and possibly assessment (formal or informal) of
student work in earlier years.
• Incorporate an understanding of what ‘research’ is in the early years to prepare a
student for their final year research project.
The discussions revolved around the concept that ‘research skills’ took time to develop.
Students, if encouraged to evolve these skills over a number of years can then be
expected to demonstrate the graduate attributes associated with research and teaching
linkages.
4.2.2 High level academic research
It was recognised that many students are completely removed from much of the high
level research that is carried out in universities. It was considered important that this
research should be connected more closely to the student experience and at the least
they should be made aware of research that is conducted by the academics in their
departments. The concept of connecting undergraduate study and research projects was
demonstrated in an example found in Warwick University. Students taking summer
placements as 'Research Assistants' experienced working on a research project with an
academic research group. This enabled the development of research skills while making
students aware of the high quality research conducted within their institution.
4.2.3 Student Skills and Graduate Attributes
How ‘graduate attributes’ and the associated student skills are identified is considered to
be different depending on the perspective of
• the student
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• the university
• the employer
There is a need to recognise the student perception of what they are gaining in terms of
so called 'graduate attributes'. This will assist in relating the university, student and
employers expectations and enhancing the value of the higher education system. Due to
the vocational nature of many engineering and built environment degrees, linking these
‘graduate attributes’ to the professional framework can strengthen and justify the need
for research teaching linkages.
Recognition was given to skills developed from non subject specific sources. Mature
students (non cognate, life experience) and Experienced students (work placements,
etc.) bring a range of skills that can be difficult to measure and specify, but contribute to
the development of ‘graduate attributes’ for the students themselves, but also the peers
that they work with during their education.
Progression at each level associated with the development of ‘graduate attributes’ and
the possibility of recognition and reward for these skills was considered a positive
approach to reinforcing their importance.
Finally, recognition was given, that not all students will have the same creative ability
and approach to problem solving. This could be problematic if graduate skills associated
with creative thinking streamed certain types of learners.
4.2.4 Linking to the Curriculum
Each of the workshops explored the views of academics, some research-active, some
not. The conceptual framework from Healey (2006) was used to frame the discussion on
the links between research and teaching in the Engineering and Built Environment
subjects. This framework divides the range of approaches into four quadrants of
Research-tutored; Research-based; Research-led; and Research-oriented.
In one of the workshops, a continuum was perceived across the framework from a
Teacher focused/Research content position common to many first year courses to a
Student participant/Research process position that would be evident in the development
of students as they progressed through their courses (Figure 4). The student
participating in a research process represents the dominant position in architecture
courses. This is mirrored in the academics where ‘practice based’ research is prevalent
for many who maintain a practice role. This same focus on research process is not found
in some of the more vocational courses that require the development of technical skills.
A quantity surveying student will be taught to ‘measure’; a structural engineer will be
taught how to calculate loads. The classification of courses using Healey’s model would
be divisive and it was not the aim of the workshop to ‘pigeonhole’ courses by type of
research approach that characterises them. However it did prove useful to discuss the
predominance of research type activity according to a course objectives and the
development of graduate attributes.
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STUDENTS AS
PARTICIPANTS
Research-tutored Research-based
EMPHASIS
EMPHASIS ON
ON RESEARCH
RESEARCH PROCESSES
CONTENT AND
PROBLEMS
Research-led Research-oriented
TEACHER-FOCUSED
STUDENTS AS AUDIENCE
Figure 4: Continuum of student progression based on the Healey Model (2005)
It was acknowledged that room was required in the curriculum to ensure that discipline
specific skills were taught in many courses. This might result in reduced exposure to
‘research’ activities until the later years of courses. A professionally accredited degree
must equip the students with the necessary knowledge to be able to operate in the
workplace and some employers seek graduates with the necessary technical skills in
favour of those demonstrating the ‘graduate attributes’ associated with research teaching
linkages.
A student being exposed to new knowledge does not necessarily imply a research led or
research based approach to their education. The discussion explored the notion that
knowledge could be imparted to students without them taking an active role in the
creation of that knowledge. This will often be the case in relation to new products and
processes that are not in the research expertise of the academics teaching the students.
The issues emerging from the workshops represent a broad view of research teaching
linkages relevant to the disciplines across the sector. A rich picture of the issues facing
the sector was developed and discussions allowed the participants to examine each of
these issues in relation to their own subject area. It was evident that there was a broad
vocational nature to most of the courses and research teaching linkages had a varied
definition. The strengths and weaknesses of approaches were explored
The built environment workshop explored the opportunities that RTL provided. There
were opportunities for both academics and staff to gain from these linkages. Academics
could use the linkages to establish funding opportunities. This has been done
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successfully at one university through a series of undergraduate projects, combined into
a significant research project. Another example of involving students in research was to
test concepts, where published research could be evaluated and challenged by students
with the aim of examining and questioning established theories.
5 Conclusion and Further Research
The assumption that research and teaching should be linked is made in much of the
literature. It is not the intent of this paper to re-state that linkages should be made, but to
explore the relationship between research and teaching in the Built Environment in
relation to development of graduate attributes. Trowler and Wareham (2007) identify
seven categories of the relationship between research and teaching (Table 1). The
practices, benefits and possible dysfunctions of each are explored and it is clear that
there is no one approach that provides a perfect solution for linking research and
teaching.
Table 1: The Relationship between Research and Teaching from Trowler and Wareham (2007)
Meaning of the Nexus Practices Suggested benefits Possible
dysfunctions
1. Learners do Research Research-based learning Range of skills and Patchy coverage
concepts developed of curriculum
2. Teachers do Research Teaching cutting edge Professionalises Exclusion of
material academic staff students
3. Teachers and learners Students as research Task-oriented and co- Learning too
research together assistants operative relationship slow to cover
curriculum
4. Research embedded in Research incorporated in Action research feeds Essential
the curriculum curriculum design into quality review and knowledge
enhancement poorly effected
5. Research culture Research culture Motivational context for Research
influences teaching and permeates learning teaching and learning prioritised over
learning teaching
6. The nexus, the university Teaching and research are Research-teaching links The needs and
and its environment linked into the commercial offer knowledge transfer priorities of
environment and and value in institutional employers and
communities reputation*. others take
precedence
7. Teaching and learning Research projects refined Mutual benefit to both Substantive
influences research and developed as with teaching and research in research becomes
students a feedback loop. sidelined.
The integration of research is expected by the professional bodies that have a significant
role in defining the content of the curriculum. There is currently a huge amount of
breadth in the interpretation of the inclusion of research. This provides flexibility to the
universities to define how research is best linked with teaching to provide the optimum
environment for the enhancement of graduate ‘attributes’. However there is evidence
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that the culture of the higher education sector has separated research and teaching,
which fails to stimulate the development of RTL within the curriculum.
Built environment courses incorporate a large amount of problem based and inquiry
based learning, but the accreditation process has witnessed a ‘squeezing’ of curriculum
which has reduced the opportunity to develop this practice as much as is necessary to
fully develop the ‘attributes’ expected of high calibre graduates. The future of higher
education depends on a differentiation between industry trained employees and higher
educated graduates. The evolution of RTL within the higher education sector is the key
to maintaining the value that universities offer.
6 Acknowledgement
The study was funded by the Scottish Quality Assurance Agency, through the
Enhancement Themes. This is an ongoing body of work aimed at the enhancement of
the student experience in higher education within Scotland. National and international
experience was sought to provide a better understanding of the RTL. The author
gratefully acknowledges the financial support and the assistance received.
7 References
Amaratunga, D., Senaratne, S., Kagioglou, M., Baldry, D., and Aouad, G. (2006)
‘Transferring Research Knowledge into Teaching in the Built Environment’, CEBE
Case Study
Boyer, E. L. (1990) ‘Scholarship reconsidered: priorities of the professoriate’, New
Jersey: The Carnegie Foundation for the Advancement of Teaching
Brew, A (1999) ‘Research and Teaching: Changing Relationships in a Changing
Context’, Studies in Higher Education, 24 (3), pp 291-301
Brew, A (2003) ‘Teaching and research: New relationships and their implications for
inquiry based teaching and learning in higher education’, Higher Education
Research and Development, 22, pp 3-18
Durning, B. & Temple, M. (2004). ‘Learning from LINK’, Brookes eJournal of
Learning and Teaching, 1 (1).
Durning, B. and Jenkins, A. (2005) ‘Teaching-research relations in departments: the
perspectives of built environment academics’, Studies in Higher Education, 30 (4),
407–426.
Enhancement Themes (2007) ‘Research-Teaching Linkages: Graduate attributes’,
http://www.enhancementthemes.ac.uk/themes/ResearchTeaching/attributes.asp
Freestone, R and Wood, D (2006) ‘Exploring Strategies for Linking Research and
Teaching’, Journal for Education in the Built Environment, 1 (1) pp. 94-111 ISSN:
1747-4205 (Online)
Healey, M. (2005) ‘Linking research and teaching exploring disciplinary spaces and the
role of inquiry-based learning’, In Barnett, R. (ed.) Reshaping the university: new
relationships between research, scholarship and teaching, pp.30–42. Maidenhead:
McGraw-Hill/Open University Press.
Marsh, H.W. and Hattie, J. (2002) ‘The relation between research productivity and
teaching effectiveness’, Journal of Higher Education, 73(5), pp. 603–641.
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Ramsden, P and Moses, I (1992) ‘Associations between research and teaching in
Australian higher education’, Higher Education, 23, pp 273-295
Roberts, A (2007) ‘The Link between Research and Teaching’, Architecture Journal for
Education in the Built Environment, 2 (2), pp. 3-20 ISSN: 1747-4205 (Online)
Spronken-Smith, R. A., Angelo, T., Matthews, H.,O’Steen, B. and Robertson, J. (2007).
‘How Effective is Inquiry-Based Learning in Linking Teaching and Research?’, In:
An International Colloquium on International Policies and Practices for Academic
Enquiry, Winchester, UK, April 19-21, 2007
Trowler, P. and Wareham, T. (2007) ‘Reconceptualising the Teaching-Research Nexus’,
In: Proceedings of the Annual HERDSA Conference 2007: Enhancing Higher
Education Theory and Scholarship, HERDSA, Adelaide Australia, 8-11 July 2007,
ISSN 1441001X. ISBN 0908557728.
Webster, C (2007) ‘Research-teaching Links and the Knowledge Problem’ CEBE
Transactions, 4 (2), pp 1-7 ISSN: 1745-0322 (Online)
Webster C. (2002) ‘Constructing the teaching-research link in the built environment
disciplines’, Exchange, 3, pp 12–14. www.exchange.ac.uk/issue3.asp viewed
12/4/09
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
S Zulu, M Smith and I Douglas, pp 356-361
A reflective evaluation of group assessment
S Zulu1, M Smith & I Douglas
School of the Built Environment,
Leeds Metropolitan University, Leeds, LS1 3HE
United Kingdom
Abstract:
Groupwork is seen as an important component to university education. This is more so
important to built environment education as groupworking provides a platform to mirror
industry working. However one of the problems with groupworking is the method of
assessment. This is compounded by the fact that it becomes a difficulty task for
assessors to assess indivdual contribution as most of the task working happen outside
the asessors attention. This paper provides a reflection of the authors experiences with
group working in the built environment. The reflection is based on a single
interprofessional studies module which is delivered to three student’s corhorts,
including quantity surveying, architectural technology and building surveying. In
addition the reflection is made against issues identified in a literature review. The
motivation for this was that contrasting opinions were found in literature concerning the
contribution of groupwork to student learning. Overall, the evaluation suggest a
possitive experience for students in groupwork tasks including the suitability of
assessment methods used in the module. However one of the limitation is that usually
weaker students are put at a disadvantage as they are usually identified late. The work
provides ground for further extensive research work on the subject.
Keywords:
Assessment, Education, Groupwork, Interprofessional studies
1 Introduction
Group work is increasingly being seen as an important method in university education.
There is a general agreement in literature that group work helps to develop important
interpersonal and personal skills (Race 2001, Visram and Joy 2003, Elliot & Higgins
2005, Kench et al 2008). However, one of the problems with group work for both
students and lecturers is how the work should be assessment (Parsons & Kassabowa
2002). This is primarily because of the possibility of having ‘free-riders’ and also the
difficulty of fairly awarding marks to reflect the level of students contribution to the
project outcomes (Race 2001). Peer assessment is seen by many as one of the methods
to deal with these problem areas with group work. Peer assessment, in group work, can
generally involve students assessing each others contribution to the group’s output
(Visram and Joy 2003). Kennedy (2005; pp) refers to peer assessment as ‘any of the
variety of approaches where students are required to assess other members of the group
1
Email: [email protected]
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S Zulu, M Smith and I Douglas, pp 356-361
on their relative contribution to a project’. This paper provides the authors’ reflection on
the use of group assessment on a student group project in the school of the Built
Environment.
2 Group Assessment
Race (2001) suggests several ways of assessing group work which can be divided into
two main groups. The first group relates to those methods were students are not
involved in the allocation of marks, while the second The group of methods relate to
those which account for the level of contribution to the groups output. As discussed
earlier one of the problems with group work amongst students is the potential for
conflict due to variations in input between students. In order to provide a fair criterion to
assess the work, students can be involved to assess the level of contribution so that
those who have contributed more can be awarded higher marks that those whose
contribution was low.
Several authors have identified the advantages and disadvantages of peer assessment.
The existence of passengers and free loaders is widely acknowledged as a potential
problem with group work (Parsons and Kassabova 2002). Freeman & McKenzie (as
cited by Elliot & Higgins 2005) argue that students view group work assessment as
unfair if there is equal reward for unequal contributions. However peer assessment is
widely seen as one means of overcoming the problem of freeloading (Elliot & Higgins
(2005). Visram & Joy (2003) acknowledges that sometimes students may lack the
ability to evaluate each other. Despite this acknowledgement, Elliot & Higgins (2005) in
their study on group assessment found that generally students view peer assessment as a
fair way of distributing marks. Nordberg (2006) noted that group projects can have an
effect on both weak and strong students. They suggest that while weak students can
have a free ride in group projects, strong students can be held back from achieving the
higher marks as the work of individuals is subsumed in the group output. Fairness of
peer assessment has also been questioned, as in some instances students may not want
to downgrade other students in order to preserve friendship (Visram & Joy (2003) and
Kennedy (2005)). Kennedy (2005) also identified some issues with peer assessment
including, the reluctance by students to judge others, the propensity by students to mark
down those who had not done a fair share, lack of consistency in judgement between
students in a group, the potential for peer assessment to limit weaker students
contribution on the project as they may be ignored or given less important tasks, the
possibility of generating tension instead of true teamwork, the process for collection and
collation of data can be time consuming and that sometimes dominant students can
influence the allocation of tasks to their advantage. While Kennedy (2005)
acknowledges the possibility of inconsistencies in judgement, Baker (2008) suggests
that students are in a better position to assess their peers and that the aggregate rating
score increase reliability of the system.
Despite the potential problems with peer assessment as cited above, it is generally
agreed that it can bring potential benefits. Visram & Joy (2003) for example cited the
following as advantages of peer assessment; that student actively participate and take
responsibility for the assessment process; that students can critically analyse work done
by others rather than simply receiving a mark as feedback; that the process can
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encourage students to be accountable to the team; that it helps to reduce or avoid free
loading and; that the process makes it easier to identify students who do not contribute
effectively as it is the students themselves who make the judgement.
3 The Interprofessional Studies Module
The Inter-Professional studies module is a final year module with students from three
disciplines in the school of the built environment. These include Architectural
Technology, Building surveying and Quantity Surveying. The module is project based
requiring students to work in inter-disciplinary groups of professionals mirroring
industry working practice. The project involves a development project which requires
input from students from different professional backgrounds to come up with a solution.
In order to run appropriately, the groups are required to appoint a team leader and to
sign a group contract. The group contract governs the working relationships and the
procedure for dealing with inappropriate conduct. The group work concept is
emphasised as each individuals input significantly impacts on the group mark. The
assessment for the project work includes components which involve intra-peer
assessment. The method requires students in the same group to assess the contribution
of other members of the group. Using the peer assessment scores 50% of the group
mark is adjusted to account for the level of students’ contribution to the group output.
4 A Reflection
The experiences with group assessment generally reflect the reviewed literature. Overall
the method of peer assessment for group work provides a useful mechanism for
recognising individual effort in a group work. The method used in this module is
effective and generally students are happy with the final outcome, both in terms of
fairness and grading system. Below is our reflection, based on an analysis of the
performance of 26 groups over 3 years, in relation to various peer-assessment issues
identified in the literature.
Does it encourage participation? Generally students actively participate in the
assessment of the module. The groupwork seem to give the students an element of
independence and responsibility. The peer assessment component plus the group
contract make students to be more accountable to the group. It must be said however
that the design of the group work is such that every students input should have a direct
bearing on the others. Therefore in order for the group task to be completed all
components have to be completed making all students accountable. This makes the
students to be more aware of the impact of their input to the group output.
Do students lack ability to peer assess? Evidence suggests that students fairly mark
down those who have not contributed effectively to the group output. However there
have been a few incidences where a group member has complained that they have been
marked down deliberately. Generally however the majority of students seem to fairly
assess each other. The level of contribution is also evidenced from minutes of group
meetings. Each group is required to keep weekly minutes as evidence of group
discussions and is used as a record of attendance and performance. There seems to be a
correlation between the evidence in the group meetings minutes and the peer
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assessment. Evidently also students seem to clearly acknowledge those who have
contributed more. Case 1 in Table 1 below, for example, shows a group where one
student has been awarded the highest marks, meaning that all students acknowledged
his/her input. The peer assessment (PA) score for each student was computed as the
average score as assessed by other group members.
Table 1: Example of Peer Assessment Scores
Group Student PA Score
Case 1 St1 24.00
St2 22.00
St3 21.67
St4 18.50
St5 12.50
St6 11.17
Case 2 St1 24.00
St2 24.00
St3 24.00
St4 24.00
St5 24.00
Case 3 St1 24.00
St2 24.00
St3 24.00
St4 24.00
St5 3.20
Are they capable to peer-assess? Although literature suggests that sometimes students
are inclined to give equal scores due to friendships, the experience on the module
suggest that students are capable to peer-assess and that the friendship effect may be
minimal. Of all the 23 groups analysed only 6 groups (26%) so far have chose to give
each other equal marks such as in Case 2 in Table 1. It is not clear, however, whether
this reflects the inability of the students to assess, as it may also reflect a group were all
the team members actively participate. Case 3 in Table 1 also shows a situation where
students have awarded one particular student a very low mark. This clearly suggests that
students are able to discriminate marks particularly against those who would like to take
a free ride. Therefore it can be concluded that students on this module are capable of
peer-assessing effectively.
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Is their consistency of judgement? Generally in the majority of cases the assessment
scores are consistent across the board. Assessing others seems to be consistent although
in some cases students give themselves exaggerated scores.
What about Weaker & Stronger students? Group work however has some
disadvantages in that it is difficult sometimes to identify weaker students early as their
level of performance in the group is only known at the end of the peer assessment.
However the use of minutes for group meetings by the student group, is be used by the
tutors to discuss group progress and member performance. This therefore makes it
possible to identify problems within the group early. A review of literature also suggests
that stronger students may be hampered by group work. As discussed above, peer
assessment in the module seem to be fair and consistent and therefore stronger students
are usually rewarded for their level of contribution. The correlation between peer
assessment scores and individual marks was also computed and was found to be 0.812.
This shows a very strong correlation (0.812) suggesting that students who contribute
more in the group component are likely to gain better marks in their individual pieces of
work.
5 Conclusion
The purpose of the paper was to reflect upon the use of group assessment generally and
the use of peer assessment in particular. A review of literature shows that generally
group assessment can be used effectively to discriminate marks in order to account for
levels of students’ contribution towards group work. The experiences of the authors on
the interprofessional studies also show that peer assessment has been successfully used
to award and discriminate marks. Several studies were cited in the reviewed literature in
which various issues were identified as potential problem areas of peer assessment. The
findings in our reflection, whilst acknowledging the potential problems with group
assessment, are generally supportive of the use of peer assessment. One of the problem
areas with group work in general is that usually weaker students are put at a
disadvantage as they are usually identified late. The authors recommend that an
appropriate approach to detail with this needs to be put in place. The use of a group
contract and the requirement for the groups to keep minutes of their meetings provides a
mechanism for tutors to check students’ performance even before the final per
assessment. This is helpful in identifying and providing support to weaker students.
References
Baker, D. (2008) Peer Assessment in Small Groups: A Comparison of Methods;
Journal of management education, Vol. 32 No. 2, April 2008 183-209
Burdett, J (2003) Making Groups Work: University Students' Perceptions; International
Education Journal Vol 4, No 3, 2003 http://iej.cjb.net 177
Elliot, N. & Higgins, A. (2005) Self and peer assessment – does it make a difference to
student group work?; Nurse Education in Practice (2005) 5, 40–48
Kench, P., Field, N., Agudera, M. & Gill, M. (2008) Peer assessment of individual
contributions to a group project: Student perceptions; Radiography, pp1-8, The
College of Radiographers.
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Kennedy, G. (2005) Peer-assessment in Group Projects: Is It Worth It?; Australian
Computer Society, Inc.
Parsons, D. and Kasabova, D. (2002) Group work and fair assessment: A case study;
Proceedings of the 15th Annual NACCQ, Hamilton New Zealand July, 2002 pp 341-
348
Nordberg, D. (2006), Fairness in Assessing Group Projects: A Conceptual Framework
for Higher Education. Available at SSRN: http://ssrn.com/abstract=873605
[Accessed 22/06/2009]
Raban, R. and Litchfield, A. () Peer assessment in large group projects: forming
professional attitudes in IT students; Faculty of Information Technology, University
of Technology, UniServe Science Assessment Symposium Proceedings, pp182-186
Race, P. (2001) A Briefing on Self, Peer and Group Assessment; Assessment Series
No.9, LTSN Generic Centre
Visram, Z. & Joy, M. (2003) Group assessment for computer science projects; 4th
Annual LTSN-ICS Conference, NUI Galway, LTSN Centre for Information and
Computer Sciences
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Kathryn Robson, pp 362-380
Satisfied Students, “I’d like to see that”: A discussion of
strategies introduced in the classroom with the aim of
improving student satisfaction
Kathryn Robson
RMIT University, GPO 2476V, Melbourne, VIC, 3001, Australia
Abstract
This study uses a group of 70 second year university students in the School of Property,
Construction & Project Management at RMIT University in Melbourne, to examine the
concept of student satisfaction. The students are studying Property or Valuation, in the
second year of a four year degree and are undertaking the core subject (course), Urban
Economics.
The students were surveyed during the first and one of their last classes. The first
survey asked their assessment preferences and their expectations of the course. The
final surveying process was a combination of the standard Course Experience Survey
(CES) undertaken university wide for each course, each semester and a short
qualitative survey asking similar questions to the initial survey. These results were then
compared to those of previous semesters for this course. The purpose of the first
questionnaire was to give students input into the assessment for the course, which
would hopefully lead to increased engagement and positively influence student
satisfaction. The questionnaire at the end of the course was to gather student feedback
for the semester.
This course has been taught by the same lecturer for the three previous years and
assessment innovations have been trialled over two of these, with successful increases
in student satisfaction results. This fourth year is the first time that the students have
been pre-tested, with the assessment tasks discussed and justified to the students. This
process has definitely increased student engagement in the tasks, but has it increased
student satisfaction? Is student engagement just one step in a long journey towards the
elusive concept of student satisfaction?
Keywords
Student engagement, student satisfaction, property/valuation education, assessment
Introduction
Action, not theory is the starting point for learning. People perform tasks; solve
problems etc., not usually in isolation and certainly in interaction with their
environment. This forms the basis of the learning process (Svensson & Ellstrom,
2004). This idea formed the starting point of the examination within one course
(subject) over a period of three years but specifically for 2009.
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Many people in Higher Education grapple with the elusive and important concept of
student satisfaction. In Australia, graduate satisfaction is seen as one of the important
aspects for government funding. How can we measure it and how can we maintain it?
One of the most important measures in higher educational research is student
engagement. If we engage with the students, we will have achieved worthwhile
learning outcomes and this will lead to student satisfaction ((Kuh, 2003). In the USA
educators rely heavily on the National Survey of Student Engagement (NSSE) and the
main component of this survey is The College Student Report (Appendix 1). This
instrument asks students to report the frequency that they engage in activities that
represent good educational practice across a wide spectrum of areas and direct
measures of student satisfaction are obtained from the questions:
• “How would you evaluate your entire educational experience at this
institution?” and
• “If you could start over again, would you go to the same institution you
are now attending?”
These ideas form the major criteria evaluated for educational engagement in higher
education in the United States and the initial 22 questions in appendix one, became the
guidelines of the current examination into student engagement in the Urban Economics
class at RMIT University during 2009. This paper looks at the following questions, in
the concept of this one course (subject):
What is student engagement in Higher Education?
What is the connection between student engagement and student satisfaction?
What affect does student centred teaching strategies have on higher education student
satisfaction?
There are a number of difficulties with attempting to measure student satisfaction in
higher education. It is becoming increasingly important to listen and engage with
students. The question is, are the current questionnaires used the best method of doing
this? More work needs to be done to ensure that the questionnaires are fit for the
purpose they are intended for and that response rates are optimised (Rowley, 2003).
With this in mind this research was planned around pre-surveying students about their
preferences and preconceptions and then re-surveying them for their feedback at the
end of the course. The university required Course Experience Survey was also
administered at the end of the semester. When the data was analysed, although
providing evidence of student engagement and a high level of student satisfaction in the
course, the experiment was not entirely successful. This type of activity is very
worthwhile and usually leads to improved teaching results. This particular exercise
will need to be repeated a number of times and the teaching methods, assessment types
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Kathryn Robson, pp 362-380
and curriculum, fine tuned each time, before this teacher can be satisfied that student
satisfaction overall is increasing.
Literature Review
Higher education in Australia was once the domain of the elite. Universities are no
longer considered hallowed places for the few, but are seen as an opportunity for
anyone within the community to learn and expand their knowledge and skills. But this
open policy often comes at a price and current university students in Australia usually
find themselves part of a very large cohort. The level of support they receive varies
and they are often left to fend for themselves in this very foreign environment. In their
first year of Higher Education students either adapt, or disappear (Kift, 2004). There
is evidence that many first year students are engaged, but they engage in a myriad of
ways and we need to be more creative as teachers, to capture their interest (Krause,
2005b). Considerable research has been completed on first year experiences (FYE) and
it appears as this where we often lose students. In 2004, students responding to the
FYE questionnaire in Australia, found that students fell roughly into two groups; those
that persist and potential drop-outs. In fact 28% of the respondents said that they
seriously considered dropping out of higher education (Krause, 2005a). It is difficult
for a university to control these factors and it is realistic to expect to have up to 30% of
your students who are working to support themselves and be not very interested in their
program. For many it is simply a means to a job. This of course leads to problems in
the classroom with poor attendance, inability to complete tasks, problems meeting
group expectations and rarely completing set work. In this theme of inevitability with
some students failing and dropping out, the universities are often in an impossible
position. Kington (2008) suggests that this may be inevitable and is more a result of
poor self esteem issues, which are very difficult for universities to overcome. This is
the challenge for teachers; to engage the students who are disenchanted from their FYE
and encourage them to undertake learning options that are absorbing and reflective,
rather than cramming information for a test, or exam (McLaughlin and Robson, 2007)
The theories about university education may differ, but inherently most educators have
a strong concept of what a university education entails. Bowden and Marton (1998)
believe that university studies should equip students with the ability to deal with
situations in the future which are unknown until they occur. They must be guided to
expect the unknown and be able to meet the challenge. They argue that simply giving
students the facts is a static situation and does not prepare them for the dynamic and
every changing world that they will confront in the workplace. Candy (2000) takes this
idea even further and describes “lifelong learning” as all aspects of education and
training at all stages of life and wherever it occurs. When discussing teaching and
assessment strategies, Candy (2000) maintained that the teaching approaches most
likely to encourage students to engage in lifelong learning skills include those that
involve real-world learning. This is supported by de la Harpe and Radloff (2005) who
encourage universities to ensure that learning environments are a student centred
process, rather than content focused and that learning outcomes, learning activities and
assessment tasks be aligned.
The Educational Commission of the States (1995) maintained that colleges and
universities, who effectively engaged students, were those that added value and
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channelled student energies into appropriate activities. The National Survey of Student
Engagement in the USA draws heavily on the “Seven Principles for Good Practice in
Undergraduate Education” (Chickering & Gamson, 1987) in preparing the student
engagement questionnaire. These principles are:
• Encouragement of student-faculty contacts.
• Interchange and cooperation amongst students.
• Use active learning techniques.
• Provide prompt feedback.
• Promote time spent on the tasks
• Encourage high expectations and
• Have respect for diverse talents and different ways of learning.
Like Bowden and Marton (1998), Chickering and Gamson (1987) felt that students
should be prepared to understand and deal with life. They believe that, what is taught
is equally important as how it is taught; but until the how is consolidated, it is difficult
to tackle the curriculum. They also offer strategies to implement the seven principles.
To become an active learner, students need to be given structured exercises,
challenging discussion and team projects with peer critiques in the classroom; this type
of activity should also be encouraged outside the classroom through research projects
etc. It is very difficult for students if they are not given appropriate and prompt
feedback on their assessment tasks. This links hand-in-hand with time management for
higher education tasks and it is also important that students develop a timetable for the
tasks that they have to undertake. With regard to expectations, academics must set
high standards and guide students well as to how they can achieve these. Finally,
students need opportunities to show their talent and learn in ways that suit them. There
are various tactics that can be put into place to enhance these characteristics.
Curriculum should have a mix of learning styles to enable students to experience things
they are comfortable with and yet on the other hand contain new styles to challenge
them.
How does this compare to similar research by Professor Geoffrey Scott, (2006) on the
Course Experience Questionnaire (CEQ) for Australian Higher Education Institutions?
The CEQ is the only nationally generated data for higher education graduates in
Australia. It has been administered to every Australian graduate for over ten years.
The survey combines rating and open-ended comments on the Best Aspects (BA) and
the most in need of improvement (NI) for a student’s tertiary experience. This study
used a database of over 168,000 comments from 94,000 graduates of 14 Australian
Universities for the years 2001-4. This resulted in 285,900 hits on their university
experience. The survey was possible due to IT software called CEQuery. This
software classifies comments into five main domains; Outcomes, Staff, Course Design,
Assessment and Support, then into 26 sub-domains. The relative importance of the total
hits was approximately:
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• Course Design 41%
• Staff 26%
• Support 14%
• Outcomes 12% and
• Assessment 7%
This gives an indication of the relative weight of the factors that motivate student
engagement in an Australian context. This analysis revealed that practice-orientated
and interactive, face-to-face learning methods attracted by far the most “best aspects”
(BA) comments than the usual “sage on the stage” traditional lecturing indicates the
importance of shifting the focus to student-centred approaches to course design. For
this group of 95,000 students, learning remained very much a social experience.
The study also identified three areas that warrant an intensified focus for improvement
(NI) and these areas are:
• Assessment
• Student Administration and Support and
• Course structure and Expectations.
The study has identified that it is the total experience of a university that shapes
students’ judgements of quality and motivates their engagement in their studies. The
feedback workshops of more than 100 key staff from the 14 participating universities
endorsed the use of CEQuery as an educational tracking tool and formulated a set of
educational guidelines that have emerged from this particular study for sound higher
education teaching. They are:
• A sound, flexible, relevant and responsive course design;
• Capable, committed, accessible and responsive staff;
• Efficient and responsive administrative, IT, library and student support
systems actively working together; and
• Relevant, consistent and integrated assessment of a university standard
that the course design, learning methods and resources support.
The report then went on to state that the factors that are important to students are that
the course (program) they are undertaking be:
• Relevant;
• Desirable;
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• Distinctive; and
• Achievable (Scott, 2006)
Conscious of this growing problem, many academics in Higher Education are
struggling with student disenchantment and discovering ways that they might
successfully engage with their students.
Snyder (2003) noted that often the cultural environment of higher education did not
encourage active learning in students and teachers needed to be creative in their subject
matter to encourage creative learning. Snyder maintains that teachers must take a risk
and experiment with different teaching styles and methods to facilitate change.
D’Andrea and Gosling (2001) discuss the gap between educational rhetoric, such as
“enhancing the student experience” or “quality of learning” and what is often actually
delivered to the student. It comes back to student expectation. If students are informed
about the different processes and the educational reasons for them, they are more likely
to be supportive of their introduction. Sheppard and Gilbert (1991) found that the way
courses were taught rather than the subject matter led to improved student learning.
Whether a student experiences satisfaction, or lack thereof, is the result of a
combination of many factors in the education experience and possibly the most
important of these is student engagement, from which all the other factors flow. There
is evidence that the use of student evaluations does encourage lecturers to improve their
teaching methods and styles and it is only by surveying students that we find what their
opinions really are (Kanagaretnam et al, 2003).
What exactly is Engagement?
It can be positive, non-existent, or even negative. For many students the University
Experience is a battle. The word ‘engagement’ has become synonymous with the
qualities seen as essential to a high quality undergraduate experience. Students are
either more or less involved with their university community and the term refers to the
time, energy and resources that students apply to their learning experience at
university. It is widely accepted in educational research that involvement contributes
to a range of outcomes that include: persistence, satisfaction, achievement and success.
On the one hand we have modern universities being places of great diversity. Mass
higher education brings with it diverse abilities, age groups and backgrounds. The old
recipe for engagement is no longer relevant. The challenge is how to engage with such
a diverse university population? We need to do more ‘to address adequately the full
meaning and implications of student engagement (Krause, 2005a).
Research indicates that students are working longer hours in paid employment and
generally feel less committed to their tertiary studies. The students find the transition
from Secondary School difficult and lonely. The increasing class sizes and flexible
course delivery exacerbates this sense of alienation (Kift, 2004). Higher Education
staff and students are made up of an enormous pool of individuals and as individuals it
is very difficult to make generalisations about their thoughts and actions. With regard
to Australian universities, Ramsden et al (2007) surveyed 439 lecturers with reference
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Kathryn Robson, pp 362-380
to their approaches to teaching large first year classes (greater than 170 students). They
found a causal path from experiences of academic leadership for teaching and
collaborative management and a commitment to student learning and the context of
teaching by lecturers. Lecturers who felt this leadership support were more likely to
agree that large class size and other variables do not hinder effective teaching.
Kift (2004), in her paper regarding data from First Year Experience (FYE) found that
the majority of higher education teachers are either stretched and weary with no time to
contemplate change , or are adverse to change. A number of dedicated and committed
teachers are rising to the challenge, but many more are simply disconnected from the
idea of treating students differently. The challenge is to find support for any changes
from academics who are prepared to take the pedagogical risks necessary to follow
FYE objectives and who are senior enough to invest the time to improve the first year
experience (Kift, 2004). One very interesting approach to higher education teaching
commitment appears in the research by Akerlind (2004) based on interviews with 28
university academics at Australian universities from a mixture of disciplines. From
these interviews the author developed four categories of teacher experience which are
broader than the traditional teacher-centred or student-centred approach:
• A teacher transmission focused experience;
• A teacher-student relations focused experience;
• A student engagement focused experience and a
• Student learning focused experience.
The author discovered that teachers gained very little personal satisfaction from the
first type of experience; they gained some measure of satisfaction from the second
method of teaching; although requiring more preparation time the third method was
very rewarding and the fourth method not only was immensely satisfying, but also
extended their own knowledge of the subject area. The resulting conclusion was that
although many lecturers see teaching as interfering with their research and use only the
first two approaches, those that choose to focus on the latter two methods find that
teaching can actually enhance their research potential (Akerlind, 2004).
The literature points to a number of factors that contribute to and influence student
satisfaction in higher education. Some of these relate to the general university
experience and are outside the control of academics. On the other hand, a number of
the suggestions can be applied into a teaching scenario. The author took note of these
and incorporated them into the planning for this course over a two year period. The
areas addressed came directly from the literature and covered the topics of assessment,
feedback, course design, graduate outcomes, time allocated to tasks, high expectations
and respect for differences in talents and learning styles. The strategies that were
implemented in these areas by the author to improve student engagement and
consequently student satisfaction are outlined in the remaining sections of the paper.
The idea of surveying students before their classes commenced to initiate student
preferences with regard to assessment also came from the literature. Gapp and Fischer
(2006) conducted their own surveys of their classes in higher education and the
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feedback from students was that the process was more inclusive than previous survey-
driven approaches and the students felt things were changing for the better.
Method
A core second year course (subject) in the Property and Valuation degrees at RMIT
University, called Urban Economics, was chosen to evaluate the relationship between
student engagement and satisfaction. This course is undertaken by students in the third
semester of an eight semester degree. Over a two year period, various adjustments
were made in the teaching methods and content of this course, with the aim of
improving student engagement and thereby hopefully improving student satisfaction.
The research material used to evaluate student satisfaction consisted of a number of
survey forms. Of the five factors Candy (2000) discussed; the structure of the
curriculum; the content of the curriculum; teaching methods; approaches to assessment
and the student support system, four of them are in the control of the teacher. These
are the items that can be used to engage higher education students. Likewise, the seven
principles of Chickering and Gamson (1987) can all be used by teachers to enhance the
learning process and create engaged students. Teachers can expand their assessment to
focus on the aspects of learning that contribute to development of lifelong learning
skills. Assessment can include as well as content, have a focus on different aspects of
learning (Radloff and de la Harpe, 2001).
Starting from a base at the end of teaching in 2007, the Course Experience Survey
(CES) (Appendix 2) indicated a good teaching score of 64.3% and overall satisfaction
with the subject of 60%. These scores formed the background of a decision to design a
subject that students would engage with and as a consequence, be satisfied with. A
number of meetings were held with a member of the then Portfolio Teaching and
Learning staff and a completely new set of teaching methods and curriculum were
implemented for 2008. In summary, emphasis was placed on using a variety of
assessment tasks and class tests instead of a final exam. The apparent award for this
effort was an increase in the good teaching score to 86% and overall satisfaction of
over 90%. Although very satisfying, this left the lingering doubt as to how these scores
could be improved upon? What could be done in 2009 to improve these scores, given
that they were already high? The author noted that in none of the official
questionnaires delivered to students were they ever asked their preferences before a
course commenced. The surveys were always conducted towards the end of the
semester when it was too late to make changes. The decision was made to ask student
preferences for assessment at the beginning of the semester and then design the
assessment tasks around the results. This decision is supported by research undertaken
by Kanagaretnam et al, (2003) and Lecouter and Defabbro (2001).
During the first class in 2009, the challenge was to continue to improve the course.
The 70 enrolled students were asked to complete a brief three question questionnaire
about assessment and satisfaction (See Appendix 3). At the completion of the
semester, students completed both the University CES questionnaire and a further three
question feedback sheet for the teacher (See Appendix 2 & 4). The results of these
three sets of questionnaires have been tabulated and are presented in the following
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section. The results are predominately qualitative research, supported by the University
CES survey which is largely quantitative analysis.
Results
During the first Urban Economic class in 2009, students were given an outline of the
course then asked to provide feedback in the form of a short survey (Appendix 2). Of
the 70 students, 57 provided responses. When asked what type of assessment they
would prefer, the majority of students (75%) displayed a preference for individual
assignments and 50% favoured group assignments; as many students expressed a desire
for both. Online exercises were favoured by 35% of students, followed by tests (30%)
and class exercises (27%). Only 7% of students preferred to undertake an exam. The
unexpected results were a high preference for Take Home Exercises (68%) and only
9% wanting to do a presentation. The only other assessment suggested was an Open Book
Test.
percentage for assessment preference
80
70
60
percentage
50
40
30
20
10
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.
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.
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Figure One: Assessment tasks in order of student preference
Students were then asked what it would take to be 100% satisfied with the course. This open
ended question drew a variety of responses including nothing, fun, a glass of cold
lemonade before each class, be interesting, clear and concise assessment tasks and
material, a pass, easy access to help, more reading and discussion, or a high distinction
and no exam.
On the basis of this survey, the assessment tasks were adjusted to include take home
exercises and the students were given the option of either completing these five take
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Kathryn Robson, pp 362-380
home exercises and one class test, or undertaking two class tests (all three were worth
10% making a total of 20%). There was to be no exam and an individual research
exercise was set for the week the lecturer was absent, worth 10%. An individual
Cost/Benefit report (worth 20%) and a group development proposal with 15% for a
presentation and 35% for the report made up the total assessment.
When reporting back to the students in the second class, the teacher firmly defended
the presentation, despite being unpopular, as a necessary skill to learn for the
workplace. All other assessment had been adjusted in accordance with student
preferences.
During the final weeks of semester, 55% of the 70 students completed the CEQ form
(Appendix 2), 43 students also completed the three question survey (Appendix 4). This
final student survey asked students, in the first question, what they had found
worthwhile in this course. Unlike the survey at the commencement of the semester, the
students were not led by suggestions, as the question was completely open-ended.
The answers were many and varied. 28% liked the tests, 56% the weekly class
exercises, 49% found the lectures relevant and interesting, 30% liked having a choice
of assessment, 26% enjoyed the presentations and 33%, the site development project.
Overall, a very positive response was obtained, with 21% enjoying researching ideas,
9% discussion in tutorials, 9% the class interaction and a small percentage related to no
exams, ongoing assessments and fast return of assessments.
Activities preferred by students
60
50
40
percentage
30
20
10
0
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ity
es
n
.
s
.
Ex
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in
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Te
oj
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ta
ct
e
us
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Pr
ar
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As
Le
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Re
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Figure Two: Preference for course activities
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With regard to question two, 55% wanted no changes and the rest made very valid
suggestions that varied from organisational matters, clearer learning outcomes,
preferences for an exam and criticism for the individual research activity. Results
highlighted that there is certainly plenty of room for improvement for further semester.
The final CEQ scores for 2009 were 74% for the good teaching score and 76% for
overall student satisfaction.
Discussion
Disappointment was the overwhelming emotion felt at the end of this semester.
Although the lecturer felt that the course was better structured, more interesting and
challenging; and the students on the whole more engaged with the course materials
than in any previous semester, the CES scores did not appear to reflect this. Though
still high, they were lower than the previous year. In addition to the two short
questionnaires, the students were offered opportunities to present drafts of the two
assignments, only three individual students and two groups, took advantage of this
offer. Class time was allocated for group work and the link was reinforced between
other courses that they might be undertaking, especially Property Development. All of
which were questions from the US College Student Report in appendix 1, as indicators
of improved student engagement.
Which survey results reflect the true position of student satisfaction, the small class
room surveys or the CES university wide survey given in every class? There is no
doubt that the students who chose to complete the assessment were engaged. Overall,
the assessment tasks were enthusiastically and diligently completed. Their feedback
was enthusiastic and positive; their one negative theme was the research activity which
was provided to cover the week the teacher was absent. The students were critical of
this activity and on reflection it was vague, ill-conceived and added additional
assessment to a course that was already very solid. This resulted in a larger number of
low grades for this activity and many have contributed to a lower satisfaction score
than for the previous year. In the endeavour to maintain a robust curriculum, the
assessment tasks became overpowering. Secondly, every cohort of students is
different, as is the teacher and it is difficult to compare scores from one teaching period
to another.
The CES survey was administered over three separate weeks due to optional
assessment and presentations and many students were not briefed about how to fill
them out correctly. Finally, the CES forms themselves are seen by many students as
meaningless and repetitive. For example, question 13 should have elicited a response
of N/A (as no such software was used) and yet only 26% answered this way (appendix
3). As one student stated, “I answer these forms the same way for every class,
regardless of the experiences”. The six questions that make up the good teaching
scores do not really relate to student engagement, which was the major motivator for
the curriculum changes. 76% overall satisfaction is still high and it may not be 90% as
for the previous year, but it may be in the range of maximum scores that we can expect
from class room activity.
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Conclusion and Further Research
In hindsight the most important question for this research was; what would it take for
you to be 100% satisfied with this course? The question was not really discussed in
class, nor was it emphasised as important. It needed questions leading up to it, rather
than following immediately on from the assessment question. Another factor was the
25% of students who did not choose group assignment as a desired assessment. To be
consistent they should have been encouraged to complete the assignment as
individuals, or in groups of less that four. In fact there was only one single person
assignment and one two person assignment. This is a very grey area. It is highly likely
that the ill-conceived research exercise and the dislike of group assessment were
sufficient to contribute to the 25% dissatisfaction with this course. 2010 will be
another opportunity to fine tune the course material. The take-home exercises were
introduced as a direct result of question one, from the initial survey (Appendix 2) and it
was an optional activity that would replace one of the two class tests. The numbers
completing this assessment (76%) and the robustness of their answers was extremely
satisfying. The class by this stage had split into two distinct cohorts. One group (in the
majority) were engaged with the course material and the teaching methods; the
minority group were rarely attending, relying on downloading the lecture slides,
swotting for the tests, rushing their assignments and behaving unprofessionally in their
group work. From the evidence in the research this is to be expected. The dilemma for
future semesters is how to engage with this group. Future research needs to
concentrate on how to engage these disenchanted or less motivated students. Zusho
and Pintrich (2003) found that results in Introductory Chemistry at college level were
heavily dependent upon the student level of motivation and overall interest in their
educational experience.
A Higher Education experience is much wider than one individual course and the
challenge is still there to widen this type of exercise across many courses and across
entire universities. Although changes have been made over the three semesters this
course has been taught, there is still a lot of room for improvement. To précis
Abraham Lincoln, it is difficult to satisfy all of the people, all of the time and aiming
for student engagement is a worthwhile goal, despite the fact that it may not directly
lead to an increase in student satisfaction. One exciting result this semester has been
the success of the take-home exercises. Although an optional activity, the intensity and
diligence that many of the students showed to this activity was both amazing and
rewarding. As Mazur (1999) discovered, sadness and frustration can disappear when
the pieces of the puzzle fall into place and you are rewarded with student engagement
and assessment success.
References
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Akerlind, G.S. (2004) A new dimension to understanding university teaching, Centre
for Educational Development and Academic Methods, Australian National University,
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Bowden, J. and Marton, F. (1998) The University of Learning. Kogan Page Ltd.,
London
Candy, P. C. (2000) Reaffirming a proud tradition. The Institute for Learning and
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D’Andrea, V. and Gosling, D. (2003) Joining the dots: Reconceptualising educational
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de la Harpe, B. and Radloff, A. (2006). Lessons learned form three projects to design
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Undergraduate Education, Report from Chairman of ECS, pp.1-34
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assurance in Education, Vol.14, No.2, pp.156-166
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the Use of Student Evaluations: Implications for Universities, Managerial and Decision
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Kift,S. (2004) Organising First Year Engagement around Learning: Formal and
Informal Curriculum Intervention, pacific Rim Conference
Kington, E. (2008) Emotional competence and drop-out rates in higher education,
Education & Training, Vol. 50, No.2, pp.128-139
Krause, K–L, (2005a) Engaged, inert or otherwise occupied? Understanding and
promoting student engagement in university learning communities, James Cook
University Symposium, Qld, 21–22nd September 2005
Krause, K-L, (2005b) Serious thoughts about dropping out in first year: Trends,
patterns and implications for higher education, Studies in Learning, Evaluation,
Innovation and Development, Vol. 2(3), pp. 55-68
Kuh, G.D. (2003) The National Survey of Student Engagement: Conceptual
Framework and Overview of Psychometric Properties, (Indiana University for
Postsecondary Research and Planning)
Lecouteur, A. and Delfabbro, P.H. (2001) Reperoires of Teaching and Learning: A
Comparison of University Teachers and Students using Q methods, Higher Education,
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McLaughlin, P and Robson, K. (2007) What happens after orientation: building
learning experiences, School of Property, Construction and Project Management
Symposium
Mazur, E. (1999) Understanding or memorization: Are we teaching the right thing?
American journal of Physics Vol.67, No. 4, pp. 359-360
Radloff, A and de la Harpe, B. (2001) Expanding what and how we assess: Going
beyond the content. In A Hermann and M. M. Kulski (Eds.), Expanding Horizons in
Teaching and Learning Proceedings of the 10th Annual Teaching Learning Forum, 7-9
February 2001
Ramsden, P, Prosser, M, Trigwell, K. and Martin, E. (2007) University teachers’
experiences of academic leadership and their approaches to teaching, Learning and
Instruction, Vol. 17, pp. 140-155.
Rowley, J. (2003) Designing student feedback questionnaires, Quality Assurance in
Education, Vol.11, No.3, pp.142-149
Scott, G. (2005) Accessing the student voice: Using CEQuery to identify what retains
students and promotes engagement in productive learning in Australian higher
education, Australian Government, Department of Education, Employment and
Workplace Relations.
Sheppard, C. and Gilbert, J. (1991) Course Design, Teaching Method and Student
Epistemology. Higher Education, Vol.22, No.3, pp.229-249
Snyder, K. D. (2003) Ropes, poles and space: Active learning in business education,
The Institute for Learning and Teaching in Higher Education, Vol. 4(2) PP.159-167.
Svensson, L. & Ellstrom, P-E, (2004) Integrating formal and informal learning at work,
The Journal of Workplace Learning, Vol.16, No.8, pp.479-491
Zusho, A. and Pintrich, P. R. (2003) Skill and will: the role of motivation and cognition
in the learning of college chemistry. International Journal of Science Education, Vol.
25, No. 9, pp. 1081-1094.
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APPENDIX 2
URBAN ECONOMICS (OMGT1124) STUDENT SURVEY
1. What type of assessment do you prefer? (Circle all of your preferred
assessment)
Individual Assignment
Group Assignment
Exam
Test
Presentation
Class Exercises
Take home exercises
On-line exercises
Other (Give details)…………………………………………………………….
2. What would it take for you to be 100% satisfied with this course (Urban
Economics)?
……………………………………………………………………………………………
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3. What do you think you might learn from this course?
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……………………………………………………………………………………………
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……………………………………………………………………………………………
……………………………………………………………………………………………
…………………………………………………………………………
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APPENDIX 4
Final Student Survey – Semester 1, OMGT 1124, 2009
What things have been worthwhile in this course?
What changes could be made to improve this course?
What have you learnt in this course?
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Geoffrey Outhred, pp 381-397
Dual Sector teaching: a method of optimising university
resources to facilitate better learning and teaching.
Geoffrey P. Outhred
School of Property, Construction and Project Management (PCPM)
RMIT University
Melbourne, Australia
Email: [email protected]
Abstract:
The School of Property, Construction and Project Management takes in undergraduate
yearly cohorts of approximately 220 students to study property and valuation,
construction and project management. All first year students undertake common
subjects. As part of ongoing enhancements to learning and teaching in the School, the
author is undertaking a research project to better utilise the University’s resources and
facilities to achieve better learning and teaching outcomes. RMIT University comprises
both a Higher Education (HE) sector and a Vocational Education and Training (VET)
sector. The project is concerned with using the VET sector to provide specialist service
teaching for a common first year HE sector subject: “Residential Documentation”. In
2008, as a pilot study, an arrangement with the VET sector was set up to provide
specialist vocational training as a component of the subject. This is referred to as “Dual
Sector Teaching”. For Residential Documentation Computer Aided Drawing (CAD)
was the VET sector component. Students enrolled in the VET subject as well as the HE
subject, and undertook the VET component at the VET facilities, with VET staff
teaching them. Results received to date from subject evaluation surveys indicate
positive learning outcomes for the students involved. Due to the successful outcomes of
the pilot study, the project is continuing in 2009 and 2010.
Keywords:
Dual sector, higher education, vocational education, project, experiential learning.
1 Introduction
1.1 Background
In 1975 Royal Melbourne Institute of Technology (RMIT), an institution offering
technical certificates through to professional diplomas, became RMIT University. This
was in response to a Federal Government initiative to elevate the status of certain
technical colleges to that of a university. These institutions were redesigned and
equipped to offer Higher Degree qualifications, from Bachelor level to PhD. However
RMIT also continued to offer Certificate and Diploma qualifications as well as Higher
Degrees, as there was still a substantial demand for these industry and trade-based
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qualifications. RMIT University therefore became a dual sector university comprising
two distinct tertiary education providers: the Higher Education (HE) sector and the
Technical and Further Education (TAFE) sector. The latter was renamed Vocational
Education and Training (VET) in 1998, to reflect the broad scope of its syllabus after a
substantial redesign.
RMIT University recognised in 2006 that its vast resources invested in the VET sector
could be utilised to enhance the learning experience for its HE students. “Articulation
and pathways will continue to be a high priority for RMIT; particularly in the
development of enterprise-specific training”. (RMIT, 2006)
The RMIT Position Paper: “The Dual Sector Advantage” (RMIT University, 2006)
states that RMIT University is one of four Victorian dual sector institutions offering
programs ranging from pre-apprenticeships through to PhD level. With the exception of
a small suite of dual sector qualifications, these programs are delivered as stand-alone
Vocational Education and Training (VET) or Higher Education (HE) programs. To date
RMIT’s approach to linking these sectors has been achieved for the most part through
vertical articulation and pathways from pre-VET through to HE. The common
characteristic of the articulation approach is that it is based on a linear view of tertiary
education, with an emphasis on facilitating the student’s passage from ‘lower’ to
‘higher’ level qualifications. From this viewpoint, then, the dual sector advantage
resides in facilitating sequential dual sector qualifications.
1.2 The dual sector project
The author of this paper has been involved in promoting and developing “Experiential
Learning” as an effective teaching method for HE School of PCPM students. This
teaching technique places students in a situation where they learn by their own activities
and experiences. In 2007 the RMIT Learning and Teaching Fund (LTIF) asked for
expressions of interest for projects to be funded. RMIT also was encouraging the
adoption of dual sector teaching arrangements at the time, and the School of PCPM was
investigating dual sector for its application to suitable subjects that involve the
development of specific skills, particularly for First Year students. As a response to the
above, an LTIF supported research project was proposed, which would enable First
Year students to undertake experiential learning by utilising VET teaching facilities in
parallel with HE teaching for the same subject, or dual sector teaching.
The 'dual sector advantage' forms a central part of the RMIT Strategic Plan (RMIT,
2006), and the dual sector CAD teaching project supports the university’s strategic plan
to embed the dual sector advantage in its course offerings to students. Increasingly, HE
graduates at RMIT have enrolled in VET courses to boost their technical skills after
entering the labour market. RMIT intends to integrate this further learning into the
structure of its HE subjects wherever it can be done.
The aim of the dual sector CAD reaching project is to enhance HE students’ learning
experience through dual sector teaching.
Students who enrol in the subject Residential Design and Documentation (BUIL 1107)
(approximately 220, across the Property and Construction disciplines) are involved in
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learning about residential construction and design, largely by producing drawings that
exhibit the technology of construction, and also demonstrate the communication
methods used in the construction sector. In the past, the students have mostly prepared
these drawings in hard-copy format, i.e. pens on tracing paper. Students were exposed
to CAD briefly in previous years, but merely as an alternative to hard-copy format
drawings. This project addresses the imperative for students to be skilled in the use of
CAD, which has almost completely replaced hard-copy format drawings in the
construction sector. The project therefore is to vastly increase the CAD content of BUIL
1107, and enable it to be taught more effectively.
This dual sector CAD teaching project was set up to enhance students’ learning and skill
development in the Semester One subject BUIL 1107 Residential Design and
Documentation, and the Semester Two subject BUIL 1114 Residential Design and
Measurement. For these subjects, CAD (Computer Aided Design and Drafting) was
selected as the most useful offering from the VET sector.
This project was developed collaboratively with input from staff within the School of
Property, Construction and Project Management, and the VET School of Design. The
project team of four people included two from the School of Design.
After student feedback was obtained, and observations were made, the dual sector
project was shown to be successful in achieving its aim - to enhance HE students’
learning experience through dual sector teaching. Students who undertook BUIL 1107
and BUIL 1114 in 2008 were truly appreciative of the learning experiences they went
through. Data supporting this can be found in Chapter 4 Findings and Discussion. The
students are now well equipped to cope with later year subjects in their respective
courses at the School of PCPM, and also better equipped to be effective professionals in
the property and construction industries. The School of PCPM at RMIT University has
achieved a close working relationship with the VET School of Design, based upon the
success of this project, and will continue to pursue dual sector initiatives.
2 Experiential Learning and Dual Sector Teaching
2.1 Enhancing graduate attributes through experiential learning
As stated in the RMIT University “Teaching and Learning Strategy” paper (Dunkin and
Bangay, 1994), RMIT seeks to produce students who are knowledgeable, creative,
critical, responsible, employable and leaders. The attribute “knowledgeable” is central,
and can be related to both the detailed content in a particular professional or
occupational field and also to broader content intended as a basis of general educational
outcomes. The paper continues with the following: “The curriculum should emphasise
student (learner) – centred approaches, directly link industry/occupational/professional
needs with specified course outcomes, provide a framework for the use of a wide
variety of learning/instructional resources and strategies by adopting flexible
delivery….” (Dunkin and Bangay, 1994)
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Boyle (1994), in his draft paper, “Quality in Teaching: Valuing, Recognising,
Evaluating and Regarding it”, identifies the following characteristics of Quality
Teaching:
• High quality and clearly articulated learning goals
• Flexibility in approaches to teaching and learning (including assessment)
• Good organization of subject matter and course, including relevance and
coherence of content and planned teaching-learning activities
• Effective communication
• Knowledge of and enthusiasm for subject matter and teaching
• Facilitation of learning through student interaction and active experience
• Respect for and positive attitude toward students
• Critically reflective orientation to teaching including effective use of feedback to
guide learning and improve teaching
• Appropriateness and fairness in assessment and grading
The dual sector teaching project was designed to include these characteristics in the
teaching of the subjects in the pilot study of its application.
Mellander (1993) lists five “Learner’s Pleas”:
• Don’t stifle my natural curiosity – awaken it!
• Just give me the information I need – not a lot I don’t need!
• Let me think things through myself and draw my own conclusions
• Help me find contents of the things I have understood
• Help me use my knowledge so it doesn’t wither away and become useless
These “Learner’s Pleas” were to be a foundation for the detailed development of the
dual sector project. THE RMIT VET sector facilities were carefully appraised to ensure
that these theoretical student’s pleas would be heard and responded to. The last plea
“Help me use my knowledge so it doesn’t wither away and become useless” was a key
factor in the design of the dual sector subjects. Experiential learning is the process of
gaining knowledge and expertise through undertaking tasks and undergoing
experiences. The experiential learning the students were exposed to in the CAD sessions
was planned to develop them into high-level skilled students and ultimately competent
professionals in their industry.
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Kolb defines learning as follows: “Learning is the process whereby knowledge is
created through transformation of experience”. (Kolb, 1994) This definition of
learning, in the context of Kolb’s discussion, suggests that true learning can be
associated with experiential learning. Learning by action is closely identified with
experiential learning, and Revans (1983) states that there can be no learning without
action and no (sober and deliberate) action without learning. This view is reinforced by:
“Action learning is the antithesis of believing that we can do nothing about our
situation. Whatever the context, people who use action learning believe that there is
always something, however small, that can be done or positively not done.”
(McGill and Beatty, 1995)
Brewer et al. (2001) discuss that a quality graduate should have the necessary attributes,
including the ability to apply knowledge and skills in practical settings, moving away
from the accumulation of factual knowledge, and towards an understanding of the
underlying principles that can applied to situations in the future. This opinion was
influential in the design of the research project for dual sector teaching.
2.2 Dual Sector teaching to enhance the learning experience
RMIT University is in a privileged position to possess both an HE and VET sector. It is
able to draw on diverse and extensive resources when planning for the holistic
education of its students. Doughney (2000) proposes that dual-sector universities
provide the potential to transcend fractured educational arrangements, and can meet the
learning needs of students in ways that stand-alone higher education or TAFE
institutions cannot. This potential is grounded in the notion of learning pathways, and
requires dual-sector universities to reconceptualise and restructure themselves as a
coherent whole. The RMIT Position Paper: “The Dual Sector Advantage” (RMIT
University, 2006) agrees with this view, and states that articulation traffic is in fact
greater from HE qualifications to VET qualifications than it is from VET to HE,
suggesting that university graduates feel the need to boost their technical and vocational
skills after entering the labour market. A key challenge for dual sector institutions,
therefore, is to find ways of incorporating the strengths of both sectors concurrently as
students progress through either sector.
Doughney continues with this theme of the structure of dual sector universities, pointing
out that there may not be a huge difference between the offerings of the two sectors:
“….while there are differences in the missions of TAFE and higher education, there is
also a growing convergence between them. Furthermore, the debate around the differing
roles of each sector often obscures the fact that there is as much diversity within each
sector as there is between the sectors. There is as much educational distance between
students undertaking a Certificate 1 or diploma in TAFE as there is between a student
commencing year one of an undergraduate degree and a PhD student” (Doughney,
2000)
Smith and Bush (2006) discuss the real and the perceived differences between HE and
VET sectors. They argue that while the concept of seamless movement between sectors
is attractive and opens up the possibility of lifelong learning that is not only smooth but
also certificated, a number of difficulties emerge. These relate primarily to the differing
conceptions of learning between the two sectors. While VET in Australia today is
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resolutely vocational and skill-based, university education is generally understood to
encompass a much broader field. There are challenges posed by suspicion, snobbishness
and market rivalries; but these have tended to mask the real difficulties associated with
different teaching and learning approaches.
Dual sector teaching gives the opportunity to universities to extend and enhance their
curricula in order to meet the ever-changing demands of the professional world,
particularly in the construction sector. “Effective vocational education can no longer be
narrowly conceptualised and task focused. The pace of social, economic, and
technological change means that narrowly defined skills will soon be outdated.
(Doughney, 2000)
Others from the construction industry area reinforce this view: “Considering the
diversity of employment opportunities for construction management graduates, they
increasingly need to have a portfolio of skills to work effectively and efficiently with
other professions in the industry” (Love et al, 2003) and: “Higher education institutions
are under pressure to deliver work-related skills and a workplace-relevant curriculum”.
(Smith and Bush, 2006)
Doughney (2000) continues this argument, stating that graduates require generic skills
and capacities. They need communication skills, interpersonal skills, an appreciation of
and capacity to work in culturally diverse environments, problem-solving skills,
literacy, numeracy, and the capacity for critical reflection. They need these skills
regardless of whether they graduate from TAFE or higher education.
There are other academics who acknowledge the need to seek out expertise from other
sources, for teaching of specific components of the syllabus. Linda Kestle of UNITEC
in New Zealand discusses the use of external teachers in the design field, and gives
some justification for going to the specialists for teaching of specialised topics: “The
view of the designer, as opposed to the builder, helped us to explore different principles
and it helped to trigger new ideas, which may not have been possible with the internal
staff due to their different experiences.” (Jeffries and Kestle, 2001)
3 Research Project Methodology
3.1 The need for dual sector teaching at RMIT
The first objective for the project team to address was to confirm the need for a dual
sector teaching initiative within the School of PCPM. RMIT teaching and learning
initiatives were investigated, and literature concerned with dual sector teaching at other
universities was sought and analysed (refer to Chapter 2 Literature Review).
One of the recommendations from the RMIT Dual Sector Position Paper (RMIT
University, 2006) is to "endorse and promote the development of the five types of dual
sector awards". This project seeks to develop and promote one of those five types: the
integrated dual award, by packaging a VET (TAFE) CAD certificate with a HE degree
program.
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Many HE graduates at RMIT enrol in VET courses to boost their technical skills after
entering the labour market. This project acknowledges this specific need by enrolling
HE students in a VET (TAFE) Certificate to focus on CAD skills while they also
complete an HE degree. In the RMIT Dual Sector Position Paper this is described as “an
integrated dual award approach” (RMIT University, 2006), and offers an effective and
efficient mechanism through which students can engage in learning delivered by both
sectors concurrently. This learning is therefore gained in parallel and not sequentially.
This project enables RMIT to offer a VET qualification in CAD to HE students. It adds
to RMIT's capacity in developing and offering a greater number and range of dual
sector qualifications to students. In addition, by having qualifications in both sectors, it
places students in a stronger position when seeking future employment and increases
their 'work readiness’ and preparation for professional practice. The project is strongly
aligned with the university’s mission to ensure that students have access to streamlined
dual sector qualifications, pathways and learning experiences.
Further, the RMIT Academic Plan (RMIT University, 2006) identifies Learning and
Teaching as a priority area under which the 'dual sector advantage' is listed as one of
"the four core defining objectives". Another of the four objectives is the development of
"work ready graduates with a hunger for lifelong learning". This dual sector project
addresses both of these two objectives (and possibly a third: student satisfaction) by
incorporating CAD skills offered through a VET qualification into a HE degree.
Students have the opportunity to increase their 'work readiness' through obtaining high
level CAD skills appropriate for their industry and participate in an integrated dual
sector award (and thus, obtain two qualifications).
3.2 Designing dual sector facilities
The project team conducted an investigation of the facilities and infrastructure
contained within the RMIT VET sector, with regard to the provision of CAD teaching.
Two members of the VET School of Design, the Facilities Manager and the CAD
Coordinator, were invited to join the project team.
The VET School of Design is an authorised AutoDesk Training Centre. Participants use
networked desktop computers and the latest release software. The trainers are registered
Autodesk instructors with extensive industry experience. A certified AutoDesk
certificate of attendance is awarded to participants who attend 80% of sessions and
complete an Autodesk online evaluation on completion. This is an internationally
recognised certificate.
The School of Design Autodesk training courses are also recognised and endorsed by
the Building Commission Victoria as Continuous Professional Development for its
registered members.
This dual sector project encourages the development and enhancement of the VET
sector facilities and services, by being involved in dual sector teaching with the HE
sector. It provides a formal link in strategies for teaching between HE and VET sectors
of RMIT University.
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3.3 Project team activities
SEMESTER ONE 2008
Several meetings were held for the project design team of four people, to set up the
provision of the VET CAD teaching component of the subject BUIL 1107 Residential
Design and Documentation. The CAD workshops were conducted at the VET campus,
for six out of the total twelve weeks of Semester One. Students from past years of CAD
teaching were consulted regarding how they felt it could be improved, and new students
for BUIL 1107, undertook an expectations survey in Week One. Students went from
preparing CAD drawings to undertaking conventional hard-copy drawings throughout
the semester, to experience both modes. At the end of the semester students did a
follow-up to the expectations survey, to give their experiences and to confirm or
otherwise whether their expectations were met. The RMIT Course Evaluation Survey
(CES) was also applied at this time, and its results supplemented the data from the
expectations survey. The project team reviewed the students’ results for both CAD and
traditional drawings, and also reviewed the design of the Course at a final meeting. It
was decided at this meeting to provide some further specialist 3D CAD training in
Semester Two to those students who were interested. This was in response to student
feedback stating they would like to do more CAD in the future.
It has been difficult in the past to provide the individual guidance necessary to develop
drawing skills in a large class, in particular for highly specialised types of drawing such
as CAD. This is further exacerbated by the fact that this subject is compulsory across
four diverse disciplines, of Property, Valuations, Construction Management and Project
Management. Students from the various disciplines need to do the drawings required to
communicate information, in order to fully appreciate the way in which they are
prepared. Students also need to do CAD drawings to be able to obtain the correct
information that the drawings convey. This project enables the efficient, specialised
delivery of course material that provides the students with the skills and knowledge to
gain information from reading drawings, and understand the techniques and problems
involved in preparing documents for the construction sector.
The Semester One class was designed and completed successfully by the project team.
In the first half of the semester, students were introduced to aspects of design and
documentation for residential construction, and produced some hard-copy drawings.
This provided them with the background knowledge and skills, to lead on to their CAD
drawing activities in the second half of the semester.
The project involved redesigning BUIL 1107 to include six half-day sessions in CAD
for all students, in the second half of the semester. These sessions were run by the VET
School of Design, in its CAD laboratory facilities, and using its own teaching staff plus
additional CAD specialists, needed to service the large number (220) of PCPM students.
Each session was restricted to 19 students, due to the number of computers in each
laboratory, and the need to have close individual interaction between the teacher and the
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students. Therefore multiple classes (12 per week) were conducted, and this required
increasing the infrastructure of the VET CAD facilities.
Assessment comprised the students’ hard-copy drawings, CAD drawings and the theory
of design and documentation. Students who successfully completed the VET CAD
sessions were also awarded a VET (TAFE) certificate for competency in AUTOCAD.
VET issued each successful student with the internationally accredited AUTOCAD
certificate at a ceremony, as well as adding the CAD assessment component into the
total course assessment. The CAD teachers assessed all CAD work produced by the
students, and the results contributed 50% towards the total assessment for BUIL 1107.
A portion of the CAD assessment was for attendance; an assessment component not
permitted by RMIT for its HE subjects. Therefore in addition to experiencing being
taught a specialist technique by VET teachers, the PCPM students were exposed to a
different ethical approach applied to their assessment.
SEMESTER TWO 2008
For the subject BUIL 1114, Residential Design and Measurement in Semester Two, the
project team designed CAD to be integrated into all activities the students undertook.
CAD was not mandatory for all tasks however, and if students preferred to produce
traditional hard copy drawings as well, this was acceptable. All activities for BUIL 1114
were done in groups of four students. One member of each group was encouraged to use
CAD, so their work would make a more creative contribution to the group’s output, and
every group would gain from this.
Students were invited to enrol in a specially created additional AUTOCAD 3D short
course, running for the first four weeks of the semester. LTIF funding was used to
provide this course to the students at no cost to them. There were only 38 places
available (two workshops of 19 students), so the first 38 responses were to be accepted
into the course. 30 students enrolled, and undertook the 28 hour short course in addition
to their studio sessions for BUIL 1114. AUTOCAD 3D enables students to produce 3D
presentation drawings such as Isometrics and Perspectives of high quality. These
students produced these drawings for their groups’ house designs and they were to
become part of the groups’ design submissions.
The first task for the groups of four students was to produce a Schematic Design
proposal for their house, in response to the brief from the hypothetical client, and to the
constraints of a real site selected for the exercise. Students were further challenged by
the requirement that their design must meet the principles of Environmental
Sustainability. The task included the preparation of Floor Plans, Perspective and a
Design Report. After client approval, the group prepared Sketch Plan documents,
comprising Site Plan, Floor Plans, Isometric and Design Analysis. When the client
approved these, students prepared the basic Working Drawings for their house.
Having done the design and documentation drawings, students used these documents to
measure quantities of materials and to submit an estimate for their house. They were
given a rigorous appraisal of Measurement techniques by an external Quantity
Surveyor, and conducted assessable exercises for this topic prior to application of it to
their own house design. Then they used their quantities calculations to make an order
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for balsa wood for a scaled framing model of their designed house. The balsa is
available in certain sizes and lengths, and the students reduced their actual size framing
components to the equivalent balsa size, at a scale of 1:20. Once their order was
received, they were issued with the balsa, and used it to build the model. There was no
further issue of materials, so they had to make do with what they ordered.
Prior to ordering the balsa, two groups merged into one group of eight people, and
agreed upon the preferred house design to be built, choosing from the two respective
groups’ designs. Having selected a design, the group prepared a complete framing
schedule for all components of the house, including wall studs size and spacing, all
lintels, beams, joists and rafters. This was a formalisation of their initial quantities
calculations to order the balsa. The next task for the group of eight was to prepare 1:20
scale framing drawings of all walls, roof framing and floor structure. These drawings
formed the template for the model to be built. The final activity was for the group to
construct the model over a four week period. They did this both in the supervised
tutorial times, and at other times by group agreement. A presentation day was set up, at
which each group presented their model to an assessment panel comprised of academic
staff and invited industry experts, and submitted a folio of all drawings and activities,
including a group diary. The assessment panel was given a proforma marking sheet to
assist them, with proportional scoring of different assessment criteria.
Students who undertook the 3D CAD short course were also awarded the VET
Certificate for Competency in AUTOCAD 3D.
For all of the above activities, some students chose to use CAD for their documents and
other tasks, particularly for the 3D presentation drawings and for the many 1:20 framing
drawings. The AUTOCAD 3D course they undertook also enabled them to “take-off”
limited data regarding areas and volumes, but not detailed quantities or estimates (See
Chapter 5 for the adoption of “REVIT” in 2009).
This project provided students with a much greater knowledge base regarding drawings
and documentation in the residential construction sector. It also brought them up to date
and familiar with the principal method of drawing communication method in the
industry, CAD. They gained the skills to not only produce basic CAD drawings, but
also to read them and extract the correct information from them. They were able to
experience both dual sector teaching and experiential learning by being involved in this
project.
3.4 Project closure
At the end of 2008 the project team had a project debriefing meeting, where the
outcomes of the project were evaluated against the original aims and objectives, and
project successes and failures were raised and discussed. The results of feedback and
student evaluation surveys were tabled, and the subject assessment results for the
students were presented and discussed. The decision to continue with the dual sector
subjects in 2009 and 2010 was confirmed.
Once the project was completed a report was prepared for the LTIF, and a presentation
was made to a forum attended by LTIF members and RMIT participants in the
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Australian Learning and Teaching Council (ALTC), which is an organisation concerned
with the promotion and sharing of innovative teaching techniques.
4 Findings and Discussion
4.1 Feedback through assessment technique
BUIL 1107:
Assessment comprised the students’ hard-copy drawings (50%), and the CAD
assessment component (50%) by VET. Students who successfully completed the VET
CAD sessions were also awarded a VET (TAFE) certificate for competency in
AUTOCAD. VET issued each successful student with the internationally accredited
AUTOCAD certificate at a presentation ceremony.
The 220 students enrolled in BUIL 1107 for 2008 achieved the following results:
80-100% HD 24 students, 70-79% DI 52 students, 60-69% CR 73 students, 50-59% PA
53 students, 0-49% Fail 10 students, Withdrew from subject 8 students.
These results are substantially higher than those for BUIL 1107 in 2007. Whilst it is
statistically difficult to demonstrate definite trends, the results do suggest that students
responded very well to the dual sector format of teaching this subject.
BUIL 1114:
The entire assessment was based upon the project and all of its activities. In 2007 an
exam was conducted for the measurement component, but for the following year this
was replaced by assessable exercises. The reason for this redesigning of the assessment
is that in 2008 the students were able to use CAD to assist with measurement if they
chose to. Therefore the means of achieving this task were varied, and an exam would
not assess this accurately.
Assessment for the project was concerned with four specific aspects of the students’
activities: for Drawings; for Models; for Involvement; for correctness of technological
and quantifiable information.
The Schematic Design drawings and Design Report were assessed, as were the Sketch
Plan documents, and the Working Drawings. Work submitted as a result of the
Measurement and Estimating activities was assessed. Project planning and
programming documents were also assessed.
The balsa materials order was not assessed in 2007, but it was in 2008. It was necessary
to add this assessment to ensure the students made a serious attempt to provide an
accurate result. It was also a further acknowledgement that students were able to use
CAD to assist their calculations. The model itself, judged by the expert assessment
panel, formed a major component of assessment, as it was the culmination of all
activities, and was physical evidence of the degree of success with which the students
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undertook the project. The submitted group diaries were not assessed directly, but their
content was used to qualify other aspects of assessment.
The 200 students enrolled in BUIL 1114 for 2008 achieved the following results:
80-100% HD 28 students, 70-79% DI 52 students, 60-69% CR 66 students, 50-59% PA
43 students, 0-49% Fail 6 students, Withdrew from subject 5 students.
These results were similar to those for BUIL 1114 in 2007. This is not surprising, as the
subject was essentially the same experiential learning syllabus for both years, and both
intakes diligently applied themselves, in their groups, to the activities. The only
difference was the use of CAD for various activities in 2008. To judge the impact of
CAD (and therefore dual sector teaching) on this subject, the CES comments need to be
referred to.
4.2 Improved student learning experiences and added value
Following the dual sector BUIL 1107 subject in Semester One, students were better
equipped to undertake BUIL 1114 in Second Semester. This subject involved them in a
project that involved designing, documenting and building a house. Students’ expertise
in CAD enabled them to undertake these activities more effectively. One example of
this is that they could measure and estimate quantities from CAD drawings, using CAD-
related measurement packages. Another example is that some of the students who
undertook the optional AUTOCAD 3D short course at the beginning of Semester Two
were able to submit professional quality 3D presentations, as their contribution to their
groups’ work.
Further, students undertaking the course were able to link their learning to not only
courses following on from the project, but also to professional activities in the property,
design and construction sectors.
Each CAD workshop had a maximum of 19 students, with one teacher. Previously CAD
was taught in an auditorium with all 210-230 students at once. The VET style intimate
teaching mode was far more effective in developing skills. The far higher quality of the
students’ CAD drawings in 2008 demonstrates this.
Each student who completed the CAD components received an internationally
recognised AUTOCAD certificate as well as a mark that was included in their overall
assessment.
4.3 How was student impact identified and measured?
Data source student feedback was captured via the Course Evaluation Survey (CES) and
other supplementary feedback mechanisms. Analysis of this data identified that students
were able to develop CAD skills to a far higher level than for previous years. Responses
to an Expectations Survey (conducted for all Semester One subjects) indicated that
students felt that it was important for them to attend lectures and activities, and that they
put a high priority on working with each other. The large majority of students thought
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the Semester was “Good”, and also agreed that university learning is entirely different
from secondary school. Other student feedback comments were full of praise for the
standard of teaching provided to them by the CAD teachers. Most students agreed that
the traditional drawing skills were necessary to learn as well as CAD skills, and that
they supplement each other.
RMIT University applies a Course Evaluation Survey (CES) to all subjects at the end of
their respective semesters. The project was evaluated by reviewing CES scores for
BUIL 1107 at the end of Semester One, and for the “follow-on” course, BUIL 1114, in
Semester Two.
To supplement this feedback, the student groups were asked to prepare a diary of their
experiences and development during the Semester Two course, BUIL 1114. The
comments in these diaries were in most cases well thought out and stated, giving an
accurate history of their experiences during the semester, and valuable information to
the project team regarding the success or otherwise of the project.
The CES results for BUIL 1107 in Semester One were a Good Teaching Score (GTS) of
53.7, and an overall satisfaction score of 73.8. The latter was abnormally higher than the
former, and this can be partially explained by the students’ comments in their written
responses to this CES. Their comments were:
“The teacher was going too quickly through the CAD, and I could not keep up”.
“I enjoy CAD, but my teacher did not explain why we were doing various things”
“CAD is interesting, but I am lousy at it”.
“Good fun, but where does it get me?”
“I can relate CAD to the traditional drawings we did. I can’t see that I would use it
again”.
“I enjoyed doing CAD but found it hard, and the teacher was unsympathetic to me and
nearly put me off it”.
“CAD would be better if we could apply it to a real project”.
The above comments suggest that many students could not see the future benefits of
their newly attained CAD skills. They enjoyed the subject generally and thought it was
worthwhile, but in some cases they were critical of the teachers, claiming inadequate
personal guidance and feedback. There was a large variation for the reactions to CAD.
Some loved using it, and some loathed it. Many students requested that more CAD be
included in later courses. Most students produced high-quality CAD drawings.
It was not until students were able to reap the benefits of their CAD skills by applying
them to BUIL 1114 in Semester Two, that they truly appreciated the usefulness of CAD.
The CES results for BUIL 1114 in Semester Two 2008, obtained after the students had
been able to put their CAD skills into practice, were far better than for BUIL 1114 in
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previous years. Also the CES scores for BUIL 1114 were far higher than for BUIL 1107
in 2008.
The GTS for BUIL 1114 was 88.1, and the overall satisfaction was 93.8. By
comparison, the CES scores for BUIL 1114 in 2007 were a GTS of 63.2 and an overall
satisfaction score of 66.0.
In order to provide some insight into these results, the following students’ comments
were in their CES responses for 2008:
“The hands-on aspect is the best where your hard work is shown in the end”.
“Practical application of knowledge is great with drawings”.
“The use of the drawings gives you a lot of insight into construction”.
“AUTOCAD session was good for building the model”.
“Great learning tool for the future”.
“Interesting and gave an insight into how buildings are constructed from drawings”.
“It was good to follow design aspects from the drawings through to the building phase.
It makes you realise what is actually “buildable”.
“I could use everything the CAD teachers gave me”.
“The CAD teachers were great. They were really interested in helping us”.
“CAD facilities were excellent. We got close personal attention from the teacher”.
The above comments from the students demonstrate that they responded positively to
the Dual Sector teaching project that was designed and implemented for them. In
Semester One for BUIL 1107 the students were effectively trained by the VET sector
experts to develop a skill, and they were able to confidently apply this skill to a
multitude of other tasks involved in the Semester Two subject BUIL 1114 that they
enrolled in.
Comments in the students’ group diaries supported the CES results. The majority of
groups demonstrated enthusiasm for the activities they carried out during the semester.
They were genuinely proud of their achievements, particularly for the 3D CAD
presentations some group members were able to produce. They described in detail how
they were fascinated by how accurately these 3D drawings resembled the final outcome
of their endeavours, the scale model of their house. They were also impressed by how
easy it was to modify the design of their house, using the 2D and 3D CAD drawings.
5 Conclusion and Further Work
RMIT University developed a strategy in 2006, to better utilise its Vocational Education
and Training (VET) sector facilities by arranging for specialised components of selected
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Higher Education (HE) sector subjects to be taught by VET. This is referred to as “Dual
Sector Teaching”.
This dual sector teaching project described in this paper was applied to First Year
students at the School of PCPM at RMIT in 2008, using RMIT VET School of Design
facilities. The project involved redesigning two subjects, BUIL 1107 Residential Design
and Documentation and BUIL 1114 Residential Design and Measurement, in Semesters
One and Two respectively. Computer Aided Design and Drawing (CAD) was taught in
parallel, by VET, with other activities involved in these subjects.
The four person project team assembled for this dual sector teaching project firstly
investigated the literature available for dual sector teaching, and compared it to the
various RMIT papers and literature regarding the topic. Then the team proceeded to
design the subjects that would accommodate dual sector teaching. The next task was to
run the dual sector subjects for 2008, and obtain feedback from the students undertaking
them. As a consequence of project team meetings throughout 2008, to continuously
review progress and outcomes, the dual sector project was evaluated and subsequently
modified for 2009 and 2010.
Project evaluation data, presented above in Chapter 4 Findings and Discussion,
demonstrates that this application of the dual sector teaching initiative was extremely
successful. Students who undertook the CAD sessions benefited in many ways from
their experiential learning and dual sector teaching activities. They are better equipped
to pursue both further academic studies and professional activities in the future.
A large number of students (220) undertook the dual sector subjects BUIL 1107 and
BUIL 1114, and there was great diversity of these students regarding their professional
disciplines. Teaching a skill such as CAD is a very intensive, personal process, and for
this large, diverse intake of students the dual sector teaching methodology, using RMIT
VET facilities, was shown to be extremely effective.
The School of PCPM is running the subjects developed from the project again in 2009,
for the current first year students and those involved are presently asking themselves
and others how the project can be improved, in the interest of increasing quality in
teaching. The School enrolments for this subject will reduce in 2009 from 220 back to
175. This should help to address the problem of meeting the personal development
needs of individual students. A method of making the project more in tune with present
technology is to further encourage the use of highly specialised CAD (Computer Aided
Drawing) programmes and enable the students to produce their detailed drawings for
framing and other building components using CAD. Therefore the students will be
invited in 2009 to participate in a series of workshops for REVIT, a sophisticated 3D
building modelling programme that will enable them to “take-off” quantities of
materials and components through this 3D CAD package.
In 2008 students complained of how tedious multiple drawings were to prepare with pen
on paper. Increased use of CAD is justifiable for BUIL 1114 in Semester Two 2009 as
the students will have been given a more comprehensive introductory CAD course in
Semester One this year. There will be a greater component of CAD taught by the VET
sector, and correspondingly less hard copy drawings to be produced in the HE sector
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subjects, using the traditional drawing method for these documents. Students were
concerned in 2008 that the VET CAD laboratories were only available to them for the
teaching workshop times, and that they would like to access the facilities at other
times.The School of PCPM now has recently acquired more adequate resources for
using CAD in HE laboratories. The students are able to book and use these facilities at
any time. Therefore the students’ choice to use CAD will be better supported and
encouraged.
6 Acknowledgement
The author would like to acknowledge the financial assistance and also guidance and
advice to the project, given by the RMIT Learning and Teaching Investment Fund
(LTIF). The project was successful in winning an LTIF grant of A$40,000 for 2008.
7 References
Boyle, P (1994) “Quality in Teaching: Valuing Recognising Evaluating Rewarding it”
Draft paper produced by EQUARD, RMIT University.
Brewer, G., Martins, R., Kolomy, R. and Chen, S. E. (2001) Assessment and Learning:
Connecting Theory and Practice In Pullen, S, Mehrtens, V, and Zillante, G (Ed),
26th Annual AUBEA Conference, 11-13 July. 2001, University of South Australia,
Australian University Building Educators Association.
Doughney, L. (2000) Universal Tertiary Education: how dual-sector universities can
challenge the binary divide between TAFE and higher education- the case of
Victoria University of Technology, Journal of Higher Education Policy and
Management, 22(1), pp. 59-72.
Dunkin, R and Bangay, R. (1995) “Teaching and Learning Strategy” Draft paper
emanating from a senior RMIT University staff meeting at Queenscliff, Victoria in
November 1994.
Jeffries, M. and Kestle, L. (2001) Enhancing Experimental Learning of Environmental
Sustainability Using External Cross-fertilisation In Pullen, S, Mehrtens, V, and
Zillante, G (Ed), 26th Annual AUBEA Conference, 11-13 July. 2001, University of
South Australia, Australian University Building Educators Association.
Kolb, D. (1994) “Experiential Learning: Experience as the Source of Learning and
Development” Prentice-Hall, Englewood Cliffs, NJ, USA.
Love, P., Smith, J., Georgiou, J., Baccarini, D. & Davis, P. (2003) Building a symbolic
relationship between academia and industry: Expectations and observations of
construction management graduates, in Langston, C. (ed.) AUBEA 2003: Working
together, 9-11 July, Geelong. Proceedings of the 28th Annual Australasian
University Building Educators Association, pp. 109-116.
McGill, I. and Beatty, L. (1995) “Action Learning, a guide for professional,
managementand educational development” 2nd Ed., Kogan Page, London.
Mellander, K (1993) “The Power of Learning” American Society for Training and
Development.
Revans, R. (1983) “The ABC of action learning” Chartwell Bratt, Bromley.
RMIT (2006). “RMIT 2010, Designing the Future”, from RMIT’s Strategic Plan 2006.
RMIT University. (2006), ‘Position Paper: The Dual Sector Advantage’, RMIT
University website, http://mams.rmit.edu.au/k2elpr4sy00y1.pdf , viewed: 6/7/2009.
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Geoffrey Outhred, pp 381-397
Smith, E. and Bush, T. (2006) “The delicate dance: the assessment implications of
awarding students vocational qualifications within university degrees”, Higher
Education Research & Development, 25:4, pp. 387 — 402
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Chris Cloete, pp 398-413
Transformation in Property Education in South Africa
C E Cloete1
1
Department of Construction Economics
University of Pretoria
South Africa
E-mail: [email protected]
Abstract
This paper describes the transformation of real estate education programmes since the
election of a democratic government in 1994. Issues related to capacity building i.e.
student enrolment, the structure of formal real estate courses offered, skills
development, the role of the SA Qualifications Authority and adult educational
programmes are discussed. The increasing participation by women and by blacks in
educational programmes are quantified by analysis of six different educational
programmes offered by the SA Property Owners Association and the SA Council of
Shopping Centres for the period 1991 to 2008, and contrasted with the changing profile
of students at the University of Pretoria.
Results show conclusively the increased participation of these previously under-
represented groups and mirror trends in the transformation of tertiary education in South
Africa. Trends in the performance of the different groups are quantified.
Keywords: Education, real estate, property, capacity building, training
1. Introduction
Prior to 1994, racial discriminatory policies and laws denied full ownership of real
estate in South Africa to the black majority of inhabitants (by ‘black’ is meant African,
Coloured and Indian persons). In addition, a traditional communal ownership system
still prevails in some of the rural areas, whereby ownership of property does not belong
to an individual but typically to a tribal group. A significant part of the total population
has therefore up to that time never experienced the benefits as well as the
responsibilities of property ownership.
The drastic curtailment of property ownership rights of black persons made it
impossible for the majority of the population to acquire assets that could serve as
collateral for loan financing: a requirement that also excluded black persons from the
long-run process of capital accrual and growth. (see e.g. De Soto, 2001)
The former Group Areas Act forced people of different races to live in separate
residential areas. Immediately after the abolition of this Act in 1994, residential
integration was very slow. Changes have, however, become more apparent in certain
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Chris Cloete, pp 398-413
parts of South African cities (see e.g. Blades, 1993; Christopher, 2001; De Villiers,
1993; Hattingh and Horn, 1991, Donaldson and Van der Merwe, 1999; Prinsloo 2005a;
Prinsloo 2005b; Prinsloo and Cloete, 2002).
The above-mentioned trends highlight the need for training in property for the black
population. As exposure to home ownership has spill-over effect on interest in other
types of property, and as affirmative action goals were set by, among others, the
Property Charter, exposure to and training of previously-excluded groups in the
important commercial property sector have become imperative.
2. Adult Educational Training Programmes in Real Estate
2.1 South African Property Owners Association (SAPOA)
The premier professional body representing the interests of stakeholders in real estate in
South Africa is the South African Property Owners’ Association (SAPOA).
Since its formation in 1966, SAPOA has committed itself to improving the quality of
education in the property industry. Up to fifteen years ago, this was done through
regular seminars, the annual convention, study tours and the Property Development
Programme (see below). In recognition of the need for transformative education and
training, recent years saw the introduction of a number of additional educational
courses, viz. the Basic Property Programme, the Property Intermediate Programme, the
Certificate for the Commercial Property Practitioner and the Property Executive
Programme, most of which are offered in conjunction with the University of Pretoria.
2.1.1 Basic Property Programme (BPP)
This three day course covers the very basic principles of property and its development,
financing, valuation and marketing. It is aimed at those who have little or no property
knowledge and, in addition, may not have had the advantage of tertiary education (or, in
some cases, even having less than 12 years school education).
The course was first presented in 1992 and is presented at various venues throughout the
country, normally twice annually, with an average attendance of about 50 (Figure 1).
More than 2000 participants have benefited from this course.
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Attendance
SAPOA Property Education Courses 1991-2008
300
250
200
150
100
50
0
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
BPP PIP CCPP
Figure 1 Annual attendance of the BPP, PIP and CCPP courses (1991-2008)
Figure 2 illustrates the cumulative number of students who participated in these courses
from their inception and clearly indicates the support for these courses by industry.
Cumulative course attendance
SAPOA Adult Educational Courses 1991-2008
Cumulative numbers
5000
4000
3000
2000
1000
0
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Years
Figure 2 Cumulative attendance of SAPOA adult educational courses (1991-2008)
2.1.2 Property Intermediate Programme (PIP)
The PIP is an intensive intermediate course aimed at junior management and young
professionals in the property industry. It is a full-time three-day course run one to three
times per year and is a natural follow-up course for the BPP. In addition to broad-
ranging lectures and case studies, participants do a simulation of a property
development project.
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The PIP was first offered in 1991 and was initially known as the Property Introductory
Programme. Due to the calibre of participants, many of whom saw the PIP as a
condensed version of the Property Development Programme (see later), it was decided
to introduce the Basic Property Programme and upgrade the PIP to an intermediate level
programme.
More than 1300 participants have attended the various PIP courses presented up to 2008
(Figures 1 and 2).
2.1.3 Certificate for the Commercial Property Practitioner (CCPP)
The Certificate for the Commercial Property Practitioner was introduced in 1996 as a
joint undertaking between the University of Pretoria and SAPOA. It comprises 16
modules on topics relevant to the commercial property practitioner. The format was
initially 26 weekly evening classes of two hours each, with evaluation by means of six
written assignments and a four-hour written examination. To enable participants from
around the country to do the course, the format was changed in 1998 to distance-
learning, with a three-day contact session.
The average enrolment is about 65 students per year, with a pass ratio of about 66 per
cent for the more than 900 students attending the fourteen courses presented up to 2008
(cf. figures 7 and 8)
2.1.4 Gender and race transformation in property programmes
The gender and race transformation in the various property programmes are shown in
figures 3-8.
It is evident from figure 3 that whereas women comprised less than 30 per cent fifteen
years ago, they now make up about 70 per cent. This is indicative of the greater role
played by women at lower levels of the property industry.
Basic Property Training
Gender Transformation 1992-2008
100.0%
80.0%
60.0%
40.0%
20.0%
0.0%
1992
1993
1996
1997
2001
2002
2003
2004
2005
2006
2007
2008
Females Males
Figure 3 Gender transformation in basic property training, 1992-2008.
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A similar trend, but less pronounced, is evident in intermediate property training (figure
4). Starting from a base of virtually zero, women now make up about 50 per cent of all
participants in intermediate property training.
Gender Transformation
Intermediate Property Training 1992-2008
100.0%
80.0%
60.0% Male
40.0% Female
20.0%
0.0%
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Figure 4 Gender transformation in intermediate property training, 1992-2008.
Women have traditionally more involved in residential property, mainly as estate
agents. Their increasing involvement in commercial property (offices, retail and
industrial) is reflected in figure 5, which shows an increase from about 20 per cent in
1996 (when training programmes in this field commenced) to about 45 per cent at
present.
Commercial Property Training
Gender Transformation 1996-2008
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Males Females
Figure 5 Gender transformation in commercial property training, 1992-2008.
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The ratio of women who passed this intensive, year-long course, however, are higher
than the ratio of students registered for the course, indicating more perseverence and/or
diligence on the part of women (figure 6).
Gender Pass Ratio
Commercial Property Training 1996-2008
80.0%
60.0%
40.0%
20.0%
0.0%
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Males Females
Figure 6 Successful candidates in commercial property training, 1992-2008.
The initial high ratio of black participants in basic property training (figure 7) can be
ascribed to the pent-up demand for such training, as well as possibly the prospect of
demands of an imminent black majority government. Thereafter the ratio of black
participants in basic property training fell initially, but stabilised at about 60 per cent.
Basic Property Training
Race Transformation 1992-2008
80.0%
60.0%
40.0%
20.0%
0.0%
1992
1993
1996
1997
2001
2002
2003
2004
2005
2006
2007
2008
Blacks Whites
Figure 7 Race transformation in basic property training, 1992-2008.
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Intermediate property training (figure 14) had an effectively zero participation by blacks
in 1992. This was to be expected, as relatively few blacks were employed by the
property industry at that level in 1992. The ratio increased dramatically over the next
16 years, with blacks now making up about 60 per cent of all participants.
Race Transformation
Intermediate Property Training 1992-2008
120.0%
100.0%
80.0%
White
60.0%
Black
40.0%
20.0%
0.0%
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Figure 8 Race transformation in intermediate property training, 1992-2008.
A similar trend, but less pronounced, is observable in figure 9, which illustrates the
participation by blacks in commercial property training.
Commercial Property Training
Race Transformation 1996-2008
100.0%
80.0%
60.0%
40.0%
20.0%
0.0%
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Whites Blacks
Figure 9 Race transformation in commercial property training, 1992-2008.
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The pass ratio of blacks initially lagged that of white students (cf. figure 10). This can
be ascribed partly to some employers ‘fast-tracking’ promising black employees beyond
their abilities and partly to the legacy of sub-standard black school education. The ratio
has, however, improved to similar levels of that of white students.
Race Pass Ratio
Commercial Property Training 1996-2008
120.0%
100.0%
80.0%
60.0%
40.0%
20.0%
0.0%
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
Black White
Figure 10 Successful candidates in commercial property training, 1992-2008.
2.2 The South African Council of Shopping Centres
2.2.1 Certificate in Shopping Centre Management (CSCM)
In response to an identified need in the shopping centre industry for education in
management and development, the Certificate in Shopping Centre Management was
initiated in 1992. It is a joint undertaking between the SA Council of Shopping Centres
and the University of Pretoria and participation is normally limited to 64 delegates.
The course comprises a full-time, five-day programme of 22 modules and a group
project. Self-study of the course material is required before the course commences.
Individual delegates write an hour-long examination at the end of each day and also
submit a group analysis of an existing shopping centre. Certificates are awarded to
those participants who have achieved a pass-mark in the individual examination as well
as in the group project. A total number of 867 delegates have successfully completed
the course to date (figure 11). The pass rate is about 93% .
2.2 Advanced Certificate in Shopping Centre Leadership (ACSCL)
An annual year-long correspondence course, the Advanced Certificate in Shopping
Centre Leadership, was introduced in 1996 as a joint venture between the S A Council
of Shopping Centres and the University of Pretoria. It is aimed at middle to senior
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managers in the shopping centre industry and comprises 16 modules to be studied by
distance learning as well as a three-day block session. To be admitted to the course, a
candidate must either have completed the Certificate in Shopping Centre Management
or must have had seven years' relevant experience in shopping centre management.
Evaluation is by means of six written assignments (including, in case study format, a
critical evaluation of a designated shopping centre) and one four-hour examination.
The average attendance on the twelve courses presented to date is about 22 and the pass
rate is about 67 per cent (figure 12).
3.2.3 Certificate in Fundamentals of Shopping Centre Marketing (CFSCM)
Following requests from industry, this course was introduced in March 2001 to provide
participants with a thorough grounding in the fundamentals of the marketing of
shopping centres. The course extends over two-and-a-half days and each participant has
to submit a strategic marketing plan for a shopping centre some six weeks after the
course. The course is presented annually. Average attendance is about 36 and the pass
rate about 84%.
Attendance Shopping Centre Courses 1993-2008
100
90
80
Number p.a.
70
60
50
40
30
20
10
0
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
1993 (1)
1993(2)
1994(1)
1994(2)
CSCM ACSCL CFSCM
Figure 11 Annual attendance of shopping centre courses, 1993-2008
Figure 12 illustrates the cumulative attendance of these courses, all of which have
become the de facto qualifications in the various aspects of shopping centre
management in South Africa. The courses regularly draws support form other African
countries, albeit on a limited scale due to the relatively undeveloped state of formal
shopping centre development in most countries in Africa.
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Cumulative number of students on Shopping Centre Courses
1993-2008
1600
Cumulative number
1400
1200
1000
800
600
400
200
0
1993 (1)
1993(2)
1994(1)
1994(2)
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
CSCM ACSCL CFSCM TOTAL
Figure 12 Cumulative attendance of shopping centre courses, 1993-2008
2.2.4 Gender and race transformation in shopping centre management training
The gender and race transformation in shopping centre management training are
illustrated in figures 13 and 14. The analysis is confined to the courses in shopping
centre management only, as statistics on the other two courses do not enable meaningful
deductions to be made.
Gender Transformation
in Shopping Centre Management Training
1994-2009
100.0%
80.0%
60.0%
40.0%
20.0%
0.0%
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
Males Females
Figure 13 Gender transformation in shopping centre management training, 1992-2008.
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Training of women in shopping centre management has increased steadily from 1994,
when only about 25 per cent of the participants were female. The ratio now averages
about 70 per cent, which is symptomatic of the much greater role played by women in
the management of shopping centres (figure 13; informal tenant feedback indicates that
many tenants regard women to be more empathetic to the needs of tenants than men).
Figure 14 indicates a similar, but less pronounced trend in the training of black
shopping centre management. It can be expected that this trend will become much more
pronounced in the future, as a number of shopping centres in traditionally black areas
are now under development.
4. Transformation in formal tertiary property education courses
As an example of the transformation occurring in universities in South Africa, the
University of Pretoria will be considered. It is the largest residential university in the
country.
Racial Transformation
in Shopping Centre Management Training
1994-2009
100.0%
80.0%
60.0%
40.0%
20.0%
0.0%
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
White Black
Figure 14 Race transformation in shopping centre management training, 1992-2008.
Racial transformation at the University of Pretoria over the past thirteen years is
indicated in figures 15 and 16. The total percentage of black students increased from
about 23% in 1997 to about 44% in 2009. As to be expected, this ratio is much lower in
the Faculty of Engineering, Built Environment and IT, but also increased steadily from
about 18% to about 43% over the period 2000 to 2009.
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UP Total Student Numbers for Contact Education
(White / Black)
May 2009
45
Thousands
40
35
Number of students
30
25 White
20 Black
15
10
5
0
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Year
Figure 16 Race transformation at the University of Pretoria, 1997-2009.
UP Total Student Numbers for Contact Education
(Male / Female)
May 2009
Th 45
ou 40
Nu sa
35
m nd
30
be
25 Male
r
of 20 Female
st 15
ud 10
5
0
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Year
Figure 17 Gender transformation at the University of Pretoria, 1997-2009.
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EBIT Student numbers according to race
30 April 2009
10000
9000
8000
Number of students
7000
African
6000
Indian
5000
Coloured
4000
White
3000
2000
1000
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Year
Figure 18 Race transformation in the Faculty of Engineering, the Built Environment and
Information Technology, University of Pretoria, 2000-2009.
Although the ratio of black students in degree programmes has more than doubled over
the past ten years, the black completion rate generally less than half the white
completion rate, neutralising the access gains.
Transformation in the EBIT Faculty: 1986 - 2009
7 M ay 2009
10
Thousands
9
8 African females
Enrolled students
7 Indian females
Coloured females
6
White females
5
African males
4
Indian males
3 Coloured males
2 White males
1
0
1986 1992 2006 2009
Year
Figure 19 Gender transformation in the Faculty of Engineering, the Built Environment and
Information Technology, University of Pretoria, 2000-2009
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EBIT Student Numbers according to gender
30 April 2009
10000
9000
Number of students
8000
7000
6000
Female
5000
4000 Male
3000
2000
1000
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Year
Figure 20 Transformation in the Faculty of Engineering, the Built Environment and Information
Technology, University of Pretoria, 1986-2009.
Race and gender transformation in the MSc(Real Estate) course are indicated in figures
21 and 22. The percentage of female students have stabilised at about 25%, while the
ratio of black students is about 50% and increasing steadily. In the latter case, however,
it must be noted that a large number of black students originate from other universities
in South Africa and other African countries and the numbers are therefore not
necessarily indicative of the transformation of students who had previously graduated
from the University of Pretoria.
A reason for the relatively lower participation by women in these courses may be that
the master’s course is advanced and typically takes 3 to 5 years for completion. In line
with other advanced degrees, many women do not consider sacrificing this time to be
worth the effort, unless they seriously intend following a professional career for most of
their working lives.
The relatively lower participation by black students can be ascribed firstly to the
stringent entrance requirements, which includes an appropriate honours degree. Fewer
than 5 per cent of black learners in South Africa successfully complete mathematics and
science at university level (this is an entrance requirement for most degrees in the built
environment). Secondly, those students who have successfully obtained honours
degrees are in tremendous demand in industry because of the pressure of BEE
compliance. Many therefore do not find it worthwhile to pursue an advanced degree, or
may not be prepared to sacrifice the time from their lucrative positions.
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Chris Cloete, pp 398-413
Gender Transformation 1990-2008
MSc(Real Estate)
University of Pretoria
35.0%
30.0%
25.0% Female students
MSc(Real Estate):
20.0% UP
15.0%
10.0%
5.0%
0.0%
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
Figure 21 Gender transformation in the MSc(Real Estate) enrolment, University of Pretoria, 1990-2008.
Race Transformation 1990-2008
MSc(Real Estate)
Univerity of Pretoria
80.0%
60.0%
40.0%
Black students
20.0%
0.0%
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
Figure 22 Race transformation in the MSc(Real Estate) enrolment, University of Pretoria, 1990-2008.
5. Conclusion
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Chris Cloete, pp 398-413
Property education of previously disadvantaged sections of the population has proven to
be a formidable challenge in the new South Africa. However, professional bodies have
risen to the challenge and have made considerable inroads into bridging the gap,
resulting in both females and blacks now making up about 60 per cent of students in
basic training programmes and about 50 per cent in more advanced programmes in
property.
In shopping centre management courses females now make up about 60 per cent and
blacks about 50 per cent, whereas both groups had a participation of about 25 per cent
in 1994.
In the case of the MSc(Real Estate) degree at the University of Pretoria, women make
up about 30 per cent of the students (in line with general gender composition at
universities) and black students about 60 percent, which is much higher than the general
race composition at the University of Pretoria as well as the relevant faculty.
7. References
Blades, M. A, (1993). A quantitative analysis of the effect of the Group Areas Act on
residential property prices in Pietermaritzburg, Unpublished MSocSc
(Economics) treatise, University of Natal (Pietermaritzburg).
Christopher, A. J. (2001). “Urban Segregation in Port-apartheid South Africa”, Urban
Studies, 38(4) pp. 449-466.
Cloete, C E (2002). “Progress in real estate education in South Africa”. Property
Management 20(5):369-382.
De Soto, H (2001). The Mystery of Capital. London: Black Swan Books, Transworld
Publishers.
De Villiers, D A (1993). “The apartment market in Pretoria after the abolition of the
Group Areas Act” (in Afrikaans), Unpublished MSc (Real Estate) treatise,
University of Pretoria.
Donaldson, S. E. and Van der Merwe, I. J. (1999). Residential desegregation and the
property market in Pietersburg, Urban Forum, 10(2) pp.235-257.
Department of Education (1996). Green Paper on Higher Education Transformation.
Pretoria, South Africa.
National Commission on Higher Education (1996). An overview of a new policy
framework for higher education transformation. Pretoria, South Africa.
Hattingh, P.S. and Horn, A.C. (1991). “Apartheid Pretoria”. In Lemon, A. (Ed.),
Homes Apart, Davis Philip, Cape Town.
Prinsloo, D A and Cloete, C E (2002). Post-apartheid mobility patterns in two South
African cities. Property Management 20(4):264-277.
Prinsloo, D A (2005a). “Ten years of democracy”. S A Property Review , Jan/Feb: 52-
55.
Prinsloo, D A (2005b). “Great potential in township residential market”. S A Property
Review , Mar/Apr: 32-35.
SA 1998. Regulations under the South African Qualifications Authority Act, 1995 (Act
No. 58 of 1995), Government Gazette No. R.452, 28 March 1998, Pretoria:
Government Printer.
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Mex Muatjeteja, Jacob Kashiwagi and Dean Kashiwagi, pp 414-425
Professor career progression
Mex Muatjetjeja1, Jacob Kashiwagi2, and Dean Kashiwagi2
1
Faculty of Engineering and Technology
University of Botswana, Gaborone
Botswana
2
Del. E Web School of Construction
Arizona State University, Tempe
United States
Email: [email protected]; [email protected]; [email protected];
[email protected]
Abstract:
The University of Botswana (UB) Project Management (PM) section in the Civil
Engineering (CE) faculty are in a resource restricted environment and tasked to teach
three classes a semester. Each faculty is now being requested to do research work,
publish papers, and in many cases work on their PhD at the same time. The emphasis is
on administrative and teaching roles, and not research roles. They are caught up in a
career ladder that forces them to do research to get promoted, but with no strategic
research plan and research is only a means for progression in an academic career and not
the end. The mentorship of younger faculty in research is difficult, both from the role of
the mentor, and the protégé. The research mentors are rare, and the younger lecturers feel
neglected. There is no coordinated strategic research plan for the department, section, or
faculty. The average research activity of the majority of the staff at the University of
Botswana is very low. The publishing of research of the staff is currently very poor.
This paper proposes that the problem is not a University of Botswana issue, but a
structural issue that all universities face. The authors propose that faculty be exposed to a
new research based faculty career ladder instead of focusing on the traditional teaching
and administrative career, and a new approach to research. The research will investigate
whether a research based career can possibly be successful at the University of Botswana
Project Management section.
Keywords: project management research: PM faculty career plan
1 Introduction
There are a couple observations about research in the construction management and
project management areas. Over the last 15 years the following has occurred:
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Mex Muatjeteja, Jacob Kashiwagi and Dean Kashiwagi, pp 414-425
1. The construction management research has been isolated from industry practices.
Results in construction management funded research rarely become dominant in the
construction industry.
2. Government funding groups who are governed and regulated by academic and
industry representatives keep changing what concepts are critical to the industry, and
researchers continue to change their research expertise to get the research grants.
3. Researchers have developed research ideas such as lean construction, business
process planning, revaluing construction, continuous improvement, knowledge
transfer, six sigma, data mining, key performance indicators, sustainability and
different construction delivery processes; however the impact on construction
performance has not been clearly documented.
4. Research capability of universities is determined lately in the UK by number of
researchers, experience of researchers, amount of research grants previously awarded,
capability to spend the research funding, number of publications, and other research
activity. Because of past history of poor performance of academic research efforts
and a perception that construction research takes time to develop value added
contributions, government funding agencies in the UK have decided to give more
funding to just a few universities over a longer period of time to allow them to
produce a greater impact on the construction industry.
Some may disagree with the above perceptions. However, they will have great difficulty
in disagreeing with the performance of the construction industry: the only industry with a
decreasing productivity, an industry that is losing their quality craftsmanship,
performance that is not on time, with minimized change orders, and meeting the client’s
expectations, and constant changing of the delivery system to pass risk instead of
minimizing risk which is countered with the continual need for partnering sessions.
2 Literature Review
The role of the researcher seems to be a temporary stop in the journey of the construction
academic. Academics seem to have a promotion progression plan of going from lecturer,
to senior lecturer, to associate professor, and full professor, or from assistant professor, to
associate professor and tenure, and then to full professor, and finally to regent professor
at some U.S. universities. Their career progression seems to go from lecturer, researcher,
to head of department, and dean of research, administration, or a school or college,
deputy vice chancellor, and for a few being a vice chancellor.
Very few researchers are career researchers. The authors define “career researchers” as
having research as their primary task throughout their career, constantly and continuously
changing the industry environment through hypothesis testing. Testing involves
innovation, change, and solving complex issues in their area of expertise with innovative
solutions. Career researchers will:
1. Remain in research for over 20 years without changing their core research area.
2. Run repeated hypothesis testing.
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Mex Muatjeteja, Jacob Kashiwagi and Dean Kashiwagi, pp 414-425
3. Constantly developing technology and information that has a tremendous impact on
the construction industry performance throughout their career.
4. Will mentor others to follow in their path due to the dominant impact.
5. Have technology that has impact on the industry practice.
6. Simultaneously and continuously conduct theoretical development, prototype testing,
and implementation of technology.
7. Have a non-traditional funding model, more resembling consultation because the
traditional funding model will not allow continuous funding and development of the
same technology area.
8. Very focused, deep” and “high impact” technology development.
9. Will be an industry expert in implementing the developed technology.
10. Peer review for a very successful researcher comes from industry test results and
industry implementation, and not from fellow academics who may for one reason
may not have the proper technical knowledge or experience, or may be biased due to
existing practices and defensive approach to change, and who are used to more
subjective reviews that concentrate on the administrative aspects of the research.
One of the major characteristics of career researchers is that they run repeated hypothesis
testing. They are differentiated from academic researchers who often propose solutions
but rarely run hypothesis testing. CIB W117 did an exhaustive search of all university
research groups that did repeated hypothesis testing on research developed construction
systems, and found just two groups (Egbu et al., 2008). One of those groups is the
Performance Based Studies Research Group (PBSRG), the home of CIB W117 the use of
Performance Information in Construction. There are other research groups who
document and analyze the performance of delivered construction services, but do no
prototype testing of their own. Their information is vital, but they may have a more
difficult time impacting the industry and sustaining the research effort over a number of
years while getting their researchers promoted within the traditional university system.
These researchers are more reactive to the industry, instead of proactively changing the
construction environment.
The authors are proposing an alternate track for career construction researchers,
construction research experts who leads and impacts the construction industry, who
continually runs hypothesis testing, who is a mentor to academic and industry personnel,
who is sought after to solve construction industry problems, who is the source of
construction knowledge and not one who packages industry practices and concentrates on
training and education. Career researchers are needed more in schools which have low
research activity, require research activity to get promoted, are understaffed, have no
access to huge government grant opportunities, are isolated from the industry, and have
very few opportunities to advance up the academic career ladder. Career researchers may
be able to increase the prestige of the university, attract industry to the university creating
a partnership that is required to impact industry practices, and be excellent mentors for
graduate students and younger faculty attempting to do research.
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2.1 Problem
The current academic construction research environment at the University of Botswana
(UB) is not aligned to motivate researchers to concentrate and become very
knowledgeable of the construction industry, develop research expertise, have tremendous
impact to the Botswana construction industry, and integrate their research testing,
publication and teaching efforts for the next 15 – 20 years. Without career researchers,
the UB Project Management (PM) research program will have a difficult time impacting Deleted: niversity of Botswana
Pro
the industry, solving their problems, and drawing them into meaningful research.
Deleted: ject
2.2 Hypothesis
An alternate track for construction management/project management academic
researchers can be created at the University of Botswana (UB) that will provide
researchers with the potential to become career researchers, and who can become
professors while becoming research experts.
3 Research Methodology
The authors will go through the following steps:
1. Identify a successful career researcher in construction management to validate the
possibility of the career path.
2. Identify the potential benefits of a career researcher at the UB.
3. Identify the requirements of a career path for a professional researcher at the UB.
4. Identify what constraints prevent an academic based educator to be a professional
researcher at the UB.
5. Design the career ladder and requirements at the UB.
6. Identify a system to measure deviation from the projected baseline course at the UB.
7. Identify several academics who want to test the career path at the UB.
8. Track the researchers as they proceed through the new career path.
9. Also track the success of the graduate education program at UB (number and
percentage of graduates, number of refereed papers, number of research tests, number
of research grants.)
3.1 Objectives
This paper has the following long-term objectives:
1. Confirm that a career researcher concept is viable by example or logic at the
University of Botswana.
2. Identify value, and validate that lecturers are interested in career researcher concept
as test cases.
3. Create a new breed of researchers who can impact the construction industry by
redefining the requirements and constraints.
4. Design the new career ladder for the career researcher.
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5. Identify career rules, activity map, and risk mitigation techniques for professional
researchers.
6. Document the test cases of career researchers at the University of Botswana. This is a
follow on objective that will be analyzed over the next three years.
The objective of this paper is to define the new career ladder for career researchers and
define an operational map and activities of the career professional. The actual testing
will occur over the next couple of years with lecturers at the University of Botswana and
elsewhere.
4 Findings and Discussion
4.1 Value Added Work: Identify a Career Researcher
The first objective is to identify a case of the career researcher. One of the most
developed cases is Dean Kashiwagi and the Performance Based Studies Research Group
(PBSRG). Kashiwagi is the Director of the PBSRG, a researcher for 15 years, a
Coordinator for the CIB W117 working group, Fulbright Scholar, tenured and promoted
to full professor, practicing professional engineer, and has minimal administrative duties.
Other characteristics of his research effort include (PBSRG, 2009; PBSRG, 2009;
Kashiwagi, 2009):
1. Core expertise of best value processes is most published source in the world due to
repeated testing, licensed processes (Performance Information Procurement System
(PIPS) and Performance Information Risk Management System (PIRMS.))
2. Requested in by other countries: UK, Finland, Netherlands, Botswana, Japan, China,
Malaysia, New Zealand, Pakistan and Australia for transfer of technology.
3. Number of years in same core area: 15 years
4. Research grants (cumulative): $8.4M
5. Research reserve funding for capitalized innovative efforts: $700K (May, 2009)
6. Number of research tests conducted by PBSRG: 650 delivering $2.3B of services
7. Number of research tests conducted by CIB 117/PBSRG licensed partners in other
countries: total of 13, 6 tests, 1.3B Euros, Scenter/Rikeswaterstaat, Netherlands; 7
tests in Botswana on smaller projects
8. Research partners in the United States: US Federal government agencies, state
organizations, city organizations, universities, construction manufacturers, general
and specialty contractors, design firms
9. Number of refereed publications: 175
10. Current staff: 26
11. Number of countries with active research participants: 7
12. Number of research platforms in other countries doing PBSRG developed research: 2
(Netherlands, Botswana)
13. Annual education/training best value conference attendance (2009): 220, industry
attendees: 210, academics: 10
14. Number of other young lecturers and assistant/associate professors who are being
mentored: 10 protégés
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The second step is to identify the need and potential success for career researcher at the
University of Botswana. The current situation at the UB in Botswana is that lecturers are
faced with promotion requirements of doing research work (publications, research
funding, and research tests that lead to a change in industry practice.) Botswana
industries are currently isolated from the academic research efforts. The FET also has
requirements to have successful graduate programs (students graduating), of research
funding, and publications. Both the researchers and the FET are facing challenging
economic circumstances that need a non-traditional solution (opportunity for a new
approach, a career researcher. The Botswana industries are facing the same project
management (PM) problems that are found worldwide (projects are not on time, not on
budget, and not meeting client expectations.) The UB FET/CE department/PM
section/MPM program brought Fulbright Scholar (FS) Kashiwagi to see if the career
researcher model could add value and would assist in overcoming the problems. A one
year test (FS was on site for only four months) led to the following results (Mselle et al.,
2009; Adeyemi et al., 2009; Kashiwagi et al., 2008):
1. Signing of two research grants of $25K US to proliferate the PIPS technology in
Botswana. Four lecturers being mentored had no grants in the last three years.
2. Writing of 21 refereed conference papers on the Botswana test case (increase for four
lecturers worked with moving from 0 papers in the last three years to 21 papers in one
year.)
3. Design of a research based graduate program that fits the career activities of a career
researcher and aligns research and graduate education, and uses postgraduate students
as resources in a partnership instead of students trying to get a degree. The
graduation rate of the current program is less than 10%. The FS has identified 15
students, mapped out productive thesis work, and if completed, can increase
graduation rates by 30%.
4. Implemented a career researcher based design into four graduate MPM courses.
5. Mentored four lecturers in the exposure to the new career researcher or research
based approach.
6. Made nine different industry presentations. Previously the four lecturers being
mentored had no industry presentations for obtaining research grants.
7. Conducted 8 different research tests not including the transformation of the graduate
program and a test case graduate class. These were the first research tests in
Botswana.
8. Convinced a major UB department, the UB Information Technology (IT) to change
the paradigm of their business. This is a huge step, as the operational group steps
forward to change the paradigm. Only one other university has gone to academia, to
change their operational paradigm (Arizona State University.)
9. Convinced two of the mentored lecturers to get their PhD, using the new career
researcher approach.
The results are leading to Phase II of the UB test to create career researchers. The next
phase of the research test includes:
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1. MOU between ASU and UB.
2. Strategic plan agreement between PBSRG and FET and CE.
3. Visiting professor role of mentor to mentor 2 PhD candidates, and 15 MPM and CEM
postgraduates.
4. Assist in the increase of research funding to $50K US to UB.
5. Test the PIPS system with the UB IT department, possibly leading to UB adopting the
PIPS/PIRMS methodology as a new efficient operating model.
6. Continue to publish 20 refereed publications including 5 journal refereed papers per
year with UB faculty on UB testing.
4.2 Requirements of a Career Researcher
By definition, a career researcher is a change agent, must be confident, depends on
deductive logic and test results instead of industry consensus and best business practices,
has the ability to control their own destiny, depends on test results rather than academic
relationships for promotion, and is skilled in doing basic conceptual, prototype testing,
and implementation research (tests that bring documented change to the environment.)
The nature of a change agent is by definition a non-traditional approach to being an
academic researcher. The following are some of the requirements of career researchers
as documented in the 15 year $7.5M PBSRG research program. The list is not all
inclusive and the characteristics can be applied to a relative degree. Deductive logic
identifies that greater success will result from more consistent alignment with these
principles. Requirements include (Hamel, 2007):
1. Be a change agent, a leader of change, bold and proactive.
2. Be consistent, accountable, and responsive.
3. Confident of use of deductive logic.
4. Simultaneous basic conceptual, prototype testing, and implementation research.
5. Industry funding related to prototype testing.
6. Do educational marketing of technology and find research clients.
7. Understand and use deductive logic.
8. Ability to communicate technological advances in simple and short communications
and presentations.
9. Think in the interest of others.
10. Ability to add value to others.
11. Documentation of research performance.
12. Alignment of teaching duties and research. Teach research results.
13. Use of research funding to minimize administrative requirements.
14. Minimize administrative requirements.
15. Using graduate students and industry organizations as resources, partners, and test
laboratories.
16. Innovative use of technology to manage own research business.
17. Alignment of research and research partners.
18. Constrained to area of core expertise. Do not accept funding from research partners
who do not have core foundation concepts of efficiency, effectiveness, measurement,
accountability, and value.
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19. Strategic plan of research activities.
20. Alignment of research concepts, established experts in the industry, and research
partners.
21. Ability to not be concerned with traditional academic model.
22. Document test results, industry impact identified and documented.
4.3 Constraints that Undermine the Development of a Career Researcher
The following are characteristics identified by the Information Measurement Theory
(IMT) as tip-offs that the individual is not capable of being a career researcher. These
characteristics also apply to identifying academic career activities which if not managed
and minimized through successful research activity, are detrimental to the promotion of
the career researcher (J. Kashiwagi, 2007; Muatjetjeja et al., 2009):
1. Relationships and beliefs in the traditional processes.
2. Desires to control, direct, and influence others.
3. Takes criticism personally.
4. Threatened by change.
5. Dishonesty or inaccurate perception of reality.
6. Their perceived knowledge of industry practices is more important than deductive
logic.
7. Inconsistent decision making.
8. Short term thinking with no strategic planning.
9. Person is a part of a bureaucracy.
10. Depends on relationships and politics to be successful.
11. Suspicious of everyone with no faith in logic.
12. Reactive, creator of transactions.
13. Perceives they are being controlled.
14. Always asking “what if” statements that have zero probability of happening.
15. Do not keep commitments, do not answer emails.
16. Depends on complexity and confusion to show their value.
17. Inefficient and ineffective in bringing change.
18. Financial reward is more important than actual value of contribution.
19. Cannot quickly prioritize objectives, obstacles, and goals.
20. Will not listen to and does not honor mentor.
These characteristics have been researched and analyzed for the last 15 years in IMT
research and repeated industry hypothesis testing (Kashiwagi, 2009.) The above
characteristics are the foundation of the very successful IMT/PIPS model (600+ tests,
$2.3B of delivered services, 98% performance, minimize up to 90% of risk management
and transaction activity. The above characteristics were identified in the 600+ research
tests over the last 15 years.
4.4 Career Ladder and Activities of Career Researchers
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The career ladder of the career researcher is unlike the carrier academic. Instead of
moving through the various rungs of academia, picking up more and more administrative
duties, the career researcher finds their niche as soon as possible, and focuses on building
a research program. The most difficult task is to find a successful, experienced mentor
and a research area that has opportunity for impact in the industry, which will be an area
of problems and need, and which will naturally result in funding. Both have been
identified at the UB. The career researcher must also minimize as much administrative
workload as possible, and create industry research platforms, relationships, and
hypothesis testing as soon as possible. The authors propose that the career researcher
also find a mentor in the research area and in the industry as soon as possible. To be
efficient and effective, the following activities should be documented in a weekly risk
report (WRR) (Muatjetjeja et al., 2009) by the career researcher:
1. Research activity goals in terms of number of presentations, refereed papers
(conference and journal papers), research grants, and research tests.
2. Build research platform by aligning research expertise with graduate research course
instruction, finding graduate students who are interested in the concentration as
resources and not students, and using deductive research methodology expertise to
assist students to identify their thesis/dissertation research objectives.
3. Teach research based graduate courses (as opposed to education based courses.)
Research based courses are made up of 50% of the time used for students doing
research activity, 25%
4. Minimize transactions in administration, undergraduate education, university, college,
and school by trading off services with graduate students or by hiring administrative
personnel using the research funding.
5. Schedule of research activities over the next three years.
6. Minimize the impact of academic career ladder activities. If the researcher tries to
fulfill all the activities of both career ladders, they will be successful at neither.
4.5 Operating Rules for Career Researchers
The shrinking resources and increased demand on graduate research units will make it an
easier decision for career researchers at the University of Botswana. It will be different at
every university. The author is still using the philosophy after 17 years at Arizona State
University, and it has proven very successful. Career researchers at the University of
Botswana must understand that promotion comes from a professor working on their
strengths, and not on every requirement. Career researchers will always be the minority.
It is more difficult (the reason they are so sparse today), takes better planning and
proactive approach (majority of humans are slow changing and reactive) (J. Kashiwagi,
2007) and have to be very efficient with time, minimizing transactions (redundant
activity, out of order/alignment activity, no result activity, confused activity, and
communicating or passing information with confused individuals.) Career researchers
must do the following:
1. Be an IMT expert.
2. Be proactive, and identify what will be required ahead of time.
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3. Do not redo work.
4. Use IMT to quickly identify who can help (alignment) and who cannot help.
5. Do the least amount of work in terms of education, markings, reviews, coordination
work etc.
6. Plan time wisely.
7. Use expertise of research based approach in all activities.
8. Do not get caught up in long discussions. Long discussions lead to people who create
transactions, usually bureaucratic personnel.
9. Utilize a strategic plan, schedule, risk management plan and weekly risk report.
10. Manage deviations to schedule very carefully.
11. Prioritize and minimize activities with transactions.
12. Must have quick, continual internet access.
13. Time in the office where the researcher can be interrupted must be minimized.
14. Students must be treated as resources and partners.
15. Must deliver dominant research activity results and add value to both the school and
the industry.
16. Graduate students are much more important than undergraduate students.
17. All students who give presentations or reports need to be educated in the construction
of a dominant overview sheet, backup information, and dominant powerpoint
presentation.
18. Propose solutions, and if not taken, move on.
4.6 UB Career Researcher Experiment
The UB experiment is being headed by Dean Kashiwagi and the PBSRG staff at Arizona
State University (Kashiwagi et al., 2008). The experiment goals include:
1. In three years, mentor two lecturers to completion of their PhD requirements.
2. Increase the graduation rate of the MPM program by 300%.
3. Form an industry research group of at least 10 major Botswana organizations.
4. Transform the education based graduate program to a research based program.
5. Increase research grants to $50K US/year.
6. Generate 15 refereed conference papers a year and 10 refereed journal papers.
7. Host a conference at the UB.
8. Have every participant in the test case promoted.
9. Have the protégés being mentored have strategic goals and be regulated by the
weekly risk report (WRR) and the risk management plan (RMP)
The authors will also propose this program at other universities, and benchmark the UB
participants against other university lecturers in other countries.
5 Conclusion and Further Research
The University of Botswana (UB) Project Management (PM) section in the Civil
Engineering (CE) faculty are in a resource restricted environment. Each faculty is now
being requested to do research work, publish papers, and in many cases work on their
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PhD simultaneously with their regular teaching and administrative duties. The emphasis
is on administrative and teaching roles, and not research roles. They are caught up in a
career ladder that forces them to do research to get promoted, but with no strategic
research plan, research is only a means for progression in an academic career. The
mentorship of younger faculty in research is difficult, both from the role of the mentor,
and the protégé. Research mentors are rare, and the younger lecturers are discouraged in
a reactive, overtaxed environment. There is no coordinated strategic research plan for the
department, section, or faculty.
The average research activity of the majority of the Project Management staff at the
University of Botswana is non-existent. The publishing of research of the staff is
currently very poor. This paper proposes that the problem is not a University of
Botswana issue, but a structural issue that all universities face. The authors propose that
faculty be exposed to a new research based faculty career ladder instead of focusing on
the traditional teaching and administrative career. The research has run a scale test on
whether a research based career can possibly be successful at the University of Botswana
(UB) Project Management section. The results are very encouraging. The UB has
identified a mentor, protégés to be mentored, a project management industry who is in
desperate need of assistance from a university research group, and a new research based
approach to graduate education which will simultaneously assist the faculty and the
industry. The scale test took the form of a Fulbright Scholar (FS) coming to the UB PM
section and having tremendous success. The test will be carried on for the next three
years, using the weekly risk report (WRR) and risk management plan (RMP) as
technological tools of the participants. The test will also change the status of students
from students to resources, and the industry organizations will open up their businesses as
research laboratories.
6 References
Adeyemi, A., Mselle, P., Kashiwagi, D. and Sullivan, K. (2009), Challenges of a
Graduate Project Management Student, TG592009-22 International Conference on
People in Construction, Port Elizabeth, South Africa, July 12-14, 2009, Manuscript
submitted for publication.
Egbu, C., Carey, B., Kashiwagi, D. and Sullivan, K. (2008), Identification of the Use and
Impact of Performance Information within the Construction Industry. Rep, The
International Council for Research and Innovation in Building and Construction,
2008, United State, Arizona, CIB TG61.
Hamel, G. (2007), The Future of Management, Harvard Business School Publishing,
Harvard, Massachusetts.
Kashiwagi, D.T. (2009), Best Value, Performance Based Studies Research Group
(PBSRG), Arizona, Tempe.
Kashiwagi, D., Sullivan, K. and Ssegawa, J. (2008), Movement of the Latest Cutting
Edge Project Management/Delivery Systems to the University of Botswana, First
International Conference on Construction In Developing Countries (ICCIDC–I
“Advancing and Integrating Construction Education, Research & Practice” August
4-5, 2008, Karachi, Pakistan.
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Mex Muatjeteja, Jacob Kashiwagi and Dean Kashiwagi, pp 414-425
Kashiwagi, J. (2007), Leadership is alignment not influence, Arizona State University.
Tempe, AZ, United States of America. Master Thesis.
Mselle P., Muatjetjeju, M., Sullivan, K. and Kashiwagi, D. (2009), Developing a
Research Based MPM Graduate Program, The Fourth Built Environment Conference,
Zambia, (17 - 19 May 2009).
Muatjetjeja, M., Mselle P., Kashiwagi, D. and Sullivan, K. (2009), Development of a
Professor in the Project Management Academic Profession, ASOCSA2009-63 The
Fourth Built Environment Conference, Zambia, (17 - 19 May 2009).
PBSRG (2009), Performance Based Studies Research Group, Retrieved February 23,
2009 from PBSRG Web site: http://pbsrg.com/overview/documented-performance/
PBSRG (2009), Performance Based Research Group Internal Research Documentation,
Arizona State University, Unpublished Raw Data.
425
COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Winston Shakantu and Charles Chiocha, pp 1568-1576
Corruption in the construction industry: the case of Malawi
Winston Shakantu and Charles Chiocha
Department of Construction Management,
Nelson Mandela Metropolitan University,
South Africa.
Email: [email protected]
Abstract
Corruption is perceived to be present to some degree in most major industries.
However, in construction there is a higher level of suspicion than in other industries.
This is so because by its nature the construction industry is prone to abuse by its
stakeholders. The major concern is that the project nature of the industry, which
requires interface of many stakeholders, makes it especially susceptible to the vice. This
paper reviews the issue of corruption using Malawi as a case study. The survey research
method was used for the conduct of the research. The findings show that there is prima
facie evidence for suggesting existence of corruption in the South-Central African
country. The corrupt practices include bribery, fraud, collusion and negligence. Local
conditions and procurement systems seem to shape the form and extent of corruption.
The paper concludes by suggesting preventive measures that could be effected to
minimise the vice.
Keywords: Malawi, Bribery, Corruption, Susceptibility, Prevention, Procurement.
1 Introduction
Corruption is one of the ethical issues that have not received much attention. This is so
because for most construction stakeholders, especially in developing countries, it is
viewed as an inevitable if unpleasant part of procurement (Shenkar and Luo, 2004). In
many industries, including construction, it is treated as the proverbial ‘clouds’;
everybody knows where they are but nobody wants to do anything about them. As a
result, in many instances, corruption flourishes freely.
Corruption can be defined as “dishonest or illegal behaviour, especially of people in
authority that results in distortion in the allocation of resources and performance of
firms or government’’ (Hornby 2002:261).
Szeftel (1998) amplifies the above definition and suggests that corruption is behaviour
which deviates from the norms, rules and duties governing the exercise of a privileged
role or office for purposes of private gain; it may do so by ignoring prohibitions against
certain acts, or by fulfilling obligations to act or by exercising legitimate discretion to
act, as long as it does so for private advantage or private regarding motives.
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Shenkar and Luo (2004) seem to support Szeftels definition and suggest that for
corruption to occur there must be an exchange between two partners which:
a) has an influence on the allocation of resources either immediately or in the
future; and
b) involves the use of or abuse of public or collective responsibility for private
ends.
The construction industry is perceived to be more susceptible to corruption because of
several features. Firstly, the nature of construction projects where contracts tend to be
huge and yet the companies with financial and technical capability to implement them
are few. Secondly, the process of construction lends itself favourably to corruption. At
each stage of the process the potential for corrupt practices is high (Robb, 1996).
The impact of corrupt practices on the construction industry would depend on what the
intention of the acts was. Whatever the case, any form of corruption is harmful to free
and fair business dealings. The situation is worse in cases where corruption is associated
with organised crime because it discourages legitimate business as potential clients
withhold their investments. In the case of construction, misuse of scarce resources could
mean less development in a country.
Corruption also has a pervasive and negative impact on the poor since it distorts both
public and private choices in favour of the wealthy. In developing countries, corrupt
practices tend to reduce the capacity of individuals, businesses and the state to provide a
social safety net.
2 Causes of corruption
There are many reasons why individuals engage in corrupt practices. The leading
problem by far seems to be financial pressure. The financial pressures that motivate
individuals to perpetrate corruption include:
• very low wages;
• vices such as consumption of drugs and alcoholism;
• family crises;
• greed;
• living beyond one’s means;
• high personal debt;
• high medical bills;
• poor credit ratings;
• personal financial loss; and
• unexpected financial needs (Albrecht et al., 1995).
3 Forms of corruption
A study of literature shows that corruption can take any of the forms listed below:
• connivance between officials and contractors;
• negligence of some consultants (Sigcau, 2000);
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• proprietary information infringements and concealing of other peoples’ ideas
during the design stage;
• collusive bidding during the tendering stage;
• cash inducements (bribery) for overvaluing work performed during the site
operations stage;
• negligence in the form of the provision of poor quality documents during
production documentation stage; and
• fraudulent conduct such as covering up poor workmanship during site
operations.
According to Pearl et al., (2005) the forms of a type of corruption known as bribery
include: gifts, and fully paid trips. The forms known as negligence include: poor
material quality, poor workmanship, inadequate safety methods and bad
documentation.
These practices are engaged in by practitioners at all levels e.g. developers, product
suppliers, engineers and tradesmen (Vee and Skitmore, 2003).
4 Effects of corruption on the construction industry
Corruption impacts negatively on the economy of a country as well as the capacity of
the construction industry to address development imperatives. Corruption, according to
Szeftel (1998), alters the character of institutional performance in the context of
administrative efficiency; it undermines managerial efficiency and redirects resources
from regional, country and global policies to individual interests. Wraith and Simpkins
(1997) espouse the view that corruption is essentially destructive of public interest.
Therefore, corruption, whether incidental, systematic or systemic and whether endemic
or planned is profoundly damaging to the political, social and economic well being of a
country.
Goldstock (1990) points out that a consequence of corruption is that it dramatically
increases the cost of construction by undermining competition. For instance, corruption
on residential projects means less middle- and low-income housing. Corruption on
industrial and commercial projects means higher commercial rents, and therefore higher
costs of goods and services. Ultimately the high cost of construction makes investment
in building unattractive.
Corruption affects health and welfare when it touches the quality of construction i.e.
when buildings fail to meet safety requirements and specifications due to corruption and
bribery in building materials and workmanship or to bribery of public inspectors
(Shakantu, 2003).
According to Sigcau (2000) collusion amongst Building Inspectors brings the concept
of monitoring into disrepute. Moreover, some actions of Building Inspectors, such as
delaying payments to contractors and consultants, threaten the sustainability of the
construction industry and in particular, the development of emerging contractors. In this
regard, corruption undermines the promise to deliver infrastructure and empowerment
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of individuals. The bottom line of corrupt practices such as collusion, money
laundering, price fixing and kickbacks in the construction industry posits Farren (2003),
is that construction costs increase and owners and tenants have to foot the bill.
Sangweni and Balia (1999) show that the general view of corruption by business in the
construction industry is that it undermines healthy competition, retards economic
development, deprives buyers of goods and services of the real benefits of the economy,
and takes away the good character of individuals and groups.
Fluor Corporation’s Alan Boeckmann summarises the effects of corruption as having a
corrosive impact on market opportunities and general business climate. It deters
investment, curbs economic growth and sustainable development, distorts prices and
undermines legal and judicial systems (Boeckmann, 2003).
In effect corruption could lead to
• projects, which are unnecessary, unsuitable, uneconomic or dangerous;
• specification of components, which are over-priced, or expensive to operate and
maintain;
• increased project costs;
• project delays;
• the supply of defective equipment, materials or services; and
• payment for equipment, materials or services, which were not supplied
To investigate the problem of corruption, a survey was conducted within the Malawian
construction industry.
5 Description of the research method
The research subject and nature of the specific problem being investigated largely
influenced the choice of the research method. This is because in general the research
methodology evolves from and is determined by the research question (Neuman, 2000;
Rudestam and Newton, 2001; Easterby-Smith et al 2002). Significant factors were that
the study needed to be conceptually and theoretically grounded whilst the method
needed to be rigorous and appropriate. Although there is a wide and varied selection of
research methods that can be adopted, Remenyi et al., (1998) and Eaterby-Smith et al.,
(2002), demonstrate a distribution of appropriate research methods according to the
nature of the research problem being addressed. In this case the research needed to be
objective, generalisable and quantitative. Moreover, given that the fundamental nature
of the problem required perceptions of object reality of the respondents, the approach to
knowledge generation needed to be logically positivist. Therefore the most appropriate
primary method of research in the context of this paper was established as being the
survey research method.
The research, therefore, used a descriptive survey method for collection of the required
data. The population included building and civil engineering contractors, Built
Environment Consultants, Developers, Bankers, Public Works Officials and Clients.
The sample was selected using the random method. The questionnaire used comprised
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Winston Shakantu and Charles Chiocha, pp 1568-1576
nineteen open ended statements requiring specific rankings. The rankings were of a
Likert Type Scale with 1 depicting strong disagreement and 5 strongly agreeing as
given below:
1 strongly disagree
2 disagree
3 not sure
4 agree
5 strongly agree
Seventy questionnaires were forwarded to randomly selected respondents and forty
seven were returned giving a 67% response rate.
5 Research findings
The research findings with respect to prevalence and existence of corruption are given
in Table 1. Table 2 gives the results with respect to types of corruption occurring.
Table 1. Prevalence and involvement in corruption (Source: Chiocha, 2009)
Statement Frequency
1 2 3 4 5
There is a high prevalence of corruption in the Malawian 0 0 9 10 28
Construction industry
Corruption is likely to increase in the Malawian 0 0 8 13 26
construction industry
Bribery has led to a high rate of uncompleted construction 2 0 14 23 8
projects
Corruption has led to delays in the construction process 2 2 17 22 4
Construction consultants are involved in corrupt 0 2 6 19 20
practices
Building contractors are involved in corrupt practices 0 0 2 12 33
Politicians are involved in construction corruption 0 0 0 12 35
Public works officials are involved in construction 0 2 10 12 23
corruption
Legal loopholes abet construction corruption 2 0 20 21 4
Suppliers are involved in construction corruption 0 0 17 23 5
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Table 2. Types of corrupt practices (Source: Chiocha, 2009)
Type of corrupt practice Frequency
1 2 3 4 5
Collusion 2 2 4 14 25
Kick backs 0 2 2 23 20
Price differentiation by same supplier 0 2 12 31 2
Bid rigging 2 2 6 28 9
Short delivery of ordered materials 3 3 23 14 4
Contract work being charged for but not carried out 2 2 5 25 13
Overvaluation of completed works 2 2 4 26 13
Over valuing of loss and expense claims 2 2 2 12 29
Falsifying quality of completed work e.g. strength of 2 2 7 23 13
concrete tests
Both Tables 1 and 2 show that the majority of the respondents either agree or strongly
agree that there is corruption in the Malawian construction industry an/or with the
occurrence of some types of corrupt practices. From the above tables it appeared that
corruption constituted a major problem in the Malawian construction industry and will
likely increase in the future.
5.1 Discussion of the research findings
The empirical investigation revealed that despite the calm façade that the construction
industry portrays, there is deep-rooted corruption in the process. Corruption in the
Malawian construction industry is engaged in by most project participants at every level
and every phase of the process. Some of the corrupt practices result in project delivery
delays.
Collusion, price differentiation, bid rigging tempering with claims and payment
certificates are amongst the major corruption practices affecting the development of the
construction industry in Malawi.
5.2 Preventive measures
The characteristics of a good procurement system are that it should be able to deliver
goods or services economically and efficiently. To achieve this, Transparency
International (2006) suggests, procurement systems should entail that:
a) contracting opportunities are widely publicised;
b) awards are made to those who meet the contractual requirement and make
best offers;
c) the rules are clear and fair;
d) the process is transparent with predictable results; and
e) public officials are accountable.
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In order for the procurement process to achieve the above mentioned characteristics,
posits Transparency International (2006), the competitive and bidding process should
adhere to the following best practice principles:
a) give public notification of bidding opportunities;
b) documents should be clear;
c) documents should clearly:
• set out the needs;
• describe the bidding process and contract terms and conditions; and
• give criteria for choosing the winner.
d) secretly sealed bids submitted should be opened in the presence of the
bidders at a specified time and place;
e) impartial evaluation and comparison of bids by competent evaluators
without influence of or interference by bidders or other parties;
f) award of contract to bidder complying with all requirements and offering the
best bid defined by the published selection criteria;
g) establish sound procurement codes that require open bidding and tenders to
act as a preventative on corruption;
h) requirement for third party monitoring of large procurements; and
i) requirement for sound independent audits of procurement processes.
Recently the UK Anti Corruption Forum called on all those with interests in the
infrastructure, construction and engineering sectors to take effective and co-ordinated
action to reduce corruption (ACF, 2006). The Forum recommends preventive and
enforcement actions including increasing awareness of corruption and its consequences
through publicity and training; improved international co-operation; the adoption and
enforcement by organisations of anti-corruption codes of conduct and management
systems; fair, reasonable, objective and transparent procurement and project
management procedures; the introduction of effective anti-corruption monitoring and
reporting procedures on projects; and fair and effective prosecution and blacklisting
procedures (ACF, 2006).
To reduce corruption, this paper contends that it is necessary to resolve the issues
making construction procurement especially susceptible in the first instance and to
investigate the issues raised in this section of the paper. The issues raised under this
section of the paper could go a long way in assisting construction industry stakeholders
in Malawi combat corruption if taken on board.
6 CONCLUSIONS
The literature review suggested that there are a number of personal pressures impacting
on the ethical inclination of individuals. The pressures inevitably force some officials to
commit corrupt practices. In Malawi the likelihood of occurrence of corruption is
expected to increase in the future if stakeholders do not implement preventative
measures. The bottom line of corrupt practices – collusion, price fixing and kickbacks in
the Malawian construction industry abound.
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6 REFERENCES
ACF [Anti Corruption Forum] (2006), Newsletter No. 1, February; Online
http://www.bccb.org.uk/downloads/AntiCorruption%20Forum%20Newsletter%201.
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Albrecht, W.S., Wernz, G.W., Williams, T.L. (1995), Fraud, Bringing Light to the Dark
Side of Business, Irwin, Homewood, Illinois.
Boeckmann, A. (2003), Engineering and Construction Industry Tackles Global
Corruption. Online: http://www.weforum.org, viewed 15th April 2009.
Chiocha¸ C.I.M. (2009) Corruption and its effects on the development of the
construction industry in Malawi, M Sc treatise, Nelson Mandela Metropolitan
University, Port Elizabeth.
Easterby-Smith, M. Thorpe, R. and Lowe, A. (2002), Management Research: an
Introduction 2nd ed, Sage Publications, London.
Farren, C.E. (2003), Ethics in the Construction Industry. Online:
http://www.ifmagny.org.ethics.htm viewed 15th March 2009.
Goldstock, R. (1990), Corruption and Racketeering in the New York City Construction
Industry. New York University Press, New York.
Hornby, A. S. (2000), Oxford Advanced Learners Dictionary. Oxford University Press,
Oxford.
Neuman, W.L. (2000), Social research Methods: Qualitative and Quantitative
Approaches (4th ed) Allyn and Bacon, Boston.
Pearl, R.G., Bowen, P.A., Makanjee, N., Akintoye, A. and Evans, K.M. (2005),
Professional ethics in the South African construction industry - a pilot study. In A.C.
Sidwell (Ed.), Proceedings of the International RICS Foundation Cobra Conference,
RICS, Brisbane, Australia, 4-8 July 2005, pp 60-71.
Remenyi, D., Williams, B., Money, A. and Swartz, E. (1998), Doing Research in
Business and Management: An Introduction to Process and Method. Sage
Publications, London.
Robb, D.J., (1996), Ethics in Project Management: Issues, Practice, and Motive, PM
Network, Volume 10, (12), pp 13-16, 18.
Rudestam, K.E. and Newton, R.R. (2001), Surviving your dissertation, 2nd ed , Sage,
Thousand Oaks.
Sangweni, S. and Balia, D. (1999), (eds) Fighting corruption: Towards a national
integrity; incorporating the report of the proceedings of the national anti-corruption
summit held on 14-15 April 1999 in parliament Cape Town. Pretoria.
Shakantu W M.W. (2003), Corruption in the construction industry: Forms,
susceptibility and possible solutions. CIDB 1st Postgraduate Conference 2003,
CIDB, Port Elizabeth, South Africa.
Shenkar, O. and Luo, Y. (2004), International Business, John Wiley and Sons, Inc.,
USA.
Sigcau, S. (2000), Speech at the Building and Drainage Control Conference 25th
August, Online: http://www.publicworks.gov/speeches, viewed 10th March 2009.
Szeftel, M. (1998) Misunderstanding African Politics: Corruption and the Governance
Agenda, Review of African Political Economy, Volume 25, (76), pp 221-240.
Transparency International organisation (2006), Preventing Corruption on Construction
project. Online: www.transparency international.org/Preventing Corruption on
Construction Projects.html, viewed 7th August 2009.
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Vee, C. and Skitmore, M. (2003), Professional Ethics in the Construction Industry,
Journal of Engineering, Construction and Architectural Management, Volume 10
(2), pp 117-127
Wraith, R. and Simpkins, E. (1997), Corruption in Developing Countries, 6th Edition,
Allen and Unwin, London.
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Henry Odeyinka, Shane Kelly and Srinith Perera, pp 435-446
An evaluation of the budgetary reliability of bills of quantities
in building procurement
Henry Odeyinka1 and Shane Kelly
1
School of Built Environment,
University of Ulster, Shore Road, BT370QB, United Kingdom
E-Mail: [email protected]
and
Srinath Perera2
2
School of Built Environment,
Northumbria University, Newcastle, NE18ST, United Kingdom
Abstract:
Bills of quantities have been documented to exist in some form or another as far back as
when the Egyptian pyramids were being constructed. In spite of that age long history, the
bills of quantities (BOQ) seems to be the most misinterpreted aspects of building
documentation today. The pros and cons of the bills of quantities have been deliberated
on for many years and have generated strongly held and differing views. Whilst this is
recognised, the essence of this study is to evaluate the reliability of bills of quantities in
building project procurement. The study was carried out using secondary data from some
recently completed building projects within the Northern Ireland construction industry.
Using secondary data from completed projects, the budgetary reliability of the bills of
quantities in building project procurement was investigated. Data analysis was carried out
using percentage deviation of final account figures from the bills of quantities. Further
analyses were carried out using root mean square deviation and relative mean absolute
deviation methods of analyses. Results showed that the budgetary reliability of the bills
of quantities seems to vary depending on project types. Whilst a deviation of -3 to 4%
was obtained on housing projects analysed, the deviation on educational projects was
between -4 and 17% whist on commercial project, it came out to be between -20 and 20%
and in the case of refurbishment projects, a deviation of between -11 and 37% was
obtained. This seems to suggest that the more complex a project is, the less reliable it is to
use the BOQ to guarantee cost certainty.
Keywords: Bills of quantities, budget, building projects, reliability, traditional
procurement
1
Author for Correspondence, E-Mail: [email protected]
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Henry Odeyinka, Shane Kelly and Srinith Perera, pp 435-446
1. Introduction
Bill of quantities (BOQ) in traditional contracting according to Seeley (1997) is a
document itemising all potential works in a construction project and their estimated
quantities. According to Davis et.al. (2009), the bill of quantities is usually produced by
the quantity surveyor based on drawings and specifications prepared by the Architect.
According to them, the contractor tenders against the BOQ, stating his price for executing
each item of work. The total of the contractor's prices, added to his prices for the various
items in the Preliminaries, forms the contract sum. According to Ramus et. al. (2006) the
contract sum cannot be varied just because the actual quantities differ from those in the
bills of quantities, so the contractor must satisfy himself that the quantities shown are at
least approximately correct.
Bills of quantities have been documented to exist in some form or another as far back as
when the Egyptian pyramids were being constructed (Pheng and Ming, 1997). In spite of
that age long history, the bills of quantities seems to be the most misinterpreted aspects of
building documentation today. The pros and cons of the bills of quantities have been
deliberated on for many years and have generated strongly held and differing views.
According to Davis et.al. (2009), one of the strong arguments against the use of the BOQ
is that it can only accurately price the materials and labour of a project at a given time.
According to them, outside the scope of materials and labour, there are additional costs of
preliminaries which consist of insurances, site set up, items of plant and so on. These
costs according to Davis et.al. (2009), are in some cases priced on the basis of a
percentage of the total material and labour costs. Pheng and Ming (1997) view the
uncertainty of being able to price items such as preliminaries accurately as a downfall of
the bill of quantities. Brewer (1998) among others felt that nothing divides the
construction industry quite so much as the argument over the use of Bills of Quantities.
According to him, the rules on which a bill of quantities is based does not allow items to
be measured accurately enough, thus creating uncertainty in the bill. Brewer (1998)
further contended that the interpretation given to some terminologies used in the BOQ is
different from the one held by the court, thus leading to uncertainties in case of dispute.
According to Cartlidge (2009) during the recent past, the bill of quantities has been much
maligned as outdated and unnecessary in the modern procurement environment.
According to him, it is undeniable that on the face of it the number of contracts based on
a bill of quantities has declined sharply in the UK over the past 20 years or so. In their
survey of the Australian construction industry, Davis et. al. (2009) also observed a
general decline in the use of BOQ prepared according to the Standard Method of
Measurement as a pre contract tool. Despite all the criticisms against its use, Cartlidge,
(2009) maintained that the bill of quantities remains unsurpassed as a model on which to
obtain bids. Davis et. al. (2009) also concluded that the BOQ is a very useful tool for
post contract cost control.
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Whilst the usefulness of the BOQ in obtaining bids and as a post contract cost control
tool have been documented, to the best of the knowledge of these researchers, there is no
recent documentary evidence of an investigation into the budgetary reliability of the BOQ
in building project procurement. This then is the focus of this study.
2. Literature Review
2.1. Previous Works on Bills of Quantities Format and Usage
According to Brook (2008) the BoQ has two primary uses. One is at the pre-contact stage
where it assists the contractors in the formulation of their tenders. The other is at the post-
contract stage where the BOQ assists contractors and quantity surveyors in the valuing of
progress payment and variations among others. For more than 40 years, a lot of work had
been done to examine the suitability of the BOQ in these two key phases of construction.
According to Banwell (1964) BOQs were primarily devised for tendering and allied
purposes. He however contended that it should not be their only function. According to
him, BOQ could be used for other purposes including costing, bonusing, ordering,
programming and control. The conventional format of the BOQ was considered by
Banwell to be inadequate for such purposes. He however did not propose an alternative.
Nelson (1970) also criticized the BOQ as being inadequate to provide the site
management team with the information it needs. According to him, site management
team spend a lot of their time seeking information from numerous sources and re-
calculating dimensions and quantities into units which are required on site. He further
criticized the BOQ for lack of coordinated information, aggregation of quantities on a
‘similar material’ rather than on an operational basis; and the measurement of quantities
in units which need conversion before they can be used. He therefore recommended the
operational format proposed by Skoyle (1968) for the BOQ. Kodikera et. al. (1993)
however contended that the operational format was not successful in implementation.
Skinner (1979) investigated contractor’s use of the BOQ and the utility derived from the
information contained in a BOQ during the construction phase. A detailed investigation
was conducted into the usefulness of the BOQ using three parameters of bill format,
adequacy of information presented and independence in terms of any need to seek
additional information to supplement that presented in the bill. Skinner’s (1979) study
concluded that BOQs make a substantial contribution to the planning, buying and
manufacturing areas of production. He also concluded that it was not evident that existing
bills were suited either in format or content to the needs of tendering or production.
Whilst he did not propose any new method, he pointed out that preparation of a tender
document which provides the contractor with the cost significant factors and authoritative
information which may be manipulated to satisfy a variety of needs was an urgent
requirement.
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Kodikera et. al. (1993) investigated the extent of usage of the BOQ for post contract work
in building contractors’ organizations. Using eight case studies, they concluded that the
average extent of use of the BOQ for post-contract work was found to be 50%. According
to them, this 50% of the BOQ requires some form of re-working which needs to be
reduced if improved post-contract use of estimating data is to be achieved. They further
concluded that information stored in the BOQ should be arranged in a directly usable way
and that ‘quantities’, ‘quantity units’ and ‘unit rates’ are the key elements of the BOQ
information that need to be presented in a more meaningful format if the amount of re-
work is to be reduced.
In the UK, the Latham report (1994) and Egan report (1998) questioned the rationale
behind using the traditional procurement as the main method of construction procurement
despite its draw backs. Since their reports, there had been a significant shift from
traditional procurement to the use of other modern methods of procurement. Since
traditional bills of quantities are most popular in traditional procurement, that meant a
resultant decline in the use of traditional BOQ as well. According to Gruenberg and
Hughes (2004), there is a steady decline between 1990 and 2004 in the use of traditional
procurement and by implication, the use of traditional BOQ. Davis et. al. (2009) argued
that over the last 5 years in the Australian construction industry, the use of the traditional
BOQ based on the Standard Method of Measurement has greatly declined. They however
submitted that there has been an increasing demand for abridged forms and builder’s
quantities, particularly from contractors.
According to Love et. al. (2006), the use of traditional procurement is heavily reliant on
the design documentation being complete and a detailed BOQ being produced so that cost
certainty can be provided to a client prior to construction commencing. The concept of
cost certainty, however, according to Rowlinson (1999) is a fallacy in the context of
traditional approaches that are based on full drawings and BOQ. Whilst in principle,
traditional lump sum contract can provide a public client with a firm, fixed price for
construction, in practice, very few projects are actually completed within the tendered
price (Love et. al. 2006). This they contended is because complete drawings are generally
not available when a project goes to tender. Thus, by implication, it is unlikely for the
BOQ to be complete in such a way as to guarantee cost certainty. Pheng and Ming (1997)
were also critical of the risk of pricing the preliminaries as well as the mechanical and
electrical services accurately in the absence of adequate information. Besides, according
to Odeyinka et. al. (2006), there are several other risk factors such as problems with
foundations, variations, economic factors and so on which may impact the goal of cost
certainty.
According to Seeley and Winfield, (1999) a BOQ prepared by a professional quantity
surveyor (PQS) is most useful when pricing projects of medium to large complexity.
According to them, a contractor pricing a project like this may feel compelled to increase
rates to cover the increased risk which is taken by not using a quantity surveyor to price
the job. According to Davis et. al. (2009), the Australian Institute of Quantity Surveyors
(AIQS) recommends the use of BOQ for the following projects: where the anticipated
reduction in tender price is calculated to be greater than the fee for producing the BOQ;
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for all projects of a complex nature or alteration work and for less complex projects with
an estimated cost of greater than A$2 million.
From the foregoing review of previous works on BOQ format and usage, it is evident
despite the decline in the use of the traditional BOQ, there is still a demand for BOQ in
one form or another. It is also evident that a primary goal of using the traditional BOQ is
to guarantee cost certainty. The question this research seeks to answer is whether or not
the BOQ is reliable as a budgetary tool to guarantee cost certainty.
2.2. Risk and Variability in Construction Cost
According to Flanagan and Norman (1993), the environment within which decision-
making takes place can be divided into three parts: certainty, risk and uncertainty.
According to them, certainty exists only when one can specify exactly what will happen
during the period of time covered by the decision. This, they concluded, of course does
not happen very often in the construction industry. Bennett and Ormerod (1984) also
concluded that an important source of bad decisions is illusions of certainty. They
submitted that uncertainty is endemic in construction and needs to be explicitly
recognised by construction managers.
According to Flanagan and Norman (1993), uncertainty, in contrast to risk, might be
defined as a situation in which there are no historic data or previous history relating to the
situation being considered by the decision-maker. In other words according to them, it is
‘one of a kind’. Smith (1999) also distinguished between risk and uncertainties in
decision making. According to him, risk is a decision having a range of possible
outcomes to which a probability can be attached, whereas, uncertainty exists if the
probability of possible outcomes is not known. According to Flanagan and Norman
(1993), a company has to operate in an environment where there are many uncertainties.
The aim is to identify, analyse, evaluate and operate on risks. Accordingly, the company
is converting uncertainty to risk. The more one thinks about risk and uncertainty, the
more one is inclined to the view that risk is the more relevant term in the building
industry (Flanagan and Norman, 1993). Perry and Hayes (1985) submitted that while the
distinction between risk and uncertainty is recognised, the distinction is unhelpful when it
comes to construction projects.
According to Flanagan and Tate (1997), the budgeted cost in the BOQ determined at the
pre-contract stage of any construction project forms the basis of the contract sum and it is
the amount established for the project, which is not expected to be exceeded. According
to Flanagan and Tate (1997), the budgeted cost should incorporate both foreseen and
unforeseen costs needed for the achievement of project’s objectives. Ashworth and Hogg
(2002) submitted that all the planning and decision-making by both the client and the
contractor for the success of the project centre on the budgeted cost. Therefore the
budgeted cost is expected to be accurate to avoid cost overruns. Mak and Picken (1999)
asserted that contingency sums are often allowed in cost estimates to ensure that the
estimated project cost is realistic and sufficient to accommodate any surprises. Perry and
Hayes (1985) and Flanagan and Tate (1997) were of the opinion that construction
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projects are expected to be completed at budgeted costs. This is because of the expected
inclusion of contingency sums to cover all the foreseen and unforeseen occurrences.
On the contrary, evidences abound in construction management literature that it is very
difficult to find a project in which the final account figure is the same as the contract sum
(Winch, 2002; Walker, 2002). This according to Perry and Hayes (1985) and Odeyinka
(2000) could be traceable to risk factors inherent in construction. According to Winch
(2002), risk is inherent in construction from the inception to the completion stages of a
project’s life. According to him, less information is available at the inception of a
construction project, as such the less the amount of information available, the higher the
level of risks and uncertainties. According to Ramus et. al. (2006), such uncertainties
would come from lack of site investigation information, leading to problems with the
foundation, incomplete drawings leading to variations during the construction phase, little
or no information about mechanical and electrical engineering services, leading to
inclusion of prime cost sums and provisional sums in the BOQ among others.
3. Research Methodology
This study was carried out primarily through the use of secondary data. Data were
obtained from past bills of quantities of building projects recently completed in Northern
Ireland. Data were collected from 4 different types of building projects, namely, housing,
educational, commercial and maintenance projects. The data relate to the tender price and
final account figures for the different project types investigated. Detailed element-by-
element data were also collected for each project type. The aim of the research was to
evaluate the budgetary reliability of the BOQ in each of the 4 project types. As such data
analysis was carried using percentage difference between initial contract sum and final
account figure. Two further analyses were carried out using root mean square (RMS)
deviation and relative mean absolute (Rel MAD) methods of analyses. The RMS is
expressed mathematically as follows:
1 n (Equation 1)
RMS = { ∑ (ti − oi) 2 }
n i =1
Where RMS is the root mean square deviation measure; n is the number of projects
investigated, ti is the tender sum for individual project and oi is the final account figure
for the individual project.
The Rel. MAD is expressed mathematically as follows:
1 n | ti − oi |
Re l.MAD = ∑
n i =1 ti (Equation 2)
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Henry Odeyinka, Shane Kelly and Srinith Perera, pp 435-446
Where Rel. MAD is the relative mean absolute deviation measure; n is the number of
projects investigated, ti is the tender sum for the individual project and oi is the final
account figure for the individual project.
4. Findings and Discussion
Table 1 presents the BOQ data as well as final account figures for 5 housing projects
studied. An analysis of the percentage difference between the tender sum and the final
account figure gives an indication of the budgetary reliability of the BOQ. From the
Table, it is evident that the percentage difference between the budgeted cost and final
account ranges between -3.42% and +3.85%. This falls between the ±5% range
recommended by Morrison (1984) as the acceptable accuracy range between the Quantity
Surveyor’s estimate and the accepted tender.
Table 1: Budgetary Reliability Measures for Housing Projects
Tender Sum Final Account Cost Difference Percentage
£ £ £ Difference
887,781.35 857,408.29 -30,373.06 -3.42
397,228.49 405,628.84 8,400.35 2.11
452,750.00 460,340.00 7,590.00 1.68
765,539.36 751,366.86 -14,172.50 -1.85
517,180.00 537,105.00 19,925.00 3.85
A detailed examination of the elemental breakdown for each of the 5 projects studied
showed a minimal difference between the tender figure and the final account figure.
Within the limitation of the data set, this then suggests that in traditional procurement,
where traditional BOQ produced according to the Standard Method of Measurement
(SMM) are used, the BOQ tends to be a reliable budgetary tool. This is not a surprise
because housing projects are usually well defined in terms of design and specification at
the pre-construction stage. As a result, the risk of variation and change in scope is usually
very low during the construction phase. In the same way, the mechanical and electrical
services requirements in housing projects are usually very straightforward, thus removing
the risk of cost overrun in complicated building services where complex building is
involved.
Table 2 presents the BOQ data as well as final account figures for 5 educational projects.
An analysis of the percentage difference between the tender sum and the final account
figure gives an indication of the budgetary reliability of the BOQ. From the Table, it is
evident that the percentage difference between the budgeted cost and final account ranges
between -3.69% and +17.05%. This is a range of more than 20% which is on the high
side. A detailed examination of the elemental breakdown for each of the 5 projects
studied showed wide variability between the tender figure and final account figures in
some elements such as floor and wall finishes, electrical and mechanical engineering
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services and external works. The observed high variability suggests that the BOQ is not
so much a reliable budgetary tool in educational projects. This is a bit of a surprise as one
would expect that educational projects like housing projects should be straightforward
enough. However, as evident from the elemental breakdown, high variability was
Table 2: Budgetary Reliability Measures for Educational Projects
Cost Difference Percentage
Tender Sum £ Final Account £ £ Difference
247,159.97 289,290.08 42,130.11 17.05
352,780.00 363,850.00 11,070.00 3.14
402,730.00 450,340.00 47,610.00 11.82
129,000.00 140,624.95 11,624.95 9.01
298,500.00 287,479.42 -11,020.58 -3.69
observed in some cases which suggest the occurrences of risk factors such as variation
and change in specification among others. According to Cooke and Williams (2009), one
of the risks with the most serious effects for the client is the failure to keep within the
cost estimate.
Table 3 presents the BOQ data as well as final account figures for 5 small to large
commercial projects. An analysis of the percentage difference between the budgeted cost
and final account shows a range of between -19.94% and +19.92%. This is a range of
more than 39% which is on the very high side. A cursory look at the percentage
differences of each of the 5 projects showed that the bigger the scope of the commercial
project, the higher the level of variability on the positive side between the budgeted cost
and the final account. A detailed examination of the elemental breakdown for each of the
5 projects showed wide variability between the tender figure and final account figures in
some elements such as roof element, internal wall, floor and wall finishes, electrical and
mechanical engineering services and external works. The observed high variability
suggests that the BOQ is not so much a reliable budgetary tool in commercial projects,
especially where the project is large in scope and of a complex nature. This is not a
surprise because where large and complex projects are involved, there is uncertainty in a
Table 3: Budgetary Reliability Measures for Commercial Projects
Cost Difference Percentage
Tender Sum £ Final Account £ £ Difference
270,149.83 261,760.76 -8,389.07 -3.11
306,050.00 245,033.74 -61,016.26 -19.94
2,350,740.00 2,591,830.00 241,090.00 10.26
5,086,741.64 6,100,000.00 1,013,258.36 19.92
230,379.04 238,610.04 8,231.00 3.57
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lot of project information available. The more uncertain the project information is at the
pre-construction stage when the BOQ is prepared and priced, the more risky it is for cost
and time certainty to be guaranteed to the client at project completion.
Table 4 presents the BOQ data as well as final account figures for 5 refurbishment
projects. An analysis of the percentage difference between the budgeted cost and final
account shows a range of between -10.72% and +36.90%. This is a range of more than
47% which is on the very high side. A cursory look at the Table does not show a clear cut
pattern of percentage variability. For instance, the highest positive variability came from
what would be expected to be a small refurbishment project. A detailed examination of
the elemental breakdown for each of the 5 projects showed wide variability between the
tender figure and final account figures in some elements such as demolitions and
alterations, external wall, finishes and mechanical and electrical services installations.
The observed high variability suggests that the BOQ is not so much a reliable budgetary
tool in refurbishment projects. This is not a surprise as refurbishment projects are known
for their unpredictability in terms of cost and time certainty due to many unknowns in
terms of scope and complexity at project commencement.
Table 4: Budgetary Reliability Measures for Refurbishment Projects
Cost Difference Percentage
Tender Sum £ Final Account £ £ Difference
283,250.00 313,965.67 30,715.67 10.84
337,248.49 375,628.84 38,380.35 11.38
83,250.00 113,965.67 30,715.67 36.90
206,283.65 184,171.89 -22,111.76 -10.72
63,723.52 57,007.54 -6,715.98 -10.54
Further analyses were carried out in order to ascertain the budgetary reliability of the
BOQ for procuring buildings of different types previously analysed. One of the analyses
is the RMS measure which was detailed in Equation 1. A normalization adjustment was
made to the RMS measure to convert it to percentage measure so as to make it
comparable to other measures. This is referred to in Table 5 as the adjusted RMS
measure. The normalization precaution was taken because the RMS values obtained are
more of the function of the tender and final account figures. However, the adjusted values
are relative values which are more comparable. The second analysis is the Rel. MAD
measure which was detailed in Equation 2. The results of these further analyses are
presented in Table 5.
From the Table, it is evident that the adjusted RMS measure and the Rel. MAD measure
are relatively close and they follow the same trend, indicating that the measures are
reliable for measuring the phenomenon under study. From the Table, the reliability
ranking based on the adjusted RMS and Rel. MAD measures shows that the BOQ is most
reliable as a budgetary tool in procuring housing projects. This is followed by educational
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Table 5: BOQ Budgetary Reliability Measures of Different Building Types
Adjusted RMS Rel. MAD Reliability
Building Type RMS Measure (£) Measure (%) Measure (%) Ranking
Housing 18,157.99 2.73 2.58 1
Educational 29,734.81 10.34 8.94 2
Commercial 466,621.47 13.58 11.36 3
Refurbishment 27,906.95 19.15 16.08 4
projects and commercial projects in that order. The reliability ranking showed that the
BOQ is least reliable as a budgetary tool in procuring refurbishment projects. Whilst this
finding is not a surprise, it reveals a great deal about the danger of relying too much on
the BOQ as a budgetary tool. Apart from housing project with a budgetary reliability of
±2.58% which is quite acceptable, the deviation margins for other project types are quite
high. This suggests that where clients are interested in cost certainty, Quantity Surveyors
and Project Managers need to qualify the price they give to clients with an indication of
confidence limits. This is very essential because the deviations observed are as a result of
risk factors which are inherent in construction.
5. Conclusion and Further Research
This study has investigated the budgetary reliability of the BOQ in procuring building
projects using secondary data from completed building projects. Employing three
different methods of analyses the study concludes within the limitations of the data set
confined to Northern Ireland, that in traditional procurement where traditional bills of
quantities are used, there are deviations between the budgeted cost in the BOQ and final
account figures. In the case of housing projects, the percentage deviation ranges between
-3.42% and +3.85%. In the case of educational buildings, it ranges between -3.69% and
+17.05%. In the case of commercial projects, it ranges between -19.94% and +19.92%. In
the case of refurbishment projects, the percentage deviation ranges between -10.72% and
+36.90%. This suggests that apart from housing project with small and acceptable
deviation, the deviations observed in other project types are quite high.
The study further concludes that in aggregate terms, BOQ was found to be most reliable
(relative MAD of 2.58%) as a budgetary tool in procuring housing projects. This was
followed by educational projects (relative MAD of 8.94%) and commercial projects
(relative MAD of 11.36%) in that order. The BOQ was found to be least reliable as a
budgetary tool in procuring refurbishment projects (relative MAD of 16.08%).
Whilst there is a general awareness of the limitation of the BOQ as a budgetary tool, an
awareness of the possibility of deviations in different project types in quantitative terms
offered by this study makes it a useful tool for risk management to avoid cost overrun.
According to Smith (1999), risk can be categorized into three: known risks – risks that
are an everyday feature of construction; known unknowns – risks which can be predicted
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or foreseen and unknown unknowns – risks due to events whose cause and effect cannot
be predicted. Thompson and Perry observed that all too often, risk is either ignored or
dealt with in an arbitrary way on construction projects and that the practice of adding a
10% contingency is typical industry practice. Raftery (1994) maintained that risk in
construction has to be recognised, assessed and managed. In projects procured using the
BOQ, most of the risks involved would be known risks and known unknowns. These lend
themselves to quantitative assessment and management. Thus, the deviation measures
yield very useful information as a first step in applying risk management techniques to
manage construction cost so as to avoid cost overrun.
6. References
Banwell, H. (1964) The Placing and Management of Contracts for Building and Civil
Engineering Work, Report of the Committee of Sir Harold Banwell, HMSO, London.
Bennett, J. and Ormedo, R.N. (1984) Simulation applied to construction projects,
Construction Management and Economics, 2 (3), 225-63.
Brewer, G. (1998) The Use of Bills of Quantities [Online]. Available at:
http://www.brewerconsulting.co.uk/cases/CJ9822CI.htm Accessed on 25 June 2009.
Brook, M. (2008) Estimating and Tendering for Construction Work, Butterworth-
Heinemann, Oxford.
Cartlidge, D. (2009) Bills of Quantities [Online]. Available at:
http://www.isurv.com/site/scripts/documents.aspx?categoryID=303 Accessed on 20
June 2009
Davis, P.R., Love, P.E.D and Baccarini, D. (2009) Bills of Quantities: nemesis or
nirvana? Structural Survey, 27 (2), 99-108.
Egan, J. (1998) Rethinking Construction. London, Department of the Environment
Transport and Regions.
Flanagan, R. and Norman, G. (1993) Risk Management and Construction. Blackwell
Science, London. P. 22.
Flanagan, R. and Tate, B. (1997): Cost Control in Building Design. Oxford, Blackwell
Science Ltd.
Kodikera, G.W., Thorpe, A and McCaffer, R (1993) The use of Bills of Quantities in
building contractor organizations, Construction Management and Economics, 11 (4),
261-269.
Latham, M. (1994) Constructing the Team, Final Report of the joint
Government/Industry Review of Procurement and Contractual Arrangements in the
United Kingdom Construction Industry, HMSO, London.
Love, P.E.D., Edwards, D. and Smith, J. (2006), “Contract documentation quality and
rework in Australian projects”, Journal of Architectural Engineering and Design
Management, Vol. 1, pp. 247-59.
Morrison, N. (1984) The accuracy of quantity surveyors’ cost estimating.
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Construction Management and Economics, 2, 57-75.
Nelson, J.I’A (1970) Construction information, Building Technology and Management,
8, 3-5.
Odeyinka, H.A. (2000) An evaluation of the use of insurance in managing construction
risks. Construction Management and Economics. 18, 519-524.
Odeyinka H.A, Oladapo A.A. and Akindele O. (2006) Assessing risk impacts on
construction cost. In: Sivyer, E. (ed.) Proceedings of the RICS Foundation
Construction and Building Research Conference (COBRA), University College,
London, September 7-8, Pp 490-499.
Perry J.G. and Hayes, R.W. (1985) Risk and its management in construction projects.
Proceedings of Institution of Civil Engineers, Part 1, June, 78, 499-521.
Raftery, J. (1994) Risk Analysis in Project Management. E.& F.N. Spon.
Ramus, J., Birchall, S. and Griffiths P. (2005) Contract Practice for Surveyors, 4th
Edition. Amsterdam, Elsevier.
Seeley, I.H. (1997) Quantity Surveying Practice, Macmillan Education Limited, London.
Seeley, I.H and Winfield, R. (1999) Building Quantities Explained, Macmillan Education
Limited, London.
Skinner, D.W.H (1979) An analysis of the utility of BOQ in the process of Building
Contracting. PhD Thesis, Department of Construction and Environmental Health,
University of Aston in Birmingham, UK.
Skoyles, E.R. (1968) Introducing Bill of Quantities (Operational Format). BRS current
paper, CP62/68. Building Research Station, UK.
Smith, N.J. (1999) Managing Risk in Construction Projects, Blackwell Science.
Walker, A. (2002) Project Management in Construction, 4th edition Blackwell Science.
Winch G.M. (2002) Managing Construction Projects, Oxford, Blackwell Publishing.
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
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www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Obinna Ozumba and Winston Shakantu, pp 447-461
Information and communication technology - based
application of ‘just- in- time’ (JIT) to internal logistics on site
Aghaegbuna Ozumba1 and Winston Shakantu2
1
School of Construction Economics and Management,
University of the Witwatersrand, Johannesburg, Wits 2050,
South Africa.
2
Department of Construction Management,
Nelson Mandela Metropolitan University, Port Elisabeth,
South Africa.
Email: [email protected]; [email protected]
Abstract:
Since its developement, Just-In-Time system of logistics has been adopted by various
economic sectors. The Just-In-Time approach to logistics has been appreciably applied
in construction through research and development. The effect of this application can be
seen more in the external logistics of supply chain management. Though appreciable
research and development efforts have been aimed at implementing Just-In-Time in
internal logistics, there seems to be a lagging behind in harnessing potential utility in
Information and Communication Technology for this system in internal logistics. A
major reason seems to be the lack of clarity regarding the technology needs of the
system, and suitable methods of implementation. Improvement could be brought to the
situation by a careful study of the technology requirements and building a framework
for adaptating available technology. A theoretical study is presented here; carried out to
define requirements for Just-in-Time system in internal logistics on construction sites,
using Information and Communication Technology as backbone. The study goes on to
show how this idea, could enhance the management of resources and improve the site
management process in general. Findings at this stage suggest the possibility of further
reduction in the redundancy and obsolescence of materials and equipment at work areas,
and downtimes due to material shortage or lack of appropriate tools and equipment at
work areas. Also, there is potential for improving dynamic inventory, tracking and
monitoring location and status of resources on site. Furthermore, findings could form
basis for modelling Just-In-Time internal logistics, enhanced with information and
communication technology.
Keywords: Logistics, JIT, Internal Logistics, ICT, site materials, site management
process
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Introduction
Since it was developed in the 1950s, Just-in-time (JIT) logistics system for
manufacturing has gained acclaim and adoption widely across economic sectors. The
adoption has been most felt in the area of supply chain management. The nature of
adoption for respective industries has been influenced by the inherent peculiarities in
each case. JIT system in the construction industry has been emphasised appreciably by
way of research and application of JIT principles to resource management in supply and
construction sites process. This has been met with various issues and challenges, some
of which have been addressed through research (Pheng & Hut, 1999; Howell, 1999;
Bertelsen & Nielson, 1997).
Along this path, integration of Information and Communication Technology (ICT) has
also been directed towards logistics in construction. However this has not been without
issues emerging. Generally, implementation of ICT in construction has been activity
oriented. Therefore the nature of JIT and the basic principle of process improvement is
not properly accommodated (Koskela, 1992). As in the case of other innovations
adopted in construction, JIT is not new. JIT has been researched and developed for more
than four decades. There is available research on the translation of the principles, and
application of JIT to the construction site (Vrijhoef1 & Koskela, 1999; Howell, 1999;
Bertelsen & Nielson, 1997). However inadequate knowledge of ICT end-user
requirements and the construction environment hinders effective ICT implementation.
Also the use of unsuitable technology aggravates the situation (Ugwu & Kumaraswamy,
2007). The issue here seems to be that of less effective approaches to implementing ICT
for systems such as JIT. Problems of ICT implementation extend to other aspects of the
Site Management Process (SMP) (Ozumba & Shakantu, 2008a). The apparent failure of
ICT implementation amongst construction organisations is significantly due to a
deficiency in perception of the practical meaning of ICT implementation (Peansupap &
Walker, 2005). Unwholesome and less effective approaches to ICT implementation will
keep construction behind in technology integration. Poor technology integration usually
results in the technology not performing up to expectations, and actually contributing
additional stress to the system (Ozumba & Shakantu, 2008a; 2008c). In addressing the
apparent failure of ICT implementation in site processes generally, there seems to be a
need for more innovation, by taking advantage of available ICT through adaptation of
potential utility. This refers to being innovative in the utilisation of ICT for the site; to
make ICT suitable for the particular site situation (Shakantu & Kajimo-Shakantu, 2006;
Ozumba & Shakantu, 2008a; 2008b; Löfgren, 2006).
Existing research indicates the possibility of a more effective approach to implementing
ICT in a JIT system could be achieved. By utilising existing literature an attempt is
made to define ICT requirements for a JIT internal logistics system. Research presented
here would lead to subsequent reports in which a framework for an ICT backbone on
which the JIT system runs will be modelled.
In order to achieve the first objective, which is determining the ICT requirements, the
paper uses specially selected journal and conference publications. The review focuses
on JIT, logistics, site management and innovation reviews on ICT such as simulation /
visualization, embedded technology, smart sensor networks, GPS, mobile computing
and communication in intelligent environments. The paper also makes use of previous
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research effort along this path. All these are used as basis for extrapolations that could
enhance a JIT Internal Logistics System on site. The theoretical study is presented at
this stage.
Currently the findings are propositions as the research is ongoing and there is need for
modelling the requirements, within the framework described, and validation of the
results in a test case. Nevertheless, research so far suggests that there is potential for use
of ICT in enhancing efficiency of internal logistics with a cost and time saving
approach. In addition the potential use of ICT increases with the discovery of more
potential utility in latest ICT products.
At this stage of the research the paper presents a formulation of ICT requirements for
ICT-based JIT in internal logistics. The paper also proposes a framework for an ICT-JIT
system that is based on adaptation of potential utility in latest ICT. The focus for the
paper is the site materials aspect of internal logistics. The adaptation of the potential
utility in latest ICT is expected to enable the following: Actual reduction in the
redundancy and obsolescence of materials and equipment at work areas; reduction of
downtimes due to materials shortage or lack of appropriate tools and equipment at work
areas; and potential for improving dynamic inventory, tracking and monitoring location
and status of resources on site. Findings at this stage could form a starting point for
modelling an ICT-based JIT system for internal logistics. It also forms a reference for
further research into current / latest ICT for the purpose of finding potential utility that
could be adapted to enhance specific aspects of the site management process.
Theoretical background
This section aims at setting the background of the study by giving definitions and
descriptions of keywords used in the paper. Keywords include Logistics, JIT, Internal
Logistics, ICT and JIT Internal Logistics. Furthermore relevant issues, problems and
challenges, are considered in relation to internal logistics in the SMP. This leads to
analyses and discussion.
2.1 Logistics
Logistics deals with planning, implementation and control of goods, services and
relevant information in order to achieve efficiency in the process flow and meet clients’
needs. The ultimate goal implied here is meeting the customer’s requirements. However
delivering value to the client is done while reducing production process cost, by
minimising total cost in production activities (Centre for Logistics Management (CLM),
2008; Jang et al., 2003; Silva & Cardoso, 1999). Logistics developed from the military
and was adopted first in the manufacturing sector, where methods were first developed
for internal logistics. It is has been widely adopted across various industries with
variations respecting the peculiarity of each (Bertelsen & Nielso, 1997)
2.2 Just-In-Time (JIT)
The JIT system was developed at Toyota manufacturing company in Japan. It was
developed as one of the pillars of the Toyota Production System. The JIT system is a
precision based manufacturing resource management system that seeks to eliminate
wastes of any kind by supplying resource just in time to be utilised, not just the right
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quantity / quality but to the right location and job on the shop floor. JIT looks at the
length and breadth of entire delivery system, starting form supply side through
production to client side delivery. The JIT system aims at increasing throughput or
adding value to processes involved in the system. JIT implementation aims to minimise
waste, reduce inventory, complexity, masses and sizes of production sets. JIT is
basically a form of logistics by consumption which seeks to keep inventory to the barest
minimum or near zero by the time new supplies arrive. Thus the supply arrives just in
time to be used (Value Based Management.net, 2009; Bertelsen & Nielsen, 1997; Lai et
al., 2003). Logistics and JIT are most found as ingrained principles in current supply
chain management philosophy. The concept of supply chain management deals with the
flow of information and materials across the supply chain for a particular process.
Though it is currently practiced as a distinct management philosophy, supply chain
management uses logistics as its main tool and in many cases is still dominated largely
by principles of JIT logistics (Vrijhoef1 & Koskela, 1999).
2.3 JIT and Logistics in Construction
Application of JIT in construction generally takes the face of lean construction. Lean
thinking and approach considers the control of planning and management efficiency of
the design and construction process. Firstly the lean construction approach to JIT takes a
wholesome view on the entire construction process flow. This is achieved by utilising
concurrent design of product and process. Secondly the approach aims at client
satisfaction by taking a project view on the process. Thirdly JIT involves managing
activities, their dependence on each other and the variations that result from their
interactions. Fourthly the focus is on process flows of design, material and work or
actual construction, and ordering of the flow of resources and inventory management
(Howell, 1999; Koskela, 1992). This is done by using a steady value of dependence and
variation between stages and activities in the production system (Howell, 1999). JIT in
construction logistics goes contrary to the traditional production management view of
conversion process which treats stages in the production process uniquely (Koskela,
1992).
Applying JIT logistics to the schedule driven construction process requires the
replacement of the schedule-push system with plan-pull system. The approach
minimises inventories between processes and continuously pulls resources forward
through the process flow. Thus resources go to where they would be most utilised to add
to the overall volume of work and productivity of the entire system (Ballard & Howell,
1995). Logistics today is a broad area of operation; however its main focus within
construction is efficient materials management. JIT is therefore closely knit with
building process supply chain management. The guiding principles are viewed as tools
and methods employed in supply chain management concept (Bertelsen & Nielsen,
1997; Vrijhoef & Koskela, 1999).
Logistics applied in construction also involves external and internal logistics. These two
areas of application are linked in a process flow, where external logistics ideally flows
into the internal. The two parts are essential to the economic accuracy of projects.
Therefore, there is need for a seamless integration of the two. It is important for internal
logistics to take off efficiently where external logistics stops (Jang et al., 2003; Ozumba
& Shakantu, 2008c).
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2.4 JIT-Internal Logistics in Construction
In modelling logistics in construction, external logistics deals with the supply side
logistics while the internal is the site aspect of logistics. Site logistics falls under the site
management process and in the sphere of responsibility of site management. This
involves the management of the site itself, different systems and resources, flow of
activities, and dealing with variations, divergences and disagreements on site. JIT-
internal logistics in a broad sense would include application of management functions
with a JIT approach to actual flow of the site production process. It would also include
all resources that fall within the sphere of responsibility of site management such as
labour, materials, equipment and site accommodation (Silva & Cardoso, 1999; Jang et
al., 2003; Ozumba & Shakantu, 2008c; Pheng & Hut, 1999). In addition, internal
logistics presents a more complex scenario than external logistics in the sense that there
are a more factors influencing the outcomes of the principles of JIT in it. Internal
logistics is also made up of the in-bound and out-bound logistics. In-bound logistics
deals with the delivery of resources to site while out-bound logistic deals with the
removal of construction waste from site (Shakantu et al., 2008).
2.5 Issues and challenges
The JIT concept has been widely adopted in the manufacturing and other sectors
successfully since its inception. However JIT adoption in the construction is not wide
and there are limitations in the scope and methods of adoption (Yuan et al., 2004;
Koskela, 1992). Though similar to manufacturing or factory processes in terms of
general nature of production, construction differs in many ways. Experiences derived
from applying generic principles in construction show the effect of its uniqueness. This
is evident in the challenges which result in a less effective adoption of JIT Logistics in
construction, especially on site processes (Bertelsen & Nielsen, 1997).
Firstly, the site is generally a highly volatile environment where, in spite of a very good
planning, a myriad of things can and will go wrong at any time. Site problems could
emanate from any part or aspect without prior notice. Since internal logistics happens on
site it is subject to problems of the construction site (Forster, 1989). Secondly, there is
the issue of directly adopting the principles of JIT without modification. This would
obviously lead to failure in the system since the origins and setting for the development
of JIT are different from the construction site. Construction is a once-off product
development process which results in one product for each scenario. The construction
site production process requires the one-time convergence of different participating
professionals for the construction phase of the process, which ends in the assembly of a
physical product; the facility (Ballard & Howell, 1995; Koskela, 1992). Thirdly,
construction is naturally laden with uncertainty and variation in its process flow.
Consequently, inventory in construction is more dynamic than it is in manufacturing
and other industrial processes. Applying principles of JIT strictly would mean the
virtual elimination of inventory on site. The requirement for maintaining good physical
and service process flows in construction makes the exclusion of buffer stock highly
impossible. Managing the realities of dependence and variations between processes in
the flow becomes a huge responsibility because any inaccuracy in decisions taken can
cause time and cost excesses which the practice seeks to avoid (Yuan et al., 2004; Low
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and Mok, 1999; Ballard & Howell, 1995). Fourthly, the lean construction approach to
JIT on site is the creation of buffers in either labour (excess capacity) or inventory as
near zero stock that keeps crews working. This approach however does not reduce the
variations that emanate from the site which can still cause failure in the system.
Variations in supply and usage rates, the physical location and allocation of inventory,
and excess capacity are challenges that are managed through a predictive approach used
in manufacturing. This is powered by historical data on details of resource content from
previous factory operations. Such detailed information on resources from previous
projects is not readily available in construction. Moreover, undue reliance on planning
systems by project managers may also result in the inability to tackle multiple demands
that can and will arise either from both upstream and downstream changes (Howell,
1999). Operating JIT system in a classical sense intensifies the focus on quality due to
the elimination of alternatives. Though efficiency of the system flow is achieved under
normal circumstances, unforeseen abruptions can cause the system to fail from time to
time (Denison, 2002). Differences in human perceptions and attitudes can not be
ignored in the issues that plague the implementation of JIT. This is amplified by the
need for good working relationships and effective communication amongst participants
on both sides of the logistics practice (Howell, 1999; Yuan et al., 2004).
The challenges stated above are not exhaustive as JIT in construction is still work in
progress. Nevertheless considerable research effort has been made towards addressing
these challenges. It seems that the primary way to improve JIT could be achieved by
allowing an optimal amount of buffer stocks on site. However there are peculiarities in
each project, which make it difficult to generalise efficiently. This situation could be
addressed by application of technological solutions which are generic. Technology
integration can be utilised to enhance well designed logistics systems (Yuan et al.,
2004).
Integration of technology has been applied to different aspects of construction with
proven success. Information and communication technology (ICT) has been a prime
process improvement vehicle in construction. The high level of interactivity that could
be enabled in intelligent environments would make it possible for strains in the flow of
processes to be attended to in real time. The integration of ICT is here referred to as
construction information and communication technology (CICT), (Ozumba & Shakantu,
2008a; Cabarello, 2002; Howard, 1998).
2.6 Construction Information and Communication Technology (CICT)
CICT is the integration of the continuously growing capabilities of ICT with the
complexities of construction. In the context of this paper it includes information and
automation systems, information technology, communication technology and systems.
When applied to logistics, CICT or technology integration in construction could support
process improvement by enabling automation and process redesign (Ozumba &
Shakantu, 2008a; 2008b). It could enhance process clearness. It could be used to check
lapses in the flow thereby preventing costly errors and could be used for the provision
of constructability analyses. Information technology has improved process information
flow and encouraged better organisation in the supply chain. Thus JIT is more
achievable now for individual businesses (Koskela, 1992; Lai et al., 2003).
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However the implementation of ICT in construction has not been as impressive
compared to other industries. There are a number of issues arising from implementing
ICT in construction which boarder on approach (Koskela, 1992). As a result,
construction is not able to take full advantage of available ICT. Nevertheless there are
appreciable potential benefits in ICT. Considering the quality and quantity of latest ICT,
the state of CICT is less than what could be reasonably expected. This is obvious in the
site management process, and JIT Internal logistics on site is not shielded from the
effects. The problems emanating from various approaches to ICT integration necessitate
a different mindset (Ozumba & Shakantu, 2008a; 2008b; 2008c). Research shows that
ICT should play a supportive role, from which it could initiate or catalyse radical
changes in the system (Koskela, 1992). A more effective CICT would result from
implementing ICT on site through adaptation of ICT potential utility. Individual
processes could function and communicate through an ICT framework that connects the
processes (Ozumba & Shakantu, 2008a).
The use of adaptation approach to CICT, as highlighted in previous research is
suggested. The approach should be used to develop an ICT framework as backbone for
JIT internal logistics. This essentially refers to an ICT-based JIT system for internal
logistics on site. Innovations and developments from the ICT sector should be
continuously harnessed and integrated within this proper framework, to act as tools in
an enhanced internal logistics system. The approach suggested requires adaptation of
ICT into need areas within the internal logistics process flow. Designing an ICT-based
JIT internal logistics system for the site would require the following steps: Firstly,
defining and describing the requirements for JIT internal logistics, and ICT
requirements for JIT internal logistics. Secondly determining what potential utility
exists in latest ICT. Thirdly using the information derived to define the framework for
adapting potential utility in latest ICT. Fourthly modelling a detailed and comprehensive
ICT-based JIT system for internal logistics.
The research objective is to define and describe ICT requirements for a JIT internal
logistics system. The description is based on adaptation of potential utility in current
ICT.
Research Methodology
The study presented here is part of a wider research agenda whose methodology is the
modelling of an ICT-based JIT-Internal logistics system. This is achieved by
determining the ICT requirements of internal JIT system, and potential utility in latest
ICT that could be adapted. This is achieved through a purposive sample of selected
literature on JIT, logistics, site management and innovation reviews on ICT. The
proposed adaptation is then modelled and tested in a real life case to further evaluate its
enhancement on the process. The stage presented here is the theoretical study. The
objectives for this stage are: review of existing literature, analyses of findings and
conceptualisations. Firstly models are presented for general requirements for JIT-
Internal logistics by relying on previous research publications on JIT, logistics, and site
management. ICT requirements for JIT-Internal logistics are then derived through
analyses. In the discussion that follows, initial conceptualisation of an ICT-based JIT-
Internal logistics system is presented. Further extrapolations are made on the
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requirements and nature of the proposed system. In addition, suggestions of findings so
far are deliberated upon. The scope of work presented in the paper concentrates mainly
on the flow of materials on site.
3.1 Requirements for JIT-Internal Logistics
As described in (Bertelsen & Nielsen, 1997), logistics deals mainly with decisions that
determine the flow of daily operations. Firstly logistics is concerned with the supply,
storage, processing and handling of materials; distribution of labour; controlling work
schedule and flow of materials on site; managing the use of site infrastructure and
equipment; and Information Management for the flow of physical resources and works.
As described in (Pheng & Hut, 1999), the principles of JIT are waste elimination;
‘kanban’ / pull system; continuous work flow; total quality control; employee
involvement; good relations with suppliers; and continuous improvement.
From the above mentioned, internal logistics on site deals with the flow of materials on
site; inventory at different points in the on-site material flow viz. storage, processing,
handling and usage of materials; use of portable, mobile and semi-mobile and stationary
equipment, site infrastructure and accommodation. Information on the flow of processes
on site is used to direct, monitor and control work schedule, on-site materials flow, and
physical and service flows.
Application of JIT principles to internal logistics can be achieved through the following
ways: The pull system is achieved by efficient site materials management. Continuous
work flow is achieved by either grouping related process and areas of stocking or
simplifying and automating most of the processes. Total quality control relies heavily
on employee involvement and the capacity of site management to monitor physical and
service flows within entire site’s operations. Continuous improvement results from
adding site organisation and cleanness, workers’ discipline, cleanliness, participation in
planning and organising, should result in continuous improvement. In addition site
layout design plays a big role in the effectiveness of JIT-internal logistics (Pheng &
Hut, 1999).
The site materials management aspect of JIT is the focus of the research at the stage
presented here. A number of adjustments have been suggested to applying JIT in order
to deal with current challenges. There is the use of minimal buffer inventory, and the
method of combining the logistics systems of planning and consumption (Ballard &
Howell, 1999; Bertelsen & Nielsen, 1997). There is also the suggestion of ‘dual
inventory’ system and stretching the reach of the information system (Denison, 2002).
In addition, taking care of the challenges faced by logistics, as discussed in the paper,
might require building in a floating inventory; this type of inventory will rely on recent
historical data or a real-time pre-emptive system to activate its entrance into the
logistics system.
In the site materials management of internal logistics, the major challenge for real-time
management is the continuous coordination of the different points in the flow of
materials on site. For more efficiency, site real-time monitoring of the logistics situation
of material resources is needed. The type of comprehensive data required should come
from a dynamic real-time inventory system. Moreover this would require the creation of
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intelligent construction site environments through distributed computing and intelligent
site support systems (Shafer et al., 2000; Sammut, undated; Ghosh, 2005; FIATECH,
2007; Ozumba &Shakantu, 2008c; Bagby, 2006).
As discussed in (Thomas et al., 2005) Site material management goes beyond delivery,
storage, and handling. It includes the allocation of spaces and resources and the main
aim is to support the flow of work and reduce congestion and excessive materials’
traffic. These would bring down the degree of inefficiencies. The different points in the
materials flow on site are: the storage area, staging area which is the immediate
surrounding of a construction work and the workface which is the actual spot or limited
space where the particular work is carried out. The storage refers to all places of
temporary storage on site. This includes both the official site storage and impromptu
storage. Figure 1 below is a model of on-site materials flow as derived from (Thomas et
al., 2005). From the point of entrance to site the material goes either to site storage,
staging area or workface depending on the nature. From the site storage, materials could
go to the staging area or the workface. Materials also flow from the staging area to the
workface.
Figure 1. On-site materials flow as derived from descriptions in (Thomas et. al., 2005).
JIT-internal logistics of site materials, using the nodes and links approach as in
(Shakantu et al., 2008). In this context the site environment is considered in isolation.
The paper applies the description of JIT system flow completely to the site. This
effectively brings in the supplier node within the site environment and materials flow.
This set up assumes two points of origination on site for the supplier: The Fixed
supplier and the mobile supplier points. For the purpose of this study, the following
terms have also been developed, and some borrowed from previous research to redefine
different points in the flow of materials on site: temporary storage, construction area and
delivery routes. With this redefinition, an application of JIT to internal logistics of
materials on site is modelled, see figure 2.
The supplier here refers to the site storage (fixed supplier) and inbound logistics from
the point of entrance to site as (mobile supplier).
The temporary storage refers to the staging area.
The construction area refers to the workface.
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The delivery routes refer to the site layout. This would be the links between the points
in the flow (Ozumba & Shakantu, 2008c).
Figure 2. Application of JIT to internal logistics of materials on site
3.2 Requirements for ICT-based JIT-Internal Logistics
In order to adapt potential utility in latest ICT to this flow, there is need to determine the
ICT requirements. The flow should be viewed as an information system. The
information management, communication, monitoring, control and other needs should
be analysed for each node. These needs should then be matched to known potential
utility in latest ICT. Furthermore, ICT requirements should also be considered as a
framework looking at an overview of the system. From previous research it has been
determined that these requirements should be based on the following needs: detection
and identification, tracking of movement and status, monitoring of location and
correlation of information with status of works, automatic dynamic inventory at all
points in the materials’ flow. These needs should be provided with real-time update
(FIATECH, 2007; Bagby, 2006; Lai et al., 2003; Yuan et al., 2004; Ozumba &
Shakantu, 2008c).
Considering the normal flow of site materials and their flow within a JIT system as
described earlier, the following ICT needs for specific nodes have been determined:
Mobile supply node; needs capacity for detection, identification, directing and tracking
of movement. The mobile supply node originating from the site entrance, would require
that the content of delivery be detected and identified in detail, up on entrance to site.
Detection and identification in this context includes the state of the resource at that time,
any discrepancies in volume, quantity or quality that is immediately detectable. This
would help in the real-time dynamic inventory. Also the movement of delivery vehicles
within site needs to be tracked in real-time to ensure adherence to pre-determined
movement directives. This will enable efficient dynamic management of site traffic.
Fixed supply node; needs capacity for detection, identification and notification. This is
the designated site storage, now viewed as a supplier to the staging area and workface.
It has the following needs: Firstly, capacity to receive notification about incoming stock
from the mobile supply node. Secondly need for real-time inventory information from
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the temporary storage and construction areas. Thirdly need for detection and
identification of items of inventory moving in and out, and within the fixed supply
node. Fourthly need for real-time transmission of inventory information to central
management.
Temporary storage node; needs capacity for notification, detection and identification.
This is the usual staging area now viewed as Temporary storage. Firstly this needs to
receive notification about incoming stock from the mobile and fixed supply nodes as the
case may be. Secondly the node needs to detect and identify items of inventory moving
in from supply and moving out to the construction area. Furthermore there is need for
real-time inventory information from the construction area, and to send out the same to
fixed supply node and central management.
Construction area node; needs capacity for notification, detection and identification.
This is the workface, as such it needs notification of incoming stock from the mobile
supply, fixed supply and temporary storage nodes respectively. It needs capacity to
detect and identify items of inventory moving in from its three possible supply nodes.
There is also need for real-time communication of inventory information to construction
area, fixed supply node and central management.
Delivery route links; need capacity for identification, directing and tracking of
movement. This refers to the site layout, specifically the traffic routes. Site traffic routes
in construction are fairly dynamic. Usually there are problems of bottlenecks along the
routes, blind spots, risk of collision, misdirection and off-loading of resources at wrong
places. There is need for identification of vehicles, their contents, and their location on
site; tracking of their movement and correlating the information with delivery
directives.
Findings and Discussion
Having determined the various needs for each node as stated above, the next stage
would be to incorporate provisions for these needs in an ICT framework. This
framework would be the backbone for the JIT-internal logistic system.
The scenario of an ICT-based JIT system on site can be compared to the functioning of
a basic computer system. The computer is made of both hardware and software
components. The hardware has the operating system (OS) software which sits over the
central processing unit (CPU) to interpret commands for the CPU and feedback for the
human user. The operating system functions as a man-computer interface and also a
digital interface for application software which maximises usage of the computer.
Features and capabilities of the computer could still be accessed directly through
machine code, but with the attendant challenges. The OS however sits as a framework,
connecting to all the features of the computer, thereby supporting and enhancing the
usage of the computer.
Drawing from the analogy above and with further research it should be possible to
categorise available ICT potential utility according to determined needs, and then
construct a framework. Further work and careful considerations for the derivation of the
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Obinna Ozumba and Winston Shakantu, pp 447-461
framework goes beyond what is presented here. Nevertheless, from deliberations it is
possible to extrapolate for requirements of the proposed system and its possible
benefits. Therefore a number of possibilities are expected at the conclusion of the wider
research agenda. With the ICT-based JIT internal logistics system running, there is the
possibility of enhancing the flow of materials on site to the point that the JIT system can
be seen to work perfectly. It is possible, within the context of ‘site’, to eliminate waste,
redundancy and obsolescence of materials.
So far in the course of research it has been determined that information systems and
communication cycles plays a very big role in the application of JIT. Needs for dynamic
real-time multidirectional information flows, distributed management with central
coordination are recurring. Furthermore there is need for intelligent construction site
environments that are context and user aware. In other words, ubiquity in the
management process powered by ICT such as wireless technology, mobility, distributed
computing, remote control and telepresence. REF. (Mair, 1999; Sammut, undated;
Gosh, 2005; FIATECH, 2007; RFID Centre, 2009; Ozumba and Shakantu, 2008b)
Conclusion and Further Research
From work done up to this stage; there is the possibility of adapting ICT potential utility
towards achieving an ICT-based JIT-internal logistics system. By attempting to model
JIT for site materials management, inherent needs in the flow which could be improved
by harnessing potential utility in existing ICT are considered. A picture of JIT Internal
Logistics on site is constructed in the context of materials management. Following the
study presented other aspects of JIT internal logistics can be investigated and modelled.
Ultimately the data derived could be used to extrapolate for the seamless connection of
internal logistics with external logistics.
Further stages of the wider research effort include detailed investigations and modelling
of ICT requirements for other aspects of internal logistics. These requirements would
need to be fine-tuned and subsequently used to develop a hypothetical framework for an
ICT-based JIT-internal logistics system. This framework should then be tested in a real
life case. Outcomes at a future stage would be the evaluation of the framework and
appropriateness of adapted ICT potential utility.
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Michael Regan, Jim Smith and Peter Love, pp 462-474
Public private partnerships: What does the future hold?
Michael Regan1, Jim Smith1 and Peter Love2
1
School of Sustainable Development,
Bond University, Gold Coast, Queensland 4229,
Australia
2
Department of Construction Management
Curtin University of Technology, Perth, WA 6845
Australia
Email: [email protected] ; [email protected]; [email protected]
Abstract:
Internationally, Public and private Partnerships (PPPs) are being used across a wide
variety of economic and social infrastructure projects in more than 85 countries. PPPs
are a procurement methodology that brings a rigorous risk-weighted approach to major
projects using a competitive bid process and private sector expertise and innovation.
PPPs are achieving a number of significant improvements in major project procurement
and improved public service delivery.
This paper considers the prospects of PPPs from the perspective of government clients
and their promoters of PPPs and whether current volatility and uncertainty in the capital
markets in Australia will affect the feasibility of privately financed infrastructure, and
specifically, the PPP method of procurement. A survey of financial advisers and lenders
indicates that present market conditions will be placing PPPs under pressure. Future
PPPs will be subject to new disciplines – lower leverage, higher reserves, stronger
underlying credit credentials, higher debt service coverage criteria and higher cost debt.
This will affect both bid depth and state/government risk allocation with lenders
expected to take a tougher approach to the support of delivery and operational risks.
This suggests some impact on the value for money outcomes for the PPP model in the
short-term.
The characteristics of PPPs will be reviewed in this paper using national and
international sources in order to identify those features that will be essential in this new
economic climate. From the literature and views of experts gained form its survey, the
authors suggest that present market conditions do not close the door on PPPs, but do
provide an opportunity for both government and industry to develop a more refined
model that is more appropriate for the new environment. This may require a more
scientifically costed approach to risk allocation, state guarantee support, improved
underlying credit credentials and a rethinking of patronage risk. It is a shared
responsibility. It is also likely to be a further step in the continuing evolution of
alternative major project procurement mechanisms.
Keywords: Procurement, Public and Private Partnerships, Risk
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Michael Regan, Jim Smith and Peter Love, pp 462-474
1. Introduction
In the 1980s, economies in most developed countries were characterised by high levels
of public participation in the economy, high levels of state debt and deficits, stagflation
and low levels of economic growth. The response of government was to reduce public
debt, downsize government, privatise government business enterprises, improve
microeconomic performance and outsource the delivery of public assets and services.
Private capital was an appealing substitute to state investment and in the early 1990s,
procurement models based around build own operate transfer arrangements became
more common for the delivery of networked public assets such as roads, water and
sewerage plants, pipelines, ports and public buildings (Grimsey and Lewis, 2004).
These arrangements were generally input-specified stand-alone assets for periods of 15-
25 years. In 2001, the United Kingdom introduced its Private Finance Initiative which
eventually came to consolidate a number of procurement methods including PPPs
(Savas, 2000). The Victorian Government introduced its Partnerships Victoria program
about the same time and policy variants of these approaches were eventually adopted by
the commonwealth, state and territory governments in the following 6 years. Victoria
has employed PPPs for more economic and social infrastructure projects than any other
Australian jurisdiction and the Partnerships Victoria policy template is widely used as a
best practice template in developing economies in Asia, the Pacific and Africa.
Infrastructure describes the structural framework, systems and networks that facilitate
economic and social activity in an economy (Rutherford, 2000 and Regan, 2008b).
Infrastructure is also one of Australia’s largest asset classes accounting for around $616
billion in assets and around 22.8% of GDP each year (Australian Bureau of Statistics -
ABS, 2007). However, economic and social infrastructure plays a much greater role in
the economy because of its extensive multiplier effects on most other sectors of the
economy. Infrastructure also accounts for 13.6% of private capital investment and
around 17% of aggregate gross fixed capital formation, an important driver of domestic
demand, output and economic growth (Regan, 2004).
In Australia, around 68% of economic and social infrastructure is provided by the state
although in recent years, private infrastructure investment has increased to around 2%
of GDP. The average age of infrastructure is increasing and overall net contribution to
capital stock accumulation is less than the average for Organisation of Economic
Cooperation and Development (OECD) countries.
PPPs have been widely employed in developing economies for over 10 years as a small
but significant alternative method of procuring economic and social infrastructure (Mott
McDonald, 2002). During calendar year 2008, international capital markets experienced
high levels of instability with a sharp fall in the share market prices of listed
infrastructure securities, a sudden and acute contraction in structured and project debt
markets and institutional restructuring that saw state bailouts or acquisitions of a large
number of privately owned financial institutions. These events were quickly felt in
Australia and reflected in sharp falls in security prices, a decline in business and asset-
based lending and a sharp rise in lender spreads for corporate, project and structured
finance. Capital market observers suggest that current market conditions are the worst
they have been since the Great Depression and economic forecasters are predicting
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continued capital market instability in the short to medium term and a long recovery
period.
2. The Research Aims and Methodology
2.1 Research Aims
The purpose of this study was to examine the present and future use of public private
partnerships (PPPs) in Queensland and Australia generally given recent events in
international and domestic credit markets and prevailing capital market conditions. The
essential research question to be answered here is whether current volatility and
uncertainty in capital markets in Australia affects the feasibility of privately financed
infrastructure and specifically, the PPP method of procurement.
This research also examined the likely impact on the use, form and configuration of
public private partnerships by canvassing three further issues:
1. Whether changes to the financial environment will affect the type of projects
suited to this method of procurement.
2. Are opportunities presented in present market conditions and how these can be
accessed and further refined?
3. What changes may be necessary to the PPP procurement model in the light of
prevailing market conditions and what is required by stakeholders to adapt to
changes in this market?
2.2 Research Methodology
The research consisted of a comprehensive literature review and a detailed analysis and
review of these works is contained in Regan (2008d). This literature review of more
recent national and international experience informed this work at a critical time in the
evolution of PPPs and included a significant number of industry and government
reports, which abound in this subject (Infrastructure Australia, 2008a, 2008b, 2008c;
Department of Treasury and Finance Victoria, 2009).
To give views and focus to assessing present condition a capital market survey was
conducted in late 2008. Interviews and discussions were conducted over a two-month
period with 18 senior executives selected from the financial services community
including leading firms engaged in equity investment, project finance, credit ratings,
funds management, financial intermediation, State Treasury and Finance Departments,
banking and, the PPP bid market. The survey was informal and confidential at the
request of respondents for the reason that responses may influence capital markets or
transactions. The interviews with these senior managers/executives were designed to
elicit their views on the debt markets, availability of capital, cost of debt, toll roads,
credit insurance, unlisted PPPs and general market conditions. These views and
opinions have informed the later sections on present market conditions, the medium
term outlook for PPPs, market opportunities and the conclusion.
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3. Public and Private Partnerships
A significant body of evidence (Mott McDonald 2002, Fitzgerald 2004, Allen
Consulting 2007; National Audit Office 2005) points to the advantages of PPPs over
traditional procurement methods. The benefits include:
1. The delivery of projects on time and on budget
2. Reduced procurement costs and improved value for money outcomes
3. Improved project management – integration of design and construction
processes and full lifecycle costing
4. Adoption of an output specification to encourage design and construction
innovation and new technologies
5. Improved public services and qualitative user outcomes
These results are supported by a comparative review of state procurement methods
undertaken in 2008 by Bond University (Regan, 2008c). This study identifies the
improved performance of PPPs, build own operate transfer (BOOTs) and, to a lesser
extent, alliance contracting methods using ex ante measures of value for money, the
optimal alignment of incentives and process management.
PPPs also offer a rigorous project selection and evaluation process using a risk-weighted
analytical framework that features both qualitative and quantitative measurement
techniques (Flyvbjerg, et al, 2003). This process is now being applied to traditional
procurement processes and is achieving similar value for money improvements
(Infrastructure Australia, 2008c).
The empirical evidence suggests that PPPs are improving government infrastructure
performance in three additional ways:
1. PPPs are an important innovation in the evolution of the science of major project
procurement and studies suggest they are a more efficient method of project
delivery than the alternatives (Regan, 2008c).
2. PPPs are worth preserving – along with alliance contracting and the input
specification models, they are driving favourable value for money outcomes and
form part of the diverse procurement tool box available to government for
appropriate applications (Clark and Evans, 1998; Mott McDonald, 2002).
3. Private capital markets provide an important alternative source of capital for
governments hard pressed to meet the high levels of investment needed to renew
Australia’s ageing infrastructure (Wolf, 1993).
PPP projects are capitalised with high levels of debt which is well suited to long-term
capital-intensive projects. Infrastructure is a specialised asset class possessing
investment characteristics not commonly found in other asset classes. These
characteristics include:
1. Stable, indexed revenue streams
2. Low variable cost structures
3. High earnings before interest tax and depreciation (EBITDA) margins
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4. Low demand price elasticity (Regan, 2004).
Infrastructure also features low demand price elasticity although recent evidence from
toll roads suggests that this asset group may be the exception. These assets are well
suited to high levels of debt which has the effect of lowering the sponsor’s weighted
cost of capital and improves return on equity. Several early PPP toll road initial public
offerings (IPOs) employed stapled security structures and high leverage compared with
other capital intensive asset classes such as the resources sector, direct and indirect
property. The market appeal of these assets was their robust and indexed revenue
stream, strong debt service coverage and the long-term investment horizon which
matched the long-dated liabilities of pension and fund managers.
3. PPPs are Dependant on Capital Markets
PPPs generally concern the production of economic and social infrastructure services
and are heavily dependant on capital markets. This dependence occurs at five levels.
3.1 Equity capital
Australian PPP projects draw their equity capital from the Australian Stock Exchange
(ASX), listed portfolio investors, banks, private equity, fund managers and institutional
investors. Three of Australia’s largest and most recent toll road projects were listed on
the ASX and listed portfolio investment vehicles hold significant interests in ports,
airports, toll roads, energy production and distribution within Australia and overseas.
The ASX is the single largest source of PPP equity capital in Australia.
3.2 Debt capital
PPPs are highly leveraged using medium-term bank debt, project finance or long-term
bonds. These securities are placed in debt markets and with private investors. Australian
PPPs also make greater use of medium-term corporate debt than traditional long-term
project finance. This permits investors to take advantage of short-term revaluation and
refinancing although it requires consortia to assume refinancing risk and more frequent
visits to the debt market than would be the case with conventional project finance.
3.3 Financial services
The financial economics of PPPs place strong reliance on capital markets for
fragmentation of risk and services that include intermediation (debt and equity
underwriting), credit enhancement (monoline insurance), credit rating and financial risk
management.
3.4 Market drivers
In Australia, the drivers of the PPP bid market are the financial service providers. Their
selective participation or withdrawal from future bids combined with barriers to entry
created by softer market conditions may lead to some realignment of the bid market.
Whether building and facility management contractors are willing to assume a greater
equity and mezzanine finance role in their bids remains to be seen.
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3.5 Capital market innovation
PPPs benefit from capital market innovations such as the stapled security, unit trust
structures and credit enhancement. Recent credit rating downgrades for financial
intermediaries including credit insurers will adversely impact competition in PPP bid
markets, weaken value for money outcomes and affect the fast-tracking of infrastructure
projects which are major attractions of the PPP procurement method.
PPPs are strongly dependant on capital markets although the level of dependency varies
across industry sectors, projects and the nature of the revenue stream. In present market
conditions, capital will generally be harder to find, it will be more expensive and stricter
credit standards may require bidders to take a more conservative approach to risk
acceptance. This suggests some weaknesses in bid depth, private sector appetite for
greenfield projects and those projects involving patronage risks. A less competitive bid
market may also have an adverse impact on value for money outcomes. In summary,
debt markets have become strongly risk averse. For projects involving the refinancing
of existing debt against mature revenue streams, availability payment streams and
sponsor-provided equity, bid market depth and debt market activity levels are expected
to remain buoyant albeit with stricter credit standards.
4. Present Market Conditions
The present conditions in debt markets follow 12 months of instability that had its
origins in the US sub-prime mortgage market and sub-optimal risk pricing in
international capital markets for some years. The asset write-downs, lack of liquidity
and low confidence in the market that followed, led to a repricing of risk, a significant
increase in spreads (risk premiums) in interbank markets and higher corporate
borrowing costs. These conditions were recognition of the deterioration in risk
management practices in the financial services industry and lack of trust in financial
institutions and capital markets over the preceding 12 months. A decade of low interest
rates, bank asset disintermediation and high leverage in buoyant market conditions
created circumstances for a pro-cyclical correction which was amplified by tighter
liquidity conditions (Reserve Bank of Australia, 2008).
Capital markets in Australia and overseas are presently characterised by:
1. Historically low share prices
2. Limited opportunity for new on-market capital raisings
3. Reduced activity in mergers, acquisitions & divestments
4. A fall in asset values at odds with underlying fundamentals.
5. How are PPPs Affected by Present Market Conditions?
The prevailing capital market conditions are expected to have the following effects on
PPP bid markets:
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1. Risk is in the process of being repriced but has not yet stabilised. This will place
sustained short-term pressure on the pricing of debt capital for PPP projects.
2. A reduction in the availability of debt capital in the short to medium term.
3. Tighter credit standards including lower debt to equity ratios (leverage), higher
debt service coverage ratios (interest cover) and wider use of capital reserves
and sinking funds to manage revenue volatility risk.
4. Limited availability and increased cost of credit enhancement services and
tougher credit rating standards.
A further effect will be the disappearance of the IPO capital-raising model for
transportation projects in the short to medium term (1-5 years). The Australian equity
market has demonstrated a long-standing appetite for infrastructure securities. The
many innovations include the single asset investment vehicle, sector-specific investment
vehicles and innovations such as the stapled security. Nevertheless, present uncertainty
suggests that the IPO method of raising capital is not feasible in present market
conditions and unlikely to make a re-appearance in the new future. There are three
factors at play here:
First, the market is wary of high debt levels and distress premiums are greater now than
at any time in the past 15 years.
Second, the market has demonstrated a reluctance to carry delivery risk. Promoters may
need to revert to quarantining the delivery risks for future large-scale construction
projects. The investment grade credit rating given to the Lane Cove Tunnel project by
Standard and Poor’s in 2006 was influenced by the underlying credit rating of the
constructor, Leighton Group and a qualitative assessment of that company’s capabilities
and track record.
Third, new IPOs will need to address the question of optimism bias in forecasting and
the perception of systemic forecasting error.
The survey of PPP financial advisers and lenders suggests that PPP transactions will be
harder to do in present market conditions but not impossible. The degree of difficulty
increases with projects that carry patronage risk and those that require investors to
absorb high levels of delivery and operational risk. The degree of difficulty in raising
capital for future PPP projects can only be determined on a case by case basis. The
factors that will mitigate finance risk for PPP projects in present market conditions
include:
• conservative leverage
• high debt service coverage ratios
• adequate reserves
• source and stability of the payment stream
• underlying credit rating
• benign abatement regimes
• availability of appropriate credit insurance
• capabilities and track record of consortium members, and
• state risk allocation.
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Refinancing risk is also a potential difficulty for existing projects although mature
projects with strong revenue streams, staged maturities and availability-based payment
arrangements mitigate this risk. For projects not featuring these covenants, refinancing
risk presents a more serious problem.
The survey of finance executives suggests that the cumulative effect of recent events in
capital markets can be expected to have the following long-term impacts on the PPP bid
market.
1. Equity will be difficult to source. The demise of the IPO equity raising option
will also mean the end of other equity-raising techniques employed with this
model such as the dividend reinvestment plan and deferred equity subscription
arrangements. Firms will find it increasingly difficult to meet new minimum
equity capital standards and the short-term outlook is for higher cost of equity
pricing.
2. It may be increasingly difficult for small firms and non-credit rated market
participants to find a place in consortium line-ups. In tighter capital market
conditions, this is expected to result in a reduced number of players in the bid
market.
3. The construction industry will be reluctant to provide long-term equity capital
for PPPs when the alternative is relationship contracting and lower project risk
absorption.
A contraction of the PPP bid market has important implications for the future provision
of infrastructure in Queensland and the rest of Australia. These include:
1. A decline in the number of PPPs with the loss of benefits available from this
procurement method
2. A slowing of the roll-out of the South East Queensland Infrastructure Plan and
Program with consequential effects on both transitional and long-term economic
development in Queensland (Regan, 2007a)
3. A greater emphasis on State provision of infrastructure financed through state
debt or taxation with associated “deadweight” costs.
Financiers and advisers responding to the survey agreed that new PPP transactions over
the next 12 to 18 months will attract higher spreads or risk premiums. As previously
identified, this is especially the case with greenfield projects that carry market or
patronage risk. Projects where the revenue is by way of state availability payments such
as projects in health, justice and education and the refinancing of mature market risk
projects should be easier to finance although risk pricing, leverage and debt servicing
criteria are expected to be tougher throughout 2009.
A further factor influencing the financing of PPP transactions is the relative maturity of
the industry and the allocation of risk. Research by the Australian Centre for Public
Infrastructure in 2006 suggests that some infrastructure industries attract lower lending
risk premiums than others. Mature tollway projects, energy generation and transport
hubs (airports and ports) and social infrastructure generally attract lower debt funding
margins, on average, than projects in higher risk categories such as in the water and
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urban transport industries. This research was based on capital market indicators for the
period 1995 to 2005 and a return beta proxy for systematic risk (Regan 2004, 2006).
6. What is the Medium Term Outlook?
The difficult conditions presently being experienced in overseas and domestic debt
markets are not expected to continue indefinitely. Anecdotal response from industry
suggests that equity and debt finance will continue to be available for PPP projects in
the sub-$300 million capitalisation sector of the market. However, as noted, lending
criteria will be tougher and projects with lower delivery and operational risk profiles are
more likely to raise capital than those with projects carrying greater risk burdens. This is
a view supported by the capital market survey (conducted by Regan, 2008a). In this
latter category are projects requiring high levels of innovative design or technology,
patronage risk and greenfield land transport projects.
A significant part of the problem for PPPs in Australia is the wide use of IPOs and
medium-term corporate finance as opposed to long-term project finance more common
in Europe and the United States (Regan, 2007b). The IPO may not be an option in the
foreseeable future and medium-term corporate debt may be difficult to source.
However, financiers and credit rating agencies report that larger projects with lower
overall credit risk will continue to attract long term project finance. Project finance
creates a problem for the Australian PPP financing model for several reasons including
the early stage refinancing to capture shift in the risk and return profile of the project,
the preference for early stage contractor withdrawal, and an inability to extract the
preferred risk and incentive framework favoured by local firms.
Adverse market conditions also present opportunities and Australia’s capital market has
proven adroit in developing innovative financial solutions designed specifically to
facilitate investment in this asset class. The stapled security, deferred equity
contribution and composite group structure are examples of this. Superannuation fund
managers and institutional investors are attracted to this asset class because of its
investment characteristics which include:
• High capital intensity and EBITDA margins
• Low variable costs and high yield in maturity
• Indexed long-term cash flows
• A long-term investment horizon that is well matched to the tenor of fund
liabilities.
This group of investors have a reduced appetite for delivery and forecasting risks
associated with land transportation projects. However, as projects shed early-stage risks
and revenue streams mature, these projects are more attractive to fund managers.
Further innovation in structuring PPP projects for listed and unlisted investments may
well target the quarantining of early stage project risks with a view to attracting earlier
participation by fund managers.
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Further innovation in the PPP model is also a possible response to present market
conditions. PPPs are a hybrid procurement form that has proved remarkably resilient
since its first use in Australia with the Sydney Harbour Tunnel in the 1980s. Continued
refinement of the model to meet changed circumstances including the withdrawal of
franchisees, the apportionment of windfall gains, extension of the model to complex
social infrastructure services including specialised applications in corrective services,
the health sector (Melbourne’s Royal Children’s Hospital, Royal Women’s Hospital)
and education (schools projects in NSW, Victoria and Queensland).
7. Market Opportunities
Financiers, advisers and the credit rating agencies indicate that present market
conditions favour PPP projects with strong credit attributes. Many of the characteristics
of these projects are highlighted above but can be summarised here. PPP projects have a
greater chance of success in attracting private debt and equity finance in present market
conditions if they possess more of the following characteristics:
• An availability based revenue stream
• Equitable and not wholesale risk allocation by the state
• A benign regulatory framework with a graduated abatement regime, incentives
for high performance and robust mechanisms for dispute resolution
• Low leverage or equity contributions commensurate with actual project risk
• Strong debt service coverage and adequate stand-by liquidity
• Manageable technology and lifecycle risk
• Strength in the underlying financial covenants
• Track record, financial or well rated contractors
• Adequate measures for project and financial risk management (Standard and
Poor’s, 2008).
Projects that meet this criteria are generally PPPs in the social infrastructure sector
especially non-core service delivery in health, education, public buildings, law courts
and police stations, corrective services, waste management, energy and the water
resources industries. Project size is not a barrier to raising capital for PPPs with these
characteristics.
Governments keen to maintain a strong bid market should consider fast-tracking
projects that meet these criteria. Governments should also consider a more equitable
cost-based approach to risk transfer and guarantees to support privately-sourced senior
debt in projects that are suited to delivery by PPP but cannot be financed in present
market conditions. This may not be a significant number of projects and will mainly
concern those with complex construction or patronage risk. Such a measure will also
have the advantage of preserving value for money outcomes in an environment of
higher cost private capital.
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8. Conclusion
Internationally, PPPs are being used across a wide variety of economic and social
infrastructure projects in more than 85 countries. PPPs are a procurement methodology
that brings a rigorous risk-weighted approach to major projects using a competitive bid
process and private sector expertise and innovation. PPPs are achieving a number of
significant improvements in major project procurement and improved public service
delivery. A wide body of evidence supports the following findings:
• PPPs are bringing forward the delivery of major projects
• The model is achieving value for money, reducing procurement costs and
delivering more projects on time and within budget than traditional methods
• PPPs are improving the science of state procurement and have led to wider
application of Gateway Review and alliance contracting methods with
significant benefits for state procurement outcomes
• Certainty with lifecycle costing
• High levels of construction and design innovation and new technologies.
PPPs are highly leveraged and a number of major assets are either listed on the
Australian Stock Exchange (ASX) or controlled by listed portfolio investment funds.
PPPs are highly dependant on capital markets for many services including:
• Raising equity capital through initial public offerings
• Debt finance
• Financial risk management
• Intermediation, credit insurance and related services
• Innovation from financier-led competitive bids.
Conditions in international and domestic capital markets are unstable and volatile.
Present conditions exhibit the following characteristics:
• A 50% fall in stock prices since the market peak in 2007 and stock price
volatility
• Limited opportunity for on-market equity raisings
• Increased difficulty raising debt and higher debt financing costs
• Limited supply and repricing of credit insurance
• Uncertainty and lack of confidence.
A consequence of these market conditions is limited availability of equity and debt
capital and a higher cost of capital. This condition is exacerbated in Australia where
projects listed on the ASX make greater use of medium-term corporate debt and
periodic refinancing than other countries. Revaluation and refinancing, once revenue
maturity is achieved, are key elements of investment economics through increased
leverage, a return to equity and a reduction in the cost of debt. Present market
conditions would indicate that these opportunities will be considerably reduced over the
medium term.
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Michael Regan, Jim Smith and Peter Love, pp 462-474
Present market conditions do not close the door on PPPs but do provide an opportunity
for both government and industry to develop a more refined model that is more
appropriate for the new environment. This may require a more scientific costed
approach to risk allocation, state guarantee support, improved underlying credit
credentials and a rethinking of patronage risk. It is a shared responsibility.
2. Acknowledgements
A research report was prepared for the Infrastructure Association of Queensland as a
joint undertaking of the Association and the Mirvac School of Sustainable Development
at Bond University and the support of the Association is kindly acknowledged.
The authors also wish to thank the anonymous reviewers whose constructive comments
and suggestions contributed to the final form and content of this paper.
3. References
Allen Consulting Group 2007, Performance of PPPs and Traditional Procurement in
Australia, Final Report to Infrastructure Partnerships Australia, Melbourne.
Australian Bureau of Statistics 2007, Australian National Accounts, Cat. No. 5204.0,
Canberra.
Clark, G.C. Evans, J. 1998, The Private Provision of Urban Infrastructure: Financial
Intermediation through Long-Term Contracts, Urban Studies, vol. 35, no. 2, pp. 301-319.
Department of Treasury and Finance, Victoria (2009) National Public and Private
Partnerships Guidelines: Partnerships Victoria Requirements, Government of
Victoria, Melbourne.
Fitzgerald, P. 2004, Review of Partnerships Victoria Provided Infrastructure, Final
Report to the Treasurer, Growth Solutions Group, Melbourne.
Flyvbjerg, B. Bruzelius, N. Rothengatter, W. 2003, Megaprojects and Risk, An Anatomy of
Ambition, Cambridge University Press.
Grimsey, D. and Lewis, M. K. 2004, Public Private Partnerships, The Worldwide Revolution in
Infrastructure Provision and Project Finance, Edward Elgar, Cheltenham.
Infrastructure Australia (2008a) National Public and Private Partnerships: Policy
Framework, Commonwealth of Australia, Canberra.
Infrastructure Australia (2008b) National Public and Private Partnership Guidelines:
Overview, Commonwealth of Australia, Canberra.
Infrastructure Australia (2008c) National Public and Private Partnerships Guidelines:
Volume 1 – Procurement Options Analysis, Commonwealth of Australia, Canberra.
Infrastructure Australia (2008c) National Public and Private Partnerships Guidelines:
Volume 2 – Practitioners’ Guide, Commonwealth of Australia, Canberra.
Mott McDonald 2002, Review of Large Project Procurement in the United Kingdom,
Report for H.M. Treasury, July, Croydon.
National Audit Office 2005, Improving Public Services Through Better Construction,
Volumes 1 and 2, Report by the Comptroller and Auditor General, Case Studies, HC
354-1, Session 2004-05, 15 March.
Regan, M. 2008a, Market Solutions to Public Failure, Public Infrastructure Bulletin,
Edition 6, Bond University, November.
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Michael Regan, Jim Smith and Peter Love, pp 462-474
Regan, M. 2008b, Glossary of Terms, Project Finance, Sustainable Development and
Project Procurement, Working Paper WP114, Mirvac School of Sustainable
Development, Bond University, Gold Coast.
Regan, M. 2008c, A New Approach: Comparative Procurement Methodology Analysis,
Working Paper 130, Mirvac School of Sustainable Development, Bond University,
Gold Coast, Queensland, Australia.
Regan, M. 2008d, What Impact will Current Capital markets Conditions have on Public
Private Partnerships?, Working Paper 121, Mirvac School of Sustainable
Development, Bond University, Gold Coast, Queensland, Australia.
Regan, M.E. 2007a, The Economics of the South East Queensland Infrastructure Plan
and Program 2007-2026, a report prepared for the Department of Infrastructure and
Planning, Queensland Government, September.
Regan, M.E. 2007b, Australia’s Hybrid Approach to Project Finance, Public
Infrastructure Bulletin, Edition 6, pp. 21-24.
Regan, M.E. 2006, PPPs: Adding Value to Public Procurement, Research Paper 0432,
Australian Centre for Public Infrastructure, the University of Melbourne, Hawthorn.
Regan, M.E. 2004, Infrastructure, A New Asset Class in Australia, Research Paper 2/04,
Australian Centre for Public Infrastructure, School of Enterprise, Melbourne
University Private, Hawthorn.
Reserve Bank of Australia 2008, Bulletin, August.
Rutherford, D 2008, Routledge Dictionary of Economics, 2nd edition, London.
Savas, E.S. 2000, Privatisation and Public Private Partnerships, Chatham House Publishers,
New York and London.
Standard and Poor’s 2008, To Meet Growing Infrastructure Needs, Asia Must Develop
A Credit Culture, Ratings Direct, Newsletter October 2008, McGraw-Hill, Sydney.
Wolf, C. 1993, Markets or Governments, Choosing between Imperfect Alternatives, 2nd edn.
The MIT Press, Cambridge and London.
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Yvonne Simpson and John Dye, pp 475-493
Value for money: a quantity surveyors perspective of the
quantitative versus the qualitative
Yvonne Simpson1 and John Dye2
1
The School of Architecture and Construction,
University of Greenwich, London, SE9 2PQ,
United Kingdom
2
TPS Consult Limited
Centre Tower, Croydon, CR9 0AU
United Kingdom
Email: [email protected]; [email protected]
Abstract:
In ascertaining whether aspects of a construction project are value-for-money, the
Quantity Surveyor uses a quantitatively biased toolbox including supply chain
management, whole life costing, value analysis, and key performance indicators. This
approach may miss an opportunity to pursue value through innovation. A client’s
values are at the core of value-for-money and the QS is well placed respond to the
client’s qualitative needs whilst acting as a guardian of cost and value. Working against
a wider interpretation of the QS’s critical, qualitative role is a shallow form of
pragmatism that operates inside project teams, which pursues narrow technical solutions
in the name of value-for-money. The purpose of this paper is to identify the quantitative
and qualitative components of value-for-money, review the tools that the QS will draw
upon to measure the achievement of value and highlights their quantitative bias. In
proposing a wider methodological approach to determining value-for-money, the role of
pragmatism in project teams is examined together with its potential shortcomings.
Methodological stances and approaches are identified and their relevance to the QS role
and a triangulation approach is recommended to augment a QS’s methods in pursuing
satisfaction of clients’ values. Further research might examine in greater detail the
defining components of value-for-money and identify ways to link QS tools together to
provide greater qualitative output.
Keywords:
Value-for-money, quantitative, qualitative, triangulation
1 Introduction
The Quantity Surveyor (QS) has a quantitative approach. The QS measures, records and
apportions, speaks in the language of amounts, sums and quantities and thus has
attracted the name of “bean counter”, which reduces the QS’s role to recorder rather
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than controller or enabler and reflects the quantitative approach undertaken to data
gathering. The definition of a cynic in the words of Oscar Wilde “a man who knows the
cost everything and the value of nothing” has been aimed at many a QS. However,
perhaps some of the interpretations of value, i.e. providing best quality for least price,
do not aid the debate about value-for-money because they emphasise the requirements
of accountability, and measurement but miss out the requirements to improve and
innovate.
In order to facilitate improvement and innovation, the QS must, whilst applying his
technical knowledge, also employ the more qualitative skills of enablement, negotiation,
management and problem solving, to each project. To challenge the contemporary
perception of our profession we need to re-examine the services we provide – skills,
techniques and knowledge, and to offer a new method for marrying the qualitative
measures we are judged against with the quantitative methods used by a QS.
The hypothesis we are offering up is Value-for-Money [VFM] depends upon the use of
triangulation to achieve a more considered relationship between qualitative and
quantitative measures.
The aim of this paper is to identify methodologies to enable the Quantity Surveyor to
deliver value-for- money innovatively. To achieve this aim, definitions of value and,
indeed, VFM will be reviewed and discussed, also an investigation of the quantitative
approaches undertaken at present by the QS to support the delivery of value for money
will be listed. A discussion and evaluation of the different methodologies available to
balance the qualitative requirements of the client with the quantitative approach adopted
by the QS to value for money will make up the final section of the paper. The final
outcome of the paper is to suggest that there are methods of overcoming the QS bias
towards quantitative measures and ensuring the client is better served.
The methodological approach to this paper has covered a number of styles evolving
through the epistemological and ontological stance viewed through the
positive/normative distinction leading the debate onto quantitative and qualitative. The
overarching belief is that a mix of methodologies using triangulation will give better
results for clients who require value-for-money.
The conclusions point to solutions and further research is necessary to find ways to link
together differing QS tools. Key to this is the relationship between academia and
industry; academia should reach into industry to embed methodological skills and
industry should reach into academia to effect a change in culture that supports the use of
a wider set of methodologies by the QS.
2 Value for Money
2.1 Concept of Value-for-Money
In construction, value is usually defined as a desirable monetary equivalence of a
physical item (Kelly and Male, 2001). Kelly and Male expanded value to also mean
equivalence of effort and exchange but again these are usually measured in monetary
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terms. Value and VFM can be regarded as distinct concepts; value is considered to
reflect the client’s business goals and is measured qualitatively [client value] whilst
VFM tends to address matters of affordability and price reduction and is measured
quantitatively. In this paper, it is argued that the term ‘value’ in VFM stems directly
from the client’s values and the quantitative and qualitative aspects of value need to be
reconciled if they are to have real use in the guiding of a project to outcomes that match
the employer’s overall expectations.
Quantity surveyors have a long history in the analysis of the quantitative aspects of
value and are well placed to help clients obtain an understanding of their own needs. In
order to underpin the relationship between client value and VFM, it is necessary to
understand the meaning of VFM in a construction environment and what informs the
dichotomy between the traditional QS approach to VFM and the wider aspects of client
value.
2.2 Defining Value-for-Money
A survey of VFM statements from UK sources reveals a number of components. Public
sector organisations look at VFM from the perspective of inputs, e.g., sound
procurement of goods and services; private sector VFM is usually related to outputs,
e.g., customer satisfaction. This is not entirely surprising given the relative position in
the value chain of public and private organisations but can these different perspectives
be reconciled?
In the following sections, the authors have cited and expanded upon some examples of
VFM policy in the UK public and private sectors; examples include the definition of a
best value authority as described in the UK Local Government Act 1999 followed by an
interpretation placed on this by a university internal audit department at Warwick.
Following on, the review of the UK private sectors provides a typical example of VFM
policy from Associated British Foods relating it to customer satisfaction and a more
targeted policy from GlaxoSmithKlein, which is concerned with relating value to
innovation when pricing in countries with no effective market forces. The theme of
innovation is further alluded to in an a recent interview of Professor Peter Williamson of
the Judge Business School, Cambridge; Professor Williamson compares Western
attitudes to value in products with the Chinese approach of reducing costs to customers
through technological investment. The public and private sector policy observations are
combined in the final part of this section to suggest that VFM consists of a quest for
economy, efficiency and effectiveness through innovation.
2.2.1 VFM in UK Public Sector Organisations
In the UK public sector, VFM is governed by Best Value legislation, which imposes a
general duty on ‘best value authorities’:
“A best value authority must make arrangements to secure continuous improvement in
the way in which its functions are exercised, having regard to a combination of
economy, efficiency and effectiveness”
Local Government Act (Great Britain, 1999)
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Value for money is obtained from having regard for economy, efficiency and
effectiveness. Best Value is obtained by enhancing VFM through continuous
improvement of the organisation, e.g., raising standards of service.
o Economy: buying inputs of a given quality at the lowest cost
o Efficiency: ensuring that the maximum amount of output is achieved from and
operating for the minimum amount of input
o Effectiveness: ensuring that the outputs of an organisation are as closely aligned
as possible to its objectives
The University of Warwick (2009)
Economy implies cost effectiveness, if this component were the sole criterion for VFM,
it would amount to getting something for the cheapest price. During the 1980s and
1990s, the cost-effective approach was the received wisdom in the operation of
Compulsory Competitive Tendering which had mixed results as the wider interests of
both customer and supplier were ignored in favour of getting something as cheap as
possible. In construction, such practices were the traditional norm but it was also
normal for customers to end up disappointed and for contractors to seek to rectify poor
margins through claims.
The objective of efficiency stated in the Local Government Act 1999 has developed
further into sustainability, which aim is to use resources wisely with a view to obtaining
sustainable outputs.
“Sustainable Procurement is a process whereby organisations meet their needs for
goods, services, works and utilities in a way that achieves value for money on a whole
life basis in terms of generating benefits not only to the organisation, but also to society
and the economy, whilst minimising damage to the environment.
“Sustainable Procurement should consider the environmental, social and economic
consequences of: Design; non-renewable material use; manufacture and production
methods; logistics; service delivery; use; operation; maintenance; reuse; recycling
options; disposal; and suppliers' capabilities to address these consequences throughout
the supply chain.”
Procuring the Future
(Department for Environment, Food and Rural Affairs, 2006)
Organisational effectiveness seeks to align business objectives with the procurement of
goods and services. In a school, for instance, effectiveness is the delivery of education
in line with or better than educational targets; in a hospital, effectiveness may be
measured through waiting lists or infection rates; in a housing department, measurement
may be in rental void or dilapidation rates. In any event, the idea behind organisational
effectiveness is to achieve most bangs for each buck.
2.2.2 VFM in UK Private Sector Organisations
There is less focus on VFM in private sector procurement perhaps because competitive
pricing and purchasing is a necessary requirement for corporate survival. The most
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regularly mentioned criterion for VFM in the private domain relates to customer
satisfaction, typically:
“We seek to be honest and fair in our relationships with our customers and above all to
provide the standards of product and service that have been agreed whilst at the same
time offering value for money.”
Associated British Foods plc (2009)
VFM in the UK private sector is seen as a key driver for maintaining relationships
whilst maintaining standards. An interesting insight into the private sector’s expectation
upon customers is provided by GlaxoSmithKlein [GSK] when referring to negotiating
prices in countries where there is no effective market system:
“Competitive market conditions are the most efficient way of allocating resources and
rewarding innovation. Given the absence of genuine market conditions in many
countries, GlaxoSmithKline is committed to engaging with governments and other
parties to discuss processes and principles that will enable the development of pricing
and reimbursement systems that reflect the value of products and reward innovation.”
GlaxoSmithKlein plc (2005)
This one-off statement reveals a core attitude to VFM in a private sector business; price
and reimbursement exist in relationship with value and innovation. This is interesting
insofar that GSK mentions “reimbursement”, which in the construction sector is usually
based on cost models. Research and development may be included in cost modelling by
inclusion in company overheads but clients may argue that such allowances have no
value to them as they only wish to pay for previously developed products. This is a
dilemma for any seriously minded management team which seeks to balance future
sustainability of its business with immediate competitiveness.
The VFM rationale for investment is to drive down unit costs, which in the longer run
will benefit the customer. According to Williamson (2009), experience in China
suggests that investment targeted at bringing technological improvements to mass
market goods and services aids competition by spreading costs normally associated with
niche markets to a greater customer base. Value for money in this context does not
entail delivery of extra “bells and whistles” but requires creative thinking of entire
business models such that customers have greater choices for little or no price premium.
It requires firms to question whether niche products exist because there is little demand
for them or whether such limited demand is a result of the product being too expensive.
Firms may then ask whether technological improvements in the business model lead to
cheaper, mass-market opportunities. New market leaders arise from firms beating
existing market leaders by concentrating on a plan that utilises VFM as a tool to change
high-cost products into low-cost products and capture market share.
The GSK and Williamson views point to innovation as a necessary element of VFM.
How does this tie in with the public sector VFM – can there a unified definition?
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2.2.3 Cross-Industry VFM – Unifying Policies from Public and Private Organisations
The private sector perspective of VFM through innovation and customer satisfaction
relates well to public sector VFM. In essence, in order to innovate towards wider
market penetration, a private sector business will invest in technological improvements.
In the construction sector, these improvements may be concerned with the underlying
systems of accountability, for instance, which allow clients in open book contracts the
most transparent access to financial information. This will, over time, increase trust and
persuade clients (particularly in the private sector) to use more innovative forms of
procurement that rely on cost reimbursement and which should improve the speed of
procurement and delivery of projects (Simpson and Dye, 2008). As a result of this,
methods of procurement that might otherwise remain ‘niche’ at the fringes of the
industry are encouraged to become ‘mass market’ and, as the market increases in size,
so the ‘unit cost’ of the investment in new forms of procurement falls and, with that,
price.
Process driven VFM assists public clients achieve their goals of economy, efficiency
and effectiveness in much the same way that lower costs physical products can also
achieve. Procurement methodology and post-contract audit are key aspects that affect
the course of VFM in the following ways:
• Economy is enhanced by the levering of a contractor’s value chain and the
enhancement of innovation that brings lower ‘unit cost’ through technological
investment; the more influence a client has over a value chain, the greater
likelihood that economies will flow
• Efficiency is best driven through value management techniques in which the
client’s values are stated at the commencement of a project and these are the
basis for resolving functional dilemmas and design-to-cost decisions
• Effectiveness is in part assured through external accreditation of supply chain
management systems backed up by client audit seeking out non-compliance,
wastage and fraud.
The unified approach to VFM described above is visually summarised in Figure 1
below.
Though VFM integration is conceptually feasible, there remains a divide between the
qualitative and quantitative aspects. It is the contention in this paper that these two
aspects of value must be reported together with inconsistencies identified and actions
formulated in response to both equally and jointly. In order to achieve this there needs
to be some analysis of quantitative tools presently used to obtain VFM.
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Economy Efficiency
INNOVATION
Effectiveness
Figure 1 Value for Money Integration
3 QS Tools and Methods: A Quantitative Approach
Concentrating upon the quantitative approaches, the authors have identified four
approaches adopted by QS’s in contemporary practice: Supply Chain Management
(SCM), Whole Life Costing (WLC), Value Analysis (VA), and Key Performance
Indicators (KPI). An overview of the systems and methods employed will be undertaken
to identify the manner in which the QS fits them to the requirements of VFM. Though
the tools are quantitative in nature there is inherent in their delivery qualitative aspects
which need to be recognised.
3.1 Supply Chain Management (SCM)
The origins of supply chain management can be traced back to the US pre-WW1
manufacturing systems subsequently introduced to Japan and heavily embraced by
Toyota in the 1950s followed by Honda. A comparable definition appropriate for the
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UK construction Industry is “the replacement of a short term single contracts with long
term, multiple project relationships based on trust and co-operation” (Holti et al., 2000)
SCM tends to suit large clients with repeat order books. It allows for minimising
inefficiencies, working out what is value for money for this particular client and project.
Clients (Cain, 2003) have reported time savings, exhibition of innovation, savings to
budgets, more efficiency and a better approach to whole-life concerns tailored to the
clients needs. Adding value and providing value for money can be measured in reduced
defects, minimising waste, reducing transportation costs and time, reducing waiting
time and client satisfaction (Cain, 2004).
Within SCM there are many approaches: Lean construction, Just in Time (JIT), Total
Quality Management (TQM) and Value Management (VM). In the following
paragraphs these will be discussed with reference the quantitative approaches. Value
Management warrants its own separate discussion which is provided later in the section
under the heading of Value Analysis.
Lean construction (AKA lean production) was spotted in the car manufacturing industry
and was introduced to the UK via a research programme run by International Motor
Vehicle Programme IMVP, highlighted by Egan in his DETR report (1998) It looked to
reduce waste with pared down store rooms and no over ordering with a primary focus
on correct initial design and minimal change. Lean construction is a diagnostic
procedure which views the process from a clients’ stance and checks the whole system
for impacts when any changes are made. The stages are to (Smith, 2003):
• map processes
• identify improvements
• implement improvements.
Within the practices of Lean construction a consideration of inventory control and the
benefits derived from the economics of transaction costs led to the idea of ‘Just in Time’
ordering [JIT] (Ford, 1922; Ohno and Mito, 1988). The JIT approach to ordering
materials ensures that materials and information arrive at the correct time to allow the
next stage to progress but with attention to cash flow and delivery at the optimum time.
The overarching importance of quality and its impact upon time and cost is recognised
by clients, contractors and suppliers as it affects profitability- “right first time” and the
emergence of TQM (DETR, 1998) was derived from these concerns. TQM is the
practice of involving and valuing all people in the production of the project, and as such
is an organisational approach to efficiency.
Effective supply chain management uses value to deliver a satisfactory project for the
client. This is achieved by defining the clients values, establishing supplier
relationships, integrating project activities, managing collaboratively, developing a
mindset of continuous improvement and the ability to mobilise and develop people
(Oakland and Marosszeky, 2006).
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3.2 Whole Life Cycle Costing (WLC)
Whole Life Cycle costing was discussed in the early 80’s as Life Cycle Costing
(Flanagan and Norman 1983) in a quantitative manner allowing assessment of the true
costs of a building, element or component over the life of that building, element or
component. More recently the British Standard on Reliability of Systems has produced
a definition “Life cycle costing is the process of economic analysis to assess the total
cost of acquisition and ownership of a product” (BSI, 1997). Moving on, the arrival of
Whole Life Cycle brought with it a definition from the Construction Best Practice Panel
(2006) “Systematic consideration of all relevant costs and revenues associated with the
acquisition of an asset”
WLC is used to describe the basic principle of including all costs – capital, running and
maintenance, to give a better indication of VFM and greater choice to the client over the
life of the asset. This is particularly important as the Facility Managers Faculty (RICS,
2003) have indicated over an asset’s life of 30 years capital costs to maintenance costs
to running costs are in a ratio of 1:5:200.
Sustainability is a topic in which WLC is an extremely useful tool to enable
comparisons of products and the manner in which items are purchased and installed.
Whist this is a topic that is quite emotive, there are standards that clients impose to
address concerns about greener, more sustainable methods of purchasing construction.
When a client wants VFM and has identified sustainability as one of the measures this
tool will deliver a quantitative answer.
3.3 Value Analysis
In this paper, Value Analysis is used as an umbrella term for Value Management and
Value Engineering. By using the stages of Value Analysis the emphasis of costs are
changed from product to functionality. This enables the design team to look at providing
the function required at the lowest cost, while maintaining the importance of it in the
decision making process. Two ways this can occur are through Value Management
(VM) and Value Engineering (VE).
3.3.1 Value Management
Value Management continuously reviews VFM by identifying a client’s needs and
wants, allowing a distinction between the primary function of the project and the nice to
haves. It is defined by the Institute of Value Management as “a structured team based
approach to identify functional requirements of projects/contracts to achieve Optimum
Function for Minimum Cost” (2009).
VFM can be identified in VM as not simply the lowest capital costs but a balance
between quality, fitness for purpose, initial capital costs and WLC over the life of the
element or building.
The main purpose of VM is to cut out unnecessary costs that provide little or no benefit
in use or life quality, appearance or customer requirements. Such costs usually arise due
to a poor brief (BRE, 1996), lack of ideas, incorrect beliefs or just plain habits and
attitudes. VM passes through a number of stages from conception of the project to
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delivery and feedback. Perceived wisdom suggests that early decisions or choices
minimise the impact on time, cost and quality. Methods such as Functional Analysis
Systems Technique (FAST), tied into a simulated probability decision tree based upon
the Monte Carlo simulation computer programmes produce quantitative results which
allow ranking of choices based on numerals. In the life of the project there are
workshops aiding communication and the progression of the design tied into the overall
client goal.
3.3.2 Value Engineering
Value Engineering tends to appear post contract and is often criticised for being a “cost
cutting” tool (AUDE, 2000) rather than a value-improvement tool. It is a systematic
application of recognised techniques; identifying alternative designs, solutions and
choices, which reduce the basic premise to the actual function of the product or service,
from this it aims to establish a monetary value for this function and looks to provide the
function at the lowest price. The approach is based upon a hard and scientific approach
to the problem, enabling decisions to be made in a comparative manner based upon a
purely quantitative approach.
This is less effective tool for VFM as it happens too far down the design stage to be of
tremendous help. However, there is a place for value engineering to bring the budget
into line and offer choices to a client close to the construction phase. Value engineering
arose first in the Second World War in the USA used by General Electric Company,
who were at the time manufacturing war planes and were was facing a shortage of
copper. So, much like a modern day Dyson they took the design apart and looked at
alternatives that would give the same results or better.
3.4 Key Performance Indicators (KPI)
The role of KPI in VFM is to act as an indicator and bench mark to measure
efficiencies, to gauge actual events against best practice or rather the best industry
benchmark (DETR, 2000a) The overall positioning of KPI as a tool is most beneficial
when measuring actual progress against good practice enabling corrective behaviour to
take place. Often as not KPI are measured at the completion on the measured task and
rewarded from this point. This is a mechanism used in the assessment of payment for
pain/gain contracts.
The KPI were implemented by UK Government as a method of measuring the best
value for projects carried out across the full spectrum of industry. There were specific
indicators developed for the construction industry, emphasising the performance and
progress of projects, enabling targets to be set and an award of best value as a criteria of
selection to be put forward (DETR, 2000b). An indicator is a series of quantitative
measures (CCIN, 2004) that can be used to show the viability of the business and at
another level to enable specific activities of the company to be measured and compared,
a version of time and motion studies found in operational research. The measure is a
snapshot and, as such, needs to be repeated so a comparison can be made. This should
happen over a period of time to enable a productive comparison resulting in a report to
allow decisions to be made. Such generic indicators allow for comparisons of the
construction industry to other industries operating in similar mannerism i.e.
transportation or communications. (CIRIA, 2006). The KPI are divided into strategic
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indicators and operational indicators with the aim of stimulating performance through
monitoring achievements against a benchmark, this being the best performance
achieved.
In conclusion the main emphasis of the above methods and the QS’s role in supporting
them is quantitative. The QS is above all a technocrat who measures outputs and inputs,
undertakes cost engineering by using rates and prices, produces Bills of Quantities and
schedules. The QS also brings a level of construction technology knowledge (but not the
design) that enables a functional analysis of the construction to take place. Other skills
cover the governance and particularly the production of Risk Analyses. However, in
widening the QS’s skill base to accommodate more of the qualitative methods
advocated in this paper, the soft skills of communication, relationship building and
collaboration required to gather necessary information from human sources assumes
greater importance.
4 Changes to the Methodological Approach to Determining VFM
In order to identify a methodological approach, there is a need to examine the division
between quantitative and qualitative in the design and execution of VFM analyses. This
part of the paper will first examine the role of pragmatism in the pursuit of practical
solutions and propose that the QS should be aware of the alternative methodological
stances and how to apply these to finding solutions within a project team.
Then there is a consideration of the underlying philosophical and economic concepts
behind the positive/normative distinction including the role of ontological and
epistemological stance and how these may then relate to design and execution
quantitative and qualitative investigations. Finally, there is proposition that VFM
studies should be designed using a triangulation approach; the drawbacks of
triangulation are also considered prior to the conclusions.
4.1 Pragmatism in Quantity Surveying Practice
A pragmatist seeks to solve problems by identifying their ‘practical consequences’
(Haack, 1992). Pragmatism at its best will exhibit the following qualities:
• ability to adapt to changing circumstances
• focus on achieving results
• comparison of options using cost/benefit analyses
• opposing bureaucracy
• quash closed mindedness and dogmatism
• identify and utilise the best of all methods and those elements that will be
harmful to the objective.
(Tan, 2009)
Despite the obvious advantages of using pragmatism in the business world, there is also
a less robust form that seeks quick and dirty technical solutions in an uncritical manner
– this is referred to here as shallow pragmatism. When faced with day-to-day
challenges, the QS will more often than not enter team environments where there is a
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focus on immediate technical solutions without consideration of critiques based on past
experience and theoretical knowledge. The QS is likely to come under pressure to
conform to the social norms of the group and to address only an immediate set of
technical problems in an environment that lacks tolerance for criticism. Such is shallow
pragmatism where there is a real danger that the virtue of seeking the best of many
possible solutions becomes a dogmatic pursuit of one solution through a route of least
resistance. Shallow pragmatism is solely action orientated using measurable, technical
targets coupled with almost indecent haste, which quashes contemplative consideration
of less tangible value-driven objectives. The solution will not have dealt fully with
these objectives and these cast a shadow over the project and will form the basis for
customer dissatisfaction.
In Quantity Surveying, shallow pragmatism is most noticeable in the focus on
functional optioneering (the process of assessing design options based on function
rather than, for instance, aesthetic value) based on whole-life costing, value
management analyses and associated cost planning, which are clearly valuable skills
possessed by the QS but their value is compromised if not critically examined both from
a quantitative and qualitative perspective.
Avoidance of shallow pragmatism involves the combination of technical skill and
judgement. The balance between these two ways of analysing the world is the
investigator’s stance (Olsen, 1995), which is measurable on a scale between objectivity
to subjectivity. Stance is wholly ontological at the objective end of the scale, which
means that the agent undertaking research will assume and design a methodology in
which the investigator is entirely detached from objects in the study (including people)
and all observations of behaviour assume regularity and are measurable; at the other end
of the spectrum is epistemological stance where the agent assumes the world to be a
social construct and dependent on the minds of each and every actor, expressed
linguistically. An ontological stance is dualistic in the sense it assumes detachment
between the knower and the would-be knower, whereas an epistemological stance is
idealistic and relies on shared concepts between investigator and actors.
The answer to shallow pragmatism requires awareness of the ontological/
epistemological spectrum selecting the best method to fit the investigator’s and actor’s
stances. For most, the awareness of the ontological/epistemological spectrum may be
tacit and revealed in their attitude towards evidence-based research and reporting
compared with intuitive and theoretically-based judgements, which in economic theory
is described as the positive/normative distinction.
4.2 Positive/Normative Distinction
Adam Smith (1998) argued, after Hume (1978), that judgements cannot be directly
obtained from reasoning, which is a principle that is known as the fact/value distinction.
Over time economists developed the division between fact and value into a version
known as the positive/normative distinction (Robbins, 1940). Put simply, a statement of
fact cannot be used to justify an opinion. Science cannot be used as evidence to prove
cause of someone’s favourite colour, their selection of a car, or their taste in buildings.
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The practical benefit of the positive/normative distinction is that it allows room for
distinctly objective or subjective methods of study to co-exist in connection with the
same phenomenon. Where the position taken is purely normative, it is understood that
there can be no agreement from scientific analysis, unlike a positive position, which is
measurable by scientific methods.
It might seem, therefore, that the best way of conducting affairs in a technocratic world
might be to avoid normative positions altogether but this is difficult to achieve. Firstly,
even positive statements often contain one or more assumptions about the world and
these are usually normative in nature. Second, normative statements state or explain
desires, opinions and inductive judgements whilst positive statements state or analyse
facts through deductive arguments. A practical decision almost always needs to be both
positive and normative if it is to achieve both the aims and the objectives of some
endeavour. The trick, therefore, is how to find a way to link positive and normative
aims and objectives in decision making.
In relation to VFM studies and decisions, most methods will start by ascertaining an
employer’s value-laden strategic needs but how far these will influence VFM depends
upon the employer’s ultimate attitude to decision making based on normative
propositions rather than scientific or statistical analysis. In other words, the client’s
ontological/epistemological stance is more important than that of the QS who is driving
VFM. The QS may be best served by considering the client’s stance and categorise
these into one of the following methodological styles (Love et al., 2002):
• Positivist – one who believes that they can start from a hypothesis, work through
empirical observations to a deductive generalised solution, the main toolbox of
the positivist is the scientific method.
• Intepretivist – one who will commence from observations and make rational
generalisations, which are then used inductively to explain (modernist) or
debunk (postmodernist) laws - the main toolbox of the interpretivist is ideas and
critical theory, and the language used to express these.
• Pragmatist – one who will use both the mind and the senses to isolate ideas and
to test them through some form of action, a pragmatist should use both scientific
and critical theory to seek out their objectives.
Reflecting upon the positive/normative distinction and its relevance to QS VFM
activities, a positivist would place the greatest weight on objective, factual evidence and
deductive reasoning. An instance might be the use of measurements to compare
designed floor areas for designated uses against strict requirements set by a client or a
third party, e.g. areas for workstations. The resulting comparison would reveal areas
designed to be either be right or wrong based on this factual analysis.
An intepretivist would lend greater weight to ‘normative’ judgemental evidence
allowing multiple mind-dependent realities and is a relativist and uses inductive
reasoning. A QS who participates in a Value Management exercise might seek opinions
on a number of options to satisfy a functional requirement rather than price the benefits
of a single option, e.g., a ventilation system for internal bathrooms in a block of flats
may be naturally ventilated, subject to mechanical extraction only or mechanically
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ventilated in both directions depending upon the selected functionality of the ventilation
system – the interpretivist QS would lend more weight to the client value system in their
recommendation than purely to factual cost-build considerations; the client may desire a
high standard of ventilation because the building is regarded as ‘high quality’.
In principle, the pragmatist will examine the world using both positive and normative
approaches, and will endeavour to find a practical solution by extracting the good whilst
rejecting the bad from each approach. The pragmatist QS is prepared to entertain
degrees of relativism, that is be less constrained by a single set of principles across all
clients and projects. In some circumstances and for similar problems faced, the
pragmatist will consider a positivist solution whilst in other situations, an interpretivist
solution.
Given the variety of stance and styles, how does this relate to identifying both the
positive (quantitative) and normative (qualitative) criteria of VFM for a construction
project; can a method be designed to measure successful VFM?
4.3 Triangulation
Triangulation is the mixing of more than two research methodologies in order to study a
single phenomenon (Denzin, 1978). It is intended to validate results by ensuring that
variances are a part of the phenomena and not arising from the method. The idea is to
seek convergence of results across the differing research methods used. Triangulation
may take a number of forms:
• data triangulation – different data or sources of data
• investigator triangulation – different researchers collect data separately and then
compare their results
• methodological triangulation – multiple methods are adopted and analysed
• interdisciplinary triangulation – using other social practitioners such as lawyers,
accountants, economists or psychologists.
(Jick, 1979)
From this list, there are two viable methods of triangulation that may be utilised by the
QS in the design of VFM studies: methodological and investigator
The first of these is methodological triangulation. As discussed earlier, there are four
tools that the QS may utilise in the examination of VFM and by finding ways of
combining the output from these tools the QS could refine the study of VFM on a
project. Though the precise methods of combining outputs are beyond the scope of this
paper, some themes are proposed in Table 1 that may be relevant to a methodological
triangulation.
The QS might identify thematic linkages across the methods and seek to use these to
validate results. These may be undertaken in a single stage or continuously through the
project to ensure that client success factors are being met.
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Tool Quantitative/ Qualitative/
Positive Themes Normative Themes
Supply Chain Management Time management Customer Satisfaction
Defect reduction User values
Waste minimising
Distribution cost reduction
Whole Life Cycle Costing True costs Sustainable delivery
Revenue forecasting
Value Analysis Initial capital costs Client needs
Maintenance costs Optimum value
Decommissioning costs Life quality
Cost reduction Fitness for purpose
Briefing
Ideas
Misapprehensions
Communication
KPIs Benchmarking Corrective behaviour
Task measurement
Table 1 – QS Toolbox Themes
The second viable methodology is investigator triangulation. In this instance, a single
methodology may be pursued in isolation to others, much like current practice, but the
results are presented using and number of ‘investigator’ styles. It is important that this
kind of triangulation is undertaken by more than two investigators to gain the advantage
of reducing investigator bias in the results. For instance, value management may be a
selected method and the data collected by three separate investigators. Each would take
use a particular style, e.g. positivist, interpretivist or pragmatist and they would present
their results from their viewpoint. In order to obtain the most from such an
arrangement, the results might be presented in a workshop with a large number of
project actors whose role would be to challenge each viewpoint. The objective would
be to understand the input from each player and to formulate a common approach that
takes account of each position.
Regardless of the method used, the client is an essential member of the team in order to
lead, guide and to ensure their normative aspirations are fully recognised in the
emerging VFM solutions and measures.
Triangulation is usually regarded as a pure research methodology but it is possible that
some versions of this approach could be used in VFM studies
4.4 Criticism of Multiple Methodologies in Solving Practical Problems
Use of triangulation may resolve some of the imbalances of single methodologies but
there are both theoretical and practical issues.
Triangulation methods are difficult to replicate across many unique projects because
each project has too many idiosyncrasies. The next difficulty is ensuring the right
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question is being asked and answered. This is because there is the possibility that the
value system of a client is not clearly stated or understood and this may point the project
team along the wrong course. Also, there is the possibility of researcher bias even if
triangulation is used; a researcher may still lend greater weight to either qualitative or
quantitative outcomes depending upon their particular outlook.
From a practical point of view, the greatest enemy of triangulation is cost and time.
Commercial firms are rarely afforded the luxury of multiple exercises to triangulate for
any one outcome. As such, businesses have to work in competitive markets in which
they have to control their costs; there is scarcity both in technical and managerial
resources. Next is the natural disposition of people in the private sector to concentrate
on technical solutions, which are geared to factual analysis and they often have little
interest in the ‘fluffiness’ of value-led intangible criteria. Commercial firms are geared
to annualised and monthly reporting and the immediacy of cost, profit and performance
measurement. These are all ‘hard’ measures that shut out the investigation of less
measurable objectives in the corporate mindset.
On reflection the major disadvantage of triangulation in the construction sector is the
lack of client leadership. Much of the product of triangulation relies on the balance
between results and the person who should be the judge of this is the client. There is a
need to promote client involvement (Strategic Forum for Construction, 2002) in projects
beyond the setting of basic objectives. There is also a need to promote supply chain
involvement in the understanding of the client’s business from top to bottom in order to
make ‘tangible’ the client’s underlying value system.
5 Conclusion and Further Research
The QS is often the guardian of VFM on a construction project and should play a major
part in directing the project towards value-based solutions. The most distinctive features
of VFM in the preceding review are economy, efficiency and effectiveness, which are
achieved through innovative solutions. These features are essential ingredients in each
of the tools discussed before. Inherent within VFM is a need to reconcile both client
values and innovation on a unique project. These are qualitative factors that will
influence the degree of client satisfaction in the project outcomes.
Opposing the need for qualitative considerations in VFM is the quantitative bias of the
QS. The question, therefore, is: how do Quantity Surveyors achieve a balance between
quantitative and qualitative methods in their approach to identifying and measuring
VFM?
This paper has sought to find ways to better identify the objectives of VFM studies on
construction projects, show why the QS is skilled to direct these despite quantitative
bias and to propose ways of ensuring qualitative considerations are fully recognised
rather than demoted to broad brush aspirations.
In the first part of the paper, the authors reviewed text from both UK government and
industry to identify the chief components of VFM, which are economy, efficiency,
effectiveness supported by innovation from which value springs. In the second part
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there is a review of established techniques adopted by the QS to assist in the
measurement of VFM including supply chain management, whole life costing, values
analysis and KPIs. These are predominantly quantitative but with qualitative elements
as noted in Table 1.
In the final part, there is a discussion on the role of pragmatism in modern practical
decision making and how this can easily be hijacked to justify narrow technical
solutions at the expense of critical review and value-led analyses. It is suggested that
the QS needs to be aware of the positive/normative distinction and the ontological and
epistemological stances that underlie these positions. It is proposed that VFM analysis
is best served by a Triangulation methodology utilising a number of QS tools linked by
common themes or investigative styles to ensure different points of view are aired.
One of the limiting factors in developing the definition of cross-industry VFM was the
lack of private sector policy documents in the public domain; in order to take this aspect
of VFM forward it would be necessary to interview relevant private sector policy
makers and test their responses against the model indicated in this paper. Additionally,
there should be further research into how the QS tools referred to above may be linked
together using both their quantitative and qualitative themes.
Finally and as alluded to in the introduction, the melding together of methodological
approaches and practical tools for resolving VFM criteria and measurement requires a
greater role for academia in industry and an acceptance by industry that there is a place
for methodological practices and tools (Tan, 2009). The application of methods that are
mostly associated with scholarly study in a real-world environment required student
QSs and their tutors to seek actively apply their learning within industry. This is not
simply to place students in firms in a gap year but to involve students in real-world
problems in business-focussed organisations and for these to be related back to
classroom studies. In this way, the university system will better prepare future QSs to
act in a rounded role and to be aware of the dangers of shallow pragmatism, group think
or any other shortcut that deprives a project of the benefits of critical thought.
6 Acknowledgement
The authors would like to thank Moira Tighe, Catalina Gandelsona and Steve Foskett
for their time, guidance and patience.
All errors, idiocies and inconsistencies are the authors’ own.
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Terence Lam, pp 494-508
Prediction of consultant performance for the selection process
Terence Y M Lam
Department of the Built Environment
Anglia Ruskin University, Chelmsford CM1 1SQ
United Kingdom
Email: [email protected]
Abstract
Outsourcing of services has proliferated and property and construction services are
commonly outsourced. A carefully selected consultant can enhance a project in
many ways and ensure its success to meet the client’s needs and to strive for best
value services. This research aims to develop a performance predictive model for
selecting quality maintenance services consultants. It was hypothesised that there
was a correlation between output performance and input economic and management
factors. Triangulation methodology was used to develop and test the correlation
whereby literature review and qualitative interviews with the maintenance
consultancy management practitioners of the Hong Kong Housing Authority (HKHA)
were used to generate the hypothesis which was then tested by quantitative regression
analysis, using data from the maintenance consultancies of the Authority. Results of
the qualitative and quantitative studies confirmed and validated the hypothesis, and
hence substantiated the predictive model. This regression model provides an objective
prediction of the consultant performance, and overcomes the drawback of the existing
assessment approach adopted in construction industry, which allows the assessors to
make discretions to choose from the pre-determined ranges of weightings for
selection factors and for their individual performance descriptors, thus introducing
subjectivity to the assessment.
Whilst the performance predictive model of this research is developed in the context
of housing maintenance at the HKHA, it forms a conceptual baseline from which
further research can build to develop predictive models for selecting quality
consultants and contractors for maintenance services in many other settings of
facilities and property management organisations.
Keywords – Selection of Professional Consultants, Prediction of Performance, Quality
Services for Maintenance
Introduction
Outsourcing of services has proliferated through different industries and property
services are commonly contracted out (Field Fisher Waterhouse and Remit Consulting,
2004). The International Facilities Management Association (IFMA) conducted a
questionnaire survey on outsourcing of facilities management services to its North
America members and confirmed that the services most often outsourced are building
maintenance, architectural design and engineering (IFMA, 2006). The percentage of
firms outsourcing one or more services was 77% in 2006. In the UK, outsourcing of
public services has become a significant part of the economy, accounting for £79bn in
2007/08 (nearly 6% of the GDP), and directly employing over 1.2 million people
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(DeAnne, 2008). Construction services, facilities management and professional
services are part of the key public services outsourced.
For public sector management, the theory of public choice argues that market
competition is essential to productive efficiency and quality which can be improved
by better working methods, better organisational structure, better equipment and
technology, and elimination of waste under market pressure, as quoted by Boyne
(1998). IFMA (2006) confirms that cost savings and quality improvement are the
most important reasons for choosing outsourcing of services. DeAnne (2008) points
out that competitive tendering can yield 10 to 30% of cost savings with no adverse
effect, and sometimes an improvement, in service quality. The outsourcing process
involves empowerment by which the service production is transferred to the external
suppliers in order to benefit the consumers.
Construction and maintenance professional services that can be outsourced typically
cover architectural design, building surveying, quantity surveying, building services
engineering, structural engineering, geotechnical engineering and civil engineering.
These services are provided by qualified professionals having a recognized identity in
related disciplines, and their offering is advisory, focused on problem solving and
usually commissioned on an on-going property management or project basis.
Good construction consultants can bring value to the organisations they serve. A
carefully selected consultant can enhance a project in many ways and ensure its
success to meet the client’s needs (CIC, 2005). However, as a purchasing decision,
the selection of professional consultants is complex and difficult. Professional
services are intangible, heterogeneous and multi-dimensional. Every maintenance or
construction project is different, with buildings of different user requirements,
complexity, age, causes of failure, extent of obsolescence, etc. An experienced
professional will recognise many of the same characteristics from project to project,
but each project will generally have some unique character. Professional judgment
is needed to recognise similarities and differences and to decide what to do with a
difficult project, one that is going to require extra time or different kinds of techniques.
Professional services vary from performance to performance. Measure of quality, in
terms of criteria and standards, is therefore difficult.
There has been a lack of research on selection of consultants in public sector.
Previous research in the U.K., U.S.A. and other countries have spelled out cost
savings, quality benefit and fair competition as the three main successful outcomes of
contracting-out of services. Nonetheless, there is a lack of a conceptual framework
to arrive at these three prescriptions (Dehoog, 1995). Pottinger (1998) points out
that such problem exists in selection of property services. Lember and Kriz (2006)
supplement that in the context of contracting-out of public services, gathering
information about providers’ behaviour and service outcome is a most complicated
task. Proper procurement mechanism is necessary to effectively decide on the
provider for a quality service.
It is therefore critical to find practical ways to select high quality services that provide
the best value for money for clients and taxpayers, especially under budget constraints.
For complex professional services, quality commissioning skills are absolutely
required and there is a need to train procurement and contract monitoring staff to
ensure success for outsourcing of public services (DeAnne, 2008). The consultant
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services should meet the needs of demanding users and the selection process should
focus on performance rather than just lowest cost. Best value approach, which is an
optimum combination of cost and quality to meet the customer’s requirement, is now
adopted by public and private clients for procuring goods, services and works (OGC,
2008; Audit Commission, 2005; Latham, 2002; CIRC, 2001). If the intangible
performance quality can be significantly predicted, tenders can then be determined
whether their services can meet the client’s needs in the first place, and then be further
decided whether they will provide best value services. Accurate prediction of
performance can ensure that a quality consultant is selected and that best value is
obtained.
Efficiency Unit (2003) indicates that outsourcing is extensively used by the Hong
Kong Government to deliver public services. Price Waterhouse Coopers (1999)
finds that housing maintenance and management services are commonly outsourced
in Hong Kong, and argues that the service providers can offer quality service at a
competitive price. In 1999, the Hong Kong Housing Authority (HKHA) decided to
outsource its professional housing management and maintenance services in phases
for a portfolio of more than 600,000 flats in the forthcoming years.
This research aims to develop an objective performance predictive model for public
managers of the Hong Kong Hong Authority (HKHA) to select quality housing
maintenance consultants and to strive for best value services.
Problems of the Existing Quality Assessment Method
Best value for money is now a predominant principle for procurement of public
services in Hong Kong, including outsourcing of property services for social housing
(Efficiency Unit, 2003; HKHD, 2005). Both quality and cost are considered but
assessed separately based on the technical quality and the fees proposals submitted in
the tender. The quality is assessed first to determine whether the consultant’s
services can meet the client’s requirement. It is then weighted against cost (tendered
fees) according to their importance to the project to arrive at a final value for money
judgment. The final selection should be the tender which offers the best overall
value for money. Similar approach is adopted for procurement of public services in
the U.K. (OGC, 2008). To further enhance the performance quality of professional
services in the private sector, CIC (2005) suggest that the best quality consultant
should first be selected and this should then be followed by negotiation of fees.
Quality assessment is therefore of utmost importance for the selection process.
Professional services are intangible, heterogeneous and multi-dimensional so it is
crucial to ensure that performance quality is accurately assessed. Nonetheless, the
existing quality assessment method has a major drawback which renders it unsuitable
for selecting quality consultants and hence ensuring best value services. For quality
assessment, critical selection factors are identified according to the size and
complexity of a project, and each of these factors is then elaborated into a list of
descriptors. The assessors are allowed to make discretions to choose from the
pre-determined ranges of weightings for the selection factors and for their individual
performance descriptors, thus introducing subjectivity to the assessment. As a result,
different consultant may be selected depending on whether upper or lower range of
the weightings is chosen (Ng et al., 2001). Quality assessment is subjectively
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jeopardised. Consequently quality consultants and best value services cannot be
obtained.
Assessment of construction professional services may involve a number of critical,
intangible selection factors including cost effectiveness of design, programme,
experience, staffing, teamwork culture, innovation, health and safety management,
lean construction approach, sustainability and risk management (Ng et al., 2001; CIC,
2005) . Thus quality assessment can be significantly distorted by the assessors’
subjectivity. There needs to be a revolutionary change of the existing approach so
that performance quality is objectively assessed.
Forecast of Performance Quality
Walker (2007) contends that quality services can only be realised when specification
requirements are clearly written and performance is stringently monitored. Boyne
(1998) put emphasis on the impact of market competition on improving cost and
quality performance. Empirical studies show that there is a causal relationship
between output performance and input economic and management factors in the
production of services and that regression can be used as a tool to forecast
performance quality (Lee et al., 1999). Accordingly it is possible to predict the
performance of professional consultants, based on these influencing factors.
The Impact of Competition on Performance
The use of market competition for the delivery of public services is primarily founded
on ‘public choice’ theory. The theory suggests that if public officials monopolise
service delivery, then the result is oversupply and inefficiency. By contrast, if
services are contracted out, the pressure of a competitive market would lead to
improved performance on quality and cost (Flynn, 2002; Boyne, 1998).
For the private sector, in a survey of around 670 manufacturing companies in the U.K.,
Nickell (1996) finds that direct competition, as measured by the number of
competitors, has a significant positive correlation with the rates of total factor
productivity growth, including improvement of product quality. Nickell explains
how efficiency and quality performance are improved by competition. Competition
works not only by driving the performance of managers and workers, but also by
allowing ways of doing things to be tried out before selecting the best, something a
monopoly finds it hard to replicate.
For the maintenance consultancies of the HKHA, the consultants’ performance is
affected by the number of direct competitors on the approved list of tenderers who can
compete for tenders and substitute poor performers during the course of contract.
These direct competitors affect the consultant’s performance in such a way that the
consultant has to provide competitive quality and quantity of resources to bid and
undertake a contract.
In short, there should be a positive correlation between the consultant’s performance
and the level of competition, as operationalised by the number of bidders in the
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tendering.
In a questionnaire survey of 500 client organisations engaging in construction
professional services to assess the consultant service quality upon the impact of
competitive fee tendering and fee levels, Hoxley (2000) found from the 244 replies
that the service quality would not be influenced by fee level in competitive tendering.
Construction professionals had not allowed fee competition to compromise their
professionalism. Instead of inputting fewer resources into the projects, consultants
would minimise costs by improving the organisational structure and working methods
as well as using better production equipment and technology, as explained by Boyne
(1998) for the positive impact of competition on performance.
Hoxley’s empirical test and findings were related to the construction professions in
the U.K. public sector. The findings showed that fee level should have no
correlation with output performance. But in the context of Hong Kong housing
sector, the insignificant relationship between performance quality and fee level needs
to be further examined in order to address the concerns of the construction and
property service professionals about the negative impact of fee level on performance
quality.
The Impact of Management Factors on Performance
Williamson (1997) explains that performance monitoring is required because of
bounded rationality and opportunism. Complexity and uncertainty in housing
maintenance works are generally high. For example, structural repairs of buildings
and replacement of underground pipes are technically complicated and have high
uncertainty in the scope and extent of works. It is really difficult to be precise in the
service level agreement in consultancy contracts because of this uncertainty and
bounded rationality. Stringent monitoring is necessary at the procurement stage for
preparing contracts, compiling qualified tenderers, and selecting quality consultant to
minimise opportunistic behaviour.
Past behaviour and performance is considered to be the best predictor of future
behaviour performance according to the theory of selection psychology (Hogan et al.,
1996; Ling, 2000). Hogan et al.’s meta-analytic research suggests that performance
in many jobs should, in principle, be predictable using good measures of past
behaviour and performance, including ‘being responsive to client’s needs’, ‘being
persistent’ and ‘taking initiatives’. Many studies show that past performance is an
important selection criterion for construction consultants (Kasma, 1987; Parks and
McBride, 1987; Winch and Schneider, 1993), particularly when projects are of a
complex nature. As such, there should be a positive correlation between output
service quality and past performance in the context of construction consultancies.
Leadership was found to be a critical factor affecting performance by Lewis (1989) in
his literature review of a number of articles. Such finding is supported by Terziovski
and Dean (1998). They consider management commitment and true leadership to be
the cornerstones of good service quality. In a study of 550 medium to large
Australian service organisations to determine the effect of quality management
practices on various service quality outcomes using regression analyses, Terziovski
and Dean found there was a significant association between service quality outcomes
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and quality management practices: including quality in the strategic planning process,
customer involvement, empowerment of the workforce, and using quality
performance as a key performance indicator. All these management practices are
driven by the project leader. Accordingly, there should be a positive relationship
between project leadership and output performance in service delivery.
For size of firm, Rizzo (1996) argues that large engineering companies have resources
of technical expertise, databases and branch of offices. They can tackle projects
quickly and handle piles of documentation. However, smaller firms often have a
higher degree of specialisation and can assign senior staff to projects. Rowbotham
(1992) shows a concern about consistent performance of firms. With small firms,
there is a danger that heavy workloads, sudden illness, or employee turnover could
cause some projects to flounder. In a large firm, a project could be pushed aside to
make way to service large or sudden–priority projects. He argues that it does not
necessarily matter if the firm is large or small. Mostly importantly, the firm should
provide adequate, competent and experienced resources to provide prompt and quality
services. There should be no correlation between firm size and performance output
in construction consultancies.
Basing on the literature review, there should be positive causal relationships between
performance quality and economic and management factors, although there should be
no causal relationship between fee level / firm size and performance. The causal
relationship between the key variables can be summarised in a function as below.
Output Service Quality = f (Competition Level, Past Performance, Project Leadership)
Research Methodology
Triangulation methodology was adopted to examine the causal relationship between
output performance and input economic and management factors. There has been a
lack of comprehensive research on the collective impact of quality measures on
performance in the context of outsourced professional housing maintenance services.
This is found to be the case after an extensive literature search over the past 30 years.
Hypotheses were therefore generated by literature review and then compared with the
findings from the qualitative interviews with 30 consultant management practitioners
of the HKHA to establish the final hypotheses for testing by quantitative regression
analysis, using data from 50 outsourced maintenance consultancies of the HKHA.
Such a methodology achieved high levels of authenticity and generalisation, and most
importantly objectivity (Fellows and Liu, 2008).
The qualitative study aimed to seek experience and views from practitioners. The 30
practitioners interviewed constituted 50% of the population of 60 professional and
senior professional staff responsible for consultant monitoring in the HKHA. They
all had had consultant monitoring experience for more than three years. The sample
size needs to be carefully considered to ensure meaningful and reliable results.
Fellows and Liu (2008) state that small samples are less reliable than large samples.
Small numbers in the samples will mean quite large percentage differences and it is
the proportionality of differences which tends to be important. The boundary
between large sample size and small sample size is 32 in statistics sense, although the
size adopted in practice often is 30 (Levin and Rubin, 1991). So a sample size of 30
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for the qualitative study was considered to be sufficient to produce meaningful and
reliable results to confirm the hypotheses developed from the literature review.
To ensure generalisation and objectivity for study, there should be sufficient number
of cases in the quantitative study. With regard to regression analysis, Coakes and
Steed (1999) stipulate that the minimum requirement is to have at least six times more
cases than predictor variables. Because there were five predictor variables in the
research model, the minimum number of cases required was 30, and 50 consultancy
cases would be sufficient for carrying out the analysis, although this sample size is
rather limited. The cases were randomly selected and constituted 69% of the 73
consultancy contracts completed between 1998 and 2002.
It was hypothesised that there was a positive correlation between output service
quality and input economic and management factors. This main hypothesis was
transferred into the following sub-hypotheses:
1. Competition level has a positive correlation with output service quality.
2. Past performance in similar consultancies has a positive correlation with
output service quality.
3. Project leader assessment system leads to selection of competent leaders and
its presence is associated with better output service quality.
4. Size of firm has no correlation with output service quality.
5. Fee level has no correlation with output service quality.
The relationships were tested by regression analysis which provides a powerful tool
for developing a forecast of the future based on the past (Schleirfer and Bell, 1995).
It is one of the most efficient methods to analyse the relationship between the result
and various types of influencing factors. In fact, multiple regression models have
been used in a number of empirical cases to study the relationship between output
quality of services or products and input management practices of production process
(Terzioviski and Dean, 1998; Lee et al., 1999; Forker, 1997).
Findings and Discussion
Descriptive analysis was conducted to obtain qualitative views of the 30 consultant
management practitioners so as to explore whether they agreed that the individual
input factors of competition level, past performance, project leadership, fee level and
size of firm would significantly influence output service quality. The results
generally confirmed the sub-hypotheses which were developed from the literature
review. There should be significant positive correlations between the output service
quality and the input factors of competition level (25 out of 30 agreed), past
performance (27 out of 30 agreed) and project leadership (24 out of 30 agreed). The
hypotheses that output service quality had no correlation with size of firm (14 out of
30 agreed) and with fee level (15 out of 30 agreed) were kept unchanged for
quantitative testing because the qualitative results on these two factors were
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inconclusive.
The multiple linear regression equation is shown in Table 1. The analysis was run
by the SPSS programme and the results are given in Table 2.
The dependent and the predictor variables should objectively be measured. Without
these objective measures, the regression analysis would not produce objective
findings. In this research, the dependent variable of output service quality was
measured by using the quarterly performance appraisal model for maintenance
consultants of the HKHA, which is virtually the same as the proven SURVEYQUAL
quality gap model for performance measure of construction and property professional
services in the U.K. public sector (Hoxley, 2000). In both models, similar quality
criteria for planning, design, contract administration and relationship with client are
used and they are measured by the quality gap between perception and expectation,
which is represented by various grades corresponding to different marks.
Comparison of the models is given in Lam (2002). For the predictor variables,
management influencing factors were operationalised by objective figures, as shown
in Table 1.
The results showed a significant adjusted R2 of 0.753 for the overall correlation
between the output service quality and the input factors of competition level, past
performance and project leadership. Hence there is a significant correlation between
the consultant performance and all these economic and management factors. These
factors are considered to be influential in performance, as shown by various theories
and empirical studies in the literature review. The qualitative study revealed similar
findings.
OSQ = α + β1 CL + β2 PP + β3 PLAS + β4 SF + β5FL+ε , where
VARIABLES OPERATIONALISATION
Dependent Variable
OSQ (Output Service Quality) Average of the quarterly performance scores
in the maintenance consultancy
Predictor Variables
CL (Competition Level) Number of bidders in the tendering
PP (Past Performance) Average of all quarterly performance scores
in the similar consultancies within the past
two years
PLAS (Project Leader Assessment System) 1 or 0 for present or absence of the system
(Out of the 50 consultancy contracts used for
this regression analysis, 27 had started using
the PLAS system in which the factor was
operationalised by the length of post
qualification experience, experience in
similar public & private projects, and
percentage of time committed by the project
leader for the consultancy.)
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SF (Size of Firm) Number of qualified professionals and
administrators in the firm
FL (Fee Level) Tendered fee percentage in the maintenance
consultancy
α = Constant, or the Y-intercept of the regression plane
βn = Regression coefficients for the predictor variables
ε = error constant arising from the prediction values and the actual observed
values, which are subjected to variability and cannot be expressed as exactly a
linear relationship.
Table 1: Regression Model for the Production Process of
Professional Housing Maintenance Services
Stepwise Regression Model Analysis
Model R R2 Adjusted Std. Error Durbin- Testing
R2 of the Watson Procedure
Estimate
1 0.809a 0.654 0.647 6.998 Stepwise
2 0.857b 0.735 0.723 6.186 Stepwise
3 0.876c 0.768 0.753 5.848 1.794 Stepwise
a. Predictors: (Constant), Past Performance
b. Predictors: (Constant), Past Performance, , Competition Level
c. Predictors: (Constant), Past Performance, Competition Level, Project Leader Assessment
System
d. Dependent Variable: Output Service Quality
Model 3 has the best adjusted R2 (0.753) and should therefore be chosen.
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Analysis of the Chosen Regression Model 3
Significant variables accepted:
Variables B SE B Beta t-value p-value Collinearity/
Tolerance
pp 0.489 0.133 0.408 3.686 0.001 0.412
cl 1.618 0.476 0.336 3.397 0.001 0.515
plas 5.915 2.304 0.253 2.567 0.014 0.519
(Constant) 20.164 7.375 2.734 0.009
Insignificant Variables excluded:
Partial Collinearity/
Beta In t-value p-value
Correlation Tolerance
Size of Firms (sf) 0.040 0.524 0.603 0.078 0.900
Fee Level (fl) 0.026 0.227 0.821 0.034 0.402
Table 2: Regression Analysis of the Causal Relationships
Norusis (1996) regards the correlation between dependent variable and predictor
variables to be significant if the adjusted R2 is around 0.800. Mohr (1990) considers
the relationship between dependent variable and individual predictor variable to be
significant if the partial regression coefficient of predictor variable has a t-value >
1.98 or < 1.98 at significance level smaller than 0.05 (p-value).
‘Past performance’ and ‘competition level’ stand out to be the highly significant
predictors. Past performance is the most significant predictor, with t-value equal to
3.686 and p-value equal to 0.001. Such finding coincides with the empirical
evidence from the case study of selection of consultants for alteration and addition
building works in Australia (Harfield and Oluwoye, 2001) that past performance is
found to be particularly relevant to predict the service quality of professional
maintenance consultants. In fact, many studies show past performance is an
important criterion for selection of construction consultants (Kasma, 1987; Parks and
McBride, 1987; Winch and Schneider, 1993). Past performance is considered to be
the best predictor of future performance according to the theory of selection
psychology (Ling, 2000; Hogan et al., 1996). HKHD (2005) clearly spells out that
past performance is one of the key tender assessment criteria for outsourcing contracts
of property management services.
For ‘competition level’, it is highly significant to the output service quality, with a
t-value equal to 3.397 and a p-value equal to 0.001. This shows market competition
does have a strong effect on improving performance, as explained by the theory of
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public choice and its associated argument of market competition (Boyne, 1998).
‘Project leader assessment system’ is also a significant predictor of service quality,
with a t-value equal to 2.567 and a p-value equal to 0.014. Out of the 50 consultancy
contracts used for the regression analysis, 27 had started using the project leader
assessment system in which project leadership was operationalised by the length of
post qualification experience, experience in similar projects, and time committed for
the consultancy. Thus the results also infer that these three critical factors can be
incorporated in the regression model for performance forecast. It is paramount that
competent team leaders should be employed to execute consultancy projects.
‘Size of firm’ was excluded from the regression model because the factor had a
t-value of 0.524 and a p-value of 0.603. This shows that the factor itself is highly
insignificant to the output performance. The finding clarifies the contradictory
views of the practitioners in the qualitative study. Rowbotham (1992) confirms it is
not the size of firm but the competence, experience and adequacy of project resources
which are crucial to performance.
‘Fee level’ was also excluded from the regression. With a t-value of 0.227 and a
p-value of 0.821, this factor itself was found to be highly insignificant to the output
service quality. This finding coincides with the empirical result of Hoxley (2000)
that there is no significant correlation between fee level and service quality in the
competitive tendering of construction professional services. Under market
competition, firms would try to improve its productive efficiency according to the
theory of public choice.
The strength of linear relationships among the predictor variables can be measured by
tolerance values. For each predictor variable, the tolerance is the proportion of
variability of that variable that is not explained by its linear relationships with the
other predictor variables in the model. Such tolerance is a proportion and its values
range from 0 to 1. A value close to 1 indicates that a predictor variable has little to
be explained by the other predictor variables. A value close to 0 indicates that a
variable is almost a linear combination of the other predictor variables, and is
described to be multicollinear. A rule of thumb is that a tolerance value smaller than
0.1 indicates the presence of multicollinearity problem (Norusis, 1996). The
tolerance values of all the tested predictor variables were found to be larger than 0.1
so they had no multicollinearity problem and were independent from one another.
This supports the individual impact of each predictor variable on output service
quality, and hence the validity of all sub-hypotheses.
The results showed there was a significant correlation between the output service
quality and the input factors of competition level, past performance and project
leadership. The sub-hypotheses and hence the main hypothesis were substantiated,
i.e. there is an overall correlation between output performance and input economic
and management factors.
Conclusion and Further Research
The main objective of this research is to develop a performance predictive model for
public managers to select quality consultants and obtain best value services, based on
the correlation between output performance and input factors. The empirical test
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results confirm that output performance can be predicted with a high level of
confidence by means of a regression model using the relevant economic and
management predictors, including competition level, past performance and project
leadership. With accurate prediction of performance, quality consultants can be
selected to provide services meeting client’s needs, whilst best value services can also
be obtained.
The predictive regression model provides an objective prediction of the consultant
performance, and overcomes the drawback of the existing quality assessment
approach adopted in construction industry, which allows the assessors to make
discretions to choose from the pre-determined ranges of weightings for selection
factors and for their individual performance descriptors, thus introducing subjectivity
to the assessment. As such the existing approach should be replaced by the
predictive model.
The performance predictive model is developed from one particular set of data from
the outsourced maintenance consultancies of the Hong Kong Housing Authority.
Nonetheless it forms a conceptual baseline from which further research can build to
develop predictive models for selecting quality consultants and contractors for
maintenance services in many other settings of facilities and property management
organisations.
In developing the regression model, this research adopted the triangulation
methodology whereby theory and literature as well as qualitative views of consultant
management practitioners were used to generate and finalise the hypotheses on causal
relationship between output performance and input factors, which were then tested out
by quantitative data from the consultancy contracts. Such methodology can achieve
high levels of authenticity and generalisation, and thus it should be adopted for further
studies.
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Aderemi Adeyimi, Dean Kashiwagi and Kenneth Sullivan, pp 509-521
Acceptance of IMT/PIPS Philosophy in Botswana
Aderemi Adeyemi1, Dean Kashiwagi2 and Kenneth Sullivan2
1 2
Faculty of Engineering and Technology Performance Based Studies Research Group
University of Botswana, Gaborone (PBSRG)
Botswana Arizona State University, Tempe
United States
Email: [email protected]; [email protected]; [email protected]
Abstract:
The best value Performance Information Procurement System (PIPS) has been tested in the
United States with great performance results (98% client satisfaction, no contractor
generated cost change orders,) and meeting client delivery schedule using an alignment
philosophy rather than the traditional U.S. and U.K. based management, control, and
direction philosophy. PBSRG made the strategic commitment with the Fulbright Program
and the University of Botswana (UB) project management (PM) section to test the PIPS
technology where the UK based traditional management based processes has not had much
success, in Botswana, Africa. This test is different from all previous testing because the
PIPS technology is also being used to transform the UB graduate education from an
education based to research based program, use the graduate students as resources and
partners instead of students, and create research laboratories out of their industry
organizations. Once the graduate program is transformed, the graduate students will take
the PIPS technology into their organizations and run PIPS tests. The impact of PIPS will
expand from not only being the research technology but becoming the mechanism for
transforming the university research program into an industry changing research graduate
program.
Keywords: PIPS Botswana Testing
1 Introduction
Project delivery has been a problem worldwide for the last century (CFMA, 2006;
Simonson, 2006; Adrian, 2001; Post, 1998; Flores and Chase, 2005). The U.S., UK, and
Europe has created and practiced the management based approach (decision making, direct,
control, and inspect) to project management (Stanley, 2006). This practice has the client
management (project managers, quantity surveyors) make the decisions that dictate the
result of projects. They decide what is allowable, what meets the requirements and
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appropriate costs and schedules (Kirsch et al., 2002). Their decision making results in
success or failure of projects (Leemann, 2002).
2 Literature Review
PIPS was developed in 1992, and been tested for last 15 years (Kashiwagi et al., 1991;
Kashiwagi et al., 1996; Kashiwagi and Al-Sharmani, 1997; Kashiwagi and Byfield, 2002;
Sullivan et al., 2005; Goodridge et al., 2006; Michael et al., 2009) PIPS has the following
differences with traditional delivery systems and processes:
1. Uses a leadership alignment approach instead of a management approach of direction,
control, and inspection.
2. Transfers risk, control and accountability to the vendor.
3. Forces a contractor to increase preplanning, laying out a baseline plan with schedule
and cost, and then forces the contractor to measure, justify, and document deviation.
4. Forces the contractor and critical personnel and components to compete and justify their
capability to do the project based on past performance information, their perception of
the scope of the project, and capability to identify, manage and minimize risk that they
do not control.
5. Considers performance and price, although the process can be implemented in a price
based environment.
6. Minimizes the need for decision making, information flow, management, control and
other reactive behavior.
7. De-emphasizes the need for client’s project manager or quantity surveyor to have
construction technical skills.
The PIPS process represents the Best Value environment of the Construction Industry
Structure (Kashiwagi, 2009). This is where the client’s PM and CM do quality assurance
and the contractor’s personnel do technical quality control and risk management. The price
based or management based environment, identifies the majority of the world’s
construction industries by the following characteristics:
1. Driven by specification and minimum standards.
2. Price is the most important factor.
3. Client’s project/construction management is in charge of projects, is the most critical
function, and makes all major decisions.
4. The construction industry is volume based and performance is minimal.
5. Contractor specialty training is ineffective in increasing the number and level of trained
craftsmen.
6. Constraints changing of delivery systems, but industry capability, quality, number of
trained personnel, collusion, and other price based characteristics still remain.
Botswana has adopted the British system of management based construction delivery. The
performance has not been good (Rwelamila et al., 2000; Ssegawa and Ngowi, 2007). The
problem of delivering construction and other sector projects has been troubling, causing the
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Aderemi Adeyimi, Dean Kashiwagi and Kenneth Sullivan, pp 509-521
Office of the President to set up a specific organization, Government Integration of
Coordination Office (GICO) to attempt to increase the performance of projects. A number
of project managers from the Department of Building Engineering Services (DBES) who
are graduate students at University of Botswana (UB) Masters of Project Management
(MPM) program have identified project delivery in an unmanageable position (Kashiwagi
and Kashiwagi, 2009) Until PIPS was introduced at the UB, the MPM program taught the
management and control based PM approach. However, the graduate students from every
major government agency, design firms and consultants, and parisital group, are attempting
to find an alternate solution to the poor performance of project delivery in the UB.
In the fall of 2008, the UB graduate MPM program brought in a Fulbright Scholar (FS)
from the Performance Based Studies Research Group (PBSRG) to increase the
effectiveness of the MPM program (Kashiwagi et al., 2008). The FS and collaborating UB
staff quickly identified the following problems in the Botswana industry (Ssegawa and
Ngowi, 2007):
1. They are using and proliferating the price based award, client directed, controlled, and
managed system that has been ineffective in the more developed construction
industries.
2. The skill level of the local industry was not improving, and there is a perception that
critical project must be given to foreign contractors due to a lack of developed
Botswana based contractors.
3. Performance of projects of both foreign and local contractors has been inconsistent and
poor.
The UB PM staff and MPM program face a monumental task in changing a management
based paradigm from more developed countries (UK and US,) that has been engrained into
the fabric of the Botswana construction industry culture. The task is made more difficult
because the management based approach seems to fits well in Botswana’s developing
culture (Muatjetjeja et al., 2009):
1. Inefficient results and the employment of many managers.
2. Minimizes the need for technical competence due to the confusion in the system.
3. Confusion minimizes the accountability of all parties.
Inefficiency, lack of technical competence, and minimal accountability are characteristics
of a developing country. However, Botswana is also facing a budget and reduced funding
issue. As the worldwide economy is contracting, the demand and price of diamonds,
Botswana’s primary source of income, has disintegrated (Regonamanye, 2009) the need to
be more efficient and use the government funding wisely has become more important. To
implement and establish PIPS in Botswana, the UB PM Section faculty and the MPM
program graduate students, who were from the major organizations in Botswana, were
selected as the mechanism to change the paradigm from management based to an
alignment, quality control/quality assurance environment. The FS has proven that there is a
huge potential with the user/client in the US, and in the Netherlands. Immediate interest
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Aderemi Adeyimi, Dean Kashiwagi and Kenneth Sullivan, pp 509-521
from Botswana participants showed great promise in Botswana. The constraint for transfer
of the technology was quickly identified as the UB PM Section staff and their capability to
educate, run, and document the PIPS process. The FS has spent four months (over a nine
month period) instructing in the MPM program, changing the course from an education
based (continue the status quo) to research based (changing the industry practices), running
tests to establish the viability of the concept and at the same time mentoring the UB core
team. The results of the efforts included (UB core team performance in the previous three
years):
1. Secured $25K in two research grants in a research resource starved environment ($0K).
2. Ran seven PIPS research tests (0).
3. Gave nine major presentations (Botswana Development Corporation, Bank of
Botswana, UB IT department, U.S. Embassy, Botswana Power Corporation, ACHAP,
Barclay Bank, DBES, and UB Finance) (0 presentations).
4. Partnered with 15 MPM graduate students to write a thesis plan that would include
innovative PIPS testing with their Botswana organizations (0).
5. Submitted 21 peer reviewed conference papers capturing the best value efforts (0).
6. Implemented the research based (IMT/PIPS) philosophy into four MPM courses (0).
7. Mentored three UB lecturers in the research based concepts (0).
The FS used the same techniques that led to the success of PBSRG across the U.S., and in
the Netherlands (testing involving 1B Euro worth of highway projects). The FS’s
characteristics that assisted in increasing UB research success included:
1. Change agent with tremendous confidence to overcome resistance and non-acceptance
(Kashiwagi et al., 2008)
2. Research based and not consultant oriented. Embodies the same characteristics of
PIPS: win-win, bring value, dominant success. (Kashiwagi, 2009)
3. Proactive, always utilizes a strategic plan, and always has multiple redundant objectives
to prevent coming up empty by putting all the eggs in one basket.
4. As the creator of PIPS, has a complete understanding of the deductive logic Information
Measurement Theory (IMT) and the dominant industry structure models and PIPS.
5. Due to his understanding of PIPS, the Fulbright appointment, dominant success as
Director of PBSRG, and coordinator of the worldwide CIB W117, and being a
charismatic presenter, he has great credibility among Botswana groups.
6. Efficient and effective at identifying logical, economic solutions.
7. Servant leader, not driven by money, and has great business acumen. At ASU, even
though the effort is the most financially successful at the DEWSC at ASU, he has put
the resources back into the system instead of capturing the research proceeds, resulting
in a $700K research reserve fund in excess of current research project funding ($1M for
2008).
2.1 Problem
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The FS has proven that he can implement PIPS (15 years, 600+ tests, $2.3B in delivered
services, 98% performance). He also proved he could be successful at UB. Therefore the
biggest obstacle in sustaining a best value PIPS effort in Botswana is the changing on the
paradigm at UB, the MPM program, and the current staff of lecturers. Currently less than
10% of the students graduate from the MPM program, and students are treated as students
(education based where the students are reactive) and not as proactive valuable resources
that can test the new concepts (Adeyemi et al., 2009). The students’ organization, which
has the potential of becoming the UB PM laboratory, is currently isolated from the UB
MPM program. The initial success of PIPS testing is being fueled by the FS’s credibility,
coordination, organization, and knowledge. Over time this must change to a UB driven
effort with UB experts.
2.2 Hypothesis
Mentored UB faculty can sustain a cutting edge, research based PIPS structured research
program in industries of an underdeveloped country. The same PIPS technology which
transfers the control and the risk to contractors and vendors can be used to transfer the risk
and control of a research program to a UB team of faculty. The PIPS structure will
encourage the UB faculty to replace the characteristics of the mentoring FS, and be more
forward thinking, strategically oriented, preplanning instead of reactive, and measurement
oriented, and able to manage and minimize risk that they do not control. The objective to
establish a PIPS testing program in Botswana will thus be twofold, first to mentor the UB
faculty to become leadership based project managers, and secondly to get the leadership
based UB faculty to successfully take the PIPS technology to the industry.
3 Research Methodology
The FS must first convince the UB leadership, the Dean of the Faculty of Engineering and
Technology (FET) and the Head of Department (HOD) of the Civil Engineering (CE) that:
1. A core team of PM faculty can sustain the initial successes of the FS.
2. A transition from an education based graduate education program to a research based
graduate program can increase the number of graduates (currently at 10%), the research
activity (currently almost non-existent), and maintain a newly awarded research based
M/PhD program.
3. Alignment of scarce faculty resources, graduate students, and their working
organizations.
Once the UB leadership agreed to the above, the overview of the plan is straight forward:
1. Have the FS expert mentor the UB team core team.
2. Have the expert slowly transfer his functions to the UB team.
3. Accelerate the understanding of the research based approach by having the faculty work
on their PhD under the mentor, teach research based graduate classes, gain entrance to
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Botswana groups through the graduate students, assist them to overcome industry issues
through research tests.
4. Set up a system of strategic goals and measurements that motivated the UB core team to
succeed.
The goals of the effort will be to:
1. Prove that the more efficient PIPS can improve on project performance from the
management based UK and US traditional PM processes.
2. Prove that the best value PIPS technology can transform a resource starved education
based graduate program into a research program.
3. Create a center of expertise, education and training of PIPS at UB accessible to all of
Africa, allowing an African based group to service their own continent.
4. Identify a group of African educators and industry PMs who be the local experts.
5. Setup a research based platform of industry/university research for testing breaking
with traditional isolated construction management research.
6. Use research based graduate courses to allow researchers to teach deductive logic and
theoretical concepts instead of industry PM practices.
7. Run tests and use test results as the core of graduate project/construction management
courses.
8. Use graduate students in the graduate program to become the main resource and
mechanism to carry the new PIPS technology into the industry.
9. Analyze PIPS results in the developing countries of Africa to identify if the very
structured, management oriented environment of Africa will impact the PIPS test
results.
The strategic plan requires the elements of time, cost/funding, and performance of the UB
core team (scope of the effort). In the past four months the following requirements for the
UB PM Section and MPM program have been identified by the FS:
1. Award the FS a visiting professor assignment to mentor the PhD candidates, to work
with the partnering research partners, and mentor the business approach of the research
effort (renewable to three years, the length of time for a PhD dissertation.)
2. Setup a UB PM Section website. This will be operated by PBSRG, and will document
research projects, research partners, full access to the documentation of the technology,
full lists of partnering graduate students, and thesis outlines and research data. Twenty
percent of all grant fees shall go toward up-keeping the website.
3. The research goals of the FS include: 20 conference papers a year, 5 journal papers a
year, $50K research grants/year, and 15 MPM students graduating from the
program/year.
4. Identify all MPM students who have not graduated, along with their organization where
they are currently employed, reason for non-completion, and to identify potential
problems that can be solved and thesis outline.
5. Encourage lecturers to enter PhD program and set schedule for FS to mentor them to
completion.
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6. PhD program requirement will be the dissertation work, writing papers, teaching two
research based MPM courses, doing research projects, and coordinating the research
program.
7. Revamp the targeted courses in MPM program to be research based.
8. Have each PhD candidate teach two research based MPM program courses.
9. Have all PBSRG “core team” participants are responsible for a minimum 5 students
participating in the research based approach. Each student will have a PIPS based risk
management plan (RMP) and a weekly risk report (WRR) on their thesis, and their
organization will be requested a minimum $5K US grant. Major organizations will be
requested a $10K grant. This will be determined on a case by case basis.
10. The grants will not go toward consulting fees, but shall be stored for the advancement
of the research effort including website operation and traveling fees for the mentor and
publication of papers. Core team members will not benefit financially until they are
well trained and can get new research contracts, do the contracts, ad publish on their
own.
11. The win-win for the UB PM participants will not be immediate consultant fees, but
include successful PhD dissertation completion, conference and journal paper
publications, learning the IMT/PIPS technology, learning to be researchers, and
learning to manage a research project.
12. Move the IMT/PIPS research program to two other countries, where they would
become consultants.
The above program will have a strategic period of three years (the period of time to have
the two PhD candidates accomplish their dissertations and graduate.) The program will
start with the assignment of the visiting professorship to the FS. The program goals will be
continually measured by the lead PhD candidate, who also doubles as the UB PM Section
leader. The UB PM section must also have a tactical plan to move the functions of the FS
to the UB section. The PM section participants must do the following functions more
aggressively:
1. Keep a risk management plan on the overall effort and how they plan to manage and
minimize the risk.
2. Keep a weekly risk report of the overall project development, especially the risk that
they don’t control. The weekly risk report should include the risk management plan, a
tracking of the dominant performance information from the goals, the scope of the
effort and the overall milestone schedule.
3. Identify all MPM students who are not graduated, and interview them. Assist the
graduate students to identify industry issues in their workplaces and assist to write a
thesis outline around the solution of their issue.
4. Keep a weekly risk report on every PIPS test.
5. PhD candidates keep a weekly risk report that includes a schedule, a risk management
plan, and the scope of their dissertation.
6. Present at graduate students’ organizations to organize research tests and university
grants.
7. Keep a strategic plan and schedule on conference and journal papers for the team.
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8. Identify all opportunities to proliferate the program.
9. Plan a one day conference for all potential research partners for the next time the FS
mentor is in town. Invite academics from all over Africa, knowing that few of them
will actually attend. The main thrust of the conference will be local organizations able
to fund the research effort.
10. Ensure that all participants in the program know of when the FS will be in town. The
mentor’s time must be used very wisely and should be pre-coordinated.
4 Findings and Discussion
4.1 Value Added: Quality Assurance/Quality Control of the Program
The major value brought by this effort includes the concept of using a quality
assurance/quality control approach to transforming an education based program to a
research program; using a risk management approach that manages and minimizes risk that
the researchers do not control to minimize bureaucracy that would stop such a
transformation; using the concept of aligning graduate students and their organizations to
research objectives to increase research that impacts the industry; and using the IMT, PIPS,
and dominant deductive logic models to create efficiency and performance in the Botswana
industries. The authors understood that the major research was understanding how to
change the research structure, and continue the transformation once the initial results
showed promise. The major problem was not changing the industry; the major problem
was changing the structure of the graduate research program and the paradigm of the status
quo of educational faculty.
The FS and FET will keep a quality assurance of the program by requesting the overall
weekly risk report with scope, schedule, risk management plan, deviations, and dominant
information tracking. The PIPS program will be used on the UB PM Section research
effort, as well as being taught in the classes, and implemented in industry tests. The
following information will be tracked on the dominant information section:
1. Number of journal papers. 11. Amount of research grants.
2. Number of conference papers. 12. Number of presentations to major
3. Number of meetings with graduate organizations.
students without thesis. 13. Number of PhD students on schedule
4. Number of graduates with no thesis. being mentored in program.
5. Number of graduates being assisted. 14. Number of weekly risk reports being
6. Number of graduates being assisted completed on PhD students.
who have graduated. 15. Number and percentage of weekly
7. Number of organizations running risk reports on PIPS projects.
PIPS tests. 16. Number and percentage of weekly
8. Number of PIPS tests. risk reports on MPM thesis.
9. Performance ratings of PIPS tests. 17. Number of conferences planned.
10. Number of research grants.
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18. Number of new countries that the core 19. Weekly risk reports of conferences
team takes PIPS presentations to. planned.
The above dominant information will be reported on the overall program to implement
PIPS in Botswana. If the UB PM section successfully meets the goals listed previously, the
PIPS implementation will be a success in Botswana. The FS has shown the UB PM section
core team that success can be achieved, by performing in one year, what no other visiting
professor or tenured UB professor has done at the UB:
1. Changed the way graduate education is taught.
2. Convinced a major UB department (IT) to change the way they do business.
3. Convinced the FET and CE HOD to change their approach to graduate education to use
graduate students as resources and their organizations as research laboratories.
4. Used a strategic plan for research, and published 13 conference papers in four months
with the potential of 20 conference papers and five journal papers by the end of the
academic year.
5. Ran seven research tests using the PIPS technology.
6. Signed research contracts totaling $25K US.
The FS was successful because he managed and minimized the risk that he did not control.
After setting his own goals, and knowing that the goals involved change and great risk to
the status quo in a reactive, resource starved environment, he worked independently of the
UB FET, UB MPM program coordinator, and CE HOD. He knew that with a limited
amount of time, he had to minimize the number of resistant transactions. Being an expert
in minimizing transactions, he realized that positive results were the only leverage against
the status quo. Using the IMT theory, proven deductive models of industry structure and
supply chain, and the previous dominant results of PBSRG, he ran a scaled test which was
dominantly successful. The results convinced the resource constrained Dean of FET and
CE HOD to attempt to change their approach, and transform from an inefficient education
based graduate program to an efficient research based graduate approach.
The FS saw the risk as minimal. The education based graduate program graduation rate
was at 10%. The level of research was non-existent for the majority of faculty members.
The graduate students did not have effective mentorship to change their workplace
environments and processes. The University of Botswana environment was one of
constrained resources. They had no industry/university research platform. Every one of 15
graduate students the FS interviewed knew that there was a project management/project
delivery problem in their organization, but no one knew how to solve the problem.
The value of the test was the possibility that the PIPS technology could transform a
resource starved education based graduate program into a research based graduate program,
as well as transform industry organizations into high performance project delivery groups.
The FS then realized that once the graduate program was changed to treating the graduate
students as resources and partners in research, they would open their organizations to the
PIPS testing. If the PIPS tests were then run correctly, the industry would move from an
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inefficient management and control based system that was highly ineffective, to an efficient
alignment based system that transferred risk and control to vendors.
4.2 Risks that the UB PM Core Team Do Not Control
The only danger to the continuation of the PIPS implementation in Botswana is the risk that
the UB PM core team does not control:
1. Signing a Memorandum of Understanding between ASU and UB.
2. The FET/CE HOD must get the appointment of the FS as a visiting professor.
3. The FET and HOD must petition the DVC of Academics at the UB to allow
professionals to assist the teaching of undergraduate education, freeing the PhD
candidates to do their PhDs and focus on research.
4. The FS must agree to spend adequate time to mentor, to continue to guide the effort,
and bring the credibility of the IMT/PIPS program to the new organizations.
Some of the above actions may take extended periods of time in the UB system. One of the
actions requires changes in the UB academic policy. The partnering of the FS and PBSRG
is at risk if the UB does not implement the above actions as agreed in a timely fashion.
5 Conclusion and Further Research
The result of a one year U.S. State Department funded Fulbright Scholar program is that the
University of Botswana (UB) Faculty of Engineering and Technology (FET) has the
opportunity to take the results of a very successful test that shows that a resource starved
education graduate program can transform itself into a research based graduate program
with increased levels of research activity (publications, research tests, industry research
grants, and increase graduate student research rates) by implementing the Performance
Information Procurement System (PIPS) and related PBSRG technology that has been very
successful in the United States. By using the leadership based principles of alignment
instead of management, control, and direction, and using deductive logic based processes
instead of industry and academic research best practices, the Fulbright Scholar (FS) did the
unexpected in a short four month period of time. He went against the odds of the reactive
University of Botswana culture to:
1. Propose a new way that graduate education is taught (research based instead of
education based.) The research based approach has the potential of changing the
student’s work environment instead of just identifying their work environment and how
to do it better.
2. Changed the way the university operated as the UB IT department committed with a
$15K US grant to change their work processes to PIPS processes.
3. Increased the research activity level to a previously unseen level.
4. Implemented change into four different graduate courses.
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5. Instilled a new enthusiasm into the industry graduate students by treating them as
resources and research partners instead of graduate students.
6. Changed the dynamics of the UB FET, as the FS showed faculty they could control
their own destiny. The FS showed an independent spirit that brought the first
coordinated effort among faculty in the PM section.
7. Approached the Botswana industry with PIPS presentation, interesting many of them to
consider the new research based platform.
8. Created a research fund of $25K, and received matching funds from PBSRG.
The UB PM section has the opportunity to change the way the academic research and
graduate education and research is done in Africa. If it is successful, it could spill over to
more resource constrained programs in other African countries. They also have the
opportunity to integrate with the industry to form industry/research platforms that have
impact on industry practices. This may lead to the unthinkable impact of research
programs in underdeveloped countries of Africa influencing the more highly funded UK
and European graduate programs.
6 References
Adeyemi, A., Kashiwagi, J., Kashiwagi D. and Sullivan K. (2009), New Approach to
Teaching Procurement in Graduate Education, The Fourth Built Environment
Conference, Zambia, (17 - 19 May 2009).
Adrian, J.J. (2001), Improving Construction Productivity, Construction Productivity
Newsletter, Vol.12, No 6.
CFMA’s (2006), Construction Industry Annual Financial Survey. Moss-Adams, LLP,
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Flores, V. and Chase, G., (2005), Project Controls from the Front End. Cost Engineering,
April 2005, Vol. 47, No. 4; pgs 22-24.
Goodridge, S., Ahmed, S., Kashiwagi, D.T., Sullivan, K. and Cano, J. (2006), A New AE
Design Delivery Model, Symposium on Sustainability and Value through Construction
Procurement 2006, CIB W092-Procurement Systems, Digital World Center Salford,
UK pp. 194-205 (November 29, 2006).
Kashiwagi, D.T., (2009), Best Value, Tempe: Performance Based Studies Research Group
(PBSRG).
Kashiwagi, D. and Kashiwagi, J. (2009), Botswana MPM Graduate Students Research,
Unpublished raw data.
Kashiwagi, D., Sullivan, K. and Badger, W. (2008), Case Study of a New Construction
Research Model, ASC International Proceeding of the 44th Annual Conference, Auburn
University, Auburn, AL, CD 4:2 (April 2- 5, 2008).
Kashiwagi, D., Sullivan, K. and Ssegawa, J. (2008), Movement of the Latest Cutting Edge
Project Management/Delivery Systems to the University of Botswana, First
International Conference on Construction In Developing Countries (ICCIDC–I
“Advancing and Integrating Construction Education, Research & Practice” August 4-
5, 2008, Karachi, Pakistan.
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Kashiwagi, D.T. and Byfield, R. (2002), Case Studies of the State of Hawaii and Utah
Implementation of Performance Based Contracting, COBRA 2002 - Construction and
Building Research Conference, Nottingham Trent University, UK; Vol 1, pp. 297-309
(September 5, 2009).
Kashiwagi, D. T. and Al-Sharmani, Z. (1997), A Performance-Based Procurement System
Used by the State of Wyoming, Cost Engineering, Vol. 39 (12) pp.37-41, December.
Kashiwagi, D. T., Halmrast, C. T. and Tisthammer, T. (1996), "Intelligent" Procurement of
Construction Systems, Journal of Construction Procurement, Vol. 2 (1) pp. 56-65,
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Kashiwagi, D.T., Nuno, J.P. and Badger, W.W. (1991), Selection of Optimum Facility
Systems by Artificial Intelligence, National Conference on Microcomputers in Civil
Engineering, pp. 148-152 (October 1, 1991).
Kirsch, L., Sambamurthy, V., Ko, D. and Purvis, R. (2002), Controlling information
systems development projects: the view from the client, Management Science, April
2002, Vol. 48, Iss. 4; p 484, 15 pgs.
Leemann, T. (2002), Managing the chaos of change, Journal of Business Strategy, Sept-
Oct. 2002, Vol. 23, Iss. 5; pg. 11, 5 pgs.
Michael, J., Carey, B., and Sullivan, K. (2009), A New Approach to Contracting Design
Professionals, CRC Confernce, Seattle, WA April 5-7, 2009 pp. 269-278 (April 5-7,
2009).
Muatjetjeja, M., Kashiwagi, D., Sullivan, K. and Kashiwagi, J. (2009), Minimizing the
Impact of Culture in Botswana on the Implementation of New PM Paradigms, Fifth
International Conference on Construction in the 21st Century, Istanbul, Turkey (May
20-22, 2009).
PBSRG (2009), Performance Based Studies Research Group, Retrieved February 23, 2009
from PBSRG Web site: http://pbsrg.com/overview/documented-performance/.
Post, N.M. (2000), No Stamp of Approval On Building Plans: Contractors sound off over
difficulties with bid documents, Engineering News Record, 244 [17], pgs. 34-37, 39, 42,
45-46.
Regonamanye, J. (2009), Coronation optimistic that Botswana economy will soon, Sunday
Standard, 14 Jun 2009 Web.16 Jun 2009,
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Rwelamila, P. D., Talukhaba, A. A., and Ngowi, A. B. (2000), Project Procurement
Systems in the Attainment of Sustainable Construction, Sustainable Development, Vol.
8(1), pp. 39-50.
Simonson, K. (2006), Quick Facts, Association of General Contractors, Chief Economist
Report.
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2006, Vol. 67, Iss. 12; pg. 15, 4 pgs.
Ssegawa, J. K. and Ngowi, A. B. (2007), Causes of Poor Performance of Public
Construction Projects in Botswana, Department of Civil Engineering, University of
Botswana, Garborone.
Sullivan, K., Kashiwagi, M. and Kashiwagi, D.T. (2005), Transforming the MEDCOM
Facilities/Construction Management Environment into an Information Environment,
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Cincinnati, Ohio, CD-T6 (April 6, 2005).
521
COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Deborah Hughes, Trefor Williams and Zhaomin Ren, pp 522-536
The role of incentivisation in partnering projects – a case
study of South Wales
Deborah Hughes1, Trefor Williams1 and Dr Zhaomin Ren1
1
Built Environment Division,
University of Glamorgan, Trefforest, CF37 1DL,
United Kingdom
Email: [email protected]; [email protected]; [email protected]
Abstract:
The aim of the research was to test the hypothesis, “The use of incentivisation is a
precursor to the achievement of successful infrastructure partnering projects”. This
hypothesis evolved from Egan’s speech (2008), in which he discussed how
incentivisation should be set at 15%. The research firstly sets out a clear background to
the term incentivisation and its application within partnering. Information from
secondary sources was found related to the general topic area however, it lacked
sufficient depth and focus on the areas of incentivisation and the appropriate level of
pain gain share. The shortfall of in-depth information was addressed via primary
research. Both qualitative and quantitative data was collected through questionnaires
and interviews. Two infrastructure projects in South Wales were chosen for the study
and a selective sample of clients and consultants approached to complete the
questionnaires. Incentivisation places a focus on cost and this can have a detrimental
effect on the other aspects that exist within the oft quoted triangle of time, cost and
quality. The level at which to set the percentage for gain share is also a divisive issue.
Neither of the infrastructure projects can be adjudged a success from the perspective of
both parties. Incentivisation does not of itself appear to be the key to success and setting
this at a level of 15% would not generally satisfy either party. Overall it must be
concluded that Egan’s view appears to be too simplistic to apply in all situations and
incentivisation may not always provide the key to success he suggests.
Keywords:
Construction, Incentivisation, Partnering, South Wales
1 Introduction
The construction industry is riddled with adversarial relationships and an imbalanced
distribution of risk. Latham (1994) and Egan (1998) amongst others have examined the
industry to see how this culture can be changed. Partnering was seen as the answer to
the industry’s poor image (Cheung et al., 2003). Many Government and industry
initiatives have been introduced to promote the benefits of partnering such as Achieving
Excellence and Constructing Excellence. Contracts specifically allowing collaborative
workings have been introduced including Project Partnering Contact [PPC 2000], JCT
Constructing Excellence Contract [JCT CE] and NEC3 with the partnering option (Rich
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2008). Contracts have also been introduced which include incentives generally called
target cost contracts or cost-plus-incentive-fee contracts (Broome and Perry, 2002).
Despite this, CIRIA (Anon, 2001) describe how there is little published material on the
use of incentives in construction and the authors have discovered that this has not
changed much in the intervening years.
The starting point for the research was the speech by Egan (2008), in which he
discussed the need to use incentivisation and partnering for all construction projects. He
also discusses that the level of incentivisation in terms of cost should be plus or minus
15%. This speech formed the basis of the hypothesis, “The use of incentivisation is a
precursor to the achievement of successful infrastructure partnering projects”.
The aim of the research will be met by testing the hypothesis and using the data
obtained from secondary and primary sources to identify questions which will aid in
answering the aim. These questions include:
• Should incentivisation be used on every project?
• Should the target cost and incentive be set as early as possible?
• Should the incentives be set at 15%?
• What factors are important in an incentive scheme?
These questions were used to direct this research. In order to achieve the aims and
objectives both qualitative and quantitative data has been collected through a
triangulation of questionnaires and interviews. Both the questionnaires and the
interviews were structured to make the analysis easier and to address the aims and
objectives of the research. The questionnaire was complemented with a structured
interview the results of which will be presented in other publications. Two infrastructure
projects in South Wales were chosen and a selective sample of clients and consultants
approached to complete the questionnaires.
This paper firstly reviewed the concept of incentives, the use of incentives within
construction and incentivisation within a partnered project, then described research
methodologies adopted, discussed the results obtained from the survey; and finally drew
conclusions based on the survey results.
2 Literature Review
2.1 Incentives
Performance management has been well researched within business in general.
Incentives have played an important role in this research (Busi and Bititci, 2006).
Incentives are used to motivate personnel to behave in a certain manner or to achieve set
targets. Incentives were used in Taylor’s carrot and stick approach (Reis and Pena,
2001). However other researchers such as Maslow found that money was not always
the best motivator. The use of incentives should be based on the situation (Mullins,
2005).
Boone and Kurtz (1992) define motivation as “forces leading to behaviour directed
toward the satisfaction of some need”. Incentives are thought to be one method of
motivating people to achieve the desired task (Sappington, 1991). Anon (2001)
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describes how incentives as well as aligning objectives also takes the contractor’s focus
away from short term gain to life cycle costs. It then states that an incentive mechanism
is a process whereby parties to a contract are rewarded for performance significantly
over and above that contracted for, which is of material benefit to the client and can be
measured.
Incentives work by increasing motivation which encourages the correct behaviour and
increases effort (Mohd-Sanusi and Mohd-Iskandar, 2007). It is important to measure
and manage performance if incentives are to work, however this is not carried out as
much as it should be (Busi and Bititci, 2006). Llewellyn et al., (1990) describe how
when examining incentives in the health care system, they found that it is important that
the incentive structure is aligned to the objective required.
Incentives aim to make agents work for the best interest of the project but there is a risk
that agents will work for their own best interest, this is called the moral hazard. When
using incentives with groups of people it is further complicated because not all members
of the group may be working for the best interest of the project and there may be ‘free-
rider’ problems. Incentive schemes need to consider that rewarding the group as a whole
may not be the best possible method (Petersen, 1993). However Naoum (2003)
discusses how incentives, if used correctly, can be used to motivate teams to consider
time or quality. He goes on to discuss how the correct use of incentives could be used
to reflect the client’s priorities within projects.
2.2 Incentives in Construction
The early work on partnering suggested that incentives would be useful in producing a
measurable improvement in achievement (Saad et al., 2002). CIRIA describe how there
is little published material on the use of incentives in construction (Anon, 2001).
The incentive contracts payment schedule consists of a fixed fee plus some proportion
of the predicted project cost. Construction is unusual in that the project costs are not
known when the contract is being drawn up (Weitzman, 1980). Performance is very
hard to judge in construction and so incentives are set on the target cost rather than on
the success of the project in terms of quality etc (Sappington, 1991). Researchers such
as Shavell (1979) and Badenfelt (2007) use mathematics to calculate the appropriate
levels of incentives. The starting point is to calculate the target cost and assess the
degree of risk, from this the level of pain or gain (incentive) can be set. This would
appear to be simple but there is still no evidence that this method always works. The
level of perceived risk is used to help calculate the level of incentive and this is difficult
to value. Traditionally within construction, the higher the sharing ratio, the higher the
perceived risk involved in the project. Al-Harbi (1998) came to the conclusion that it is
important that the contractor and client come to an agreement together about the value
of the pain gain percentage.
The full list provided by Badenfelt (2007) of factors to consider for negotiating a
sharing ratio for construction projects in Sweden is as follows:
• The client’s and contractor’s perceived level of risk.
• Their attitudes towards risk, with risk-adverse contractors arguing for a low sharing
ratio when the uncertainty level is high.
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• The desire to influence the contractor’s motivation, with the size of the sharing ratio
affecting the contractor’s motivation to keep costs down.
• The contracting parties’ initial perception of the accuracy of the negotiated target
cost.
• The size of the target profit, with a large profit encouraging the contractor to choose
a higher sharing ratio.
• The contractor’s desire to increase the chances for profit in the longer term.
During this research clients expressed the opinion that to give the contractor too high a
sharing ratio is counterproductive as they may focus too much on saving money and the
quality of the project will suffer. The clients also felt that the target cost was not always
set accurately within construction projects in Sweden. To encourage the contractor to
set a realistic target cost it was suggested that the contractor is offered 70% of the
savings but only 30% of the losses. The contractors’ view was that the earlier they were
involved in the process the less the target cost was altered. Finally it was felt that the
target cost became more accurate the longer the client and contractor work together
(Badenfelt, 2007).
2.3 Incentives and Partnering
Construction has a history of adversarial relationships and an uneven balance of risk.
This led to Latham (1994) and Egan (1998) amongst others to examine the industry and
how this culture could be changed. Partnering was seen as the answer to the low quality
of construction and the lack of client satisfaction (Cheung et al., 2003).
Partnering can be described as “a long term commitment between two or more
organisations for the purpose of achieving specific business objectives by maximising
the effectiveness of each participant’s resources. The relationship is based on trust,
dedication to common goals, and an understanding of each other’s individual
expectations and values”, as cited in Himes (1995). Olsson and Espling (2004) describe
partnering as a way to avoid litigation, keep costs low and to complete the project
within time to produce a better working environment. Partnering must be worked at by
all parties, if it is to succeed.
Anon (2003) discusses the factors that are critical to a project’s success. These are:
• A shared risk register
• Targets set for health and safety
• Clearly defined roles
• Performance measurement
• Target cost set and open book accounting
• Sharing of efficiency gains
• Clear design quality targets set.
Cheung et al., (2003) summarises the successful factors in partnering observed by other
researchers. These include trust, open communication and equity, but incentives are not
discussed at all. The advantages that can be obtained from a partnering arrangement are
seen as a sufficient enough incentive on its own. Evans and Weir (1995) discuss how it
is important to get the balance of incentives right. Neither too easy nor too difficult to
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achieve seems to be the essence of their guidance. Bresnen and Marshall (2000) also
believe that a lot of the motivation research into incentives tends to ignore the intrinsic
and personal motivation of individual team members. The goal must be challenging but
achievable.
Trust is fundamental within a partnering arrangement (Barlow et al., 1997). There are
different tools available for partnering nowadays which Cheung et al., (2003) claim
helps to promote trust by identifying areas of distrust. There are five main areas of
distrust these are:
• Misalignment of measurements and rewards,
• Incompetence,
• Lack of appreciation of a system,
• Untrustworthy information, and
• Failure of integrity.
These areas were important to consider when designing the questionnaire.
Bayliss et al., (2004) discusses the TKE contract 604 in Hong Kong where they discuss
the partnering mechanism used in the contract and list the required components:
• Partnering workshops for executives,
• Partnering workshops for the contract,
• Monthly review meetings,
• Social events,
• Newsletters,
• Incentivisation,
• Evaluation framework,
• Effect on partnering spirit, and
• Effect on contract elements.
This contract utilises a gain share pain share mechanism although the amount is not
stipulated. The research found that out of the mechanisms used it is the incentives and
review meetings which were the most influential in maintaining the partnering spirit
(Bayliss et al., 2004). According to Black et al., (2000) adjusting price is the most
difficult of procedures to establish within a partnering arrangement and it is important
that cost control is maintained.
Alliances are not the easy option and in the USA general industry as a whole 50-80% of
alliances fail. The main reason put forward for this high level of failure was that
expectations were different from results (Stanek, 2004). Each party within a
construction project has a different agenda which causes a conflict. The contractor and
consultants want to make a profit, while the client wishes to complete the project at
minimum cost (Himes, 1995). Espling and Olsson (2004) discuss a Swedish partnering
project where the aim was to “create a win-win situation where each partner gains more
than they would have, through a non-partnering relationship”, the agreed gain share –
pain share was 30% between the client and the contractor. Egan (1998) discusses how
every member of the partnership should make a fair and reasonable return. Anon (2001)
discusses how incentives should not be used as a chance to attack the contractor’s profit
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margin. In contrast to this Kadefors (2005) discusses that it is the focus on economic
incentives which stands in the way of developing true partnering relationships.
As described previously risk is an important consideration and partnering should mean a
sharing of the risks inherent in the construction project and incentives have a role to
play in this (Black et al., 2000). The research indicates that parties prefer partnering
when both risk and trust is high. The feeling of equity is important in a partnership and
the feeling that one partner is gaining more from the partnership may cause them to
commit less to the partnership (Das and Teng, 2001). This may be important in setting
the level of incentivisation. Finally there is a need for transparency to demonstrate
fairness within the partnering arrangement (Anon, 2001).
The secondary data from this literature review was used to inform the design of the
questionnaire with regards to factors involved in ‘success’ and factors important within
incentivisation.
3 Research Methodology
A mixture of secondary and primary sources were used in this research. Primary
research gathered qualitative and quantitative data because quantitative is easier to
analyse but the qualitative data provides insight into the views of personnel to
incentivisation. Questionnaires were used to gather the quantitative and qualitative data
from participants of two infrastructure projects in South Wales. Project A uses strategic
partnering and is quite a mature partnership. Project B uses tactical partnering and was
relatively recent in its formation. This allows a comparison to be made between the
differing aspects of the two partnering projects.
3.1 Summary of Case Studies
Various participants from the two projects were involved in the survey. Project A
engaged in the letting of term contracts using the NEC 3 contract with option C with
target costs set as the programme progresses for individual projects within the
programme. This project has been based upon use of this system for approximately 16
years. Project A continues to use partnering with incentives. Project A has a “strategic
partnering charter” which has been signed by all eleven partners including consultants,
contractors and the client. Project A has a very complicated incentive scheme. The
company (client) comes up with a list of projects that must be carried out over the year.
The individual projects are then allocated a percentage of the total budget. Therefore
each project is allocated a total cost or “business plan cost”. The contractors then
provide their target cost and the incentive depends on whether the contractor is above or
below the client’s total cost. The incentive is greater if the contractor is below
“business plan”. The contractor is also liable for a greater percentage of the pain than he
would be able to make in gain (Anon 2008).
Project B was a dock side regeneration scheme utilising tactical partnering. This project
used the target cost contract NEC 2 option C. Project B has been operating for 2 years.
Project B has now ceased its use of NEC 2 and now uses NEC 3 option A (without a
partnering arrangement). Project B is now complete, but at the time the research was
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undertaken the pain share gain share was 20% for both the gain share and the pain
share. The project target cost was not set until design was about 90% complete.
3.2 Questionnaire Response
To answer the question “is incentivisation important in successful partnering?” it is
important to target the right audience. Therefore selective sampling was carried out.
Contract managers, cost managers, clients and project managers have the level of
understanding to make judgments on aspects of factors affecting partnering. Thirty
questionnaires were distributed within the two case projects and twenty six of the
questionnaires were returned which gave an 87% return rate. This was achieved by
collecting the questionnaires in by hand.
20 of the questionnaires were completed from people that worked on Project A while 6
were completed by people that worked on Project B. 20% of the personnel were
questioned from project A and 60% of project B, due to the size difference with the
projects. The majority of personnel targeted were cost and contract managers who were
directly involved in the setting and monitoring of the incentivisation process (Table 1).
Out of the participants, 73% of them had at least 4 years involvement within a
partnering arrangement and therefore were an experienced sample.
Table 1. Role of Respondents questioned within Project A and B.
Role Project A Project B Total
Client 1 1 2
Cost Manager 8 1 9
Contract Manager 4 4 8
Project Manager 1 0 1
Planner 1 0 1
Designer 2 0 2
HSE Advisor 1 0 1
Proposal Manager 1 0 1
Quantity Surveyor 1 0 1
3.2 Data Collection and Analysis Technique
The questionnaire includes seven questions which cover various aspects of
incentivistions in partnership. These questions are closed. This form of question is
driven by the fact that analysis is made easier if the respondents are not answering
freely because opinions can be directly compared. The data once collected was then
analysed by using data analysing software (i.e. SPSS) and comparative approaches.
From the results of these analyses it was possible to draw conclusions about the original
hypothesis and to suggest further areas for research.
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4 Results and Discussion
The results of the questionnaire survey are discussed below.
4.1 Justification of Egan’s Statement
In this question, respondents were required to make a judgement based on their
experience on the three aspects of Egan’s statement on how the construction industry
can improve. "I have to say that I would introduce, as early as possible in every possible
project, a gain share between the client and the industry, with a target based upon an
agreed set of parameters, plus or minus I would say 15%." (Egan 2008).
The results are shown in Figure 1 and Table 2. It can be seen that overwhelmingly
people agreed with Egan’s suggestion (2008) that incentivisation should be set early in
the process. However the respondents’ opinions were more varied about the use of
incentivisation in every project. 48% of them are in favour of the statement whilst 52%
are against this statement. When questioning why they did not agree with the
suggestion, most of the respondents suggested that partnership, especially the
incentivisation aspects, should be adopted based on each particular project and its
operational environment. Finally the majority of the respondents (73%) disagreed with
the statement that the level of incentivisation should be 15%. Nevertheless no particular
value was suggested by the respondents.
Table 2. Opinions on Egan’s statement [from each project].
Project Feedback Early as Possible Every Project Plus or Minus 15%
A Agree 17 10 5
Disagree 3 9 15
B Agree 5 2 2
Disagree 1 4 4
Figure 1 Opinions on Egan’s statement overall
4.2 Key Factors for an Effective incentive scheme
In this question, the respondents were asked to rank a series of key factors in
establishing and maintaining an effective incentive scheme within a partnering
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arrangement. The scores have been totalled to summarise the ranking question (Figure
2). Given the different number of respondents between the two projects, percentages
have been used.
Figure 2 Key Factors for an Effective incentive scheme
The smaller the % total the more important the factor is seen as. If the totals are placed
in order the following results are obtained:
• Clearly defined objectives
• Known design parameters
• Mutual objectives
• The correct contractor
• Positive attitude in parties involved
• Structural risk management process
• Target cost set early
• Level of pain gain satisfactory for all
• Reliable cost data
The results also show that in a strategic partnership, positive attitude in parties involved,
clearly defined objectives, and mutual objectives are the top three factors whilst in a
tactical partnership, clearly defined objectives, known design parameters, and the
correct contractor are the key factors. Interestingly, target cost set early and reliable cost
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data rank 7th and 8th in both partnerships. The correct contractor is the least important
factor for strategic partnership whilst for tactical partnership, level of pain gain
satisfactory for all is the least important factor.
4.3 Specific Incentive Factors
This question explored respondent’s opinion on issues relating to the target cost within
the incentive schema. Four issues were presented to the respondent and they were asked
to indicate their opinion using the 7 point Likert scale. Again, the differences in the
number of respondents from the two projects influence the results and so percentages
have been used to lessen this effect. Table 3 shows the results from each project and
Figure 3 illustrates the overall results.
Table 3. Opinions on target cost within Project A and B
Target cost is often set
Performance informs
Target cost must be
Set target early
target costs
too high
realistic
Opinion
Project
Agree 75% 55% 90% 55%
A Neutral 20% 25% 0% 25%
Disagree 5% 20% 5% 20%
Agree 66.7% 33.3% 83.3% 66.7%
B Neutral 0% 33.3% 0% 16.7%
Disagree 33.3% 33.3% 16.7% 16.7%
Figure 3 Opinions on target cost overall
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The results show that respondents feel that target costs are often set too high, target cost
must be realistic and targets must be set early. Respondents were less certain that
performance informs the setting of target costs. Table 3 shows that project participants
from both strategic and tactical partnership share the same opinion on these questions.
4.4 Successful Factors for Partnership
The respondents were asked how many of the projects that they had been involved with
would they consider successful. Most of them felt that most of the partnering projects
they had been involved with had been successful based on the above key performance
factors (Table 4).
Table 4. How many of the projects were ‘successful’.
Project All Most Some None
A 25% 60% 5% 10%
B 0% 33% 50% 17%
Total 12.5% 46.5% 27.5% 13.5%
When the respondents were further asked about the problems and challenges related to
the existing incentivisation mechanisms in the successful partnering projects, the
following issues were raised.
• Contractors would appear to want a higher percentage of gain than the client
wishes to give.
• Incentives can produce behaviour that does not conform to the partnering ethos.
• Small projects should not consider partnering because of the extra staff required
for administration.
• It is important that all reasonable risks are identified and design changes are kept
to a minimum.
• It is important that quality is maintained.
• An open and transparent relationship is necessary to avoid target costs being set
too high.
5 Conclusion and Further Research
This research aims to test the hypothesis, “The use of incentivisation is a precursor to
the achievement of successful infrastructure partnering projects”. In order to achieve
this objective, several questions were considered during the research. The answers to
these questions are considered below.
5.1 Should incentivisation be used on every project?
Both project A and project B were split on whether incentivisation should be used on
each project but overall 42% agreed that every project should use incentivisation while
56% disagreed. The reasons provided by the respondents for disagreeing was that
partnering and incentivisation schemes require extra administration and this was not
economically viable on smaller construction projects. Respondents agreeing with the
statement did not provide any clarification.
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5.2 Should the target cost and incentive be set as early as possible?
Over all 84% of the respondents agreed with Egan that the target cost should be set as
early as possible and only 16% disagreed. Research from Sweden showed that target
costs are often not very accurate but that they become more accurate the longer they
work together (Badenfelt 2007). Project A has worked as a partnering arrangement for
sixteen years but they are still complaining that the target costs are not accurate which is
not in line with Badenfelt’s work.
5.3 Should the incentives be set at 15%?
71% of the respondents disagreed with Egan on this statement and only 29% agreed.
This was similar for both projects. The contractor generally wanted a larger percentage
than 15% whereas the client’s consultants wanted it lower, in some cases as low as 5%.
These results were perhaps unsurprising as the client wishes to save money and the
contractor wishes to make money. However the client for project B was happy for the
pain share gain share to be 50%. This contradicts the other results. The focus of the
project however was on quality and time rather than cost. Incentives focus the parties
on cost (Busi and Bititci 2006). Using such a large percentage for the pain share gain
share, contradicts the client’s focus on time and quality.
5.4 What factors are important in an incentive scheme?
Project A and project B have different views on what makes an effective incentive
scheme. Their views on what factors were important in an effective incentive scheme
depended largely on their experience in previous projects and therefore on the type of
project they are involved in and the type of partnering. Therefore for project B they felt
that known design parameters and the correct contractor were very important. Project A
suffers from a lack of trust and communication between the partners and therefore
placed positive attitude in parties involved as the most important within an incentive
scheme. Both project A and B found clearly defined objectives to be very important but
surprisingly rated setting the target cost early very low given the contradictory answers
earlier in the questionnaire.
This research has demonstrated that partnering is not suitable for all projects.
Incentivisation places a focus on cost and this can have a detrimental effect on the other
aspects that exist within the oft quoted triangle of time, cost and quality. The level at
which to set the percentage for gain share is also a divisive issue but a substantial
majority of respondents disagreed with the 15% suggested by Egan. The timing of the
setting of the target cost was a problem on both projects with reluctance by both
contractors to set it early in the process. Project B did not judge partnering a success
primarily because the target cost was not set early enough placing most risk upon the
client. Project A has contractors that are unhappy with the uneven pain gain share and a
lack of trust between the parties. Neither of these projects can be adjudged a success
from the perspective of both parties. Incentivisation does not of itself appear to be the
key to success and a level of 15% would not generally satisfy either party. Measures of
success varied between parties and clients project A having a focus on cost and B on
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quality. What represents success to one client would not equal success to the other. Both
contractors had a focus on maximising gain.
Overall it must be concluded that the hypothesis was not proven. Egan’s view appears
to be too simplistic to apply in all situations and incentivisation is not always the key to
success he suggests.
This research has yielded plenty of quantitative data but a limited amount of qualitative
data. To address this shortcoming interviews have been carried out to provide a greater
depth of data. This research will be analysed and published in the future. It is clear that
the success of partnering must also be questioned as within the limited sample
investigated there is a suggestion that the approach has its problems particularly on
infrastructure projects in South Wales.
6 References
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Anon (2003), The Integrated Project Team – Team working and partnering, Office of
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Bayliss, R., Cheung, S., Suen, H. and Wong, S. (2004), ‘Effective Partnering Tools in
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Bresnen, M. and Marshall, N. (2000), ‘Motivation, Commitment and the Use of
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
A O Windapo and A A Balogun, pp 537-552
Study of the utilization of modern methods and techniques of
building construction in low cost housing provision in Nigeria
Windapo, A. O.
University of Lagos, Akoka
E-mail: [email protected]
Balogun, A. A.
University of Lagos, Akoka
E-mail: [email protected]
Abstract
In order to meet the growing need for housing accommodation, new ideas, techniques and
methods for achieving this need has been developed. One of such ideas today is now collectively
known as Modern Methods of Construction. This study is aimed at investigating the level of
awareness and use of Modern Methods of Construction (MMC) in the provision of low cost
housing in Nigeria. The research design used was exploratory wherein, questionnaire were
distributed to 55 randomly selected property development companies located in Lagos, south
west Nigeria in order to collect relevant data. The data collected were analyzed using the
Statistical Package for Social Scientist (SPSS). The study revealed that the critical constraints to
the use of MMC in housing estate development include: none availability of the technology, high
cost of technology and lack of awareness about the technology by some of the housing
developers. The comparison between the traditional method of construction and that of MMC
shows that the cost of MMC is higher than the traditional construction method. The study
concluded that there is an insignificant use of MMC in the provision of low cost housing in
Nigeria.
Key Words: Building Elements/Components, Housing Provision, Modern Methods of Construction
(MMC) and Prefabrication
1. Introduction
Shelter, like food and clothing, is a basic human need with profound impact on life. Therefore,
the search for shelter has spanned over the years and from all indications, appears to have eluded
complete solution in modern times, for most individuals, especially in a developing society like
Nigeria. While the housing needs of pre-colonial Nigeria at the village levels were met by a
combination of the prospective home owner’s efforts and that of the society to which he
belonged his more modern counterpart in the urban area today is constantly faced with the
problem of how and where to put up a shelter of his own (Ibagere, 2002).
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Historically, from the beginning of civilization, attention has been paid on the form, placement,
and provision of human habitation. Demand for urban housing increased and for centuries this
demand was filled by unplanned additions to, and subdivisions of, existing structures. Where
climate permitted, squatting (occupying without title or payment of rent) became commonplace,
but provided only temporary shelter. Overcrowding in the cities has caused slums to spread and
shantytown suburbs to emerge in most of the larger urban centres in Nigeria (Encyclopedia
Britannica, 2008). In the postindustrial society of the 20th century, housing in developing nations
and poor parts of developed countries continues to be of insufficient quality and does not meet
the demand of some parts of the population. Vacant, abandoned central-city housing exists
alongside structures that are usable but overcrowded and buildings that are structurally
reclaimable but are functionally obsolete (Encarta 2007).
Housing is a big problem confronting many Nations of the world and particularly for the Low-
income earner in Nigeria. Akeju (2007) stated that since Independence in 1960, all Governments
of Nigeria have highlighted housing as a major priority. Nigeria has witnessed rapid rate of
urbanization in the last two decades and it is estimated that over 40% of the Nigerian population
now live in urban areas. The rapid rate of urbanization has brought with it some significant
problems including shortage of housing, overcrowding, traffic congestion, environmental
degradation, inadequate infrastructure and services, etc. Various experts such as Adetona (2007),
Akomolede (2007), Ajanlekoko (2007), Akewusola (2007), Ajayi (2007), George (2007) and
Olawore (2007) have also observed how enormous the housing problems are. These problems
were identified as the high cost of the provision of infrastructure, unaffordable housing, lack of a
workable housing policy and unplanned urban centres. According to Mordi (2002), about 70% of
Nigerians are either homeless or live in shanties and batchers, businesses and organizations in
the building industry have stagnated, Nigerians who live in or pass through the slums, ghettos
and shanties are victims of crimes and violence associated with the negative culture in these
areas and the whole Nigerian economy is adversely impacted.
However, being the third most important thing to man after food and clothing, provision of a
decent accommodation or shelter is a necessity that needs to be fulfilled at affordable rates. It is
the aim of this paper therefore, to study the utilization of modern method, techniques and
materials of building construction in low cost housing provision in Nigeria.
In other to achieve the above aim, the paper shall focus on the following objectives:
1) To find out the level of awareness and use of Modern Methods of Construction (MMC)
in the provision of low cost housing.
2) To find out the modern methods of construction being used in low-cost housing estate
development.
3) To find out the critical constraints to the use of modern methods of construction in the
provision of low cost housing by the property developers.
4) To compare the cost of houses built with the use of MMC and houses that are built
through traditional methods.
The results of the study were limited by the fact that some respondents did not address some
questions in the questionnaires as expected; lack of records of construction project information
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and lack of flow of certain information within an organization to their staff affected the
correctness of information given.
2. Definition of Low Cost Housing
Lefebvre (2004) defines low-cost housing to be affordable housing for poor or low-income
individuals and families which would include not only individual houses but also rental housing.
This definition would include a wider range of housing types in terms of their costs relative to
lower income segments of the population of different areas and countries i.e. housing that lower
income families can afford to build themselves or participate in their construction as some form
of equity or acquire through some form of aid as in housing cooperatives or afford to rent with
their income. It should have basic utilities such as electricity, water, sanitation and should be
built with strong and durable materials so that they can last (with a minimum of maintenance) at
least 20 to 25 years or a period corresponding to the term of loans and mortgages.
REVIEW OF MODERN METHODS OF CONSTRUCTION USED IN HOUSING
Modern methods of construction is a collective term being used to describe a number of new
construction methods that are being introduced into house building that differ significantly from
so-called ‘traditional’ brick and block construction. There is no precise or universally agreed
definition of what constitutes modern methods, although in 2003 the Housing Corporation of the
U.K introduced a six-fold classification system for describing the construction methodologies for
current house building. The sixth category describes all traditionally-built dwellings; hence
categories 1 to 5 would be classed as modern methods of construction. Each of the construction
classes can be built using a number of different materials, leading to a wider range of more
specific descriptions, such as ‘volumetric steel frame construction’, ‘timber framed panelized
construction’ and so on. The most common materials are timber, steel (in the form of light-gauge
galvanized steel) and concrete, although a range of composite systems are being introduced also
(CE139, 2005).
The main forms of Modern Methods of Construction are:
2.1 Volumetric construction
Three dimensional units manufactured within a factory. Units can be made from a range of
materials (any material that can produce a structural panel could be used to make volumetric
units) but most commonly are framed structures in timber or light gauge steel. See Fig A.1.
2.2 Panelized timber frame
Arrangement of studs and rails enclosed within two sheets of lining material with insulation
within. The stud can either be of solid construction (depth usually at least 89mm) or of timber I
beams (depths usually 150mm or above). There is some debate within the industry about whether
or not timber frame should be regarded as a modern method of construction. The amount of
fabrication done in the factory varies but for timber frame to be regarded as a ‘modern method’ a
manufacturer would need to do substantially more than supply panels that comprise the studwork
and sheathing board, or incorporate some recent innovation such as the use of timber I beams.
Factory installation of insulation should produce good quality control. Panelized construction
also tends to lead to more airtight structures provided they are made accurately. See Fig A.2.
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2.3 Panelized steel frame
Panels of light gauge steel are usually delivered without insulation or sheet materials (although
they can have insulation factory applied).Typically the depth of studs would be ~70mm or
greater. See Fig A.3.
2.4 Structural insulated panels (SIPs)
SIP panels are a composite of two sheets of lining material (typically oriented strand board or
cement based boards) bonded to a continuous rigid foam core to produce a structural panel. The
panels need not contain internal load-bearing studs, although studs are sometimes included
around openings and at corners. SIP systems sometimes also use the same specification of panel
for roof structures. See Fig A.4.
2.5 Composite panels
A number of composite panels are currently in use which comprise a rigid insulation core within
a wire space frame, all enclosed within a fine aggregate concrete or render. Openings for
windows etc can be formed in the factory or formed on site by using a range of different panels
(e.g. special lintel and spandrel panels). See Fig A.5.
2.6 Tunnel form construction
Tunnel form is a technique to produce internal walls and floors using cast in-situ concrete.
External walls (apart from the side walls) are constructed using other techniques, which can be
conventional cavity masonry, or framed infill panels. Construction detailing would be similar to
cross wall and concrete frame constructions. The walls would be cast onto prepared foundations
comprising typically a beam and block ground floor. See Fig A.6.
2.7 Insulating formwork
Insulating formwork uses two layers of rigid foam as permanent shuttering for a reinforced
concrete wall. The insulation can be in the form of two sheets of rigid foam tied together, or in
the form of large hollow blocks.
2.8 Aircrete block and plank
Aircrete has been in use for many years in block work, but a recent innovation is the use of thin
joint techniques, where a thin (4mm) layer of special adhesive replaces the normal relatively
thick mortar joint. Large planks of reinforced aircrete can also be used to produce both ground
and intermediate floors, and also to create a pitched roof structure.
3. Reasons for the Basis of the use of Modern Methods of Construction in Nigeria
These include:
3.1 Population Growth
According to the 2006 National Census figure in Nigeria, there is an ever increasing growth in
the population of Nigeria from 81 million people in 1993 to 140 million with, Kano State having
a population of 9,383,682 million and Lagos State with 9,013,534 of the total population figure.
3.2 The Housing Demand
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To meet the housing demand, Nigeria is said to need a total of 8million new housing units
coupled with the vision of the Lagos State government on the Mega City Project christened
“New City on the Atlantic” (African Loft, 2007) and the Federal Governments expectation with
the “ Vision 20: 2020”, MMC might be the ready panacea to the housing demand.
3.3 The Cost Benefits ascribed to MMC due to Industrialization/Economy of Scale
MMC is touted to have the following advantages:
• That it is afaster method of construction with the ability to halve the total on-site
construction duration;
• That it requires less on-site labour;
• That large number of units can be constructed within a short time;
• That the faster construction and reduced on-site work brings financial benefits to the
developer in terms of shorter period of financing the project and completed buildings
being put up for sale much faster.
4. Research Methods
The research design used for this study was Explanatory-Cross- Sectional-Survey Research
Design. Data was collected at one point in time through self administered questionnaire to find
out the level of utilization of modern methods, techniques and materials of building construction
in the provision of low cost housing. The study was based in Lagos state, the most active state in
terms of construction activity being the Nigeria’s commercial capital. The population of the
study comprised of all Property developers both indigenous and foreign that have been involved
in property development in Lagos state. A sample size of 55 firms which were a good
representation of the Property market and cutting across every strata were selected using the
judgmental sampling technique. The instruments used for data collection in the study were self-
administered questionnaire which contained 5 sections. All the questionnaires were successfully
retrieved, representing a 100% response rate. Descriptive analysis which includes means,
percentages and inferential statistics such as the chi-square were used to analyze the data
obtained.
5. Data Presentation and Discussion of Findings
The data collected are presented as follows.
5.1 Modern method of construction being used and the type of housing Estate
Table 1 gives the breakdown of the Modern Method of Construction being used with respect to
the various types of Housing Estates developed.
Table 1 show that only three MMC’s were listed because those were the only methods selected
by the respondents. It can be seen from Table 1 that a total of 22 of the respondents (40.0%)
involved in the construction of Housing Estates have used MMC. Of these, two of the
respondents have been involved in low-cost housing only, one respondent with Medium Cost
housing alone , five with high cost housing, Six respondents with Medium and High Cost
housing and eight respondents involved in all the three types i.e. Low, Medium and High cost
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housing estate. Of these, three respondents used only Panelized Steel Frame (I), six used
Structural Insulated Panel (II), five used Composite Panel (III) while a total of eight respondents
made use of all the above methods inclusive of the Tunnel form construction, insulating
formwork and the Aircrete and Plank. It can also be seen from Table 1 that the MMC with the
highest application is the Structural Insulated Panel.
Table 1 Modern Method of Construction being used and the Type of Housing Estate
Modern Method of Low Cost Medium Cost High Cost Low , Medium None of Total
Construction (MMC) Housing Housing Housing Medium & & High the
High Cost Cost Housing
Housing Housing Units
I only
Frequency - - 1 1 1 - 3
% of Total 1.8% 1.8% 1.8% 5.5%
II only
1 1 2 - 2 - 6
Frequency
1.8% 1.8% 3.6% 3.6% 10.9%
% of Total
III only
- - - 2 3 - 5
Frequency
3.6% 5.5% 9.1%
% of Total
All the Methods
1 - 2 3 2 - 8
Frequency
1.8% 3.6% 5.5% 3.6% 14.5%
% of Total
None of the Methods
Frequency 1 2 1 1 4 - 9
% of Total 1.8% 3.6% 1.8% 1.8% 7.3% 16.3%
Voided Count
- - - - - 24 24
Frequency
43.6% 43.6%
% of Total
TOTAL Frequency 3 3 6 7 12 24 55
% of Total 5.5% 5.5% 10.9% 12.7% 21.8% 43.6% 100%
KEY: I) Panelized steel frame II) Structural insulated panels (SIPs) III) Composite panels
IV) Tunnel form construction V) Insulating formwork VI) Aircrete block and plank
5.2 Company’s willingness to use MMC and Constraint preventing its use
The study sought to know if the property development companies were willing to use MMC and
the constraints preventing the use of MMC. Data obtained for these are presented in Table 2.
Table 2 is a follow up to Table 1 and it indicates the continuous willingness of firms already
using MMC and that of firms not yet using MMC’s willingness to use it and the constraints
preventing its use. Table 2 also shows that 28 or 50.9% of the respondents indicated their
willingness to use MMC. However, the following constraints to the use of MMC were
highlighted by the respondents in order of magnitude to include: Non availability of the
technology, High cost of technique, lack of awareness about MMC and No skilled personnel for
the technology.
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Table 2 Company’s willingness to use MMC and Constraint preventing its use
Constraints Preventing Company’s use of Company willingness to use Modern Method of Voided Count TOTAL
MMC Construction
YES NO
Non availability of the Technology
Frequency 10 1 - 11
% of Total 18.18% 1.8% 20.0%
High cost of the Technique
Frequency 8 1 - 9
% of Total 14.5% 1.8% 16.3%
None awareness of the Methods
Frequency 8 - - 8
% of Total 14.5% 14.5%
No skilled personnel
Frequency 2 - - 2
% of Total 3.6% 3.6%
Voided Count
Frequency - - 25 25
% of Total 45.45% 45.45%
TOTAL Frequency 28 2 25 55
% of Total 50.9% 3.6% 45.45% 100%
5.3 Awareness of Modern Method of Construction (MMC) and the use of MMC
Table.3 presents a cross tabulation between the Developer’s awareness of MMC and its use.
Table 3 Awareness of Modern Methods of Construction (MMC) and its Use
Awareness of Modern Method of Construction (MMC)
MMC Being used I only II only III only IV only All of the None of Voided Total
above the above Count
I only
Frequency 3 - - - 1 - - 4
% of Total 5.5% 1.8% 7.3%
II only
Frequency 1 7 1 - - - - 9
% of Total 1.8% 12.7% 1.8% 16.3%
III only
Frequency 1 1 3 - 2 - - 7
% of Total 1.8% 1.8% 5.5% 3.6% 12.7%
IV only
Frequency - - - 1 - - - 1
% of Total 1.8% 1.8%
All of the above
Frequency - - - - 8 - - 8
% of Total 14.5% 14.5%
None of the above
Frequency - - - - - 8 - 8
% of Total 14.5% 14.5%
Voided Count
Frequency - - - - - - 18 18
% of Total 32.7% 32.7%
TOTAL Frequency 5 8 4 1 11 8 18 55
% of Total 9.1% 14.5% 7.3% 1.8% 20.0% 14.5% 32.7% 100%
KEY: I) Panelized steel frame II) Structural insulated panels (SIPs) III) Composite panels
IV) Tunnel form construction V) Insulating formwork VI) Aircrete block and plank
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It can be seen from Table 3 that 31 of the respondents (or 52.45%) are aware of MMC and have
actually used it in one form or the other. Of the MMC methods, the Structural Insulated Panel is
the most widely used method with 9 respondents (16.3 %) using it. Similarly 8 respondents
(14.5%) indicated that they have made use of all the methods; four of them (7.3%) make use of
Panelized Steel frame; seven respondents (12.7%) make use of the Composite panel and one
respondent has used the Tunnel form construction.
5.4 Cost Comparison between houses built with the use of MMC and houses that are built
through traditional methods
Table 4 and Fig 1 presents the comparison of the cost per square meter of some basic elements of
building built using various methods and a composite bar chart of the cost of each walling
element per gross floor area for various Building methods and the subsequent analysis of
construction cost.
5.4.1 Comparison of Cost of Wall
Fig 1 which is derived from Table 4 shows the Composite bar chart of the Cost of each walling
element per Gross Floor Area (GFA) for various construction methods. From the Chart it can be
seen that the Sandcrete wall for the 3 Bedroom bungalows by the Property developer, Lagos
Ministry of Housing has the least Composite wall cost/GFA of about N4, 734 and it is closely
followed by again another sandcrete construction of a 12-in-1 Block of flat by the same
developer. The chart also reveals that the Concrete filling construction by Sanderton of a
Detached Duplex has the highest Cost per GFA of about N16, 051 whereas the Terrace duplex
by the same developer has a significant drop of about 40% to a value of N9, 465.
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Table 4 Comparison of the Cost per Square Meter of some Basic Elements of Building
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Figure 1: Composite Bar Chart Showing the Cost of Each Walling Element per Gross Floor Area
(N/m2)
Key: 1-LSDPC Sandcrete 12-in -1 Block; 2- Solbric Stabilized 3 B/R bungalow; 3- H.S.I 2 B/R concrete panel
bungalow; 4- Bolyn Stabilized Brick 2B/R Bungalow; 5- Bolyn Stabilized Brick 3B/R Bungalow; 6- LSDPC
Sandcrete 3 B/R bungalow; 7- Sanderton Detached Concrete Duplex; 8- Sanderton Terrace Concrete Duplex
This is indicative that there is a significant savings in the Cost/ GFA of wall in a terrace building
than a Detached or semi detached building. Finally, The Stabilized laterite brick walls all have
average cost of between N7, 090 and N8, 298 which is slightly above than the cost of the
Sandcrete wall.
5.4.2 Cost of House per Gross Floor Area
Fig 2 which is also derived from Table 4 shows the Cost of House per Gross Floor Area for the
various Construction Methods. The Chart reveals that the Stabilized laterite Brick House by
Bolyn Construction Co Ltd has the least Cost per GFA of about N18, 322 and N19, 107 when
compared with the other method of construction although as indicated from the Fig 13, the cost
of Walling per GFA is higher in the Stabilized laterite brick than the Sandcrete method. These
confirms the fact that the Stabilized laterite brick Construction method is a more cheaper means
of construction of Low Cost housing than any other method of construction. This is closely
followed by the Sandcrete method with a Cost of N21, 277 and N26, 957. The Concrete Modular
housing is quite high when compared with the other methods.
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Figure 2: Bar Chart Showing the Cost of House per Gross Floor Area (N/m2) for the various
construction methods
KEY: 1-LSDPC Sandcrete 12-in -1 Block; 2- Solbric Stabilized 3 B/R bungalow; 3- H.S.I 2 B/R concrete panel bungalow; 4- Bolyn Stabilized
Brick 2B/R Bungalow; 5- Bolyn Stabilized Brick 3B/R Bungalow; 6- LSDPC Sandcrete 3 B/R bungalow; 7- Sanderton Detached Concrete
Duplex; 8- Sanderton Terrace Concrete Duplex
5.5 Discussion of Findings
The study set to find out the level of awareness and the use of Modern Methods of Construction
(MMC) in the provision of low cost housing, and the Modern Methods of Construction being
used in housing estate development, the critical constraints to the use of MMC in the provision
of low cost housing by housing developers and the cost comparison between houses that make
use of the MMC and traditional methods. The findings are discussed under the following
headings:
5.5.1 Level of awareness and the use of MMC in the provision of low cost housing
The study revealed that 29 of the respondents who represent (52.72%) are aware of MMC and
have actually used it in one form or the other as can be seen in Table 3. Table 1 shows the
breakdown of the Modern Method of Construction being used with respect to the various types
of housing Estate. A total of 31 of the respondents (56.36%) have been involved in the
Construction of housing Estate, of these figure, 22 of the respondents (36.06%) have used MMC
in their house construction. This therefore shows that there is a very insignificant use of Modern
Methods of Construction as at today in the Construction of Low cost housing development in
Nigeria. This is somehow related to The National Audit Office (2005) study which shows there
is increase in use of Modern Methods of Construction in the United Kingdom.
5.5.2 The Modern Methods of Construction Being Used in the Housing Estate Development
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Table 1 shows the breakdown of Modern Methods of Construction being used with respect to the
various types of housing estate. It shows that three respondents use Panelized Steel frame, six
make use of the Structural insulated panel, five use the Composite Panel while a total of eight
respondents make use of all the above method inclusive of the Tunnel form construction,
insulating formwork and the Aircrete and Plank.
5.5.3 Critical Constraints to the Use of Modern Methods of Construction in the Provision of Low
Cost Housing by the Property Developers
The constraints to the use of MMC in the provision of low cost housing by the selected property
developers were found to include the following in order of magnitude: Non availability of the
technology, High cost of technique, lack of awareness about MMC and No skilled personnel for
the technology.
5.5.4 Cost comparison of methods of housing construction
The study revealed that the cement stabilized laterite bricks is the cheapest means of construction
of low cost housing when compared to the other methods as shown in Fig 2. There is equally a
significant savings of about 40% in the total cost of walling element (i.e. both internal and
external wall) in a terrace building type where adjacent apartment share a common wall when
compared with the detached building as shown in Fig 1. Also, the cost of Easycrete Modular
concrete panel by H.S.I (i.e. off-site manufacture- panelized) and the Royal building system by
Sanderton (i.e. a Tunnel form construction) which are both forms of Modern Methods of
Construction when compared with the Traditional method of construction vis-à-vis the sandcrete
block of the LSDPC and the Stabilized laterite block of Boyln and Solbric confirms the findings
of the National Audit Office (2005) that the Cost of MMC is more expensive than the Traditional
Method.
5.5.5 Other Related Findings from the Research
Similarly, the research study shows that there is minimal use of Stabilized Earth Bricks (SEB)
and the Stabilized Cement Laterite (SCL) such as Hydra form block. This has been successfully
used in other countries of the world for the provision of low cost housing.
6. Conclusion
Housing no doubt, is very essential and it is currently out of the reach of a vast majority of
Nigerians. It can be concluded however from this study that there is an insignificant use of
Modern Methods of Construction in the provision of low cost housing in Nigeria due to the non-
availability of the technology and that the cost of MMC is higher than that of the Traditional
Method of housing construction.
7. Recommendations
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Based on the conclusion of the research study, the following recommendations are hereby
proffered:
1. There is a need to develop the MMC technology in Nigeria this may be through
technology transfer or bilateral relationship or through concerted effort by the
government or and the private sector.
2. The comparatively high cost of MMC when compared with the Traditional Method of
construction could be investigated with a view to having some local substitute/ alternative
to some of its constituent elements. This research could be championed by Professional
Bodies, Universities and Building Research Institutes in collaboration with Estate
Developers both public and private.
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Appendix
Figure A.1 Volumetric unit being craned into place Figure A.4 Image showing construction of SIP panels
Source: CE139, 2005 (Source: Kingspan TEK, 2005)
Figure A.2 Timber fame panel showing factory-applied window and insulation Figure A.5 Composite panel systems in use
Source: CE139, 2005 Source: CE139, 2005
Figure A.3 Open’ light gauge steel framed panels being erected Figure A.6 Skeletal Structure using Tunnel form construction
Source: The Forge Company, 2005 Source: CE139, 2005
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Figure A.7 Map of Nigerian states by population density Figure A.7 Map of Nigerian states by total population
Source: (Wikipedia, 2009). Source: (Wikipedia, 2009).
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Hendrik Marx, pp 553-565
Contractors’ perspectives of the condition of the construction
industry as captured by the cidb survey of construction
industry indicators 2008
HJ Marx1
1
Department of Quantity Surveying and Construction Management,
University of the Free State, Bloemfontein,
South Africa
Email: [email protected]
Abstract:
Annual monitoring of the condition of the South African construction industry is vital to
enable government and other role players to evaluate the impact of current interventions
and to timely and pro-actively implement revised legislation, strategies and
development programs to ensure the well-being and growth of the industry to achieve
the targeted goals. This monitoring of the construction industry is done annually by the
Construction Industry Development Board (cidb) in partnership with the Department of
Quantity Surveying and Construction Management of the University of the Free State.
A database with contact particulars of clients, contractors and consultants involved in
2198 projects completed in 2007 was compiled. Three separate survey forms were
faxed or e-mailed to the contractors, clients and consultants of these projects. Their
responses were captured in a Microsoft Access database. The scope of this paper is
limited to the results received from the contractors. Where possible the results were
compared with those obtained from previous similar surveys. It was found that four
percent of all projects were completed at a loss to the contractor. There are no
relationship between the profit made and the financial grade of the contractor.
Contractors were least satisfied with Provincial Departments and Public Corporations
for their ability to manage variation orders. Contractors received their certificate
payments on time on only 44% of all projects. The research questionnaire completed by
contractors included questions regarding project profitability, performance of clients
and performance of materials suppliers. No attempt was made to pin point the actual
origin of the problems identified by asking further in-depth questions. Government can
make use of the results obtained to timely and pro-actively implement revised
legislation, strategies and development programs to ensure the well-being and growth of
the industry.
Keywords:
cii, construction industry indicators, kpi
1 Introduction
The Construction Industry Development Board (cidb) Act (Republic of South Africa,
2000) was passed in 2000 to establish a statutory body aimed at driving an integrated
construction industry development strategy. This body was required as the construction
industry plays an indispensable role in the South African economy in providing the
physical infrastructure which is fundamental to the country’s development. The
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construction industry operates in a uniquely project-specific and complex environment,
combining different investors, clients, contractual arrangements and consulting
professions. It impacts directly on communities and the public at large and its improved
efficiency and effectiveness will enhance quality, productivity, health, safety,
environmental outcomes and value for money to the South African society.
In terms of this act the cidb ‘may develop target and performance indicators related to
those best practice standards and guidelines and establish mechanisms to monitor their
implementation and evaluate their impact’. Construction Industry Indicators (CIIs)
have been developed by the Department of Public Works and the cidb with assistance
from the CSIR (van Huyssteen, van Heerden, Perkins and Gyimah, n.d.: Online) to play
a useful role in developing a sustainable industry and to be adopted as a tool for
improving performance in the South African construction industry.
The CIIs of the cidb rely heavily on international experience and particularly those
indicators adopted in the United Kingdom. In the United Kingdom the first Key
Performance Indicators (KPIs) were published in 1999 in response to the Rethinking
Construction report by Egan (1998). These KPIs had three objectives, namely
(Rethinking Standards in Construction, 2006: 3):
• To provide companies and projects with a simple method of establishing a
performance measurement system;
• To provide organisations with a straightforward method of benchmarking their
performance against others in the construction industry; and
• To track long term trends in performance, and specifically, to demonstrate whether
the construction industry was achieving the targets set out in Rethinking
Construction.
Cost, time and quality are the three basic and most important performance indicators in
construction projects followed by others such as safety, functionality and satisfaction
(Chan and Ada, 2004: 203-221). Based on the Egan report the Movement for
Innovation and Construction Best Practice Programme (CBPP) was formed and is now
recognised as a leading organisation involved in the production of KPIs within the
industry (Beatham, Anumba and Thorpe, 2004: 93-117). The KPIs launched by the
CBPP are: client satisfaction, product and service, profitability, productivity, defects,
safety, predictability of time and cost, construction time and construction cost. These
KPIs were benchmarked within the construction industry and have been very successful
in introducing many companies to the subject of performance measurement (Beatham et
al., 2004: 93-117).
The cidb CIIs measure the performance of the South African construction industry by
measuring client satisfaction with the project milestone dates achieved, construction
costs versus tender amount, contractors’ performance, consultants’ performance, and the
quality of materials used. The contractors’ satisfaction is measured by their
profitability, the quality of the contract documentation, the efficiency, openness and
transparency of the contract adjudication process, the management of variation orders,
payment delays and the performance of their materials suppliers. The procurement
indicators measured include contractor performance issues utilised in the adjudication of
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Hendrik Marx, pp 553-565
tenders, the type of procurement procedure used, and the contracting strategy adopted.
Compliance with the cidb’s Standard for Uniformity (Republic of South Africa, 2008:
45) intervention regarding allowable forms of contract is also measured.
The cidb CIIs measured above have been captured since 2003, and are currently being
captured in partnership with the Department of Quantity Surveying and Construction
Management of the University of the Free State. The 2007 survey results have already
been published (cidb, 2007), (Marx 2008; 2009). This paper is part of a series of annual
papers presenting the results of this continuous survey project. It is a report on the
results of the 2008 survey for projects completed in 2007. The results of the 2007
survey are also presented with the purpose to make comparisons where possible, but are
not discussed in detail.
2 Methodology
A database, with contact particulars of clients, contractors and consultants involved in
2198 projects completed in 2007, was compiled. Three separate survey forms were
faxed or e-mailed to the contractors, clients and consultants of these projects. Their
responses were captured in a Microsoft Access database.
3 Scope
The CIIs of the cidb need to evolve from the lessons learned from previous surveys, and
are therefore subject to change and refinement. This is the reason why it is not always
possible to compare results with those obtained from previous surveys. The CIIs
considered in this report are only the project related indicators. The cidb also measures
health and safety and empowerment progress which are not discussed in this report.
Other economic indicators such as production prices, and building plans passed are
published elsewhere.
From the 2198 completed projects in the database, 854 survey forms were received back
from contractors, 438 from consultants and 280 from clients. This paper is limited to
the results obtained from the contractor survey forms.
4 Discussion of the Contractors’ Survey Results
4.1 Project type and client category distribution of responses received
Tables 1 and 2 give a summary of the survey forms completed by contractors for
projects completed in 2006 and 2007 respectively. The number of survey forms
completed is indicated for different client categories and project types. There has been
a significant increase in the number of responses received compared to the previous
year. This is due to the fact that a much larger database of projects completed was
compiled than during the previous year.
It is clear from the tables that the majority of responses received came from civil works
projects. For projects completed in 2007 the civil, non-residential and electrical projects
represent 46%, 16% and 17% of all the responses respectively. The results in this report
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Hendrik Marx, pp 553-565
are therefore presented per project type and per client category to ensure that the results
for other types of projects do not disappear in the average of all projects.
Most responses for 2007 were received from the private sector (37%). Public
corporations followed with 18% and provincial departments with 15%. The response
received is well distributed between the different project types as well as between the
client categories. Although 12 responses were received for public private partnerships it
constitutes only 1% of the responses received. The number of responses received in
each category should always be considered when evaluating the results. It is important
to note that only one survey form was received for a public private partnership project
completed in 2006, and the opinion, from a single contractor, can not be considered an
average response.
Table 1. Survey responses received for different project types and client categories 2006
% of
Total Total
Project Type 28% 10% 7% 32% 6% 17% 0%
No. Survey
Results
Residential Building 15 4 0 0 7 1 2 1 7%
Non-residential Building 68 24 8 7 29 0 0 0 31%
Civil Works 111 24 9 8 24 11 35 0 51%
Mechanical Works 7 4 1 0 2 0 0 0 3%
Electrical Works 6 1 1 0 4 0 0 0 3%
Special Works 11 4 2 1 3 0 1 0 5%
Total
218 61 21 16 69 12 38 1
No.
e.g. ESKOM, ACSA
Public Corporation
District Council
Public Private
Private sector
Metropolitan
Department
Department
Partnership
Regional /
Provincial
National
Council
Client Category 2006
4.2 Contractor financial grade distribution of responses received
The contractors are registered with the cidb in different financial grades, indicating their
financial capability to complete projects of certain values. Tables 3 and 4 show the
distribution of survey forms received from different financially graded contractors in
terms of project types. For 2007 only 791 of the 854 contractors indicated in Table 2
completed this question. This implies that some contractors who participated may not
be registered with the cidb or perhaps do not know their financial status as registered at
the CIDB.
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Hendrik Marx, pp 553-565
Table 2. Survey responses received for different project types and client categories 2007
% of
Total Total
Project Type 37 18 7 15 10 12 1
No. Survey
Results
Residential Building 48 34 4 1 8 1 0 0 6
Non-residential Building 136 52 23 9 32 7 12 1 16
Civil Works 393 165 26 25 43 54 72 8 46
Mechanical Works 53 12 8 7 14 6 6 0 6
Electrical Works 144 33 64 2 22 15 6 2 17
Special Works 80 22 26 14 11 4 2 1 9
Total
854 318 151 58 130 87 98 12
No.
e.g. ESKOM, ACSA
Public Corporation
District Council
Public Private
Private sector
Metropolitan
Department
Department
Partnership
Regional /
Provincial
National
Council
Client Category 2007
Grade 1 (up-coming, small) contractors were not targeted in this survey due to the fact
that most of them do not possess a facsimile machine or have an e-mail address.
However, for projects completed in 2007, 1% of the responses received came from
Grade 1 contractors. A well distributed response was received, with the best response
from Grade 4 (21%) and Grade 6 (21%) contractors.
Table 3. Survey responses received per project type and contractor financial grading 2006
Total No. of
Project Type 0% 7% 10% 25% 19% 13% 14% 6% 6%
Projects
Residential Building 14 2 1 4 3 3 1
Non-residential Building 48 2 5 16 12 9 4
Civil Works 101 4 7 24 15 15 16 10 10
Mechanical Works 3 2 1
Electrical Works 6 2 3 1
Special Works 6 2 2 1 1
Total No. of Projects 178 0 12 17 45 33 24 25 11 11
1 2 3 4 5 6 7 8 9
Contractor Financial Grade 2006
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RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Hendrik Marx, pp 553-565
4.3 Contractor profitability for different project types
Tables 5 and 6 indicate the distribution of contractor profitability for different project
types for projects completed in 2006 and 2007 respectively. Table 6 shows that for
projects completed in 2007 the largest percentage of projects showing losses were for
residential building projects (14%), while the best contractor profit (>10%) was
achieved on 55% of all mechanical projects.
The project types, with the highest percentage of projects with profitability of 6% and
more were mechanical (98%), special (86%) and electrical works (77%). Table 6
further shows that a loss was made on 4% of all the projects completed in 2007.
Table 4. Survey responses received per project type and contractor financial grading 2007
Total No.
Project Type 1% 8% 7% 21% 12% 21% 13% 7% 10%
of Projects
Residential Building 43 0 0 2 16 5 6 7 2 5
Non-residential
126 2 3 5 37 17 30 15 6 11
Building
Civil Works 371 3 18 18 74 36 85 62 29 46
Mechanical Works 50 0 12 2 4 3 17 5 1 6
Electrical Works 131 0 20 18 32 19 21 8 12 1
Special Works 70 0 10 10 4 18 6 6 3 13
Total No. of
791 5 63 55 167 98 165 103 53 82
Projects
1 2 3 4 5 6 7 8 9
Contractor Financial Grade 2007
Table 5. Profitability of projects for different project types 2006
% of all
Profitability % of Projects in each Project Type
Projects
Loss 0 3 5 17 0 0 4
0 - 5% 33 20 32 33 0 0 26
6 - 10% 40 40 34 17 67 64 38
> 10% 27 37 29 33 33 36 32
Non-residential
Mechanical
Residential
Electrical
Building
Building
Special
Work
Work
Work
Work
Civil
2006
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Hendrik Marx, pp 553-565
Table 6. Profitability of projects for different project types 2007
Profitability % of Projects in each Project Type % of all Projects
Loss 14 6 5 0 1 3 4
0 – 5% 23 23 32 2 22 11 25
6 – 10% 48 54 36 43 38 55 42
> 10% 15 17 27 55 39 31 29
Non-residential
Mechanical
Residential
Electrical
Building
Building
Special
Work
Work
Work
Work
Civil
2007
Table 7 shows the profitability of contractors per financial grade, for projects completed
in 2007. It is clear that Grade 8 and 9 contractors were the best performers who made
more than 10% profit on 49% and 48% of all their projects respectively. However,
these same grade contractors were also the worst performers who made a loss on 11%
of their other projects. Ninety-three percent of all projects completed by Grade 2
contractors achieved a profitability of 6% and more, while the same profit is only
achieved on 76% of the projects of Grade 8 and 9 contractors. There is thus no
relationship between profit and the financial grade of a contractor.
Table 7. Profitability of contractors per financial grade 2007
Profitability % of Projects in each financial grade
Loss 2 2 1 7 4 2 11 11
1 - 5% 5 13 45 21 36 20 13 13
6 - 10% 49 56 36 40 39 59 27 28
> 10% 44 29 18 32 21 19 49 48
2 3 4 5 6 7 8 9
Contractor financial grade
4.4 Performance of the client or the client’s consultants
The contractors’ satisfaction with the client or client’s representative (consultant) was
tested with regard to overall performance, the quality of the tender documents and
specification, efficiency, openness and transparency of contract
procurement/adjudication processes followed, and management of variation orders.
Tables 8 and 9 show the results obtained for projects completed in 2006 and 2007
respectively. The best overall client category for 2007 was the regional / district
councils, with an average satisfaction level of 80% followed by national departments
with 78%. The worst overall performance was achieved by public private partnerships,
with a satisfaction level of 74%. Except for provincial departments, the overall
performance of client bodies improved from 2006 to 2007.
The average satisfaction levels for the quality of documentation, specifications,
procurement processes and management of variation orders were high.
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Hendrik Marx, pp 553-565
The worst satisfaction level was obtained for the management of variation orders by
public corporations (72%), and provincial departments (73%). There has been an
improvement in the performance of national departments to manage VO’s if the 2007
results (75%) are compared with the 2006 results (66%). However, the performance of
provincial departments, metropolitan as well as regional / district councils were 9 to 11
percentage points lower for the management of VO’s if the 2007 results are compared
with the 2006 results. Note that the 100% satisfaction level with public private
partnership clients for projects completed in 2006 was obtained from only one project.
Table 8. Contractors’ Level of Satisfaction with the Client or Client’s Representatives’ Performance 2006
Satisfaction level %
Overall 73 72 74 80 74 79 100
Documentation / Specifications 83 78 84 83 88 88 100
Procurement / Adjudication 83 90 82 84 89 88 100
Management of VO's 77 73 66 82 87 88 100
District Council
Public Private
Metropolitan
Corporation
Department
Department
Partnership
Provincial
Regional/
National
Council
Private
Public
Sector
2006
Table 9. Contractors’ Level of Satisfaction with the Client or Client’s Representatives’ Performance 2007
Satisfaction level %
Overall 76 77 78 77 77 80 74
Documentation / Specifications 76 76 79 80 76 81 76
Procurement / Adjudication 79 76 80 80 76 78 76
Management of VO's 75 72 75 73 76 77 76
District Council
Public Private
Metropolitan
Corporation
Department
Department
Partnership
Provincial
Regional/
National
Council
Private
Public
Sector
2007
To determine whether the contractors’ financial grade plays any role in the evaluation of
the performance of the client bodies, Tables 10 and 11 were also created. It is
interesting to note that higher grade contractors (6 to 9) are less satisfied with the
different client bodies than the Grade 2 to 5 contractors. In particular, the Grade 9
contractors gave the client bodies a score of only 61% for the management of variation
orders in 2007.
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Table 10. Contractors’ Level of Satisfaction: Client or Client’s Representatives’ Performance 2006
Satisfaction level per contractor financial grade %
Overall 85 88 78 82 74 71 60 73
Documentation / Specifications 85 89 81 82 85 73 60 69
Procurement / Adjudication 86 85 80 84 81 76 83 74
Management of VO's 86 82 79 82 70 63 65 66
2006 2 3 4 5 6 7 8 9
Contractor financial grade
Table 11. Contractors’ Level of Satisfaction: Client or Client’s Representatives’ Performance 2007
Satisfaction level per contractor financial grade %
Overall 85 81 80 81 75 76 71 67
Documentation / Specifications 86 80 79 81 77 78 68 71
Procurement / Adjudication 86 80 80 81 77 78 71 73
Management of VO's 84 76 76 78 75 75 65 61
2007 2 3 4 5 6 7 8 9
Contractor financial grade
4.5 Payment delays
The average number of days delay between certification and receipt of payment of
interim and final certificates is shown in Tables 12 and 13 for projects completed in
2006 and 2007 respectively.
There was a decrease from 17% to 9% in the number of all projects where payments
were made quickly within 14 days, if the 2006 results are compared with the 2007
results. In 2007 the private sector clients were the worst early payers, with payments
made within 30 days on only 35% of their projects. The best performing client
categories with 59% and 56% of project payments made within a month were the public
private partnerships and provincial departments respectively. The percentage of
projects with payments that took more than 30 days increased from 2004 to 2007 from
43% to 56%. In 2007 the contractors for 20% of all public corporation projects and
21% of all private sector and provincial department projects were only paid after 60
days. It is of great concern that only 44% of all contractors in 2007 were paid on time
within 30 days. Contractors refrain from standing up to their contractual right to be paid
on time for fear of losing job opportunities in the future. This creates cash flow
problems for contractors and the cidb should communicate this with client bodies.
4.6 Performance of materials suppliers
Contractors were requested to indicate their overall satisfaction level with their
materials suppliers, the ability of the suppliers to keep to their quoted/agreed upon
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Hendrik Marx, pp 553-565
delivery schedules and whether the materials delivered on site complied with the
specifications. The results are indicated in Tables 14 and 15 for the projects completed
in 2006 and 2007 respectively. For projects completed in 2007, Table 15 shows that the
best overall performance of materials suppliers was achieved for electrical (82%),
special (80%) and mechanical works (79%) projects. The lowest performance (74%)
was experienced at residential buildings projects. The best performance for delivery
and delivered as per specification was also experienced for electrical, special and
mechanical works projects. Delivery as per agreed delivery schedule achieved the
lowest score of 72% for residential building projects.
Table 12. Days delay between certification and payment 2006
% of all
Avg. Days Delay % of Projects in each Client Category
Projects
≤ 14 16 0 19 15 25 30 0 17
14 to 30 36 57 37 42 42 33 0 40
30+ to 60 31 29 25 22 33 31 100 28
60+ to 90 15 9 13 10 0 3 0 9
90+ to 120 0 0 6 4 0 0 0 2
120+ 2 5 0 7 0 3 0 4
District Council
Public Private
Metropolitan
Corporation
Department
Department
Partnership
Provincial
Regional/
National
Council
Private
Sector
Public
2006
Table 13. Days delay between certification and payment 2007
% of all
Avg. Days Delay % of Projects in each Client Category
Projects
≤ 14 7 10 9 13 3 7 42 9
14 to 30 28 32 40 43 40 47 17 35
30+ to 60 44 38 38 23 44 36 33 38
60+ to 90 16 12 7 13 12 5 0 13
90+ to 120 2 3 3 3 0 3 0 2
120+ 3 5 3 5 1 2 8 3
District Council
Public Private
Metropolitan
Corporation
Department
Department
Partnership
Provincial
Regional/
National
Council
Private
Sector
Public
2007
The low satisfaction level (65%) for materials delivered on time for mechanical projects
in 2006 improved to 79% in 2007.
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Hendrik Marx, pp 553-565
The materials suppliers’ data was also evaluated in terms of the contractors’ financial
grade as indicated in Tables 16 and 17 for projects completed in 2006 and 2007
respectively. There is a tendency for the higher financial grade contractors to be less
satisfied with their materials suppliers’ performance. Table 17 shows that the problem
experienced is not with the quality (specification) of the materials but with the delivery
capacity of the suppliers. Their projects are larger and it is likely that suppliers can not
keep up with the larger orders placed.
Table 14. Materials suppliers’ performance 2006
Contractors' Level of Satisfaction % with the Materials Suppliers for each Project Type
Overall Performance 75 77 76 77 85 81
Keep to agreed upon Delivery Schedule 74 81 86 65 100 86
Material delivered as per Specification 92 81 86 87 100 88
Non-residential
Mechanical
Residential
Electrical
Building
Building
Special
Work
Work
Work
Work
Civil
2006
Table 15. Materials suppliers’ performance 2007
Contractors' Level of Satisfaction % with the Materials Suppliers for each Project Type
Overall Performance 74 78 76 79 82 80
Keep to agreed upon Delivery Schedule 72 75 75 79 81 79
Material delivered as per Specification 82 82 79 85 88 84
Non-residential
Mechanical
Residential
Electrical
Building
Building
Special
Work
Work
Work
Work
Civil
2007
Table 16. Materials suppliers’ performance 2006
Contractors' Level of Satisfaction % with the Materials Suppliers
for each contractor financial grade
Overall Performance 83 83 80 81 83 61 59 79
Keep to agreed upon Delivery Schedule 86 80 79 80 80 61 56 76
Material delivered as per Specification 88 87 82 85 87 75 79 82
2006 2 3 4 5 6 7 8 9
Contractor financial grade
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Hendrik Marx, pp 553-565
Table 17. Materials suppliers’ performance 2007
Contractors' Level of Satisfaction % with the Materials Suppliers
for each contractor financial grade
Overall Performance 84 78 80 78 77 77 73 75
Keep to agreed upon Delivery Schedule 84 78 79 76 75 74 70 73
Material delivered as per Specification 86 85 84 83 80 80 79 80
2007 2 3 4 5 6 7 8 9
Contractor financial grade
5 Summary and Conclusion
The cidb CIIs measure the performance of the South African construction industry by
measuring client satisfaction with the project milestone dates achieved, construction
costs versus tender amount, contractors’ performance, consultants’ performance, and the
quality of materials used. The contractors’ satisfaction is measured by their
profitability, the quality of the contract documentation, the efficiency, openness and
transparency of the contract adjudication process, the management of variation orders,
payment delays, and the performance of their materials suppliers. The procurement
indicators measured include contractor performance issues, the type of procurement
procedure used, and the contracting strategy adopted. Compliance with the cidb’s
Standard for Uniformity intervention regarding allowable forms of contract is also
measured.
Three separate survey forms were faxed or e-mailed to the contractors, clients and
consultants of projects completed in 2007. Their responses were captured in a
Microsoft Access database. Only the results of the responses received from contractors
are discussed in this paper.
The CIIs focus on critical aspects of project outputs or outcomes. The systematic use of
CIIs is essential, as the value of CIIs is almost completely derived from their consistent
use over a number of projects and years. Data collection must be as simple as possible
and a large sample size is required to reduce the impact of project specific variables.
The main findings of the 2008 survey of contractors’ opinions for projects completed in
2007 are as follows:
1) Residential building projects show the highest percentage (14%) of contractor
losses.
2) Mechanical Works projects show the highest percentage (55%) of projects with
contractor profit > 10%.
3) There is no relationship between profit and the financial grade of contractors.
4) Except for provincial departments the overall performance of client bodies improved
from 2006 to 2007, but for all client bodies the performance regarding
documentation, procurement and management of variation orders is lower.
Management of variation orders achieved the lowest score.
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Hendrik Marx, pp 553-565
5) The higher financial grade (>6) contractors are less satisfied with the performance
of different client bodies.
6) Only 44% of all contractors are paid on time within 30 days.
7) Contractors gave materials delivery for residential building projects the lowest
score.
8) Higher financial grade contractors are less satisfied with the delivery capabilities of
their materials suppliers.
6 References
Beatham, S, Anumba, C. and Thorpe, T. 2004. KPIs: a critical appraisal of their use in
construction. Benchmarking: An International Journal, 11(1), pp. 93-117.
Chan, A.P.C. and Ada, P.L. 2004. Key performance indicators for measuring
construction success. Benchmarking: An International Journal, 11(2), pp. 203-221.
Egan, J. 1998. ‘Rethinking Construction: The Report of the Construction Task Force”.
Her London: Majesty’s Stationery Ofc.
Marx, H.J. 2008. Contractors' perspective of the condition of the construction industry
as captured by the CIDB survey of construction industry indicators 2007. In:
Conference proceedings of QS + 20/20 Vision Beyond 2010. Quantity Surveying
Conference, Midrand, South Africa 10 October, CD ROM version.
Marx, H.J. 2009. Consultants’ and clients’ perspectives on the construction industry as
captured by the CIDB survey of construction industry indicators 2007. In: Conference
proceedings of The Fourth Built Environment Conference. Association of Schools of
Construction of Southern Africa, Livingstone, Zambia, 17-19 May 2009, CD ROM
version.
Republic of South Africa. 2008. Board notice 9 of 2008, Government gazette, 30692,
February1. Pretoria: Government Printer.
Republic of South Africa. 2000. The Construction Industry Development Board act, 38
of 2000 revised standard for uniformity in construction procurement. South Africa:
Government Printer.
Rethinking Standards in Construction: can standards support industry performance
improvement? 2006. Report of a strategic workshop to initiate a new approach to UK
standardisation, May, pp.1-16.
The Construction Industry Development Board (CIDB). 2007. The cidb Construction
Industry Indicators Summary Results. [online]. South Africa, Pretoria. Available from:
<http://www.cidb.org.za/documents/KnowledgeCentre/cii%20brochure%20with%20i
nlay.pdf> [Accessed: 25 July 2008].
van Huyssteen, S., van Heerden, L., Perkins, P. and Gyimah, O. n.d. The identification
and measurement of performance indicators for the South African construction
industry. [online]. Available from:
<http://buildnet.csir.co.za/cdcproc/docs/3rd/vanhuyssteen%20_vanheerden.pdf>
[Accessed: 25 July 2008].
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Francois Viruly, pp 566-577
The transformation of the South African built environment –
an institutional approach
Prof. Francois Viruly
School of Construction Economics and Management
University of the Witwatersrand
Johannesburg, South Africa
Paper Presented at the Cobra Conference
University of Cape Town
Email: [email protected]
Abstract:
This paper develops the proposition that the characteristic of the South African built
environment can largely be explained by the economic and social institutional
framework that continues to characterise this market. The proposition is developed
within the context of the Institutional Economics literature, and demonstrates the
relevance of this theoretical framework in explaining the present and future trajectory of
the South African built environment – the construction and property sectors. While
recent public and private sector policies and interventions, have attempted to alter the
players, in the South African economy, there is growing evidence, and concern, that a
significant institutional “lock in” continues to perpetuate historical market outcomes.
There is also a growing realisation that government intervention may not have been
successful in changing the institutional framework and structure of the South African
built environment. This suggests that when strong institutional “lock in” exists, public
sector interventions that attempt to alter market institutional arrangements should target
different echelons of the institutional hierarchy.
Keywords:
Institutional economics, lock In, South Africa Transformation, Black Economic
Empowerment, Institutional Hierachy,
1 Introduction
This paper primarily considers the institutional changes, and related policy interventions
that have influenced the South African built environment since 1994. While there is
widespread agreement that BEE (Black Economic Empowerment) is an essential part of
redressing the legacy of apartheid, the impact that such policy interventions have had on
the structure of the property market, remains disappointing. It can been argued that BEE
interventions have primarily benefitted a small group of politically well connected
individuals, and has not had a significant impact in broadening property ownership and
transformation of the construction sector.
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The paper suggests that institutional economics provides a useful theoretical approach
to clarify the path that the South African property and construction sectors have taken in
the post-apartheid era. In the past decade, public sector driven Black Economic
Empowerment interventions promoted by government have been significant, and
include legislation, as well direct procurement driven interventions. There is however, a
growing concern that these policy interventions have shown limited success in altering
the institutional framework and economic behaviour of participants in the South African
Built Environment. This perceived failure is encouraging government and certain
interest groups to promote new approaches to accelerate institutional change.
2 The Theoretical Background
The institutional approach provides a useful paradigm that explains the influence that
social and economic rules and regulations have on the structure of a market. From an
economic perspective, the institutional approach is based on the premise that the
behaviour of market participants is influenced by formal and informal rules and
regulations. A central theme of New Institutional Economics (NIE) is that markets are
developed by human activity, and therefore, reflect the power and interests within
society. A change in power relationships can therefore result in new market institutions
and a change in economic behaviour and economic outcomes.
The path that institutional change takes remains an important point of contention. While
it is tempting to think that institutional change results in optimum socioeconomic
outcomes, there is a growing understanding why this may not be the case. North (1990)
emphasizes that institutional transformation is always influenced by some level of path-
dependence. Path Dependence is based on the proposition that an institutional
framework is influenced by socioeconomic drivers that define the trajectory that
institutional change takes. The trajectory may result in non-optimal outcomes.
Mahoney (2000) identifies three explanations of path dependence–namely the
utilitarian, functional and power centered explanations. The utilitarian explanation is
largely based on the proposition that institutions are reproduced because potential
benefits are outweighed by the costs. North (1990) emphasizes that increasing returns
associated with a particular institutional framework provides disincentives for
institutional change – even if such a change could result in greater efficiencies. The
functional approach suggests that an institutional framework will continue to exist as
long as it serves a broader system and socioeconomic outcomes. It can be argued that
property institutions in the apartheid years continued to exist because they were an
integral part of a broader political system. In turn, the collapse of apartheid required the
transformation of the property institutional environment as it no longer served a
functional role. The power centered approach suggests that an institution can persist
even when most individuals or groups prefer to change it. It exists provided the elite that
benefits from the existing arrangement has sufficient strength to promote its
reproduction (Mahoney 2000).
From a policy perspective, the challenge therefore, often lies in developing market
interventions that can fundamentally alter the parameters that delineate the institutional
“path” of a market. The important challenge for policy makers in South Africa has been
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to devise interventions that can promote the racial transformation of the promoter
sector. The South African case study also suggests that attempting to change the
institutional framework of a market requires interventions targeted at different levels of
the institutional hierarchy.
Keogh & D’Arcy (1999), suggest that the property institutional framework can be
explained in terms of an institutional hierarchy. The property market comprises a three
tier institutional framework. First, the property market exists within an institutional
framework defined by political, social, economic and legal rules and conventions. This
includes constitutional arrangements and the legislative environment. At the next level,
the property market itself is considered as an institution with a range of characteristics
which describe its structure and determine its scope and function. Finally, at the third
level, comprise organizations that function in the property market – namely property
owning companies, professional service providers and property associations.
The Institutional Environment
• political institutions
• social institutions
• economic institutions
• legal institutions
The Property Market as Institution
• market (and non-market aspects)
• decentralised and informal
• legal and conventional aspects of
property rights
• legal and conventional aspects of
land use and development
Property Market Organisations
• users
• investors
• specialist developers
constructors
• property service providers
• financial service providers
• professional bodies
• governmental and non-
governmental agencies
Figure 1. Institutional Explanation of Property Development
(Source: Guy and Henneberry, 2002)
The hierarchy of institutions that make up the Built Environment influence each other in
numerous different ways. A top down approach suggests that the legislative
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environment influences the characteristics of the property market and the organisations
that interact within this market. But there is always the possibility that the drivers of
path dependence and institutional lock–in may reduce the trickledown effect of such
interventions.
Yet, it can also be argued that the path of institutional change can also be effected
through a bottom-up approach - underpinned by the decisions that property market
organisations and interest groups desire. This may ultimately influence the sectoral
institutional framework and the legislative environment. For the policy maker the
challenge lies in identifying the level of the institutional hierarchy that offers the best
opportunity to alter the path of institutional change.
Taking a historical perspective, apartheid legislation, which dominated the policy and
legislative environment, had a profound impact on the structure of the South African
built environment. The apartheid system determined, on a racial basis, the organisations
in the built environment as well as the interactions that existed between players. These
interactions also promoted relations that excluded black interest groups from the sector,
and as a result, few black owned companies existed at the organisational level.
The hierarchy of property institutional interventions in the South African property
market is illustrated in diagram 2. It largely builds on diagram 1 and depicts
interventions that have occurred at the Policy/Legislative, Sectoral and Organisational
levels. It also shows that with time the South African Black Economic Empowerment
intervention environment has moved from the Legislative/Policy environment, to the
building and supporting of property organisations.
1955 Freedom Charter
1990 NAFCOC Black Economic
Utilitarian Explanation
Empowerment Programme
Cost of system
1994 Elections and RDP
Transaction cost
Policy and
Functional
Legislation 1996 GEAR
Explanation
1999 Competition Act Developmental State
2001 BEE Commission Codification CSR
2003 BBBEE Act Power Explanation
Sectoral Property Transformation Charter Black Capitalist Class
Institutions (2000-2007) Conglomerates
Procurement Policy
BBBEE Company promotion
Organizations SAIBPP ( South African Institute
of Black Property Practitioners)
The South African National
Property Empowerment Co
Figure 2. BEE Institutional Hierarchy and The Property Sector
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Although the initial BEE interventions occurred at the legislative level, by 2000 there
was growing evidence that BEE legislation attempted to redress property ownership was
not having the desired effect. The view was that the required results would only be
achieved through interventions at the sectoral level of the institutional hierarchy. This
resulted in the negotiation of sectoral transformation charters. More recently,
procurement policies have attempt support new organizations in the sector.
3 The Historical Background of Black Economic Empowerment
South Africa’s policy of racial spatial segregation can historically be retraced to the
1913 Land Act which divided the country on racial lines. This was followed by the
Groups Area Act in 1952 which furthered legislated where blacks could and could not
own properties.
The apartheid system also promoted a type of - volkskapitalism , from the mid 1950s
– leading to the promotion of a white property owning class. In the mining sector,
Afrikaans controlled only 1 percent of the sector in 1949. By 1960 the figure had moved
to 22 percent. The apartheid state therefore, used the legislative environment to foster a
particular economic structure.
By the late the 1980’s economic sanctions and a changing political environment reduced
the legitimacy of the institutional framework which in turn resulted in a “Break” in the
institutional path. In 1994 the first democratic elections created an opportunity for the
South African economy and property market to shift the institutional framework in a
new direction.
Since 1994, South Africa has embarked on a number of programmes aimed at
empowering groups of individuals who were negatively affected by the previous system
of apartheid – such interactions are better known as BEE or Black Economic
Empowerment interventions. The policy was largely based on the premise that the
future democratic process of the country would be compromised if some emphasis was
not placed on redressing the inequalities of the past. The BEE policy was based on
broader policy documents such as the Reconstruction Development Programme (RDP),
and the GEAR – Growth Employment and Redistribution (GEAR – 1996) policy. In
1998 the transformation policy was strengthened with more targeted interventions
which included the Employment Equity Act (1998), followed by the BBBEE act (2003)
(Broad Based Black Economic Empowerment).
As suggested by Ponte et al, (2007), South Africa’s Black Economic Empowerment
policy can be divided into three phases;
Phase 1 from RDP to BEE Commission
In the early period the focus was on the RDP programme and the GEAR policy. There
was a general view that government intervention should not harm business practices. In
this initial phase government lacked a coherent BEE policy. By 2001 government
initiated the BEE commission. The final commission report released in July 2001 made
clear that the state had to play a more active role in economic transformation, and that
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policy had to develop a greater understanding of the processes associated with it. A
suggestion was that the BEE process should be codified in a manner that sectors and
organisations could benchmark their BEE status. By 2001 there was a growing
understanding that institutional “lock in” was substantial and that this could only be
altered through agreed codes negotiated at the sectoral level of the institutional
hierarchy.
Phase 2 from the Early Industry Charters To Broad Based BEE and Codes
(20000 -06)
The shift towards sectoral institutional interventions was accelerated through the
negotiation of sectoral transformation charters. In 2000 the Petroleum and Liquid Fuels
(P&LF) sector adopted a transformation charter calling for a 25% transfer of equity to
black investors. This was followed by the mining charter which called for 26% equity
transfer. The mining charter also identified seven pillars of broad based black economic
Empowerment - namely equity / ownership. Human resource, development,
employment equity, beneficiation, housing, affirmative procurement, and community
development. The Mining charter also accompanied a ‘scorecard’ listing five and ten
year targets for the industry.
The later charters were published in the wake of the release of the Department of Trade
and Industry (DTI) strategy document on BEE in march 2003 ((DTI, 2003) , the
passing of the 2003 BB-BEE act , and the Department of Trade and Industry code of
good practice (DTI 2005). To a degree, the BBBEE act provided the legislative
environment that pushed change at the sectoral institutional level. The DTI agreed code
of good practice also started to play a role in promoting new organizations through the
creation of a chain of compliance. The emphasis moving towards procurement, training
and the promotion of black owned property companies in the sector.
The DTI code of good practice promotes the transformation of the industry through the
following objectives;
1. Direct empowerment and management. The extent to which historically
disadvantaged South African own shares or have access to economic benefits,
dividends payments, and the proportion of historically disadvantaged South
Africans that have access to positions in senior levels of management.
2. Human resource development and employment equity enterprises are required to
comply with employment equity and skills development legislation to bring
about improved human resource development and an equitable representation of
HDSA at all levels.
3. Indirect Empowerment. The creation and nurturing of new enterprises by
HDSAs with particular emphasis on preferential procurement and enterprise
development.
4. Miscellaneous sector –specific issues; in order to allow sectors and enterprises to
tailor the score card to their needs.
In conclusion, South Africa’s black Economic Empowerment policy has attempted to
alter an institutional dependency path. Although the initial interventions occurred at a
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policy level, it has become that interventions at this level would not be effective in
addressing the institutional “lock-in” that existed. From a policy perspective this has
resulted in policy instruments that have focused increasingly on the sectoral and
organizational institutional hierarchical levels.
4 BEE and Property Transformation Charter
Although the emphasis of land reform and redistribution has always received high
priority by the ANC and the SA government since 1994, the transformation of the built
environment and the property market in particular accelerated after 2003.
The catalyst that encouraged discussions around the property charter was primarily the
Broad Based Black Economic Empowerment Act (2003). The Board Based Economic
Empowerment Act (2003) emphasized the need to promote the achievement of the
constitutional right to equality, increase broad based and effective participation of black
people in the economy and promote a higher growth rate, increased employment and
more equitable income distribution; it also focused on establishing a national policy on
broad based Black Economic Empowerment so as to promote the economic unity of the
nation, protect the common market, and promote equal opportunity and equal access to
government services,
The initial discussions in the property sector encompassed a number of interest groups
including the South African Property Owners Association (SAPOA), The Estate
Agencies Board (EAAB), The South African Institute of Black Property Practitioners
(SAIBBP), The Women’s Property Network (WPN) and the National Department of
public Works. The Property Transformation Charter was gazetted by government on 4
October 2007.
The agreement underlines some of the challenges facing the property sector and
emphasizes the following;
- That due to apartheid legislation , blacks have generally been denied access to
the property market;
- Despite legislative interventions , the transformation of the sector has generally
been slow;
- The South African property sector is dominated by certain large enterprises;
- Employment in the property sector continues to be underrepresented by blacks
and females;
- The investment in skills is inadequate;
- Preferential procurement has been implemented in sufficiently;
- Enterprise development;
- Lack of investment in under-resourced areas;
- A view that administrative and other procedures are cumbersome.
The charter largely responds to section 12 of the BBBEE Act which encourages sectors
to develop Transformation Charters. The charter applies to the South African
property sector, and in particular to all enterprises engaged in property ownerships or
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the provision of property services, also includes practitioners and enterprises involved in
property development. The property transformation charter encapsulates two critical
components. These are the Charter council and the sector agreed scorecard.
- To consider the executive structure with adequate capacity;
- To oversee and monitor the implementation of the charter;
- To receive and approve enterprise annual BBEE reports;
- To issue guidance notes on the interpretation and application of the charter;
- To prepare an annual report on progress in implementing the charter; and
- To liaise with and report to the BEE Advisory Council on transformation of the
sector.
The scorecard provides the targets that the sector wishes to achieve over a five year
period. They are summarized in Table 1.
Table 1. Property Sector Score Card
(Source: Property Sector Transformation charter, 2007)
1. Employment Equity (Target) 5 Year Target
Black People in senior Management 30%
Black Women in senior Management 15%
Black people in Middle Management 37.5%
Black Women in Middle Management 20%
Black people in Junior Management 40%
Black women in Junior Management 20%
2. Skills Development
% of payroll per annum on skills development 1.5%
% of staff learnerships for black people 2.5%
% of staff in mentorships for black people 2.5%
Compliance with the skills Development Act No. 97 of 1998
3. Procurement
Eligible procurement spend on BBEE 70%
Eligible procurement spend on property services enterprises with a BBBEE
40%
status level one to level four
4. Enterprise Development
% of net profit before tax on monetary enterprise development 3%
% of profit before taxation on non –monetary enterprise development 2%
% disposal to level one to level four BBBEE enterprises over a five year 35%
period
5. % Economic Interests held by black people and 25% plus one vote
participation by black people in voting rights
economic interests held by black women and participation by black women in 10%
voting rights
participation in ownership by broad based ownership schemes 2.5%
6. Control
black people at board level 40%
of black women at board level 20%
black people at top management level 40%
7. Development
Development investment in under –resourced areas as a % of total annual 10%
investments.
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8. Corporate Social Responsibility
Spending on:
- Education
- Environment 1% of net profit
- Arts and Culture to be spent on
- Health care ( HIV and AIDS awareness) CSI.
- Sport
- Job Creation
9. Gender Transformation
- Devise appropriate Programmes
- Target skills development
5 Conclusion
The Property Transformation Charter therefore intervenes in the property market by
promoting black property ownership, skills development, procurement and enterprise
development, gender transformation, and the development areas that have been
neglected in the past.
Although legislation played an important role in initiating discussions around the
Property Transformation Charter, the scorecard was negotiated within the property
sector and thus may largely be seen as an intervention that has occurred directly in the
sectoral and organizational hierarchical spheres of the institutional environment.
But, the progress in transforming the transformation of the industry continues to be slow
and there are increasing pressures to initiate certain new initiates accelerate the process.
Moreover, in recent months the Department of Public Works has become more
circumspect in determining who it wishes to interact with. At present the department
will only undertake long term leases with companies that have at least a 40% black
property ownership. Government is also actively promoting a procurement policy that
offers, facility management, property management and development activities to black
owned companies. Thus government procurement policy is increasingly being used as
a tool to directly promote organisations that have the correct Black Economic
Empowerment credentials in the in the property sector.
In May 2009 an initiative saw the creation of a Property Transformation Coalition
(a coalition of various black organisations), comprising black owned property interest.
The main aim of this coalition being to “accelerate the transformation process”. Added
to this initiative is the proposed creation of the South African National Property
Empowerment Company (SANPEC). The company is expected to facilitate the
acquisition of properties by black investors, support the activities of the of the property
transformation charter, provide a broad accelerated and promote the holistic
transformation of the South African property market.
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6 Acknowledgement
The approach presented in this paper was first presented at the ERES conference,
Stockhom – June 2009 . Input received from participants at the ERES conference were
incorporated in this paper.
7 References
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Beavon, K. Johannesburg: The Making and Shaping of a City. Pretoria: Unisa, 2004.
Cahan,S.F, and van Staden C.J ‘ Black Economic Empowerment, Legitimacy And The
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City of Johannesburg. The Growth and Development Strategy for Johannesburg. 2006.
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Guy, S. and Henneberry, J. (2002), Development and Developers, Blackwell,Oxford
Hamann,R., S.Khagram and S. Rohan (2008) ‘South Africa’s Charter Approach to Post-
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Mandy, N., (1984) A City Divided: Johannesburg and Soweto. Macmillan.
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Mohamed, G. And S.Roberts (2008) ‘Weak Links in the BEE Chain? Procurement,
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Natrass, N. (1994) ‘South Africa: The Economic Restructuring agenda-a critique of the
MERG report’, Third World Quarterly 15(2), pp 219-225.
Needham,B. and E. Louw (2006) ‘Institutional Economics and Policies for Changing
Land Markets: the Case of Industrial Estates in the Netherlands’ Journal of Property
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North, C, N. (1990), Institutions, Institutional Change and Economic Performance.
Cambridge University Press, New York.
Okechukwu C Iheduru (2004) ‘Black Economic Power and Nation-Building in Post-
Apartheid South Africa’ The Journal of Modern African Studies 42 (1), pp 1-30.
Ponte,S.,Roberts,S and L van Sittert (2007)’Black Economic Empowerment, Business
and the State of South Africa’ Development and Change 38(5), pp 933-955.
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Urban Age Conference. Johannesburg challenges of inclusion? The London School of
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LandMark 2006.
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
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September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
E A L Venter and C E Cloete, pp 578-594
A critical analysis of the influences of city planning policies on
property development within a metropolitan municipality.
E.A.L. Venter1and C E Cloete1
1
Department of Construction Economics
University of Pretoria
South Africa
Email: [email protected]; [email protected]
Abstract
The current planning system in the City of Tshwane (Pretoria) is restricted to land use
control mechanisms which are the result of a paternalistic culture which governed
common land use practice during the previous dispensation. City planning in general is
relegated to the execution of administrative functions, i.e. the interpretation of town-
planning schemes or policies and the requisite administrative processes necessary to
approve an application.
This study aims to arrive at an understanding of the influences of city planning on
property development from the perspectives of property developers and town-planning
consultants, ultimately to contribute to the improvement of the current land use
management system and to property development in the City of Tshwane.
A qualitative research methodology was adopted to answer the research question. The
survey sample was drawn from three individual segments, i.e. property developers,
town-planning consultants and city planning officials.
Some of the areas analysed were the role and responsibility of city planning, the
expectations surrounding city planning and the influence of city planning on property
development. The objection process was questioned as well as the issue on the
restriction of developments.
This study revealed that the city planning policies of the City of Tshwane have a
significantly negative influence on property development in the city. The vast majority
of responses confirmed that city planning policies were rigid, regulative and insensitive
to property market principles. All respondents, however, agreed on the need for
dynamic city planning policies, such policies being essential to provide structure and
security for property development and to contribute to the protection of property values.
Key words: city planning, land use, market oriented planning, paternalistic planning,
property development.
1. Introduction
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The purpose of this paper is to question the land use management approach of the City
of Tshwane Municipality and to analyse the consequences of this approach. During the
pre-1994 period, it was common practice for the city planning officials of the former
City Council of Pretoria to inform a developer that the development “would not be
successful” as submitted and had to be amended according to their wishes, in order for
the development to be supported.
1.1 Land management system in Tshwane
The Apartheid era had a significant influence on City Planning and property
development in South Africa. The South African city planning system was a replica of
the British town planning system, which is extremely control, oriented. Planning
authorities followed a strict paternalistic planning approach, guided by the need and
desirability principles of the Town-planning and Townships Ordinance, (Ordinance 15
of 1986) forming the cornerstone of any planning decision.
Planning decisions in the erstwhile City Council of Pretoria were guided by the Pretoria
Structure Plan, 1983, controlled by the Pretoria Town Planning Scheme, 1974 and the
erstwhile Transvaal, now Town-planning and Townships Ordinance, 1986 (Ordinance
15 of 1986). The views of planning officials as well as “internal” departmental policies
were crucial in the final decision making of any land use application.
The Constitution of the Republic of South Africa (Act 108 of 1996) initiated various
new pieces of planning legislation, to move away from the Structure Plan towards
spatial planning. Spatial frameworks on different on levels were introduced i.e.
metropolitan (city wide level), regional and local spatial frameworks (specific area /
business node within the region). While the Structure plan used to be based on the
principles of need and desirability, spatial frameworks are strategic documents intended
to provide direction to the development of the city.
Despite the addition of various pieces of new legislation, the evaluation of land use
applications and development proposals are still dominated by the control / paternalistic
approach. The market value and development potential of properties were never
anticipated or taken into consideration. The primary responsibility of the City Planning
Department remains the protection of residential areas and their residential character.
The crux of any land use application in Tshwane is however, the view of the relevant
Deputy Regional Manager and, to a lesser extent, the town planner responsible for the
finalisation of the application. If these two individuals support an application, subject to
the absence of objections from the community, a land use application will be approved.
However, an application will be refused, should the officials be of the view that it
cannot be supported.
City planning in general was, and still is, restricted to the execution of administrative
functions, i.e. the interpretation of the town planning scheme or policies and the
requisite administrative processes necessary for the approval of applications. The
property sector needs specific direction from the municipalities in order to plan and
coordinate developments. This direction must necessarily be based on property market
realities which are aimed at increasing the total property value of the city.
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1.2 Research question
The current land use management system of City of Tshwane lack a strategic intend to
guide and direct property development as well as to maximize the development
potential of properties. Restrictive approvals, especially in areas with high development
potential, as well as the number of land use contraventions indicate that planning
policies are not dynamic and does not anticipate the direction of the property market.
Despite the legacy of a paternalistic culture and the existence of all the planning and
environmental legislation, the Municipality seems to have very little “control” over
land uses within the City of Tshwane. This phenomenon is prevalent along major
arterial routes, i.e. Charles Street, Atterbury Road, Jacqueline Drive and Glenwood
Road, to mention but a few. A drive along any of these routes will give the impression
that the authorities have in effect “lost control” over the land uses and that there is in
fact total “planning chaos” along these routes. Business node development is driven by
developers and investors, while municipal officials seem only to be able to react on
these initiatives.
The phrase “planning chaos” is an accurate description of the land use configuration
along certain arterial routes where the majority of dwelling-houses have been converted
into a commercial activity. This phenomenon is restricted to the major arterial routes.
High traffic volumes diminished the residential quality while the good visibility of the
property encouraged a non-residential land use.
The City’s Law Enforcement Section, due to a lack of resources and the volumes of
contraventions, fights an uphill battle to maintain law and order. The legal processes to
successfully prosecute these contraventions are time consuming and cost intensive.
There is logical explanation for the existence of linear developments along the major
arterial routes. The primary reason for the conversion of a dwelling-house into an office
or some business, along the arterial routes can be subscribed to economic benefits
gained from the transaction. It also relates to the promotion of small businesses and the
emergence of entrepreneurs who prefer to own their office and thereby save on rent and
benefit from the capital appreciation of the property.
As mentioned above, these developments occur along the major arterial routes, located
in the vicinity of hospitals, shopping centres or business nodes. Professionals and small
businesses prefer to locate in a house along an arterial route.
Why is the land use planning unable to regulate in the wider public interest? Planning
does not enjoy the same status and respect in South Africa as what the case is in Europe.
There is a perception that Planning is an administrative or academic exercise in order to
approve the land use rights and building plans in South Africa.
According to Statistics South Africa, the unemployment rate is approximately 25%. The
property development process creates a substantial number of jobs, which is a high
priority in South Africa at present. The Development Tribunals are aware of the
unemployment situation and would be cautious to decline applications.
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The procedures at the Development Tribunals are dominated by the legal profession.
One of the consultants referred to the ‘cowboy town-planners and the well-paid
attorneys’ who has on one objective, namely to satisfy the client. The development of
the city bears very little interest to them.
Pearce, Curry, Goodchild (1978:28) provide good examples of the paternalistic
approach, i.e.
• Fear of an over supply of development land brought onto the market.
planners are notorious for being over conservative in the allocation of floor
space ratio’s
• Spatial location of development – market preferences for a development site
and planners’ policy documents usually don’t concur
• Reaction time to changes in consumer’s requirements – consumer
requirements, driven by entrepreneurial initiatives of a business as oppose to
the burocratic nature of government
If one considers the number of land use contraventions reported to the municipality,
there is merit in the view that land use planning is at present, in a state of orderly chaos
which is likely to worsen in the future. In fact, despite all the plans; policies and
proposals, the world goes on regardless. Consulting the municipality’s planning section
seems to be the very last resort, and only happens if an agent or developer is forced to
do so.
The research question is therefore defined as:
“A critical analysis of the influences of the City of Tshwane’s city planning policies
on property development within the City of Tshwane”.
The research studied the experiences of the users of the land management system in
Tshwane. Their views, frustrations and expectations of the influences and consequences
of the paternalistic approach of the land use management system and particularly on
property development were analysed. The intention was to allow the respondents an
opportunity to formally express their views on the land management system, views
which are familiar amongst the users but never documented.
1.3 Motivation for the research
South Africa’s political transformation in 1994 from apartheid towards democracy laid
the foundation for a total transformation of the society. The political transformation did
not bring about immediate change on all levels of society, but was a start of a “long
walk to freedom.”
During the pre-1994 period, it was common practice for the city planning officials of
the former City Council of Pretoria to inform a developer that the development “would
not be successful” as submitted and had to be amended according to their wishes, in
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order for the development to be supported. The application by Old Mutual to establish
the Menlyn Park shopping centre in 1978 was refused by the City Planning Department
on the grounds that it was located on the periphery of the City and therefore would not
be viable. The development was eventually approved by the then Transvaal Appeal
Tribunal. Today, Menlyn Park shopping centre is the most prominent centre in Tshwane
and one of the premium centres in South Africa.
Menlyn, a super regional shopping centre, was in fact on the eastern edge of Pretoria
and only a few suburbs were developed east of the N1 Highway at the time of the
application. The City Planning Department at the time (1978) did not foresee the future
eastward expansion of Pretoria, despite residential developments further east. The
officials were unable to understand the developer’s (a major financial institution) vision.
This research was further motivated by various applications which were declined by the
Municipality or the developers had to scale applications down to meet the requirements
of the officials. The Renault dealership in the Menlyn Node experienced a rising in
demand and needed to expand the capacity of their showroom. Renault explored several
relocation options and decided to relocate to the position indicated in Figure 1. This
application was primarily rejected because it was outside the Menlyn Node and
therefore in contradiction to the existing policy, i.e. the Menlyn Spatial Development
Framework.
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The expansion of the Menlyn Node (see Figure 1) has always been treated
conservatively despite the strategic importance of the area. Hatfield (Figure 2) is a
similar example of an area with enormous development potential. Hatfield’s proximity
to the inner city and accessibility to the N1 and N4 Highways make the area very
favourable for redevelopment.
Figure 2 Hatfield
The erstwhile City Council restricted office and retail development in Hatfield to a
maximum floor space ratio (FSR) of 0,6 and 3 storeys. The low intensity of
development is visible from Figure 2. While development was restricted in Hatfield, the
Brooklyn Node developed from a small shopping centre into a strong business node.
These examples are evidence of a general disregard for property economic familiar in
the evaluation of land use applications at municipal level. In terms of the Gauteng
Town-planning and Townships Ordinance (Ordinance 15 of 1986), Section 52, land use
applications have only to be evaluated on the principles of need and desirability.
The fear of oversupply, conflict between policy documents and market preferences and
the reaction time to consumer’s requirements are indicative of the planning culture in
the City of Tshwane. City planning has always been concerned with improving the
physical environment on one hand, while on the other, it has also been planning for
certain people, reports Gans (1969:368). These people are the planner himself, his
political supporters and the upper middle class citizen. Historically the planner sought to
create a city he himself liked and formulated plans so that they would gain the respect of
his peers thereby entrenching his position.
Gans (1969:373) is of the opinion that planners have to give up all traditional planning
concepts related to the physical environment and begin to ask how people live, what
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they want and what problems they have. Gans (1969: 378) points out that the planner
does not have the monopoly on wisdom regarding the goals and values of people.
The political environment changed and planners adapted to it, but Gans’ view on
“monopoly on wisdom” still holds true in many departments of the Municipality. “My
argument for a client oriented or user oriented approach is most relevant to planning.
The planner’s client is the city …” (Gans 1969:380) The planner is a servant of the
community, helping to solve their problems and achieve their goals Gans (1969:383).
The purpose of the planning function of a municipality, taking cognisance of Gans’
argument, is to add value to the properties in the city. People invest in property to make
money. The planner’s primary function is to maximise the value of the property, not
only to approve applications and lay down conditions.
For example, the application to increase the height of the PriceWaterhouseCoopers
Building from 2 to 4 storeys in order to enable the developer to maximise the approved
floor area and development potential of erf, was opposed and objected to vigorously by
the Lynnwood Glen Residents Association. (Figure 3) They were of the opinion that the
additional height would destroy their suburban privacy. The application was approved
and charges of corruption were laid against the officials. Figure 3 indicates the location
of the PriceWaterhouseCoopers Building at the intersection of the N1 Highway and
Atterbury Road).
Figure 1 PriceWaterhouseCoopers Building
There is a need for a debate on a planning system which is founded on market-oriented
principles. The escalation in property values, limited developable land, growth of the
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economy, unemployment and environmental concerns are factors which call for
applications to be evaluated in terms of property valuation, property economics and
property investment principles. This research aims to stimulate such a debate in order to
encourage a new facilitative planning culture which will acknowledge the property
developer as a major stakeholder in the planning and development of a city.
2. Research Methodology
This research followed a semi-structured in-depth interview approach to gain insight
unto and an understanding of the expectations, perceptions, views and opinions of
property developers, town-planning consultants and planning officials. Personal
interviews were conducted with every respondent; these interviews were pre-arranged,
while a generic questionnaire guided each interview.
All interviews were conducted during 2008. These interviews were arranged by
appointment while the questions emailed to the respondents 7 days prior to the meeting
to facilitate a productive discussion. The researcher led the interview process which
consisted of main questions, follow-up questions and probes in order to maximise the
responses of the respondents. Leading questions were avoided. The researcher did
however explained the questions and clarify uncertainties. Respondents had the freedom
to express their views and opinions to their own satisfaction.
All the interviews were conducted during office hours, located in the respondents’
offices. Interviews were voice recorded and then transcribed by a language specialist in
an effort to produce an accurate verbatim version of the responses and to illuminate the
author’s influences in the transcription process.
The survey sample was drawn from three individual segments, i.e. property developers,
town-planning consultants and city planning officials. Non-probability sampling
techniques have been applied to select the respondents according to specific criteria.
The selection criteria for developers were that they should be members of the South
African Property Owners Association (SAPOA); should have undertaken substantial
development projects within Tshwane, i.e. completed a shopping centre or an office
block or a residential township; and should have had more than 5 years in business and
be familiar with the planning regime in Tshwane.
Table 1 Property developers interviewed
Property Developer Respondent
REA Johan Matthee
New Africa Developments Grant Nordin, Japie
RMB Properties Barend de Loor
Atterbury Properties Jean Jordaan
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Cosmopolitan Properties Dries du Preez
Bertus Schoeman Property Developers Bertus Schoeman
Christodulo Holdings Takis Christodulu
Capicol David Pieterse
Independent property consultant - previous Freddy Blake
head of Old Mutual Property Division
PCN Developers Dirk Nel
TOTAL 10 developers
Interviews were conducted with town-planning consultants who have operated for
longer than 10 years within Tshwane; and who are affiliated to the South African
Institute for Town-Planners and / or the Council for Town-planners.
Table 2 Town planners interviewed
Town-planning Consultants Respondent
EVS Planning Charlie Els
Riana du Plessis Town-Planners Riana du Plessis
Tino Ferero and Sons Tino Ferero
Etienne du Randt Property Consultant Etienne du Randt
Frik Pohl Town-Planners Frik Pohl
Planpractice Group Peter Dacomb
Metroplan Viljoen du Plessis & Dr Marinda
Schoonraad
TOTAL 8 consultants
Interviews were conducted with town-planning officials whose decisions have a
significant influence on property development. These were: the Acting Executive
Director: City Planning; the Manager and Deputy Manager Regional Spatial Planning
and senior Town-planners in the Department : City Planning of the Cite Council.
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Table 3. Town planning officials interviewed
Town planning Official Respondent
Acting Executive Director: City Planning, Regional Mr Ashok Sudu
Services and Development as well as the Manager
Regional Spatial Planning;
Deputy Manager Regional Spatial Planning: Region 1 Mr Andredu Plessis
Deputy Manager Regional Spatial Planning: Region 2 Mr Louis Robinson and 2
senior Town-Planners
Deputy Manager Regional Spatial Planning: Region 4 Mr Chris Swanepoel and 3
senior Town-Planners
Deputy Manager Regional Spatial Planning: Region 5 Me Lettie van den Berg
Deputy Manager Regional Spatial Planning: Region 6 Mr Albrecht Heroldt and 3
senior Town Planners
Total 13 Officials
Babbie and Mouton (2006:309) states that qualitative research is especially appropriate
to the study of attitudes and behaviours best understood in their natural setting. The
main strengths of qualitative research is the comprehensiveness of perspective as well as
the ability to develop a fuller and deeper understanding of the social phenomenon.
Nuances of attitude and behaviour that might escape researchers using other methods,
will be recognised by a qualitative approach.
A quantitative approach to this research would have reduced the research construct
merely to the assigning of numbers to the properties of the phenomenon, in the words of
Babbie and Mouton (2006:49). The insight in the ‘minds’ of the respondents, their
concerns and frustrations with the current planning approach would be reduced to a
numerical value and thereby squandering an opportunity to improve the planning
system.
Hesse-Biber and Leavy (2006:119) states that the in-depth interview is commonly used
for qualitative data collection, as it is issue orientated, i.e. appropriate to focus on a
particular research topic. An in-depth interview is a particular kind of interaction
between the respondent and researcher, a dialogue which unfolds the respondent’s
experiences and perceptions; in-dept interviews are a ‘meaning making partnership’
between respondent and researcher (Hesse-Biber and Leavy 2006:134).
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This research followed a semi-structured in-dept interview approach to gain an insight
and an understanding in the expectations, perceptions, views and opinions of property
developers, town-planning consultants and planning officials.
Robertson (1993) in Hussey and Hussey (1997:248) states that the main challenge to
qualitative analysis is that there is no clear and accepted set of conventions for analysis.
As mentioned earlier, Hesse-Biber (2006), Rubin and Rubin (2005) as well as Phelps,
Fisher and Ellis (2007) noted that there is no right or wrong way about analysing
qualitative data.
In an effort to provide guidance and direction, and not adding to the existing confusion,
a framework for the analysis has been designed which will be the baseline for the data
analysis.
• In line with Leedy and Ormrod (2005) raw data were segmented into three
categories i.e. developers, town-planning consultants and officials;
• Data within the categories were then searched for meaning, i.e. data that have
internal convergence and external divergence. (Marshall and Rossman : 2006);
• The objective was to discover variation, portray shades of meaning and
examine complexity (Rubin and Rubin : 2005); as well as
• Looking for patterns and explaining those patterns. (Lee and Lings : 2008:253)
The research findings reported how participants make meaning of a specific
phenomenon by analysing their perceptions, attitudes, understanding, knowledge,
values, feelings and experiences. (Maree : 2007:99).
The study was restricted to the City of Tshwane as well as to property developers and
town-planning consultants practicing within the Tshwane Metropolitan area. The study
was further limited to developers who were members of SAPOA and thereby excluding
non-members as well as excluding town-planning consultants who operated for less
than 10 years within Tshwane.
3. Research Findings
This study revealed that the city planning policies of the City of Tshwane have a
significant negative influence on property development in the city. The fast majority of
responses confirmed that city planning policies were rigid, regulative and disregard
property market principles. All respondents however agreed on the need for dynamic
city planning policies. Policies are essential to provide structure and security to property
development and contribute to protect property values.
The research indicated that although a common goal exist amongst respondents, namely
the development of the City of Tshwane, the policies influenced each group of
respondents on a different level and proved that each group of respondents had their
own ideals and expectations. There seems to be a difference in achieving this common
goal as every respondent operates form their own personal point of reference.
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There appeared not to be any recognition for the other respondents’ position or actions.
True to say that there are at present 3 three distinct agendas driving property
development in Tshwane. Developers want to be successful; consultants are concerned
about the application procedure while officials were confined to the implementation of
town-planning legislation and policies.
The responses of the developers and officials demonstrated differences and similarities
between the groups. Developers want to develop their dreams in Tshwane but are
frustrated by the current planning system. Officials are aware of their mistakes in the
past and have a desire to change. These differences between developers and officials
can be expressed as a matter of business versus governance – developers are profit
driven and officials are bound by policies and legislation.
The City Planning Department of the City of Tshwane became the “law enforcement
agency” of all the other Municipal departments, as the Department is frequently
requested to add another condition to the approved conditions. There is a greater need
by the other departments for the City Planning Department to impose regulations than
for future planning of the city.
Consultants questioned outdated policies and were most concerned about the land use
approval process. City planning officials acknowledged that the market determines the
development of the city at present and that they fulfil a reactive role. They accepted
that, in certain instances, the wrong policies were adopted. This study furthermore
revealed some of the implications of the impact of ward councillors’ decisions on
property development in Tshwane. Several examples underline the restrictive influence
of ward councillors and ward committees on property development.
There was general discontent amongst all the respondents regarding ward committees
and ward councillors in the objection process. Some expressed the view that ward
councillors and ward committees misuse their positions to influence decisions. Several
examples were given to illustrate these views, of which a few will be presented below.
A ward councillor withdrew an objection to an application in a major development node
on the grounds that the developer scaled the application down, the application's
prominent location and because it was a "fine day". The decision to scale the application
down would have reduced the income of the development by R10 200 000.00.
In a separate area in Tshwane a resident withdrew his erf from an application for
substantial rights and was at the time critical towards the entire development. At the
next municipal elections, this individual became the ward councillor for the very same
area.
Councillors objected to policies approved by the previous municipal council, i.e. density
of a specific area, which were too lenient. Councillors object to subdivisions when in
terms of the Town-planning and Townships Ordinance, Ordinance 15 of 1986, there are
no requirement for public participation. These objections delay a subdivision
application by at least 4 months.
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A case in point is a subdivision application in a prestigious Eastern suburb. The
intention is to subdivide an erf into 2 portions of approximately 820m and 764m . The
residents association objected to the application on the grounds that the minimum erf
size should be 1000m and the shape of the erf will not accommodate an architecturally
designed dwelling. Subdivisions for Group Housing developments are however
supported at 625m in the area. The objection delayed the approval of this application
by at least 5 months. The ward councillor supported the decision of the residents
association without any consultation with the city planning officials who are ultimately
responsible for the planning of the area.
This research demonstrated that ward councillors don’t interact with officials on the
future development of the city. Councillors are more inclined to follow the
recommendations of their ward committees than to engage with officials. Ward
councillors and committees elevated themselves into “expert town-planners and
decision makers” in a ward, driving their own ideas and desires and expecting a
specialised (property) industry to respond positively.
4. Implications of the study
Developers’ perspectives of city planning policies were in general dominated by
problems and negative experiences with the system of the past. They had a strong view
that their dreams cannot be realised in Tshwane as existing policies don’t challenge or
allow developers to be radical. Nothing radical developed in the past 20 years. Every
new development is more of the same. They were of the opinion that professional
architects and town-planners submit applications which are in line with the conservative
views of officials. Several opinions were cited for the conservative views of officials,
the dominated response being officials’ approach to search for potential problems in
every development while ignoring the benefits. Officials were perceived to be more
concerned about the creation of precedents by the application than concerned about
losing an investment.
Policies dominated many of the responses of consultants, who were of the opinion that
the majority of the policies are for the council, by the council and not for the city. The
point that officials never recognise that an accumulation of contraventions in a specific
area require a change in existing policies was raised several times. The lack of urban
design principles in current policies was also cited as a serious concern.
A consultant referred to Tshwane as a “four storey city”, which confirmed that there is
only a modest chance for developments in Tshwane to be comparable with Sandton.
Land use policies were cited as not responsive to the property market. Policies were
deemed to be reactive and restrictive to a current property market trend which
contributed to the perception that dreams could not be realised in Tshwane. The view
was expressed that officials cannot plan if they cannot control, and that control is
perceived to be planning in the minds of officials.
A practical example of the paternalistic approach to property development in Tshwane
can be found on the City’s eastern boundary with the neighbouring Kungweni Local
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Authority. Figure 4 illustrates an area to the east of Hans Strijdom Drive which is
administered by the neighbouring Kungweni Local Authority. In an effort to expand
their tax base, Kungweni attracted significant new developments and created a new
town on the eastern side of Hans Strijdom Drive. The net result is extensive commercial
development east of Hans Strijdom Drive (Kungweni) and vacant land to the west
(Tshwane), limited to residential prospects.
Developers stated categorically that restrictive policies and conservative mind-sets of
officials were directly responsible for the contraventions of existing legislation in the
city. Developers are prepared to subscribed to the law, but in certain cases know in
advance that an application will not be approved by the officials and opted for an
alternative route, to fight the application in court. History proved that the success in
court is a realistic possibility because of the court’s awareness that officials are
restrictive and that development is of national importance.
The City Planning Officials had in general a more balanced response in that they
accepted responsibility for their mistakes, realising that policies are not perfect and
expressing a desire to improve in future. They accepted the socio-political changes in
their current situation and realised that an African city model is imminent.
Officials have however their own views on the future development of the city and hold
preferences as to where they would want development. In some instances, these views
were regarded as being an ideal for the city. A significant point of this research is the
difference in views and opinions between developers and officials on the development
of Tshwane. It was evident that perceptions of officials play a significant role in the
evaluation of land use applications, while developers are influenced by realities of the
property market.
They (officials) regard it to be their responsibility to protect land uses as well as
community interests and acknowledged that communities influenced their decision
making in this process. They were aware that the rigid approach to planning will not
prevail in future.
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The current planning practices place a huge premium on the protection of the residential
areas. In the past, residential areas became the ‘untouchable land’ of the city, which city
planning had to protect from business intrusion, particularly those areas within close
proximity of formal business nodes. However, residential areas located near business
nodes and along major arterial routes will always be prone to redevelopment, because
the residential area is a normal component of the urban fabric and will adapt to urban
changes as the city develops.
Despite various new legislation and policies, officials still apply the control approach in
their evaluation of land use applications. Land use control measures form the basis for
the evaluation of an application. Current realities, i.e. climate change, and urban design,
are hardly ever applied to evaluate an application.
The pace and direction of a city’s development is directly influenced by the provision of
bulk services. The major property developers in the City dominate the development of
the city as they are responsible for the installation of bulk services in, especially, the
south and east of Tshwane. It is therefore almost impossible for a City Planning
Department to dictate or control the development of the city and has no alternative but
to react to development.
There is a need for a debate on a planning system which is founded on market-oriented
principles. The escalation in property values, limited developable land, growth of the
economy, unemployment and environmental concerns are factors which call for
applications to be evaluated in terms of property valuation, property economics and
property investment principles. This research aims to stimulate such a debate in order to
encourage a new facilitative planning culture which will acknowledge the property
developer as a major stakeholder in the planning and development of a city.
“My argument for a client oriented or user oriented approach is most relevant to
planning. The planner’s client is the city …” (Gans 1969:380) The planner is a servant
of the community, helping to solve their problems and achieve their goals Gans
(1969:383).
Land use planning, according to Lind (2002) has changed dramatically in most
countries in recent decades. This development is often described in terms of a more
market-oriented planning. One theme in this debate is that the planning system is too
bureaucratic, and that a more market-oriented planning system would improve the
situation. City planners and property developers have to respond to the new consumers
and the new world by developing fresh, energetic and trendy urban environments.
Market-oriented planning is not restricted to land use decisions; it responds to the needs
of residents in terms of a quality urban environment, creative shopping centres and
office developments, as well as professional land use administrative processes.
“Cities arose from the desire of humans to meet, exchange and interact. Cities have
markets to exchange goods and public spaces, pubs and cafes to exchange news, stories
and ideas. Cities bring people close together with different interests, abilities, skills and
knowledge. Humans thrive and achieve in the diverse stimulus of cities.” (Sustainable
Cities Research Institute. 2000)
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E A L Venter and C E Cloete, pp 578-594
Sustainable Cities Research Institute. (2000). The Whole City.http://www.sustainable-
cities.org.uk/institute/policy.html. Viewed: 20 May 2007.
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Toni Lamont, pp 595-607
Factors influencing the residential development of a site-and-
service project: A case study of Mamelodi Extension 5
Toni Lamont
Department of Construction Economics, University of Pretoria, Pretoria, South Africa
Email:[email protected]
Abstract:
The subsidisation of housing for the poor is practised in most countries including South
Africa. The government has been implementing a new comprehensive subsidy policy
since 1995. However, this was preceded by a government-funded trust, the Independent
Development Trust (IDT). In 1991, the IDT approved a grant of R15m for the
installation of services on transfer of ownership of 1900 newly established erven to
landless beneficiaries in Mamelodi Extension 5, a suburb of the then City of Pretoria.
The beneficiaries, who earned less than R1000 per month, were responsible for the
erection of their own dwellings which happened soon in informal fashion. In 1995, the
community formed a development trust for community development purposes. In the
beginning of the 2000s, a housing capital subsidy project, which included the building
of 500 houses according to the People’s Housing Process, was launched in Extension 5.
The current study to determine the experiencing by the beneficiaries of problems and
support elements with regard to the process was done according to a qualitative
methodology. Interviews were conducted with 28 respondents with the aid of a semi-
structured set of guidelines. The findings reflected a constant shortage of finance as a
serious obstacle for residents to develop their dwellings to a desired level. Given their
income band, this is understandable. Further frustrations were due to confusion with
regard to the municipal development plans, inter alia for Extension 5 and a lack of clear
communication between them and the authorities. Delays in development are not
understood and accepted and lead to anger in the community. Improvements in this
regard would be helpful. Studies with regard to sustainability may be useful.
Keywords:
Beneficiary, consolidation, housing subsidy, starter home, support entity.
1 Introduction
South Africa built up a huge housing backlog during the second half of the twentieth
century because of policies which prevented large scale rural-urban migration and
accompanying housing provision. The frustration caused by this need for adequate
housing in the urban areas became an important political tool for the African National
Congress which emerged as the official dominant political party during the first
democratic elections in 1994. Solutions to the housing crisis emerged as election
promises and these had to be followed up by the new ANC-controlled government with
financially supported housing policies and programmes. Large scale subsidisation was
the foundation of this route.
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South Africa introduced a comprehensive housing subsidisation policy which was
published in November 1995, titled Housing Subsidy Scheme and other housing
assistance measures – Implementation manual (Volumes A and B).The national housing
vision is inter alia described as the striving: “…for the establishment of viable, socially
and economically integrated communities, situated in areas allowing convenient access
to economic opportunities as well as health, educational and social amenities…”
(Department of Housing, 1995).
The subsidies were aimed at the poorest households who earned less than R1500 per
month, had never owned a property and had dependants. The policy has since become
more complex with regard to categories of subsidisation but the principles remained the
same. Whereas the initial subsidy was R12500 per household, which covered land,
services and a starter unit of about 40 m2, it increased annually and is currently at is
currently around R58000 for the most privileged category. The national housing budget
for 2009/10 is R12,4 billion. About 2,3 million housing opportunities have been created
nationally since 1994 (Housing in SA).
The nature of the housing to be provided through the subsidisation policy has been
stimulating an ongoing debate. One of the options, although not a prominent one at
present, is that of site and service, a policy adopted by the Independent Development
Trust (IDT) for its housing programme between 1991 and 1996.
The IDT programme differed from the current government policy insofar that it was a
once off site-and-service programme which did not include the erection of top structures
due to the limited subsidy amount of R7500 per household. In a few cases, development
entities obtained additional funding to erect a small starter unit, but that was
exceptional.
One of the IDT projects was Mamelodi Extension 5, a greenfields (vacant land) project
on land in the municipal area of the then City of Pretoria (see map on next page). The
beneficiaries were required to build their own dwelling units and did so with mixed
results. This study aims to obtain an insight into beneficiaries’ experiencing of their own
situation in this development process, focussing on the way in which their efforts were
affected by enhancing or prohibiting factors.
The selected methodology and methods will be discussed in section 3.
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MAP OF THE SOUTHEAST OF PRETORIA
(NOW TSHWANE) MUNICIPAL AREA
(source Google Maps)
2 Rationale for conducting this study
The rationale for conducting this study stems from the development ideals formulated
by the project funder, the IDT. The researcher, who acted as a social consultant for the
IDT in the development team, subscribed to the vision of communities incrementally
developing their housing stock through their own efforts from rudimentary starter units
to formal housing to suit their needs. Over the years it became clear that this ideal was
not being reached everywhere and it was felt that a study would be useful to determine
what factors influenced the beneficiaries when developing their housing.
The establishment and initial development of Mamelodi Extension 5 has to be
understood against the background of the operations of its funder, the IDT. It is
important to consider this background which will now be briefly explained.
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The IDT’s operations comprise three distinct phases. The first phase consisted of
intensive consultations with a wide range of actors and interested parties in order to
formulate a set of objectives for programme formulation and to gain local and
international support for the same. The second phase was the translation of its initiatives
into outcomes which were reflected in the approval of a Trust Deed by the government
in July 1990. This included a R2 billion government grant for operations. Thirdly, the
allocation of resources to initiatives in order to realise its objectives. The main focus
areas were housing, health and education (Independent Development Trust, 1991).
The IDT’s investment in its housing programme amounted to R846m. The vehicle
which was created to drive the process was a capital subsidy scheme for housing. This
scheme would offer secure tenure to about 100 000 of the poorest families in South
Africa. Home ownership was seen as a critical component in the IDT’s strategy for
breaking the cycle of poverty and advancing the economic empowerment of
underdeveloped communities. This approach, it was said, was aimed “… not on putting
a roof over people’s heads but on putting some ground underneath their feet”
(Independent Development Trust, et al., 1991, p15).
About 100 projects of great variety, nature and size were selected from over 600
applications all over the country. The potential beneficiaries were heads of households
earning less than R1000 per month, who were over 21 years of age, had dependants
living with them, were first-time property owners and who had not received a housing
subsidy from the state or public authority before (Independent Development Trust, et
al., 1995).
The Extension 5 Housing Capital Subsidy Project was initiated in 1991 when tenders
were requested by a joint committee comprising representatives of the then Central
Pretoria Metropolitan Substructure, the IDT, Mamelodi Chamber of Commerce and
Industry, Mamelodi Crisis Committee for Housing, Mamelodi Civic Association and a
number of community organisations, representing especially education and health. The
committee appointed a private sector company for the implementation of the project,
which proved to be successful. Monthly meetings were held in the boardroom of a small
community hall and offices complex which the developer built and donated to the
community at the end of the project.
The housing subsidy scheme was not limited to an improvement in material wellbeing.
During the assessment phase of applications, particular attention was paid to a
commitment by the relevant community structures to community involvement. Over
and above the community “taking charge” of the implementation process, a further
element of the scheme was identified, e.g. a consolidation programme. This was
launched in 1993 with the following objective: “… the establishment of a Community
initiated and controlled, sustainable, comprehensive consolidation process in every
community that has benefited from the IDT Capital Subsidy Scheme (Independent
Development Trust, et al., 1994, p1).
The introduction of a consolidation programme was based on the assumption that the
housing subsidy scheme had to be seen as a first step in an incremental housing process.
Further to being involved in the decision-making process, the community had to
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participate in the “… progressive development of a holistic spectrum of social,
educational, cultural and recreational amenities so as to ultimately establish a healthy,
safe and desirable living environment” (Independent Development Trust, et al., 1995,
p32).
The consolidation policy determined that the IDT, through the Consolidation Policy,
provides resources in each project to be implemented to:
• Employ consultants to motivate and facilitate the establishment of a
Consolidation Vehicle (CV) and to finance the legal costs involved.
• Enable participants in a CV to understand the concept of consolidation and how
to structure their organisation effectively.
• Enable a CV to employ a Consolidation Coordinator (CC) by providing finance
to pay an adequate salary and cover basic overheads for two years.
• Enable substantial training to each CC.
• Monitor and guide the progress of the CV and of the CC, primarily via a
consultant chosen by the community and approved by the IDT.
• Obtain resource material (Independent Development Trust, et al., 1994, p2).
The project committee of Extension 5 established a CV in 1995: the Stanza Bopape
Development Trust, with 11 trustees representing all the important community
structures in the township. The trust embarked on a number of joint venture projects
such as a Trauma Centre in collaboration with the South African Policy Services, Parks
and Open Spaces as a joint venture with the University of Pretoria. It also initiated
others such as a Youth Recreation Centre, Housing Support Centre, Job Creation Centre
and an Industrial Hive, but these never developed beyond conceptual stage.
The trust’s successful operation could have had a positive influence on the development
of housing as a support entity. However, nowhere did a respondent make mention of the
CV, its CC or activities. The IDT acknowledged certain constraints in this regard by
stating that it had started too late with the introduction of the consolidation policy and
that it lacked knowledge on how to approach it (Independent Development Trust, et
al.,1994).
3 Methodology and methods
Methodology and methods form part of a labyrinth of paradigms, approaches and
methods, as well as interrelations between them. Since several forms of qualitative
research and paradigms have been identified (Hammersley and Atkinson, 1995), it is
necessary to explain the methodological approach for this research project to avoid
misunderstanding.
In order to situate the methods used in this study, it is useful first to indicate and
motivate the methodological branch which was chosen. It is agreed with Babbie and
Mouton (2001, pp xxiv – xxv) that “… the selection of methods … is always dependent
on the aims and objectives of the study, the nature of the phenomenon being
investigated, and the underlying theory or expectations of the investigator.” Heldige as
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referred to in Wild (1979), adds to that by stating that the goal is to deal with the
greatest complexity and variety in order to acquire the richest possible data.
Since the aim of the investigation is to obtain the meaning which their housing
situations had for the beneficiaries, the methodological paradigm selected for this
investigation is the qualitative one. This paradigm, which is linked to phenomenology,
could be traced back to the ethnographic work done by anthropologists during the
nineteenth century (Babbie, et al., p xxv). The methodological approach was extended
and refined by sociologists at the University of Chicago who introduced certain
qualitative methods, including three types of qualitative research design: ethnographic
studies, case studies and life histories. The distinction is valid, though closer inspection
reveals that the three main methods of qualitative data collection, i.e. observation,
interviews, and personal documents, can to a certain extent be used by more than one
qualitative design. That allows for a degree of overlapping between the designs (Babbie,
et al., p 279).
Although this study could be seen as a case study since it covers one community, the
type of interview is close to that of a life history with regard to housing provision. The
main method of data collection was interviews. The researcher remained somewhat of
an outsider in line with the advice of Hammersley and Atkinson (1995, p 21): “…as
researchers their primary goal must always be to produce knowledge, and that they
should try to minimize any distortion of their findings by their political convictions or
practical interests.”
Semi-structured interviews were used which means that the interviewers had a list of
guidelines enabling them to cover a certain field of aspects, yet allowing the interviewee
to speak freely in each case. This approach has its roots in ethnography as stated by
Hammersley and Atkinson (1995, p152): “Ethnographers do not usually decide
beforehand the exact questions they want to ask, and do not ask each interviewee
exactly the same questions, though they will usually enter the interviews with a list of
issues to be covered.”
The aim of the interview was to examine a single case and its structural ‘fit’ within a
larger context. This also allows the researcher to break up the context into smaller units,
for instance with regard to development phases: initial development and (consequent)
upgrading. Although the case studies are described as individual studies, they are
analytically merged. Conceptual categories can be created for analytical purposes
(Babbie, et al., p 283). In this study it was done, inter alia with regard to poverty and
dependence.
The fieldwork comprised the conducting of 28 interviews with the aid of a semi-
structured interview schedule. The interviews were held with the head of the household
or his/her spouse in their dwelling. The interviewers were two senior teachers from a
nearby school who have been doing community group work for many years through the
Adult Basic Education and Training Institute at the University of South Africa. They
were trained and supervised by an experienced social worker and lecturer who has
extensive experience in housing, inter alia as a former Director of Housing at Soweto,
Johannesburg.
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Regular meetings between these three persons ensured that the interviews were
conducted within the spirit of the qualitative research paradigm.
In qualitative studies the focus is firstly on “…describing and understanding
(Verstehen) rather than explaining human behaviour” (Babbie et al., 2001, p 270).
Therefore the limited number of interviews sufficed. The number depended on the
occurrence of new viewpoints or experiences indicated by the interviewees. Once a
point was reached when existing information was merely repeated by interviewees, the
process of information gathering was stopped.
Qualitative research does not make provision for statistical analysis because the accent
is on understanding and not quantitative comparison of variables. The validity,
reliability and objectivity of the information is not statistically tested, but found in the
notions of credibility, transferability, dependability and conformability (Babbie et al.,
2001). These concepts are not further described here. Suffice to say that steps were
taken to adhere to each one in the survey.
4 Literature overview
Literature reveals a variety of methods in terms of which the meaning of situations for
certain people was portrayed. Over and above the commonly used methods such as the
interview, even combinations with quantitative methods and techniques such as
questionnaires, are found. Victon Joint Venture (2006) used such combinations with
regard to determining not only quantitative aspects of housing, but also comprehensive
comments on structured questions. These comments were merged into a story by an
experienced social worker. In this way, the qualitative findings enriched the factual,
quantitative information.
In a project for degree purposes at the North West University, Roos (2007) used an
interesting sampling method for selecting potential interviewees. Firstly, observation of
clients in supermarkets was used in a non-probability sampling technique as defined by
Maisel and Persell (1996). This technique did not guarantee an equal chance for
inclusion in the study, but it proved to be the most appropriate way of selecting
respondents.
Research problems may be encountered if the respondents are illiterate and socially
isolated, while the research topic is a modern item. Bontsa (2003) conducted research
on nutrition-related problems among Pondo women in the Eastern Cape Province, South
Africa, by using focus groups. She found a “… lack of commitment and negative
attitude towards the focus group” as the constraints which contributed to the fact that no
knowledge was gained after intervention.
Historically, certain studies obtain classical significance over time. Such a case is
mentioned by Giddens (2000): The Polish Peasant in Europe and America, a study by
WI Thomas and F Znaniecki which has become a reference work of major importance.
This qualitative study, which appeared in five volumes from 1918 onwards, applied the
life study method to describe an important phenomenon in European history.
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5 Survey findings
Since the discussion of the findings of this qualitative survey is not linked to statistically
stronger or weaker indications, a process approach will be followed to present the
findings in an orderly manner. This development process, which is still continuing,
commenced when the serviced erven were registered in the names of the beneficiaries.
Various activities and experiences which took place during this period will be
described, though not merely in chronological sequence. The process is too complicated
for that. It contains multidimensional elements with forward and backward movement,
which are interrelated and influencing.
5.1 Settlement phase
The first phase which could be extracted from the interviews was that of initial
settlement. It should be kept in mind that Extension 5 was a greenfields development,
which means that the entire area was vacant except for items provided by the developer.
These included land surveyor pegs indicating erf boundaries, water and sewage
connections on the erf boundaries and rudimentary gravel roads. Electricity was
installed a few years later.
The 1900 beneficiaries lived in the Pretoria municipal area, which was a prerequisite for
inclusion on the waiting list from which beneficiaries were selected. Consequently,
moving from their place of residence to the new, allocated erf was relatively
uncomplicated. The erection of a shelter was usually completed in two days during
which the beneficiary, now the registered owner of the erf, was assisted by friends or
family to erect a rudimentary unit as described by one interviewee: “My brother and the
people next door helped me. We built two rooms, a shack, with corrugated sheets and
poles.” This speedy occupation of the sites was a prerequisite for being allocated the erf.
These small informal units were fairly well constructed, although flooding caused
problems because the units were usually built on the natural ground surface without
raising them due to the haste of construction. The following situation was often
described: “Drainage is the big problem and sometimes outside water comes into the
house.” Insulation and additional waterproofing were undertaken, often over a period of
years, in response to discomfort or necessity. In many cases this was done: “… with lots
of plastic.”
5.2 Upgrading phase
The settlement phase was seen as an initial one by the inhabitants. The ideal of a larger
formal dwelling was generally present. However, the fulfilment of this dream realised
only for some. The upgrading phase manifested itself in three ways, each one
manifesting in a dwelling type.
Firstly, a formal dwelling with brick walls and a corrugated iron roof, which was built
over a period of two or three years, subject to the availability of surplus income of the
owner’s household and sometimes financial assistance from an employer. Self-builders
linked building activities to “times when money becomes available.” The following
example was not uncommon: “After spending seven years from 1994 living in a shack
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made out of hardboard [sic] it took me three years to build a garage and two rooms to
live in.”
This is often a slow process due to the level of poverty in the community: “Housing is
my second priority because how can you live a good life on an empty stomach.” In
another case the interviewee stated that they were “… building the house alone and
there was nobody to assist with the finances.” However, the pride of self building is
evident in this interviewee’s statement: “I improve on my existing structure: extra,
strong, good looking structure.”
A second scenario was an agreement with a builder to build a formal dwelling. The
option was possible if adequate finance was available, i.e. cash or a loan, or if an
agreement could be reached with the builder. It appears that considerable
misunderstanding, confusion and discord emanated from these arrangements. The main
reasons for these problems seem to have been either the owner’s lack of understanding
of the building process and its financial obligations, or fraud or attempted fraud by the
prospective builder. There seems to have been confusion between recognising these
private builders and those of the People’s Housing Process as set out in 5.3.
Thirdly, the owner simply added informal rooms on to his/her informal dwelling or
erected separate informal units behind the initial unit. The extra units were primarily for
tenants in order to provide additional (or the only) income for the household. At the
time of the interviews a single room in the backyard could be let for about R300 per
month. Another purpose of these rooms was additional living space in cases where the
size of the household had increased, especially for children who married but did not
leave the house. Additional units were also erected at the formal houses for the same
purposes. “First in a shack. After three years I built a garage and three outside rooms. In
2001 I started building a five-roomed house. It took me three years to complete.”
However, the additions are not always adequate: “We started with two rooms. After that
we saved and made extra two rooms. It took four years. I am not happy for now as we
are too many.”
Contrary to the upgrading phase options described above, some owners did not enter an
upgrading phase at all. A typical reason for doing nothing was a belief that a
government capital subsidy scheme was to be introduced at any time. The reason for
such a strong belief was twofold. Firstly, official housing projects were historically
associated with the erection of top structures. Secondly, 1993 and 1994 were
characterised by political activities which sent contradictory housing delivery messages
into the community, one of which was that a Housing Capital Subsidy Project for
Extension 5 was imminent. Competing political candidates tried to gain popularity by
making unsubstantiated promises to their constituents. This led to confusion which was
exacerbated by rivalry between the civic organisations, which were leaders in the
political struggle, and the newly elected ward councillors. The latter were not yet
comfortable with their new roles and often lacked knowledge such as the qualifications
for housing subsidies. One interviewee put it as follows: “They hold meetings every two
weeks, but nothing happens.” Accusations with regard to favouritism are well known:
“You must first fall in love with the councillor before you can get a speedy help from
the council.”
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5.3 Housing Capital Subsidy Project and People’s Housing Process
From the time of receiving their erven, the occupants of Extension 5 kept “knocking on
the door” of the municipality and the provincial administration for the erection of RDP
housing (abbreviation for the housing design for the Reconstruction and Development
Programme). The approval of such a scheme was delayed for nearly a decade because
of urgent housing needs elsewhere. However, it became part of a comprehensive
scheme of subsidisation on the eastern fringe of Mamelodi, a vast area of squatter
settlements.
The delay in the building of subsidised housing in Extension 5 and the confusion in the
community mentioned earlier changed to anger which was expressed by interviewees. It
had also from time to time erupted into violent clashes with the authorities. Their
frustration was based on what they regarded as an unnecessary delay in building
activities. In some cases a house was built next to their informal unit on their erf but the
developer “refuses to hand over the keys”.
Due to limited subsidy funds and logistic restrictions, the Extension 5 RDP project is
implemented in phases. It has been in progress for many years and will still take several
years to complete. Occupants who have already built permanent structures are being
compensated with the upgrading of their dwelling, such as kitchen units, ceilings and
security fences around their erven.
One method of implementing subsidy projects is known as the People’s Housing
Process (PHP). In essence, the method entails the management and construction
activities as functions of formalised community committees. Such a method was
introduced in Extension 5 in 2006. However, as too many objections were received
from the public, the municipality decided to terminate it after 500 houses and revert to
contractor builders. It is obvious that many of the problems expressed by the
respondents during interviews and much of the confusion were due to the PHP. The
unacceptable quality of the RDP houses because of poor workmanship and/or material
can also be linked to the PHP: “We waited for more than ten years to find RDP house
they promised us until now. They started to build in March until now they have stopped
without finishing the house.”
5.4 Assistance sought by occupants
As pointed out earlier, the upgrading phase is still in progress for the Extension 5
community in general. In order to complete it, assistance is desired by many over a wide
field of activity. Three major fields of assistance were mentioned: financial, technical
and environmental.
As could be expected, people at the lowest end of the income spectrum in society, like
the occupants of Extension 5, are constantly in need of additional income, not only for
growth but for survival. During interviews, it was pointed out time and again that
finance was their most urgent need to complete their dwellings to the desired level.
Their situation is also reflected in a statement that they could complete their dwelling “if
money can come.” Financial assistance from the employer could be valuable: “My
workplace helped me with money to build the house.” However, the dependence on
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government was also reflected by the following attitude: “If I can get help from the
government – for mahala – government promised.”
Technical assistance is sought by both those who occupy informal units and RDP
houses. The latter group often requires assistance to fix the poor end products
mentioned. Items requiring attention include incomplete electric systems, leaking or
poorly installed sink for dish washing, doors which do not fit properly and the
installation of ceilings.
Environmental assistance for those who still occupy informal units is required first and
foremost for the consequences of flooding, as pointed out previously. Assistance in this
regard is obviously a function of the municipality. An environmental problem which
usually remains hidden is a continuous rodent plague: “Rats are a big problem. They are
big.”
6 Discussion
Probably the most effortless activity the beneficiaries had to perform was the erection of
their settlement dwelling. They merely had to dislodge it where they were staying and
transplant it through sweat equity and with the help of friends.
Their main problems occurred afterwards, mainly as a result of the following:
• Continued household poverty
• The lack of knowledge and assistance since the IDT’s support desk never
functioned
• The lack of understanding of official development proposals for the area – which
were non-existent for a long time
• The confusion stemming from contradictory messages between civic
organisation leaders, councillors and officials.
Seen from the viewpoint of the typical beneficiary (poor, relatively uneducated and
unskilled), it is understandable that most of those who undertook upgrading, limited it to
a basic level. Their focus is on government intervention to provide for all their housing
needs. They have decided, through experience, that housing provision is not their
domain. The government promised it and the government has to provide.
7 Conclusion and appropriateness of methodology
The capital housing subsidy project in Mamelodi Extension 5 started off well in the
early 1990s, but its envisaged incremental development to create a healthy, safe and
desirable living environment has not yet materialised. Insufficient personal finance and
inadequate external support seem to be the main obstacles in this regard. Increased
income is dependent on the metropole’s economy, but support could be improved
directly by the municipality or in joint ventures with the private sector.
An aspect which came to the fore in this study is the continued dependence of the
respondents on external support. This places a question mark over the sustainability of
the community: an aspect which may justify future research.
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The appropriateness of using qualitative methodology for this study could be described
as useful. The findings revealed certain hidden aspects which were not clear beforehand.
For instance, poverty and an attitude that the entire process of housing provision is a
government responsibility, fly in the face of the IDT’s vision of self-driven incremental
upgrading. For the beneficiaries, the IDT project was only a basic phase – a forerunner
to a second phase which would cover the erection of a formal dwelling.
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Babbie, E., and Mouton, J. (2001), The practice of social research, Oxford University
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Bontsa, NF. (2003), The food based dietary guidelines as nutrition education tool,
North West University, Potchefstroom.
Department of Housing. (1995), Housing Subsidy Scheme and other housing assistance
measures, Government Printer, Pretoria.
Demacon Market Studies. (2009), Morgenzon Mixed Use Development, Pretoria.
Giddens, A. (2000), Sociology. Polity.
Hammersley, M., and Atkinson, P. (1995), Ethnography, 2nd edition, Routledge,
London.
Housing in Southern Africa, 07-09, Crown Publications, Johannesburg.
Independent Development Trust. (1991), The first year, Cape Town
Independent Development Trust. (1994), Consolidation in the IDT Capital Subsidy
Projects – a review (circular), Cape Town.
Independent Development Trust (1995), The fifth year, Cape Town.
Roos, K. (2007), Convenience chicken products – shoppers’ perceptions and
purchasing behaviour, North West University, Potchefstroom.
Victon Joint Venture (2006), Housing needs assessment at Modikwa Platinum Mine
(unpublished survey). Pretoria.
Wild, L. (2009), Qualitative research methods, http://people.bath.ac.uk.
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The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Catherine Kimani, B Nawangwe and David Jenkins, pp 608-620
Integrating informal land delivery systems into urban land
use planning: a case study of Mbale Municipality, Namatala
Ward
Catherine Kimani,1Prof. B. Nawangwe2 and David Jenkins3
Email: [email protected]; [email protected];
[email protected];
Abstract
This paper provides a discussion of informal systems of land delivery in Uganda
with reference to a case study in Namatala Ward, the largest slum in Mbale. Such
informal settlements are the main channel of housing land supply, a response to the
failure of the government’s policies on urban land and the inability of the private
sector to provide land for housing the poor.
Informal land delivery systems have both strengths and weaknesses. Their strengths
include their ability to provide land in significant volumes to meet the housing needs
of various socio-economic groups. Weaknesses of informal delivery systems include
the inappropriate locations in which settlements are located, the poor layouts that
sometimes emerge and the almost universal infrastructure and service deficiencies.
The paper looks at the informal land delivery system in one informal settlement in
Mbale and how the municipal council is integrating it into its urban land use
planning programmes through regularization i.e. formalizing the informal
settlements by registration and issuance of title documents. A unique aspect of the
delivery system is the use of the local administration system in land transactions. The
paper examines the land transactions at the grassroots and the way security of tenure
is guaranteed through this system. This particular slum settlement has no records in
the lands office but there exists a vibrant land market.
The local authority comes in to provide roads but through negotiations with the land
owners because the local authority has got no control over the land although it has
planning authority.
1
Makerere University, Kampala
2
Dean, Faculty of Technology, Makerere University, Kampala
3
Professor of Land Studies, University of Glamorgan, UK
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RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Catherine Kimani, B Nawangwe and David Jenkins, pp 608-620
1.Introduction
The global scale of the challenge represented by slum dwelling is well known.
UNCHS has documented the state of affairs:
In 2001, 924 million people, almost one third of the world’s population, lived in
slums. The majority of these people are in the developing regions accounting for
43 per cent of the urban population. Sub-Saharan Africa had the largest
proportion of the urban population living in slums in 2001 at over 70 per cent. It
is projected that without serious mitigating action in the next 30 years, the global
number of slum dwellers may double to about 2 billion. (UNCHS, 2003)
Uganda is not atypical.
More than 50 per cent of Uganda’s urban population lives in informal unplanned
settlements on land owned by other people or the government. Without security
of tenure, they cannot access credit from the formal financial institutions and
therefore lack the basic means of production. The squalid conditions they live in
are a source of health hazards they face on a daily basis. Although urban
authorities have put in place programmes to improve the lives of slum dwellers,
the challenge remains enormous. Interventions are limited to public works
programmes such as drainage improvement, roads, and water supply.
UNDP 2007
The provision of adequate land for housing and other economic and social needs is a
primary challenge with which urban administrators are confronted. Land is widely
recognized as the principal component in urban housing, be it for the rich or poor.
For conventional urban housing markets, it is frequently the single largest cost
factor, whilst for the poor, acquiring land with secure tenure has long been
considered their foremost priority. Indeed this presumption has been the
fundamental premise on which numerous housing programmes for low-income
groups in the south have been founded and have foundered (Drakakis – Smith 1988).
An average of 40 per cent and in some cases as much as 70 per cent of the
population of major cities in Asia, Africa, and Latin America are living in illegal
conditions ( Lasserve and Clerc, 1996) “making informalization of housing one of
the most important issues facing urban policy makers all over the developing world.”
Realizing the futility and inhumanness of evictions, during the 1980’s and 1990’s a
generally accepted consensus developed that tenure regularization of informal
settlements is perhaps the most effective policy. Secure property rights associated
with regularized settlements increase tenure security, increase investment in housing,
improve access to credit and hence, it is believed, help reduce poverty (Jimenez
1983, De Soto 1989, and Baharoglu 2002). Indeed the registration of freehold titles
was seen almost as a magical formula that would allow markets to develop as land
can be used as collateral, form a basis for Foreign Direct Investment and even boost
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Catherine Kimani, B Nawangwe and David Jenkins, pp 608-620
agricultural productivity. While such views are more contested these days, (there is
a wealth of contradictory evidence suggesting that land registration makes little
difference, for example, to levels of agricultural investment or productivity
(Whitehead and Tsikata 2003) they formed the backdrop to the key Ugandan Land
Reform of 1998 (see below).
According to UNEP,
all countries should, as appropriate, support the shelter efforts of the urban and
rural poor, the unemployed and no-income groups by adopting and /or adapting
existing codes and regulations, to facilitate their access to land, finance and low-
cost building materials and by actively promoting the regularization and
upgrading of informal settlements and urban slums as an expedient measure and
pragmatic solution to the urban shelter deficit. (UNEP, 1999)
So in identifying the priority issues to be approached when developing strategies to
address the problem of improvement of informal settlements, a paramount issue was
seen as that of tenure regularization policies. Regularization and security of tenure
was commonly considered to be the cardinal factor in settlement upgrading and a
prerequisite for services to be provided. Indeed, it was formerly a “sine qua non” of
upgrading that secure land tenure was essential to any improvement in housing
conditions in informal settlements. Most upgrading programmes still entail a degree
of legalization of tenure rights to land, a policy designed to control the growth of
informal settlements and the basis for issuance of titles (Majale 1998).
The purpose of this study is to look at the informal land delivery system in one
informal settlement in Mbale and see how the municipal council is integrating it into
its urban land use planning programmes through regularization.
2. Literature Review
The provision of adequate land for housing and other economic and social needs is a
primary challenge with which urban administrators are confronted. Land is widely
recognized as the principal component in urban housing, be it for the rich or poor.
For the conventional urban housing markets, it is frequently the single largest cost
factor, whilst for the poor, acquiring land with secure tenure has long been
considered their foremost priority. Indeed this presumption has been the fundamental
premise on which numerous housing programmes for low-income groups in the
south have been founded and have foundered (Drakakis – Smith 1988).
Regularization or establishing tenure security is the formal transmission of a form of
legal ownership to inhabitants of informal settlements. Tenure security is important
because it protects residents against undue eviction, and it provides a legal,
transparent framework for people to sell and transfer property. To regularize the
housing sector, land information and registration systems are required. Security of
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Catherine Kimani, B Nawangwe and David Jenkins, pp 608-620
tenure should focus on legal regularizations which keep and strengthen urban land
use. (UNCHS, 2000).
Preventive land development is costly and politically and economically
impracticable on a large scale. State control of land management fails due to the
prevalent practices of irregular land subdivision. However, in the meantime, case
studies stress that no improvement takes place (or even a shift in trends) without the
intervention of public authorities when the issue was left to free market land policy
alone. Writing in the 1990’s Durand-Lasserve and Clerci, envisaged another model
for intervention taking shape, based on a new synergy. The objective is to find a
method of intervention which ensures the development of synergy between formal
and informal land and housing delivery systems. This may come about by looking at
the achievements of informal developers on the peripheries of major agglomerations.
The point has been reached where the control and management of urban growth by
traditional planning and regulatory measures is becoming less and less efficient.
(Durand-Lasserve and Clerci, 1996)
For Alain Durand-Lasserve, regularizing informal settlements means that households
by definition “must have access to basic urban services.” He suggests that tenure
regularization has distinct advantages for these households
- It advances improvements of housing conditions by owners
- It facilitates the provision of urban services in settlements –
beneficiaries are readily identifiable and locatable
- It facilitates and promotes investments in home based activities
which play a role in poverty alleviation.
- It encourages community participation in the maintenance and
management of settlement environments. (Durrand-Lasserve
1999)
Such views inform the Millennium Development Goals on slum dwellers. The goal,
MDG Target 11, is “by 2020, to have achieved a significant improvement in the lives
of at least 100 million slum dwellers”. UN Habitat’s strategy to measure progress
toward the objective is set out in its ‘Strategy for the implementation of the
Millennium Development Goal 7 target 11’ published in 2005. These metrics relate
to secure tenure and enhanced water and sanitation services.
For public authorities, the regularization of informal settlements and the provision of
secure tenure can in principle, impact positively on their resources as it not only
enables the institution of local taxation, on both property and income generating
activities but also assists tax collection. Moreover, by facilitating the identification
of beneficiaries, it improves cost recovery should this be necessary in the
implementation of a settlement upgrading project. Indeed, cost recovery has proved
to be the most serious of all upgrading programmes, and also one of the most
complex (Majale, 1998).
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Catherine Kimani, B Nawangwe and David Jenkins, pp 608-620
According to Claus Denninger (2003)
The way in which land rights are defined will therefore affect not only the
returns from specific investments and the direction and magnitude of technical
change, but also the way in which the gains from exogenous increases in land
values will be distributed e.g. through infrastructure investments, better
opportunity of trade and economic growth in general .
Denninger is another of those who suggests that granting of secure tenure will bring
on a sequence of logical consequences that will have to be addressed, albeit success
here also depends on the wider context. These consequences the need for efficient
methods of recording land title, cadastral systems, as well as the administrative
capacity to register and update property rights. The most recent text on Land
Reform in Uganda also stresses the need of formal land registration systems
(Batungi, 2008) but is conscious of problems associated with poor governance.
Records about informal settlements have not been kept up-to-date and managed
efficiently in Uganda so that the actual status of land therein is unknown.
As we shall see, in the study area, the Mbale municipal council does not have any
documentation concerning plot numbers or ownership. The possibilities of cost
recovery are a distant thought.
According to Tibaijuka (2004)
Because land is literally the base of slum formation, addressing the challenges
means taking the land issue seriously. Given that experience has shown that it
takes 15-25 years to change a country’s land administration system, we cannot
afford to wait if we wish to improve the lives of slum dwellers now in the short
term.
As noted by Davis and Fourie1998, informal settlements are likely to continue to
provide shelter for many poor people who are ‘waiting for a house within a formal
development.’ This optimistic assessment about realizing aspirations also implies
that local authorities should develop mechanisms to manage existing and future
informal settlements more urgently than the development of formal registration
systems suggests (Davies and Fourie 1998).
3.0 Research Methodology
3-1 Research design
The comments in this paper are derived from a wider yet-to-be published study by
Kimani that includes a survey aimed at establishing the steps local authorities are
taking in an attempt to integrate informal land delivery systems into their urban land
use programmes through regularization and the role played by the inhabitants of
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Catherine Kimani, B Nawangwe and David Jenkins, pp 608-620
these informal settlements. It is a descriptive study which requires the collection of
quantifiable information from a sample. To obtain data for this research, various
methods were used. The first step was a reconnaissance survey of the area to gather
information on the various informal settlements and to select a case study.
The findings of the study were supplemented by a series of independent interviews
by Jenkins culminating in a public meeting in Namatala that was attended by
political representatives and leaders of civil society (including members of NGO’s
and faith based organisations). The findings also corroborate a basic survey of
Namatala that was conducted by JENGA Community Development Outreach, a
Christian NGO, in 2006 (JENGA 2006).
3-2 Data
Both primary and secondary data provided the database for this study.
(a) Secondary Data
This involves a critical review of existing literature on the subject of study, both
published and unpublished and any other appropriate literature sources. Sources of
data included land registry data, records and land maps, development plans and the
various Acts of parliament. Other sources included books, journals and the internet.
The information concerning land use development and approved plans was obtained
from files in the Municipality. Information on the general background of Mbale
informal settlement development, population size, employment and income was
obtained from the Uganda Bureau of Statistics.
(b) Primary Data
(i) Direct observations
Primary data was obtained by undertaking a field study of Namatala and recording
what was of interest and significance to the study, using a standard observation sheet
to identify the basic characteristics of each unit in this informal settlement. (i.e
permanent or temporary, single rooms or doubles, sizes of rooms, Construction
Materials, Accessibility, Services available i.e. water, electricity, toilets, Plot Sizes,
Plot layout).
(ii) Open discussions
These were held with informal settlements occupants who provided details on the
emergence of the informal settlement, opinion leaders who have played a significant
role in the regularization process and the officials of Mbale Municipality who were
involved in the regularization process: these were mainly the engineer and the
surveyor.
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Catherine Kimani, B Nawangwe and David Jenkins, pp 608-620
(iii) Household survey
The study employed a household survey as an important tool to obtain socio-
economic and demographic data, availability of infrastructure services, questions
concerning land ownership, the degree of awareness of tenure regularization and
views on the way the process was carried out. This also helped to bring out the
gender aspect as it helped identify who is for or against the process and for what
reasons.
A sample size of 120 households was interviewed using a structured questionnaire.
The sampling technique employed here was a combination of purposive sampling
and systematic random sampling. Namatala Ward has six cells. These are Siomelo,
Sisye, Nyanza, Wandawa, Doko and Muvule. These were categorized as strata. From
each stratum 20 households were picked. The technique used in picking the sample
here is stratified random sampling. From each stratum, starting at a random point
and taking every 10th house from then to the end. This was considered a
representative sample.
(iv) Institutional questionnaires
This was prepared for Mbale Municipality office to determine their role in the
regularization process and what prompted them to start the process. It also provided
an insight on the emergence of the informal settlements.
Data was analysed using the statistical package for social sciences – SPSS for
windows. Analysis was confined to descriptive statistics
4. Findings and Discussions
Genesis of the Namatala informal settlements
Uganda got a new constitution in 1995, which brought about fundamental reforms in
the ownership, tenure and management of land. Essentially the state no longer
controlled ownership of land in Uganda. Individual rights were from then on
secured by occupation. The Land Act 1998 operationalised these constitutional
reforms. Most significant among these are that land belongs to the citizens of
Uganda and ownership is under four types of tenure namely mailo, customary,
freehold and leasehold. The constitution together with the Land Act 1998 which
operationalises the constitutional provisions put in place measures and institutions to
enable citizens to hold this land. The Act further recognized customary tenure as
legitimate tenure and provided for its regulation, administration and management.
These laws enable the customary owners to acquire certificates of ownership. (Land
Act, 1998)
Initially, that is prior to 1998 Land Act, the land where Namatala settlement is
located belonged to Mbale Municipality. It was within the Municipality boundaries.
This entitled the municipality to full ownership and control of the land. It also had
control over the development planning function and had powers to evict squatters on
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its land. Because of these fairly full powers, the Muncipality had been able to plan
and upgrade a similar informal settlement known as ADRA prior to the 1998 Land
Act.
But after the 1998 Act, the Municipality lost all control over the land. The Act
basically transferred a customary title in the land from the Municipality to the
squatters without compensation. This led to the proliferation of these informal
settlements. The council could do nothing about it. For it to plan the area, it would
now have to compensate the occupants. It would be like buying back its own land,
but, in any case, it had and has no funds to do this.
The local authority had a development plan for this area but it could not implement
it. Therefore, the informal settlements continued to grow unabated. The local
authority does not have any data on these informal settlements. It has no records on
the occupants, the plot sizes and plot numbers. Any regularization process will
hopefully help generate this data.
To further complicate issues, the 1998 Act also gives owners under customary tenure
the right to apply to convert to either freehold or leasehold tenure. However, this
regularization requires a formal application, certification and registration.
Basic environmental characteristics of Namatala Informal Settlement
Mbale Municipality has various slums surrounding the main town that exhibit
similar characteristics. These are Namatala, Namakweke, Mona and Malukhu.
Namatala is the biggest. The surveys, observations and interviews identified the
following characteristics: high densities of population and residential structures; lack
of land titles, physical planning, building and infrastructure. Standards are non-
existent for environmental infrastructure: water, sanitation, drainage and solid waste
disposal – and other basic services and amenities are elementary, deficient or
nonexistent (water supply, for example: 79% use communal tap; 7% has municipal
tap in house; 7% use the river; 7% use borehole). Structures (housing units) were
built largely of temporary materials and do not conform with minimum stipulated
building by-law standards. The most common dwelling unit is a single room (89%
of the residents live in single rooms accommodating an average of four to six
persons). The majority of households are tenants, and most occupants are engaged
in informal sector activities. Physical layouts are relatively haphazard, making it
difficult to introduce environmental infrastructure facilities, and there are non-
conforming plots, which arise where an illegal subdivision of land has taken place.
In general plots are too small, too narrow and too shallow to meet the land-use
requirements for the district and zone. There are however some permanent
structures (the JENGA survey reports 27%) which reflect what the owners are doing
for themselves in an attempt to regularize their settlements. The owners of these
permanent structures have surveyed the land and may be in the process of title
registration.
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This description should be viewed in a social context where 24% have one meal per
day; 30% have less than one meal per day; 6% obtain food from tips and in an
economic context where 63% earn less than Ug Sh 2000 per day (about $1).
The JENGA survey discovered that 40% had malaria; 22% suffer regularly from
diarrhoea; 15% Coughs/ tuberculosis; 11% of women pregnancy and delivery
problems; and 2% admit to having HIV/Aids whereas deaths from HIV/Aids amount
to 29% of all deaths.
In the midst of abject poverty people aspire to secure shelter.
Community role in regularization
Tenure regularization in Namatala is totally an individual affair. The local authority
does not help in any way as far as title processing and costing is concerned, although
they should consider the active encouragement of the process when we demonstrate
what is happening. The council’s role is simply to recognize the process and accept
the formalization. Constitutionally, the registration of title converts the occupants’
customary tenure into a leasehold. This is very important because it is enabling the
municipality to re-acquire a superior title (leases have durations from 5 extendable to
49 years). Not only does this provide the municipality with a modest rent and the
possibility of future tax income, it enables the local authority to plan the land in
future since it will be legally under their jurisdiction. It also enables the local
authority to have a record of who owns what and at which location and the land
sizes. Without this process, the local authority would not have any records for this
area.
The steps the residents are taking to regularize land ownership are to formalize the
customary tenure by applying for a title document. This is a very expensive exercise
and time consuming. It involves at least forty steps for the whole process to
completion. The total cost is about 2,000,000 Ugshs ($1000) This is one of the
reasons why most of the people do not have titles. It is very expensive to acquire it.
Most of them do not have formal jobs and are engaged in informal activities.
Raising the money is a huge task. It would seem sensible to lower the cost and
thereby further stimulate registration. It might also remove an injustice: currently, in
many disputed cases of customary tenure the wealthy can register at the expense of
those poor with better claims to title.
In planning the future of the ‘Namatala’ estate, a key issue is the opening up of
roads. Provision of accessibility is an objective of urban land use planning. A road is
essential for vehicular traffic in case of emergency and to facilitate the future
construction of other basic infrastructures. These infrastructures would be
undertaken in a stage to come, when the inhabitants have the means and willingness
to share the construction expenses and sustain the maintenance costs. The planning
objective is to ensure sustainable growth related to the limited resources that the
inhabitants are ready to mobilize and those that are available in the municipality.
With roads opening, it has enabled the municipality vehicles to access the area to
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collect garbage and empty the pit latrines. Although they are not very consistent in
these activities, at least they have been able to access the area. The council has also
set out to provide access by demolishing (with the assistance of local leaders)
structures that are on the way. They do not pay any compensation. One is given the
option of moving their developments and if they do not comply, the council
demolishes.
The community role is to provide the land since the municipality does not have any.
Initially, there was conflict but the Local Councillor (LC), a respected figure in the
local community, sensitized the people on the need to provide accessibility for the
whole informal settlement. They agreed that the council plans for the roads and the
landowners whose land the road passes through will provide the land. The role of
the LC Local Chairman is crucial in any exercise in these settlements. Without them
no project takes off.
Integration of informal land delivery system into Urban Land Use Planning
The local authority has integrated this land, which is informal, into its urban land use
planning objectives. As Durrand – Lasserve, (1990) observes, there is a general
consensus that tenure regularization policies may expedite the integration of informal
land and housing markets, and the informal sector in general into the formal
economy, particularly when tenure regularization entails the allocation of real rights,
whether freehold or leasehold.
This has actually been the case in Namatala. Its informality has been formalized.
This is very evident in the property market. There is a vibrant land market within the
informal settlement. In recent years, property values have gone up in rental and
capital markets. At the same time there is observational evidence that people are
investing in their property. The de facto declaration of customary rights under the
1998 Act seems to provide two stimuli to market activity. The fact that it is possible
to secure a title (security), whereas before it was not possible, is the first stimulus.
People are trading their customary rights under the 1998 Act and have sufficient
confidence to upgrade property where they have the capital. In the midst of squalor,
one encounters some owner occupied homes that are just like any other homes in a
middle income residential area of Mbale. At the same time landlords are constructing
more permanent rooms (physically more secure) to attract higher rents. A second
stimulus comes at registration, when formal title is achieved. At this point it is more
likely that traditional forms of finance are forthcoming.
One other feature of the current situation is that sellers are selling and moving either
to the fringes of settlements or to other informal settlements which are not
regularized and therefore not very expensive. Namatala has expanded significantly
in the last few years at the same time that land utilization has intensified. This
creates more problems for the local authority which then has to deal with the issue of
expanding informal settlements. Perhaps the ‘amnesty’ that was the outcome of the
1998 Act needs to be extended to the squatters that have moved out from their
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customary tenure, particularly on government lands. This would have the effect of
re-enforcing that legislation.
Whether or not these outcomes were intended by the legislation is not clear.
Certainly the government of Uganda’s report on MDG 11 appears to rue the
widespread “informal unplanned settlements on land owned by other people or the
government.” It is equally clear that the government is intent on revising the 1998
legislation and initiated a widespread consultation in an attempt to come up with a
land policy.
Two key aspects in this whole process is the gradual return of local authority control
over planning without paying compensation for the land and, another objective of
urban land use planning, the creation of records. As earlier mentioned, the
municipality does not know the plot numbers or title numbers because they do not
exist, nor the exact inhabitants. But with issuance of legal titles, these records can
gradually be constructed.
Majale (1998) observes that for public authorities, the regularization of informal
settlements and the provision of secure tenure can in principle, impact positively on
their resources as it not only enables the institution of local taxation, on both
property and income generating activities but also assists tax collection. Perhaps
there is a glimmer on the horizon that this may be possible in Namatala.
Conclusion
Regularisation of informal settlements is a sure way of supplying land into the urban
land market. In Namatala, it has led to improved housing and created a vibrant land
market. This is evidenced by the type of houses now being constructed: permanent
structures in the middle of shacks. There is hope that one day; this informal
settlement will be transformed to decent houses and in recent years there has been a
positive momentum. Both the declaration of customary rights and the subsequent
acquisition of a title document formalize the process and provide security. Here is
evidence that when people are confident, they will invest by improving their houses.
The process is necessarily slow and the road is long when communities are beset by
the kind of problems that typify Namatala.
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September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
David Neale, pp 621-629
The urbanisation of Caribbean coastlines: a case study of the
Trinidad West Coast
David Neale1
1
University of the West Indies
St. Augustine Campus
Republic of Trinidad and Tobago
Email: [email protected]
Abstract:
Urbanisation is a global phenomenon that is of concern in many parts of the world. As a
physical development process, it is closely associated with many aspects of land
management including the manner in which humans choose to derive benefit from the use of
property. The potentially negative environmental impacts of urbanisation and the current
appreciation of threats such as those posed by Climate Change, add to the growing need to
understand the urbanisation process in a variety of scenarios including its occurrence at the
coastlines of Small Island Developing States (SIDS).
The Caribbean Islands are SIDS that offer scenarios where the urbanisation of the coastline
appears increasingly tied to national economic independence, economic prosperity and the
lifestyle expectations of their populations. This paper specifically examines urbanisation
associated with physical development of the west coast of one Caribbean island: Trinidad,
over the past four decades years. The examination identifies the role of semi-formal
development systems in an environment in which sustainability issues are weakly expressed
and regulatory mechanisms are still in an emergent phase. While the urbanisation scenario
on the Trinidad West Coast continues to include risks of coastal pollution, socio-economic
displacement, habitat loss and increased vulnerability to natural disasters, the resulting urban
coastal form is surprisingly not entirely undesirable.
This paper seeks to justify further research on Caribbean urban space: its extent, the
challenges posed by it, its potential for creating spaces for built assets and by extension,
economic and environmental investment associated with it.
Keywords:
Urban coastlines, SIDS, Trinidad and Tobago, urbanisation.
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1 Introduction
Urbanisation has been identified as a phenomenon that functions as a critical factor in many
planning and development issues at global and national levels. It is equally important in
Small Island Developing States (SIDS).In addressing the opening session of the International
Meeting to review the implementation of Action for the Sustainable Development of Small
Island States in Mauritius in January 2005, Dr. Tibaijuka, the then UN Under-Secretary
General of UN-HABITAT, outlined four (4) key challenges that faced SIDS:(i) the alarming
rate of urbanisation, in particular its expression along coastlines (ii)the high vulnerability of
national and local infrastructure to natural disasters (iii) the management of water and
sanitation and (iv) the demands that increasing urbanisation makes on urban governance.
These issues are all intimately connected with many aspects of land management including
the manner in which humans derive benefit from the use of property. As challenges, they
collectively conspire to provide SIDS with a range of potential problems and issues that
must be addressed by economies that appear to have little choice but to grow if they are to
meet the livelihood demands of their populations. The Caribbean Island States have, since
their political independence over the past few decades, been actively pursing physical
development as part of larger economic strategies and as a result have had to contend in a
real way,with many challenges including those posed by Climate Change and urbanization
as articulated by the UN Under-Secretary General.
This paper presents a brief examination of the development dilemma associated with the
arguable success of the urbanisation of the west coast of Trinidad (Republic of Trinidad and
Tobago):that coastline is one that over the past four decades experienced high levels of
physical development that are expressed as predominantly industrial and residential
development. As a case study, the Trinidad West Coast urbanisation scenario offers special
interest since it occurs within a regulatory structure that is (a) not fully developed and (b) is
resource-constrained: both descriptors are common features of SIDS.
2 Land use on the Trinidad West Coast
2.1 The physical setting
The study area, the Trinidad West Coast is situated on the island of Trinidad(10.5˚ North
Latitude, 61.5˚ West Longitude) at the southeastern extreme of the Caribbean chain of islands.
The study area lies on the eastern limit is the Gulf of Paria, a relatively shallow, semi-
enclosed sea with a coastal environment that is dominated by sheltered physical
oceanographic conditions. North East Trade Winds and North Atlantic oceanographic
conditions dominate the physical oceanographic arrangements on the island’s eastern and
northern coastlines. In general physical development on Trinidad is therefore concentrated
on the West Coast, mainly because of the availability of relatively flat lands and low energy
coastal oceanographic conditions. Historically, port and harbour activities in Trinidad have
taken advantage of the supportive conditions on the West Coast. Present physical
development activities on this coastline include land reclamation, marine dredging, offshore
disposal, coastal protection works and the construction of a wide range of coastal (including
offshore) structures.
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2.2 Physical development
Trinidad has a population of 1.2 million persons on the 5100km2of island. The form and rate
of physical development is driven largely by the Island State’s changing economic
conditions. In particular, accelerated exploitation of the State’s energy (oil and gas) reserves
after the 1960s drove physical development both as a means of providing supportive
infrastructure and as a product of economic wealth (Central Bank of Trinidad and Tobago,
2007). Using GDP per capita figures with output per capita in construction for the period
1975 to 2000, Lewis (2004)associates the increase in levels of overall construction activity
in Trinidad and Tobago with positive national economic growth. One visible indication of
the increase in industrial and commercial port activity along the Trinidad West Coast is
provided by changes in the numbers of ports. Between 1970 and 2006, the numbers of active
ports along the West Coast almost doubled from eight (8) to fifteen (15). Significant areas of
coastal lands that were previously in agricultural production were changed to industrial use
while vessel traffic in the Gulf of Paria increased to high levels. Present day physical
development activity extends over the entire 144 km length of the Trinidad West Coast.
Caribbean Sea
Approximate position of the
Approximate position of the nearest coastal road
10-metre depth contour Atlantic
Ocean
Gulf of Paria
Columbus Channel 0 10 20 30 40
Scale in Kilometers
1 centimeter on map = 4.66 kilometers
Figure 1: The spatial spread of development projects that were considered between
1970 and 2007 for the Trinidad West Coast
Physical development is widespread and varied. Neale (2009) captures many of the
important features of land use of the Trinidad West Coast by classifying data on all projects
that were considered for that coastline between 1970 and 2007. Some of these features are
listed below.
i. Coastal development projects are located in all parts of the Trinidad West Coast with
higher concentrations in the north and central parts of the coastline (See Figure 1).
ii. Collectively, commercial, industrial, and infrastructural development projects
represent about 75% of the total number of projects (See Figure 2b).
iii. The number of coastal development projects per decade increased by more than
500% since the 1970s.
iv. There is a location bias in land use activity. In particular, industrial development
tends to be located in the central parts of the coastline.
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v. Parts of the near shore marine areas of the Gulf of Paria are included in the
development space. In 48% of the projects land reclamation is a feature; in 36% of
the projects marine dredging is a feature and in 42% of the projects there is use of the
coastal sea. These statistics suggest that developers are able to negotiate use marine
space in support of coastal activity. This feature is further evident in the widespread
use of land reclamation as a physical development technique (See Figure 2c)
Figure 2: Classification of development projects (1970 - 2007) on the Trinidad West Coast
2.3 Environmental issues
Even with high levels of physical development suggested above, the impact of physical
activity on the Trinidad West Coast is not well-researched and/or documented, however
limited research suggests the following five (5) key environmental features for the coastal
area.
1. There are significant increases in marine pollution levels particularly the levels
hydrocarbons and heavy metal concentrations from both land and marine-based
sources. There are few beaches with acceptable levels of bathing water quality and a
growing perception of worsening conditions.
2. There are significant changes in nearshore coastal circulation and sediment transport
mechanisms that increase the incidence of erosion and/or accretion at coastal sites.
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Significant parts of the coastline are now protected by engineered coastal defence
structures that require costly maintenance.
3. There are significant increases in marine traffic through nearby coastal waters that
have associated with them increased risk levels for collisions and spills.
4. There is an un-quantified level of socio-economic displacement of traditional marine
users as well as traditional farmers. Industrialised areas and their respective buffer
zones in both marine and terrestrial areas have displaced fishing, agriculture and even
small coastal communities.
5. There is loss or change of vistas as a result of coastal development projects. These
losses have arguably re-engineered the ‘island-feel’ away from open Caribbean
coastlines towards more generic industrialised spaces.
3 The regulatory environment
Alarmingly, thirty-five (35%) of the completed projects in the on the Trinidad West Coast
over the past 37 years were commenced without regulatory authorisation. This single
statistic raises several questions regarding the regulatory environment in which coastal
development occurs. Strictly speaking, the regulation of physical development projects in
Trinidad and Tobago is managed through the issuance of permits, certificates and approvals
by regulatory agencies at three (3) levels: (i) at the level of the utility companies, (ii) at the
level of the municipality and (iii) at the level of the State. Several laws, regulations,
guidelines and policies support a formal system of permits and clearances. The formal
regulatory structure includes the need for leases and licenses, development planning
approvals and Certificates of Environmental Clearance (CEC).
Despite its clarity, there is a strong perception that the approval system is fraught with
unnecessary administrative delays. Developers often cite the long length of time needed to
process CEC applications as a difficulty in the regulatory control system. The statutory
processing time for CECs, when they include environmental impact assessments, can be a
maximum of one hundred and forty-nine (149) working days. This includes one hundred and
twenty-one (121) days for application processing time and twenty-eight (28) days for the
applicant to conduct public consultations on the draft EIA Terms of Reference (ToR). The
regulatory agency’s response to complaints is that delays in the decision making on CEC
applications are usually related to the need to clarify information submitted by the applicant
at different stages of the review process. They argue that these timeframes are consistent
with those in many other jurisdictions around the world.
The physical development scenario in not assisted by any formal system of coastal
management within the study area (Mc Shine 1995, Mycoo 2002). There is, consequently,
no local attempt to distinguish between a coastal zone and a coastal planning area. There are,
however, several institutional arrangements that with varying efficiency provide for the
management of coastal areas. These institutional arrangements include the State’s espousal
of international agreements and conventions, agency and inter-agency co-operation and the
support of Non-Governmental Organisations (NGOs). These arrangements are however
plagued by inherent institutional weaknesses, inflexibility, the lack of political will and a
general inability to respond to quickly changing demands (Tompkins, et al 2002).
Neale (2009) attributes the high percentage of unauthorised development to a positive
feedback development loop in which informal development activity is encouraged by the
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precedent of adjacent development. That is, developers of all types are encouraged to build
without regulatory approval if their neighbour has been able to successfully build without
regulatory approval. Interestingly the statistic holds for both non-State and State projects. It
can be argued therefore that the State is a willing party to such a development form since it
also engages in unauthorised development.
The scenario begs questions of the existing regulatory framework and its ability and
willingness to adequately manage physical development. Several areas of resource
constraints are evident. These include the lack of clear development strategies, personnel
shortages and data collection and analysis systems. Further, the physical planning legal
framework may be in need to revision and the regulatory environmental management system
is relatively new (established in 2001) and continues to obey a learning curve.
The overall development scenario is one of urbanisation of the Trinidad West Coast that
includes semi-formal systems and is accompanied by impacts of the type that are well-
recognised in the wider literature on urbanisation in coastal areas in many parts of the world.
4 The development success
The Trinidad West Coast scenario is a critical part of the economic development strategy of
the State. It represents investment by the State in its abundant hydrocarbon-based energy
reserves, in city space and in national infrastructure. These investments include the
construction of industrial ports and down-steam energy industries, the construction and of
transportation networks and physical improvements to waterfront space its two coastally
located cities. A significant portion of the State’s investments therefore sits on or across the
coastline.
Between 1997 and 2007real annual GDP growth hovered at about 10% with unemployment
remaining consistently below 7% (Central Bank of Trinidad and Tobago, 2008). Much of
this economic success is attributed to the development of the energy-based sector including
the earnings of several energy-based activities located along the Trinidad West Coast. Even
in the face of global economic slowdowns in the last quarter or 2008and local concerns over
rising inflation, the Trinidad and Tobago economy has continued to be robust and resilient.
Over the past 15 years, real estate in Trinidad and Tobago enjoyed persistently rising prices
and only since the middle of 2008 has there been any noticeable slowing or price decline.
Coastal land, particularly properties along the northwestern parts of the West Coast where
there is a high demand for coastal residences, enjoy a premium position. In both Port of
Spain and San Fernando: the only two cities of the State, the physical development of
waterfront space is either in construction or planned for a wide range of mixed uses.
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Figure 3: Photograph of upper income residential development at the north western parts of
the Trinidad West coast
As in many developing countries, informal residential development is evident in some parts
of the coastline adjacent to the city spaces. These residents are invariably part of the urban
poor who live in squatter type settlements on valuable State lands. In these communities, the
challenges of urban crime and other social issues frustrate development efforts and fuel
varied perceptions by stakeholders about the distribution of national wealth.
In general, the Trinidad West Coast represents a largely economic success based on State or
State-encouraged investment. Its continued urbanization and the development of the coastal
urban form over the past decades are in many ways deliberate and directly associated with
the State’s economic strategy.
5 The development dilemma
It is the economic success and challenges of urbanisation that form the basis for an
unresolved development dilemma for many who are stakeholders at the Trinidad West Coast
coastline: ‘What is the best use of the Trinidad West Coast: continued physical development,
conservation or some formal (or informal) concoction of both? Such a primary question is
one that some have argued, ought to drive urban governance issues in the Twin Island State.
It has instead remained outside of mainstream discussion in the face of continued economic
prosperity. At the project level however, the current environmental permitting process is
hinged on participation that is expected to address stakeholder concerns. In general the
present lack of current national and local area frameworks (plans, policies and standards)
make the usefulness of such stakeholder contributions limited and biased towards only issues
of employment rather than a broader range of social, environmental and economic concerns.
6 Strategic development planning
After many decades of largely unmanaged physical development, the State has started to
recongise the need for published strategies, development plans and policies at both the
national and local levels that ought to emerge from a broad consultation process. There are
currently efforts at devising such local area plans, not just for the Trinidad West Coast but
also for all parts of the twin-island State. Further there are efforts at revising the currently
out-dated national physical development plan. If such plans are to be meaningful and useful,
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they will need to recognise several constraints and opportunities that have not traditionally
been part of the State’s development planning scenario. Five (5) critical aspects are:
i. The devolution of power to local government agencies
ii. The development of land use strategies that consider the potential impact of climate
change to coastal and national infrastructure
iii. The derivation of regularisation schemes and strategies that attend to current
unauthorised physical development projects
iv. The development of strategies that consider potential long and short term economic
changes at global level that may directly impact national and local development
schemes.
v. The creation of as clear as possible, a vision of the desired form and standards for
national development.
While such issues are not new to the planning process, they are not easily managed in
planning environments such as Trinidad and Tobago where reliable data and research is not
available, resources are limited and political expediency appears to be given preference over
good sense.
7 Conclusions
In summary the Trinidad West Coast presents a development scenario that through informal
design includes urbanisation and its impacts. These are closely related to both the input and
output sides of the State’s economic strategy. Issues of urbanisation, environmental
change/loss and urban governance are easily in evidence. The scenario enjoys arguable
economic success at the expense of several social, socio-economic and environmental
factors. Not unexpectedly, the weak or emerging regulatory structure and supportive
economic conditions has over the past three or four decades, encouraged informal or
unauthorised development that has itself added to overall development success. At the time
of writing, socio-economic and environmental loss is beginning to weigh on urban
governance: a burden that the wider literature suggests can best be lightened through
improved land management at both local and national level.
Data on physical development activity on The Trinidad West Coast if well documented and
researched, promises to provide useful lessons in urbanisation in coastal scenarios in SIDS
since the scenario continues to respond and evolve to global issues. This aspect of the
physical development scenario offers potential to property researchers as a contribution to
urban coastal development in SIDS.
9 Acknowledgements
The data used in this paper to describe the Trinidad West Coast was collected by the author
as part of research work in support of a PhD thesis on coastal development in Trinidad. This
work was completed under the supervision of Dr. Asad Mohammed of the Urban Planning
and Design Programme at the St. Augustine Campus of the University of the West Indies. I
acknowledge Dr Mohammed’s role in this respect.
This paper is part of an initial effort by RICS Caribbean to begin participating in regional
development through research contributions by its members on land and property. While this
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paper is specific to one Caribbean island, the broader research effort is significantly wider
and buried within the larger aim of encouraging intra-regional research and co-operation as
well as providing a vehicle for deepening RICS Caribbean as a regional institution. The
author currently leads that regional initiative while practicing as a Chartered land
professional in Trinidad and Tobago.
10 References
Central Bank of Trinidad and Tobago, 2008. Annual survey of the economy 2007
Lewis, T.M. 2004. The construction industry in the economy of Trinidad and Tobago.
Construction and Management 22:541-545.
McShine, H. 1995. Trinidad and Tobago: a small country tests and rejects integrated
management. In Coastal Zone Management Handbook, edited by J. R. Clark.
Florida: CRC Press.
Mycoo, M. 2002. Adopting integrated coastal zone planning and management: A case study
of Trinidad. International Development Planning Review 24 (3):227-248.
Neale D., 2009 Physical Development along a Coastline Boundary: An Examination of
Sea Use and Development on the Trinidad West Coast. Draft unpublished thesis.
Tompkins, E., W.N. Adger, and K. Brown. 2002. Institutional networks for inclusive coastal
management in Trinidad and Tobago. Environment and Planning A 34:1095-1111.
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Keith Jones and Roger Few, pp 630-640
Community resilience to extreme weather events: a review of
theory
Keith Jones1 Roger Few2
1
School of Architecture & Construction,
University of Greenwich, Eltham, London, SE9 2PQ,
United Kingdom
2
School of International Development
University of East Anglia, Norwich, NR4 7TJ
United Kingdom
Email: [email protected]; [email protected]
Abstract:
There is now a broad scientific consensus that the global climate is changing in ways
that are likely to have a profound impact on human society and the built environment
over the coming decades. The inherent vulnerability, resilience and adaptive capacity of
existing communities to climate change, and in particular extreme weather events, is
largely determined by the actions they take to prepare for, and recover from, such
events. However at present there is limited understanding of the factors that affect
community resilience and few recognised quantitative toolkits for measuring these
factors. In addressing the needs of community resilience toolkits the challenge to the
surveying profession is to understand the impacts that extreme weather events have on a
community, and in particular its physical assets, and to develop practical measures of
vulnerability, resilience and adaptive capacity to inform asset owners of the measures
that they can take to recover speedily from an event. This paper will outline a 3 year
research project underway in the UK to establish a theoretical model of community
resilience and develop practical tools that surveyors can use to help home-owners and
businesses prepare for an extreme weather event. The paper will review the
literature/theory pertinent to disaster recovery and consider the applicability of the
theoretical models derived from non-weather related disasters to extreme weather
events. The paper will suggest a series of factors that can be used to measure
vulnerability, resilience and adaptive capacity and outline the challenge to the surveying
profession as it seeks to advise communities on adaptation strategies.
Keywords:
Adaptive Capacity, Built Environment, Disaster Recovery, Extreme Weather Events,
Resilience
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1. Climate Change - Extreme Weather Events
There is now a broad scientific consensus that the global climate is changing in ways
that over the coming decades are likely to have a profound impact on human society and
the built environment. In the UK there is evidence that extreme weather events (EWEs)
are increasing in frequency and severity (Ekstrom et al, 2005) with, over the last decade,
the UK seeing significant increases in heavy rainfall (Fowler & Kilsby, 2003) resulting
in both localised urban flooding and more widespread fluvial flooding. Indeed, in 2000,
flood events resulted in £500M worth of insurance claims in the UK (RMS, 2000), and
in 2004 managing flooding cost the UK £2.2 billion (OST, 2004). In addition to
flooding the incidence of heat waves (Good et al, 2006) and water resource drought
(Blenkinsop & Fowler, 2008) are also projected to increase, particularly in the south of
the UK, as climate models predict wetter winters and drier summers (Jenkins et al,
2008) together with increases in temperature and thus evaporative losses throughout the
year. In August 2003 over 2000 premature deaths were attributed to the heat wave in
southern England alone (Kovats, 2006). Finally, strong storms in Europe have induced,
during the last decades, severe human losses and extensive damage to properties. The
great storm of October 15, 1987 caused €5M damage and killed 34 people in the UK
and France. The Lothar and Martin storms in December 1999 caused €13.5M damage in
Europe, killing 125 people. All of these provide challenges to the surveying profession
as they seek to quantify the risks and advise communities (households, business & local
planners) on how best to prepare for such events.
2. Vulnerability, Resilience and Adaptive Capacity
Vulnerability, resilience and adaptive capacity are concepts from the biophysical and
social realms that are increasingly being applied to the understanding of the complex
relationships between communities, the built environment, and the drivers that may
affect change. Whilst there is considerable debate over the precise definitions of the
terminology (Gallopin, 2006), in the context of this paper: vulnerability will be
considered as the likelihood of exposure to hazards (EWEs) and the adverse
consequences resulting from them; resilience, as the ability of the system to prevent,
withstand, recover and learn from the impacts of the hazard; and adaptive capacity, as
the ability for a system to change (adapt) to meet the new conditions brought about by
perturbations that fundamentally change the system.
Assessing the impact of EWEs on vulnerability, resilience and adaptive capacity at the
national, regional and sectoral level has identified a range of contextual (e.g. physical,
economic, climate scenarios etc) environments that are likely to exist in the future and
has highlighted the weaknesses in existing knowledge sets and the decision-making
processes required to ensure ‘operation as normal’. Whilst a community’s resilience to
EWEs, is known to be largely determined by the strategic decisions taken before, during
and after an event, many of the policies, guidance, codes and regulations, currently in
place in the UK tend to be complex and difficult to apply consistently (Spence, 2004)
and as such many individuals and businesses are unsure of where responsibilities lie
(following an EWE) and where assistance (to recover) can be obtained (Crichton, 2006).
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Assessing the impacts of EWEs at a local level is less well developed. Whilst it is
generally accepted that a community’s resilience and adaptive capacity is a complex
association of behavioural characteristics between: households; businesses (particularly
small and medium sized enterprises - SMEs); and local decision makers (politicians),
the precise nature of these relationships is less well understood (Smit & Wandel, 2006).
What is generally agreed is the need for each community to identify its own
determinants of vulnerability and adaptive capacity rather than rely on generic
assessments and ‘preferred solutions’ and to understand the sensitivities of these
determinants to the wider political, social, economic and technological forces (Smit &
Wandel, 2006).
3. Measuring Community Resilience
Attempts to develop practical measures of community resilience have resulted in a
number of explanatory models that seek to qualify the relationships between the various
determinants of community resilience for different extreme event scenarios. In
developing these models the concept of resilience has replaced resistance as the key
consideration in reducing loss (in its broadest terms) as a consequence of a disaster
(either natural or manmade). Whereas resistance has traditionally emphasised the
importance of pre-disaster mitigation measures that enhance the performance of both
physical elements (built environment) and social institutions in reducing loses;
resilience is more broadly concerned with improving the capacity of physical and
human systems to prevent, respond to and recover from extreme events (Tierney &
Bruneau, 2007). In exploring the twin attributes of inherent strength and flexibility,
Tierney & Bruneau developed a working definition of disaster resilience “… the ability
of social units (e.g. organisations, communities) to mitigate hazards, contain the effects
of disasters when they occur, and carry out recovery activities in ways that minimise
social disruption and mitigate the effects of future disasters..” and identified four
attributes/determinants of a resilient system framework:
• Robustness - the ability of systems to withstand disaster forces without
significant degradation or loss of performance;
• Redundancy - the extent to which systems are substitutable (by other
systems);
• Resourcefulness - the ability to diagnose and prioritise problems and initiate
solutions (by identifying and mobilising material, monetary, informational,
technological and human resources);
• Rapidity - the capacity to restore functionality in a timely way.
In addition to the attributes, Tierney & Bruneau also identified 4 dimensions/domains of
resilience:
• Technical Domain - the physical properties of systems;
• Organisational Domain - the organisations that manage the physical
components of the system (including emergency responders);
• Social Domain - population and community characteristics that render
social groups either more vulnerable or more adaptable to hazards;
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• Local and Regional Economies - ability to identify and access a range of
options for coping with a disaster – the more limited the options, the lower
the community resilience.
In considering the attributes/dimensions Tierney & Bruneau highlighted the complex
nature of resilience and emphasised the need to adopt a holistic approach to assessing
community resilience that considers organisational and community capacity alongside
household’s and business’s ability to cope with extreme events.
Paton (2006), who examined resilience to extreme events from a societal perspective,
also identified 4 general components that he believed made a society resilient to
extreme events:
• Communities, their members, businesses and societal organisations must
possess the resources (e.g. household emergency plans, business continuity
plans etc) to ensure their safety and continued core function during an event.
• They must possess the competences (e.g. action coping, community
competence, trained staff, disaster management procedures) required to
mobilise, organise and use the resources to confront problems encountered
and adapt to the reality created by the event.
• The planning and development strategies used to facilitate resilience must
include mechanisms designed to integrate the resources available at each
level to ensure the existence of a coherent societal capacity, and one capable
of realising the potential to capitalise on opportunities for change, growth
and the enhancement of Quality of Life.
• These resources need to be available over an extended time period and be
sympathetic to the changing (adapting/emerging) community.
Based on these components Paton used structural equation modelling to produce a
model of Auckland’s resilience to a volcanic eruption scenario. In developing his
model Paton assumed that resilience to an extreme event was a combination of personal,
community and institutional factors:
• Personal factors included: critical awareness; self efficacy; sense of
community; outcome expectancy; action coping; and resources available.
• Community factors included: collective efficacy; participation;
commitment; information exchange; social support; decision making; and
resources available.
• Institutional factors included: empowerment; trust; resources; mechanisms
for community problem solving.
By expressing these factors as a range of variables and undertaking a questionnaire
survey of the Auckland community Paton identified 3 personal indicators (action
coping, positive outcome expectancy and negative outcome expectancy), 2 community
level indicators ( community participation and ability to communicate community
problems) and 2 institution level indicators (empowerment and trust) as having direct
influence on community resilience. Further, in an attempt to provide local decision
makers with a mechanism to evaluate potential interventions, Paton used the base line
data collected through the questionnaire survey to develop a resilience indicator that
represented a composite measure of resilience (on a 1-10 scale). For the scenario
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examined Auckland scored 5.53, which, whilst of academic interest, has no absolute
meaning since it cannot be calibrated until the extreme event occurs. This is a recurrent
problem with the use of generic models to predict community resilience.
A third view of community resilience to natural disasters was proposed by Cutter et al
(2008). Cutter drew attention to the fact that, whilst there is a growing body of research
focussing on defining the dimensions of community resilience, little attention has
hitherto been paid to the development of consistent factors or standard metrics that can
be used to quantify community resilience. Cutter addressed this shortcoming by
outlining a conceptual model of natural disaster resilience supported by a set of
candidate variables for measuring community resilience.
The basis for Cutters conceptual model is the relationship between vulnerability and
resilience. From a hazard perspective resilience is the ability of a system to survive and
cope with an extreme event whilst from a global environmental change perspective
resilience focuses on the ability of a system to absorb the disturbance and re-organise
itself into a functioning system that may be the same as existed before the disturbance
or may have evolved to a new state through learning and adaptation. Whilst such
differences may seem esoteric to built environment researchers, they are important
because of the implications that the relationships between vulnerability, resilience and
adaptive capacity (see Cutter, 2008 for further details) have on the perspective, and
hence the body of literature, that underpin the models. Cutter’s model is based on a
hazards perspective which views vulnerability and resilience as separate but linked
components.
Absorptive capacity Exceeded?
Degree of Recovery
Bu
s
em
il
tE
yst
nv
lS
iro
cia
nm
So
en
t
Figure 1. Schematic representation of the disaster resilience of place (DROP) model
(Source: Cutter et al, 2008)
Cutter’s DROP (Disaster Resilience of Place) model (Figure 1) considers the inherent
(antecedent conditions) vulnerability and resilience of existing communities
(combination of natural systems, social system and the built environment) to an extreme
event. The antecedent conditions interact with the hazard event characteristics to
produce immediate effects. The event characteristics include frequency, duration,
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intensity, magnitude and rate of onset of the event. These vary depending on the type of
hazard and geographical location.
The immediate effects of an extreme event are either reduced or amplified by the
presence (or lack of) mitigation actions and coping responses. After any coping
strategies are implemented the hazard impact is realised. The impact of the event is
moderated by the absorptive capacity of the local community. If the absorptive capacity
of the local community is not exceeded then recovery is relatively quick. If the
absorptive capacity is exceeded (either because the scale of the event is overwhelming
or the coping responses are insufficient) then the community either adapts (through
improvisation or social learning) and recovers relatively quickly, or does not adapt and
recovery is much slower (or in extreme cases doesn’t happen). If social learning occurs
then there is a greater likelihood that mitigation and preparedness will be improved.
In an attempt to operationalise the model Cutter suggested (from a review of other
research) a range of resilience indicators that could be tested against a real world
application. These include:
• Social - demographics; social networks; community values-cohesion; faith
based organisations.
• Economic - employment; property values; wealth generation; municipal
finance/revenues.
• Institutional - participation in hazard reduction programmes; hazard
mitigation plans; emergency services; zoning and building standards;
emergency response plans; interoperable communications; continuity of
operations plans.
• Infrastructure - lifelines and critical infrastructure; transportation networks;
residential housing stock and age; commercial and manufacturing
establishments.
• Community Competence - local understanding of risk; counselling services;
absence of psychopathologies (alcohol, drug, spousal abuse); health and
wellness; quality of life.
Again however, until the model is tested against a real-world event it is not possible to
quantify the impact that any of the above have on the resilience of any given location to
an extreme event.
One potential problem with Cutter’s model is the implied linear (causal) relationship
between event characteristics, coping response and hazard impact. It could be
reasonably argued that, due to varying timescales for different responses and impacts,
and social differentiation in how an event unfolds, that a hazard impact for one actor can
affect long-term coping response of others (e.g. via economic links). If such a
relationship exists then it will demonstrate characteristics more normally associated
with a complex system than a linear deterministic system. This issue will be
investigated in the main research programme.
Finally, a practical guide for improving community resilience (although not directly
related to extreme events) was produced by the Centre for Community Enterprise
(2000). The guide, which is based on a 4 dimensions of resilience model (People in the
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community; Organisations in the community; Resources in the community; and
Community process), identified 23 characteristics that are present in resilient
communities. These characteristics cover style of leadership, open communication
channels, community pride and engagement, optimism in the future, cooperation
between groups/organisations, strong belief in education, diverse range of employment
opportunities, commitment of employers to the local community, self-awareness in
respect of their relationship to the wider economy, effective economic development
plans. The guide also outlines a series of toolkits and indicators
(http://www.cedworks.com/benchmarks.html) that can be used to measure resilience
and strengthen communities.
4. The CREW Project
From the literature it is clear that community resilience to extreme events is perceived to
be a result of the complex interaction of a range of factors that affect all parts of the
community. What is less clear is exactly how these factors interact to enhance or reduce
resilience, and the degree to which they can be converted into measureable
indicators/metrics that can be used to inform resilience planning (e.g. risk assessment
models etc). Addressing these issues form part of a multi-disciplinary research project
being undertaken in the UK.
The CREW (Community Resilience to Extreme Weather) project has built on the theory
developed for general resilience to extreme events and developed a working model of
community resilience to EWEs (Figure 2).
In the CREW model each individual stake-holder’s resilience to an EWE is perceived to
be a combination of the specific characteristics of the event, of the coping measures
(both technical and behavioural) that the stake-holder has in place to deal with the event
and the stakeholder’s level of adaptive capacity to absorb the consequence of the event
and move forward (either in the same form as prior to the event or in an adapted
(changed) state). The overall community’s resilience to an EWE is perceived to be a
combination of individual stake-holder resilience whose ‘contributions’ are either
enhanced (a driver) or reduced (a barrier) by the inter-relationship that exist between
stake-holder groups.
The quantification of the stake-holder resilience factors and the qualification of the
effects of the inter-relationships between stake-holder groups on community resilience
are being examined in a large scale action research programme underway in South East
London. Through a series of longitudinal surveys and focus groups with policy makers
(approximately 60); questionnaire surveys (400) and interviews (40) with randomly
selected households; and questionnaire surveys (500) and interviews (50) with SMEs
selected at random from the five London Boroughs that constitute the Southeast London
Resilience Zone (SELRZ) the research team (which comprises 11 researchers from 7
universities) hope to identify tactical interventions that will result in incremental
improvements to the resilience of each stake-holder group and strategic interventions (in
terms of a greater understanding of the impact that inter-relationships between
stakeholder groups has on community resilience) that will deliver a step change in the
resilience of communities to EWEs.
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Researchers led by the University of Newcastle are using the UKCIP 09 climate change
projections to develop weather hazard predictions for the SELRZ area. The predictions
are being converted (by researchers from the University of Cranfield) into a series of
Geographical Information System maps showing the distribution of both single and
multiple hazards across the SELRZ area. Once the predictions and maps are complete
they will form the basis of the action research programme. The predictions will be
presented to Local Authority policy makers, SME’s and public housing
landlords/households through a series of facilitated workshops in which each group will
examine the perceived impacts that each hazard (and a combination of hazards) will
have on them and their wider stakeholder group. Following these workshops a series of
coping strategies will be developed (in consultation with individual stakeholders) and
tested (through simulations/scenarios) with the wider stakeholder group. The coping
strategies will be refined in light of feedback to the simulations/scenarios. This
testing/refinement process will be completed 3 times. Finally, comparisons between
each stakeholder group will be examined and, through a series of questionnaires /
interviews, the inter-relationships between stakeholder groups examined.
SME’s
Community
Resilience
Policy Makers Households
Figure 2. General model of community resilience to EWEs.
The outputs from the CREW project will be a decision making framework, with
supporting indicators, metrics and toolkits that integrate the technical, economic, social,
political and business factors together in a way that improves the resilience of local
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communities and their ability to cope with EWEs. Such toolkits will include (amongst
other): risk assessment models to support business continuity/disaster recovery
planning; technical briefings of effective protection methods for existing buildings;
medium to long term modelling of potential impacts of climate change on the frequency
and severity of EWEs; and socio-economic models of population movement and house
price change in response to EWEs. These tools in turn should provide the Surveying
profession with a range of approaches to advise their existing client base on the
potential impact of extreme weather events (resulting from climate change) on the
resilience of their home, business and community.
5. Initial Results
Although the main action research programme is yet to start initial scoping studies
(interviews, questionnaires and workshops) with household representatives, SMEs and
local authority officers have reinforced many of the assumptions that the research team
gleaned from previous literature. With regards to current awareness: householders are
disinclined to consider an EWE a direct threat to them unless they have had personal
past experience of such an event; SMEs, whilst being aware of the general threat posed
to their organisation by extreme events in general (particularly terrorism, pandemic etc)
do not rank EWEs as a significant threat and as such do not include them in their
business continuity or disaster recovery planning; and Local Authority officers, whilst
having community resilience plans in place do not have integrated solutions to deal with
the risks and aftermath of EWEs.
In addition to examining the current level of preparedness for an EWE, the scoping
studies also sought to identify the wider drivers/barriers to community resilience that
needed to be addressed if an integrated approach to community resilience was to be
developed. Perceptions of risk (denial, doubt, disinterest, engagement etc), perceptions
of social responsibility (sense of community, belonging etc), communication between
groups (formal, informal, social networks, the press etc) and issues of trust (in officials,
in advocates etc) have all been identified as either enhancing or diminishing community
resilience.
These initial findings support the general model of community resilience developed by
the CREW team in which:
• Each stakeholder group exhibits an inherent vulnerability, resilience and
adaptive capacity, both at the individual level and at the collective level
(e.g. at the household level and community level).
• Community resilience is a combination (although not necessarily
summative) of each stakeholder group’s vulnerability, resilience and
adaptive capacity.
• Each stakeholder group is linked to other stakeholder groups through a
shared infrastructure (both physical and social).
• That the shared infrastructure exacerbates or mitigates the impacts of the
extreme event and acts as feedback loop to allow community learning.
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The project is now about to enter a two year action research programme in which the
issues highlighted above will be examined in more detail and indicators, metrics and
toolkits will be developed and validated.
6. Conclusions
In the UK EWEs are increasing in both frequency and severity. They pose a major
challenge to the physical infrastructure and social well-being of communities. At
present there is little understanding of how to predict them or make existing
communities more resilient to them. What is accepted is that community resilience is
far more complex than simply having disaster recovery plans in place. A wide range of
technical, social, economic and political factors affect community resilience. What is
needed is a greater understanding of how these factors interact and a range of practical
toolkits that those responsible for advising communities can use to help community’s
prepare for extreme weather events. For the surveying profession these tools will
include: physical (building) impact assessments; risk assessment models; business
continuity plans; house price fluctuation models, population movement models and built
asset management adaptation models. The development of the theory underpinning
these models form the basis of the research project outlined in this paper.
7. Acknowledgements
The content of this paper forms part of a multi-disciplinary project into Community
Resilience and Extreme Weather Events (CREW) being funded by the UK Engineering
and Physical Sciences Research Council. The authors would like to acknowledge the
contributions made by the following: Dr G Wood (Cranfield University); Dr H Fowler
(University of Newcastle); Prof G Price (Glasgow University); Prof L Shao De
Montfort University); Prof D Proverbs & Ms C Rose (University of Wolverhampton);
Dr A Wreford (Scottish Agricultural College); Dr R Soetanto & Mr A Mullins
(Coventry University); Dr D Thomas (The University of Manchester); and Dr B Ingirige
& Mr G Wedawatta (University of Salford) for the general discussions that formed the
background to this paper.
8. References
Blenkinsop, S. & Fowler, H.J. ‘Changes in drought frequency and severity over the
British Isles projected by the PRUDENCE regional climate models’, Journal of
Hydrology, in press.
Centre for Community Enterprise (2000) ‘The Community Resilience Manual’, Centre
for Community Enterprise.
Crichton, D. (2006) ‘Climate change and its effects on small businesses in the UK’,
AXA Insurance PLC, ISBN 978-0-9554108-0-2.
Cutter, S. L., Barnes, L., Berry, M., Burton, C., Evans, E., Tate E., & Webb J. (2008) ‘A
place-based model for understanding community resilience to natural disasters’,
Global Environmental Change, Vol 18, pp598-606.
Ekström, M., Fowler, H.J., Kilsby, C.G., & Jones P.D. (2005) ‘New estimates of future
changes in extreme rainfall across the UK using regional climate model
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RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Keith Jones and Roger Few, pp 630-640
integrations. 2. Future estimates and use in impact studies’, Journal of Hydrology,
Vol 300, pp234-251.
Fowler, H.J., & Kilsby, C.G. (2003) ‘A regional frequency analysis of United Kingdom
extreme rainfall from 1961 to 2000’, International Journal of Climatology, Vol 23,
No 11, pp 1313-1334.
Gallopin, G.C. (2006) ‘Linkages between vulnerability, resilience and adaptive
capacity’, Global Environmental Change, Vol 16 pp 293-303.
Good, P., Barring, L., Giannakopoulos, C., Holt, T., & Palutikof J. (2006) ‘Non-linear
regional relationships between climate extremes and annual mean temperatures in
model projections for 1961-2099 over Europe’, Climate Research, Vol 3, No 1,
pp19-34.
Jenkins, G.J., Perry, M.C. & Prior, M.J. (2008) ‘The climate of the United Kingdom and
recent trends’, Met Office Hadley Centre, Exeter, UK.
Kovats, R.S., Johnson, H.,& Griffiths C. (2006) ‘Mortality in southern England during
the 2003 heat wave by place of death’, Office of National Statistics, Health
Statistics Quarterly, Vol 29, Spring 2006.
OST (2004) ‘Foresight: Future Flooding: Executive Summary’, available at
http://www.foresight.gov.uk/Previous_Projects/Flood_and_Coastal_Defence/Rep
orts_and_Publications/Executive_Summary/executive_summary.pdf.
Paton, D. (2007) ‘Measuring and monitoring resilience in Auckland’, GNS Science
Report 2007/18.
RMS (2000). ‘U.K. Floods, Nov 2000: Preliminary report of U.K. flood damage from
increased rainfall in November 2000’, available at
Smit, B., & Wandel, J. (2006) ‘Adaptation, adaptive capacity and vulnerability’, Global
Environmental Change, Vol 16, pp-282-292.
Spence, R. (2004) Risk and regulation: can improved government action reduce the
impacts of natural disasters? Building Research & Information, 32(5), 391-402.
UKCIP (2008) ‘What to expect from UKCIP 08’ available at http://www.ukcip.org.uk.
Tierney., K, & Bruneau, M. (2007) ‘Conceptualizing and Measuring Resilience: A key
to Disaster Loss Reduction’, TR News 250, May-June 2007.
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
David Jenkins, Catherine Gateri and Anna Nakayenza, pp 640-657
Sustainable development in Mbale
David Jenkins1, Catherine Gateri2, and Anna Nakayenza3
Email: [email protected];
[email protected];[email protected]
Abstract:
This paper reports on a 3 day workshop that aims to define sustainable development as a
set of principles, a strategy and an action plan for the people of Mbale, Uganda under
the auspices of the Coalition Against Poverty (a North-South link that in 2008 was
awarded 2 United Nations Gold Stars for its development work).
The participants in the workshop are drawn from Ugandan society: government,
professional, commercial and technical sectors in the region and include community
representatives at regional, district and neighbourhood level.
The chief obstacle to sustainable development is identified as poverty typified locally by
“insufficient food, low yields, few productive assets, low incomes to meet health care
and education needs, large families, lack of social support and poor health.”
[Sustainable Development in Mbale: Issues, Challenges and Required Interventions,
Nakayenze, 2007]
This paper focuses on the real estate outcomes discussed at the workshop in the context
of the Ugandan Draft Land Policy’s attempts to address dysfunctionality in property
markets. It offers some thoughts on the question of whether customary forms of land
tenure [that account for 80% of land in Uganda] can contribute toward the sustainable
development goals or are an obstacle to that growth.
Keywords:
Land, Sustainability, Uganda
1 Introduction
This paper is concerned to describe and evaluate policies and plans aimed at the
alleviation of poverty in Mbale, Uganda and in particular to describe the activities of
PONT-Mbale, a novel form of North-South, multi-stakeholder link. Noting the minimal
impact of past interventions on wellbeing, loosely termed as ‘aid’, the paper is
concerned with perceptions of sustainable development. Finally it is concerned with
ideas about the role of land in the approach to sustainable development.
1
Department of Construction and Real Estate, University of Glamorgan
2
Makerere University, Kampala
3
District Environment Officer, Mbale Council
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Uganda is rated 154th out of 177 countries in the most recent United Nations Human
Development Index (United Nations Human Development Programme Report, 2007/8).
Given Uganda’s extreme poverty (it rates 150th for GDP per capita) it is sobering to
realise that this poverty is not evenly distributed. As one commentator observes
“20% of the people are locked in chronic poverty and inequality is increasing. It
has one of the highest rates of population growth in the world (at 3.3% per
annum) with the highest fertility rate evident in the lowest wealth quintile.
There is a widening inequality among and within regions...”
Irish Aid, Country Strategy Paper, 2007 -9: Uganda
There is more than anecdotal evidence of an east - west split in Ugandan wealth. Mbale
is in the poorer east.
Economic differentiation has a spatial component even in the poorest communities.
Mbale exhibits distinct communities based on social class and wealth though these are
more fluid than in more established urban areas and are cross-cut by ethnic and other
differences just like any other growing city. Namatala, Nkoma, Nauyo and Malukhu are
the poorest districts of Mbale and are typical of the slum phenomenon emerging in all of
the world’s poorer regions. Ultimately the efficacy of poverty alleviation policy is
tested in such areas and their rural counterparts. The Millennium Development Goals
offer a series of metrics against which such policy can be tested. An abiding problem is
the lack of reliable data: for example in relation to slum areas, there is no formal data at
all in Uganda. (Jenkins, 2008)
Neither the absence of data, nor the lack of progress is indicative of complacency in
Ugandan society:
• The government of Uganda, though lacking resources and dependent in
considerable measure on international government-to-government aid, has been
developing and implementing Poverty Eradication Action Plans (PEAP) since
2000. We offer no comment on the quality of governance which is variously
described, positively by the World Bank (2005, p36 and p50 especially) and not
so positively by others (see, for example, Monbiot, 2005) except to say that the
Government’s own indicators do not suggest much progress.
• Agencies of the UN, other institutions with global reach, donor states and major
charities are undertaking a variety of actions to address poverty issues.
• Varieties of organisations4 operating at national level have made important
contributions to policy debates and may have local branches undertaking
specific initiatives.
• At a local level smaller NGO’s and FBO’s5 are engaged in myriad smaller
projects designed to improve wellbeing.
4
Including NGO’s like Uganda Coalition for Sustainable Development (UCSD).
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• The poor themselves are the most important resource in tackling the causes of
immiseration.
Nevertheless the enterprise is characterised by the lack of an integrated approach, amid
a multiplicity of initiatives, and by vulnerability to the corrupting influences (Ruzindana
and Langseth Eds. 1998) that flourish in such circumstances. For example, a World
Bank Report estimates that Uganda loses about $300m per annum through corruption
and procurement malpractices (Olupot, 2008).
The PONT-Mbale Coalition Against Poverty brings together stakeholders committed to
the alleviation of poverty under the banner of achieving the Millennium Development
Goals. The project was initiated by PONT, the Partnership Overseas Network Trust.
The first partnership links professionals and organisations in Rhondda Cynon Taff in
the UK with Mbale. An early model of the initiative is portrayed in Figure 1.
Figure 1. The PONT model. On the left hand side the UK part of the partnership based in
Rhondda Cynon Taff (RCT) district, including the County Borough Council (CBC), the University
of Glamorgan and primary and secondary Health Care (HC) organisations. Mbale Coalition
against Poverty (CAP) embraces the NGO’s and FBO’s that comprise PONT Mbale, the three
district councils (DC) of the region and representatives from schools, the hospital etc.
5
Faith based organisations. These organisations too are often involved in networks that have national and
supranational dimensions.
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PONT acts as an umbrella for multiple links based on personal contact between
corresponding professionals so that trust and capacity can develop in a highly
decentralised model. While PONT has neither immediate or ultimate control over the
projects that its affiliates initiate, it is concerned to ensure that projects adhere to key
concepts. For example, PONT recognises “a need to empower indigenous people
overseas to help the poorest and neediest people in their communities” and “All short
term visits stimulated by this project should be with the express purpose of developing,
enhancing and maintaining long term partnerships” (http://pont-
mbale.org.uk/main/en/overview/key-concepts). In these few sentences we see the
embodiment of some important principles: PONT is about capacity building,
community empowerment, pro-poor growth and sustainable development. It is the
interpretation, application and syntheses of these principles that remain to be worked
out in the specific context of Mbale so as to provide a guide for actions in the Coalition.
An initiative that begins to grapple with these issues first came from Mbale District
Council (MDC).6 In response to this initiative the University of Glamorgan provided a
modest grant to support a workshop to be held in Mbale to elaborate on these principles.
The PONT model seems to provide several distinct advantages over established models
of international development:
The machinery of the coalition is starting to demonstrate its efficacy in
providing long term support. Lifetime friendships are being established and
trust is developing not only across the large divide of continents but also within
the local coalitions. Of course this is not necessarily always a “happy” process
but commitment to the eradication of poverty is measured by successful project
outcomes and vice versa, successful project outcomes are measured by
commitment to eradication of poverty.
The framework is developing a collaborative approach that promotes joint,
rather than several, ownership of issues and projects. The creation of a “trust”
that selects, oversees and evaluates projects gives confidence to donors that
money is reaching the targets for which it was intended. There is evidence that
this approach is creating multi-stakeholder partnerships that provide the
integration that is lacking in domestic government alone and act as a check
against corrupting influences.
Whereas development work tended historically to be secular and technocratic, it
is now recognised that the inclusion of faith based organisations within
coalitions assists aspects of well-being like cultural identity and operates against
forms of cultural exclusion.7
Government-to-government development paradigms are potentially
outperformed by multi-stakeholder partnerships that embrace the private sector
6
Sustainable Community Development in Mbale, the Issues, Challenges and Required Interventions,
Nakayenza, A. Mbale District Council 2007
7
See Gerard Clarke, Third World Quarterly, Vol. 28, No. 1, pp 77 – 96, 2007 Agents of Transformation?
Donors, faith-based organisations and international development.
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and civil society. PONT itself claims that, “This coalition offers a network
reliable, robust and effective enough to receive the large sums of money that are
required to deliver the Millennium Development Goals to the population of
Mbale.” Independent monitoring and evaluation of PONT projects are
unpublished but give some credibility to the claim: the award of two United
Nations Gold Stars for its development work is evidence of good practice. But
development theorists must remain sceptical about this: the evidence is too thin
that operations can be scaled up, and questions remain about the approach to the
task of tackling global poverty.
However, this paper does not attempt to evaluate PONT as an organisation but offers a
description of the role performed by PONT as context in which the discussion of
sustainable development emerges. The focal point of the discussion is a workshop
described in section 3 below.
2 Sustainable Development
To conduct a literature review on sustainable development is a formidable task.
Fortunately, there is no shortage of good bibliographical data that also catalogues the
diverse material. In this context, the work of publishers Earthscan merits attention: not
only because of a significant library of books and journals concerning sustainable
development but also because many publications themselves offer digests of topics and
extensive bibliographies within sustainable development (See, for example, pps 230 –
247, Dalal-Clayton and Bass).
As sustainable development becomes more embedded in governance in UK, regional
governments are also providing significant resources and useful literature reviews.
Special mention might be made of Sustainable Development: A Review of International
Literature published by the Scottish Government (2006) that contains, inter alia,
chapters on Built Environment and Environmental Protection.
Recent discussions of sustainable development are wont to look to the Brundtland
Commission’s definition as a starting point:
development that meets the needs of the present without compromising the
ability of future generations to meet their own needs. (1983)
However, the discussion has a longer pedigree. In its most elemental form, it is a
discussion about land and about ‘good husbandry’ and stewardship. In most of the
world’s sacred texts there are explicit references to care of ‘the creation.’ Mason points
out that
The Greek word for economic (oikonomia) is that used in the New Testament
for stewardship and means proper care of one’s household. Mason. 1998, p107
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The origin of economics, then, is in concern for social stewardship of property first and
then, more broadly, resources. As social forms of organization spread beyond the
household, the focus of economics as discipline adapts to encompass them but the same
concern persists.
This concern begins to take on a modern form when Malthus worries about the
exponential growth of population, in the absence of an appreciation of the exponential
growth in food supply and the role of technology. It was Schumpeter (1934) who was
to make the distinction between ‘growth’ and ‘development’, a potentially useful
distinction that has been obscured by references to sustainable development, which as
often as not actually refers to sustainable growth. For Schumpeter development
amounts to ‘spontaneous and discontinuous changes’ that disturb the ‘centre of
economic equilibrium.’8 Economic growth needs no such discontinuity and occurs in
‘steady states’. (Solow, 2000)
As capitalism emerges, the characteristic tendency of ‘overshoot and collapse’
witnessed in the business cycle informs political opinions of the left and right. For the
right this is a managerial problem. For the left it is more of an ethical problem. For the
right it is about removing constraints on the actions of free markets. For the left it is
about greedy capitalists, though a managerial dimension to the problem is recognised in
the need for ‘rational’ as well as ‘fair’ control over the means of production and
distribution. For the right this also becomes an ethical problem as rational and fair
become self serving when mediated through a bureaucracy.
Interestingly, what tended to unite economists from Monetarists to Marxists is the
cornucopian myth: nature as mother will provide and, as father, bountifully9. Mishan
points out the dominant tendency to optimism. He recalls Hoover’s cheerful
announcement that prosperity was “just around the corner”… in 1929! (1972). This
tendency to optimism is perhaps reflected in Schumpeter’s view that recession and
depression are positive and necessary phases of development not systemic flaws:
creative destruction (against Marx and Keynes).
Mishan also identifies a pessimistic strand and helpfully notes in relation to the
‘doomsdayists’ that
Calling “Wolf!” frequently and mistakenly does not mean that wolves do not
exist. (ibid p.8)
What demands Mishan’s attention, of course, is the onset of the modern discussion of
the ‘limits to growth’ of the 1960’s. The Club of Rome, amid growing awareness of
environmental degradation, commissioned Forrester and Meadows and colleagues at
MIT who brought their ‘systems perspective’ to a consideration of economic
‘externalities’. What were new in the discussion of stewardship are the global
dimension of the issue and the suggestion of a greater immediacy to resource depletion,
regarded by critics as a neo-Malthusianism.
8
Development is the introduction of a new good, a new production method, the opening of a new market,
a new source of supply or of a new organisation of industry.
9
A peculiar notion when viewed from many an African perspective.
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The idea that there are absolute constraints on development was not contentious. The
notion that these were not assigned to the far distant future scandalized the community
of economists (Thurow, 1972, asked, “Do I care what happens a thousand years from
now?”); as did an alleged underestimation of the possibilities of technology (Mishan,
1972). They pointed also to neglect of the notion of prices in MIT’s models (Solow,
1972, 2000). While MIT focused on the stocks and sinks of global natural resources,
The most glaring defect of the Forrester-Meadows models is the absence of any
sort of functioning price system... the market mechanism can be expected to
push us all to economize on natural resources as they become scarcer. Solow,
1972, p52
Even if this were a fair criticism of the models
These rising costs do not necessarily show up immediately through increased
monetary prices, because market prices can be reduced by fiat or subsidies and
distorted in other ways. Meadows et al 2005 p148
And as to technology’s ability to respond, it is inhibited by
… the many political and bureaucratic constraints preventing the price system
from signaling that the needed technologies can be profitable. Ibid. p156
In the 40 years since the Club of Rome initiated the discussion, two things of moment
have happened. First, the analysis offered by MIT raised public awareness, initiating a
review of growth theory and development economics. (See, for example, Hayami and
Godo, 2005). Of course, the original research team has moved on and the original
arguments have been refined and synthesized, but the MIT intervention changed the
agenda. It led more or less directly to new ways of looking at global resource issues: for
example, Wackernagel’s (2002) concept of an ecological footprint owes much to the
original analysis, while scientific discoveries about climate change were prompted by a
review of the evidence about the atmosphere as a global ‘sink’.
Second, ‘sustainable development’ has emerged as a loose watchword, a political
movement and a nascent industry. The danger, aptly summarized by Adams,
Analysts agree that one reason for the widespread acceptance of the idea of
sustainable development is precisely this looseness. It can be used to cover very
divergent ideas’. Environmentalists, governments, economic and political
planners and business people use ‘sustainability’ or ‘sustainable development’
to express sometimes very diverse visions of how economy and environment
should be managed. The Brundtland definition was neat but inexact. The
concept is holistic, attractive, elastic but imprecise. The idea of sustainable
development may bring people together but it does not necessarily help them to
agree goals. In implying everything sustainable development arguably ends up
meaning nothing. Adams 2006
Moreover
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Sustainability and sustainable development are effectively ethical concepts,
expressing desirable outcomes from economic and social decisions. The term
‘sustainable’ is therefore applied loosely to policies to express this aspiration, or
to imply that the policy choice is ‘greener than it might otherwise be (e.g. the
idea of a ‘sustainable road building programme’). Everywhere the rhetoric of
sustainable development is ignored in practical decisions. Ibid.
The point then is to earth sustainable development within any given context and to
develop agreement about goals. This notion informed the idea behind the Mbale
Sustainable Development Workshop.
The authors are also aware of another strand of literature/ documentation that provides a
context for a program of sustainable development in Uganda. Indeed one of the authors,
Nakayenza, had developed a preliminary understanding of an applied sustainability
agenda on the basis of this documentary context: the development plans of the Ugandan
government revealed in documents such as the PEAP, the poverty eradication program
of central government and the DPP, the MDC’s development program. Nakayenza’s
preliminary research was codified in an official MDC publication, Sustainable
Development in Mbale: Issues, Challenges and Required Interventions, Nakayenze,
2007. This document provided a basis for discussion between the various participants
in the coalition prior to the workshop.
A final strand of literature of relevance here is Ugandan history, particularly as it relates
to the land question. Here, the clear impression given is that land is among the most
politically sensitive issues in Ugandan society. Shillington (2005) describes how “big
belly” Kagwa and his friends, who aided the British in their early ‘pacification’ of the
territory, received substantial gifts of private land. Thompson (2003) relates how
... most of the great issues in Buganda since 1900 had concerned land: the 1920s
Bataka troubles, and the controversy over closer union, are the two best
examples. Land questions were so sensitive partly because of the huge
expansion in individual land ownership (and security of tenure) that took place
in Buganda after 1900. P233- 235
Later in the century, the expansion of Makerere (by about 200 acres) put Bagandans
under pressure to sell: as did an expansion at Empire Cotton Growing Corporation.
(West, 1964) These actions created ongoing suspicions that still resonate today: in July
2009 the Buganda Kingdom’s leaders announced that they would not resume talks on
the stymied Land Bill until Kampala introduces a federal system of government.
(http://www.monitor.co.ug/artman/publish/news/Buganda_calls_off_Land_Bill_talks_8
8023.shtml accessed 15 July, 2009)
Batungi describes recent conflicts over attempts at registration in Soroti District in 2005
(2008, p208).
Perhaps it is claiming too much to suggest that the aspirations of the government in
Kampala (British and post colonial) are always frustrated by the powers of tradition as
embedded in the tribal and communal culture. These examples, however, demonstrate
the potency of the issue.
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3 Research Methodology
A workshop was selected as the research tool for a number of reasons. It was already
understood that there were differing understandings of sustainable development within
the Mbale coalition and that no generally agreed best practice existed. Beyond the
coalition important actors and potential partners held differing perspectives on key
issues and a dialogue would be instrumental in revealing these differences and
providing a platform for reconciliation or mutual understanding and synergy.
Culturally it was important that attendance at the workshop should be by invitation
only. A conference open to all-comers would have some advantages but a charge might
exclude some on the grounds of impecunity, while zero admission costs would open the
floodgates and potentially ‘swamp’ discussion. Therefore an invitation list was given
over to an organising committee that embraces the different constituencies of Mbale
Coalition Against Poverty: government, NGO and civil society. The invitation list was
subsequently agreed within the coalition as representing those key constituencies that
might influence sustainable development.
The development of the agenda for the workshop was given over to the organising
committee. The workshop was attended by over 100 Ugandan delegates and embraced
the political and civic leadership of Mbale, along with all three Regional District
Commissioners and representatives of central government departments. The Glamorgan
team offered expertise in surveying, engineering, computing, education, health, climate,
entrepreneurship and physical geography/ geology. Approximately 50 student delegates
also attended.
The balance between observation and participation for the research team was skewed to
the former. The main purpose was to glean an understanding of sustainable
development from a Ugandan Perspective. The Ugandan organising committee selected
four themes for discussion: Environment and Linkages to Poverty; Economic Growth,
Opportunities for Mbale Region; Governance and Development; Approaches to
Community Empowerment. Each theme was discussed in four concurrent workshops
on the first day. Each discussion was facilitated by Ugandans selected as being national
leaders in their respective fields and the Glamorgan team’s objective was to restrict
themselves to scribing: they flip-charted during the discussion, summarised the
discussion in four documents to be made available for the second day of the workshop
and audio-taped the proceedings for later transcription and analysis. The reporting
followed the following standardised format: key issues were to be identified within
each theme; a series of positive and negative aspects were identified along with resource
and information needs; ‘hot spots’ in the discussion were noted where there was a more
charged emotional content to the discussion; solutions and actions were also solicited.
This approach was agreed with the facilitators in an attempt to give consistent form to
the discussions.
During the second and third days, these initial summaries on the four themes were
submitted to extensive plenary discussions in which the Ugandan delegates elaborated
on the aspects of sustainable development in their socio-economic-environmental
context. Key discussions were again recorded using digital technology. Additionally,
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the initial summaries of the four themes also generated a series of issues that formed the
basis of consultation with the plenary sessions using voting technology10. (Mainly this
was for attitudinal consultations about broad sweep issues). These consultations
occurred at the end of sessions after all other presentational and feedback material had
been discussed. They could therefore be regarded as ‘final workshop thoughts’ on the
issues identified.
A series of site visits allowed delegates an opportunity to view some of the sites
exhibiting environmental degradation as well as some initiatives that are illustrative of
sustainable environmental practice. The third day concluded with the development of a
procedure that will ultimately lead to a best practice statement that will be owned by the
coalition, which in turn is intended to inform the development of actions plans.
Problems emerged as early as the four concurrent workshops on the first day when it
became clear that some of the ‘experts’ were as keen to offer their views as to proceed
along the agreed facilitating/ reporting arrangements. In one group in particular a
dominant personality attempted to ensure that the reporting followed his summary and
not the discussion. In this he was frustrated as the scribes were bound to report what
occurred, though this did not make for an easy relationship in this case.
An overly ambitious framework for developing a full action plan on the final session
was advised against by the Glamorgan team. However, the workshop decided to follow
through this process and failed to reach a satisfactory conclusion. The strengths of the
approach were that some issues and actions appropriate to sustainable development
were agreed; that these were generated by Ugandans and that they established a process
that can be continued and fleshed out.
The proceedings were conducted in English, though differences of intonation,
vocabulary, syntax and wider questions of cultural interpretation had to be navigated in
reporting the proceedings. The full workshop proceedings will be published shortly for
distribution to attendees. A fuller, more reflective paper on the workshop as a whole
will be prepared in early autumn. An analysis of the transcribed recordings will later be
conducted using NVivo but this paper is based on preliminary analysis of the workshop
proceedings.
4 Findings and Discussion
Nakayenza’s original understanding about the chief obstacle to sustainable development
was expressed as “insufficient food, low yields, few productive assets, low incomes to
meet health care and education needs, large families, lack of social support and poor
health.” (Sustainable Development in Mbale: Issues, Challenges and Required
Interventions, 2007) These things typify this region.
Already her document demonstrated potential actions for MDC as shown in Table 1.
While such an action plan set a more than sufficient challenge to the MDC, beset by
budgetary challenges and allegations of corrupt practice, it was neither owned by the
10
The software used for this purpose was Turning Point, Version 4.1.0.9020
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coalition nor actionable. The challenge to the Workshop was to create a more
comprehensive understanding of the issues at the strategic level using her insights as the
basis for a more precise and operable action plan at the tactical level. In this the
Workshop was somewhat successful. The thematic discussions provided a useful entry
into the more complex problem set. A variety of cross cutting issues were identified
and elaborated within the thematic settings. Processes were begun that begin to relate
strategic issues to operable outcomes. Crucially, the Chief Administrative Officer of
MDC recognised at the outset that the Workshop itself was initiating a process and at
the conclusion delegates expressed a strong wish for the coalition to take ownership of
such process.
Table 1: An extract from Objectives and Required Interventions, Nakayenze, 2007
Theoretical (and ethical) agreement about sustainable development was, as Adams
predicts, not problematic. Delegates were united in agreement that it is a good thing
and much needed. As might equally be expected, some of the social practices that are
condoned or seen as ‘inevitable’ are anything but sustainable. By and large such
practices were scrutinised and found wanting by delegates: there were many insights
about ‘best practice’ shared by delegates and several misunderstandings and
resentments were aired and clarified. For example, one of the three districts in the
region had grown wealthy on the basis of timber production. Some delegates were
upset that the rainforest was suffering as a consequence. Not only were they assured
about sustainable commercial planting operations but some were able to visit the district
to see operations for themselves, often for the first time, on one of the Workshop field
tours.
Perhaps more critically for an appreciation of the extent to which members of the
coalition are committed to sustainable development, a proposal to de-gazette 600
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hectares of forestry land on the edge of Mbale for urban expansion surfaced at the
Workshop. This wetland was seen by many delegates as a touchstone of policy. The
expectation is that the land will be sold for development without an Environmental
Impact Assessment because it is seen as vital to the development of Mbale as it moves
from regional town to a thriving city. Attempts by a Ugandan facilitator to invite
discussion met with muted response from those in a position to know, and a less-than-
satisfactory outcome ensued.
Aspects of the land issue emerged in all four themes. In the discussion on Environment
and Linkages to Poverty, land pressure was identified with population pressure as the
key driver of poverty. A vicious cycle was identified in which the pursuit of livelihood
leads to environmental degradation that undermines livelihood and re-enforces poverty.
This finds expression in several ways as expressed in the minute of the discussion:
Environmental degradation is linked to poverty from land & population pressure:
o Encroachment of wetlands, with land conflicts over ownership.
o Deforestation causes landslides, soil erosion and loss of soil fertility.
o Encroachment of protected areas, issue of access to land and resources in protected
areas, loss of biodiversity, compensating for lack of access to land and resources in
reserves/national parks.
For subsistence farmers, the vast bulk of citizens of the region, population growth has
created shrinking plot sizes, despite extensive communal ownership and a degree of co-
operative organisation in the agricultural processing sector. This land scarcity drives
encroachment on wetlands, forests and protected areas. There is considerable land
conflict and an absence/ paucity of mediating authority. The authors have all witnessed
violent resolution to such conflicts.
Nor are all these conflicts questions of ownership, some concern other rights. For
example, in shared areas there are conflicts over competing uses of the same lands, as
when in the wetlands incompatible users like rice growers and grazers clash. Again, the
Workshop heard how the practice of gazetting in the Mount Elgon National Park, which
forms the eastern sector of the region, has led to the forcible expulsion of people from
land on which they had been settled for as long as sixty years (i.e. as long as the oldest
could remember). In such instances there was no compensation and no alternative
accommodation provided, though the law today would afford a degree of protection.
Such expulsions also haunted the urban slum dwellers. In recent memory, some
approaches to slum improvement (ADRA) had resulted in the forcible removal of
‘squatters’ from long established homes. Indeed there is a fear among some political
representatives of slum dwellers that improvements means dispossession. As one
delegate expressed it, “sustainable development should be about people not places.” In
this context, it was interesting to hear one official on a Workshop field visit to
Namatala, the largest slum in the region, suggest in a feedback session that it would ‘be
dealt with’ because it is a blot on civic dignity, rather than because of the extreme
poverty that was witnessed.
The concerns about land expressed in the discussion about ‘Economic Growth –
Opportunities for Mbale Region’ related to a different dimension of the problem. This
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group identified “a need to make registration of land easier so that people can use their
land to enable economic activity.” Indeed the difficulty in registering ownership of land
was seen as a significant barrier to growth.
When, subsequently, the plenary session was asked to vote on the greatest issue
concerning economic growth opportunities for Mbale region, from a choice of nine
issues that also included Roads, Energy Production, Water, Education, Tourism and
Agriculture, Land was selected as joint most important issue (on a par with Education)
with 31% of Ugandan delegates selecting it using the anonymised voting procedure.
Interestingly only 12% of the non Ugandan delegates, with less of an appreciation of the
specifics of Ugandan society (and stronger western cultural influences), identified Land
as such a key issue.
Perspectives about land registration vary. Some see it as a means of securing finance
that will promote economic growth, apparently unaware that customary tenure can offer
security in this context or that there is a wealth of evidence suggesting that land
registration makes little difference to levels of agricultural investment or productivity
(see, for example, Whitehead and Tsikata 2003).
For others it is a more pressing issue in that their status as squatters is precarious. It is
always open to others to register the land on which they live. For these people,
registration by others is seen as an ever present threat while they lack the finance to
register the land themselves. Registration is a very costly business, beyond the means
of most, and one that is in any case regarded as being among the most corrupt.
[There is some evidence to suggest that many are simply happy without registration,
preferring to maintain the traditional forms of customary tenure (extending to some 80%
of the total land area) and its management (Batungi, 2008), though the delegates did not
engage with this debate.]
The Governance and Development discussion re-enforced concerns about political
manipulation and corruption in general terms, while noting that several aspects of “the
land issue” were touchstones in relation to poor governance: limited security of tenure,
land fragmentation and political interference in the management of environmental
resources such as forests and wetlands were mentioned specifically. No one expressed
confidence in the current land governance processes. Many referred to a lack of
technical and professional skills in the management of property as well as to corrupt
practices among surveyors in government and in private practice. Indeed, university
training that offers support to the landed profession is very recent and numbers of
graduates very small. There are concerns about the standards of the Uganda Institute of
Surveyors.
However, the land governance issue goes even deeper. The very law of property in
Uganda, established in its current form as recently as 1998 (Uganda Government), is
contested. Indeed current land reform suggestions are controversial notwithstanding a
long consultation period. The reformers appear desirous of establishing a western style
form that embraces freehold and leasehold tenures and removes customary forms such
as the mailo tenure of Buganda. This is argued in terms of removing barriers to
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economic growth and making integration into an East African Union more
straightforward, though there is also the suggestion that the chiefs of Buganda are a
political obstacle. There is a sense here that ‘progress’ is being thwarted; that large
scale developments are inhibited within the status quo.
Opponents see more merit in retaining traditional and communal tenures. In this
climate enforcement is complicated with references to a lack of political will and there
is fear of wider scale conflict. Analysis of the failure of this legislation is provided by
one of its architects Patrick McAuslan, 2003, and by Elizabeth Daley and Mary Hobley,
2005 (especially page 41 et seq.)
The theme of Approaches to Community Empowerment drew some of its examples
from land use. It did this both positively (the extent to which landowners had realised
the need of a switch to tree planting) and negatively (a vignette about a builder using
substandard material to build a school who was chased away by the community).
Interestingly though, there was an overwhelming vote in favour of local community as
the motor for sustainable development and this is congruent with notions of retaining
community based land tenures.
In the plenary discussions, several cross-cutting themes were identified. Many of these
had a direct bearing on the land issue: two are described here.
The lack of information about “resources, throughputs and sinks” to use the language of
MIT, was identified as a serious shortcoming in respect of land as much as other
resources. One of the outcomes of the discussion relates to a potential for information
sharing from the various partners but principally the Land and Planning Departments at
MDC. At the same time concern was also expressed about the poor technological
underpinning to the management of information in the service of evidenced based
policy making. GPS surveys were being undertaken by Glamorgan University and an
embryonic team emerged to develop geo-spatial information.
Women are recognised as equal within the Ugandan Constitution but this equality does
not extend to property ownership and the 1998 legislation is silent on women’s rights.
Women in Uganda constitute up to 80% of the agricultural workforce but own only 7%
of the land and control 30% of the agricultural income (Irish Aid, 2007). The NGO’s
and FBO’s attested that women are the most readily mobilised and active within
community initiatives and that they strongly articulate the need to gain equal access to
property rights. There is some debate among women whether or not the way forward is
reform of the tenure system or reform of the eldership system within communities that
would give women greater rights (see, for example, Tripp, 2004).
5 Conclusion and Further Research
The Workshop described in this paper had the modest aim of understanding the
problems of sustainable development in this region and beginning to articulate a policy
to ‘earth’ it. The Workshop demonstrated that concepts about sustainable development
are beginning to enter the vocabulary of the political leadership of Mbale region and
that the Kampala government has provided a modest central resource to develop this
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understanding. Certainly the professional and technical officers charged with
environmental management within the three district councils have progressed well
beyond this and have identified many of the processes that are undermining sustainable
development in the region. Two things immediately impede their work. The first is the
lack of information that would quantify the extent to which unsustainable processes
have degraded land and the ecologies it supports. The second is their small numbers:
from a global perspective the idea that sustainability of this important region should be
left to such a small handful of people is regrettable.
While the need to resolve the political impasse in relation to the land issue is understood
(and understandable) there would appear to be little dialogue between the needs of
sustainable development and the land issue in general terms. For the time being, the
state of the land law is such that it may provide a barrier to indiscriminate growth and is
therefore an asset in terms of sustainable development.
At the close of the Workshop members of the organising committee agreed a process for
the development of a sustainable development strategy. This strategy embraces in the
short term a feedback period for review and reflection culminating in a brainstorming
session in the autumn, the establishment of a study centre to develop the emerging
research agenda and within one year a further Workshop that will bring the first fruits of
the study effort.
6 References
Adams, W.M. (2006), The Future of Sustainability: Re-thinking Environment and
Development in the Twenty-first Century
http://cmsdata.iucn.org/downloads/iucn_future_of_sustanability.pdf
IUCN, The World Conservation Union Screen clipping taken: 08/06/2009, 11:15
Batungi, N Land Reform in Uganda: Towards a Harmonised Tenure System
Fountain: Kampala, 2008
Dalal-Clayton, B. and Bass, S. (2002) Sustainable Development Strategies: A Resource
Book, Earthscan: London
Daley, E and Hobley, M (2005) Land: Changing Contexts,Changing
Relationships,Changing Rights, DfID
Hayami, Y. and Godo, Y. (2005), Development Economics: From the Poverty to the
Wealth of Nations, Third Edition, OUP, Oxford
Irish Aid, Country Strategy Paper , 2007 -9: Uganda
McAuslan, P. (2003), A Narrative on Land Law Reform in Uganda, Lincoln Institute of
Land Policy
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David Jenkins, Catherine Gateri and Anna Nakayenza, pp 640-657
Mason, J.D., (1998) Stewardship, Sabbath and Time In: Editor Clapp, The Consuming
Passion: Christianity and the Consumer Culture, IVP; Downers Grove, Illinois
Meadows, D., Randers, J. and Meadows, D. (2005) Limits to Growth: The 30-Year
Update Earthscan: London
Mishan, E.J. (1972), Growth and Antigrowth: What are the Issues? In: Editor(s),
Weintraub, Schwartz and Aronson, The Economic Growth Controversy,
International Arts and Sciences Press Inc, New York, pp 3-38
Monbiot, G. (2005) Spin, Lies and Corruption , Guardian 14th June
Olupot, M (2008) Uganda: Corruption Costs Sh500b a Year
http://allafrica.com/stories/200801220042.html, viewed 29/5/09
Schumpeter, J.A. (1934), The Theory of Economic Development, 4th Edition,
Transaction: New Jersey
Shillington, K. (2005) Encyclopaedia of African History, CRC Press
Solow, R.M. (1972) Is the End of the World at Hand? In: Editor(s), Weintraub,
Schwartz and Aronson, The Economic Growth Controversy, International Arts
and Sciences Press Inc, New York, pp 39-62
Solow, R.M. (2000) Growth Theory: An Exposition OUP, Oxford
The Scottish Government, (2006), Sustainable Development: A Review of International
Literature Centre for Sustainable Development, University of Westminster and
the Law School, University of Strathclyde
http://www.scotland.gov.uk/Publications/2006/05/23091323/9, viewed
01/06/2009
Thompson, G. (2003 ) Governing Uganda: British Colonial Rule and its Legacy,
Fountain . – Kampala
Thurow, L., (1972) Zero Economic Growth and the Distribution of Income In:
Editor(s), Weintraub, Schwartz and Aronson, The Economic Growth
Controversy, International Arts and Sciences Press Inc, New York, pp 141-153
Tripp, A. (2004), Women's Movements, Customary Law, and Land Rights in Africa:
The Case of Uganda, African Studies Quarterly, Volume 7 Issue 4
Uganda Government. (1998) The Land Act, 1998 (Cap 227). Entebbe: Government
Printer.
West, H.W. (1964) The Mailo System in Buganda, Entebbe : The Protectorate
Government Printer
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David Jenkins, Catherine Gateri and Anna Nakayenza, pp 640-657
Whitehead, A., & D. Tsikata, 2003. ‘Policy Discourses on Women’s Land Rights in
Sub-Saharan Africa: The Implications of the Re-turn to the Customary’. In S.
Razavi (ed.), Agrarian Change, Gender and Land Rights, London: Blackwell
Publishing Ltd.
World Bank (2005) World Development Report 2005: A Better Investment Climate For
Everyone
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Fanie Buys, Roy Cumberledge and Gerrit Crawford, pp 658-671
Comparative analysis of the performance of tertiary
institutions in managing its assets
Fanie Buys1, Roy Cumberlege1 and Gerrit Crafford1
1
Department of Building and Quantity Surveying
Nelson Mandela Metropolitan University
P O Box 77000, Port Elizabeth
South Africa
Email: [email protected]; [email protected];
[email protected]
Abstract:
Sustainable development is a key priority in terms of new developments and preserving
existing assets. The most important obstacle confronting building owners is being
forced to do more with fewer resources. Restrictions on government subsidies to tertiary
institutions have resulted in frequent reductions in maintenance budgets resulting in a
substantial decline in the condition of buildings over a number of years. As a result,
tertiary institutions are being forced to investigate ways and means to reduce building
maintenance costs and adopt a more systematic approach to its work. The
implementation of an effective maintenance management system is vital if the
maintenance of assets of any organisation or institution is to be managed effectively.
This paper presents some of the findings of a study on maintenance strategies at tertiary
institutions and its performance against best practice. The first stage of the research
indicated that the performance of tertiary institutions, in terms of maintenance
management, is far below best practice. The second phase of the research project entails
similar research in the United Kingdom (UK) and New Zealand. The results of this
phase, which included a comparative analysis of the previous results with existing
approaches indicates that, although there are promising signs of improvement, much
more needs to be done regarding maintenance, both in South Africa and the United
Kingdom. The results for the New Zealand survey were unfortunately not available for
inclusion in this paper. The conclusions drawn and recommendations made are
extremely valuable for tertiary institutions to ensure that limited financial resources are
used effectively.
Keywords: benchmarking, computerised maintenance management systems
maintenance strategies, maintenance planning, tertiary educational
institutions.
1 Introduction
Sustainable construction implies the use of natural and physical resources that enables
people and communities to provide for their immediate social, economic and cultural
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well-being without compromising the ability of future generations to meet their needs.
The construction industry inevitably must address certain consequential issues in the
process of achieving sustainable development; it consumes a considerable amount of
natural and physical resources and as such has a significant impact on the environment.
Current building design, engineering methods, manufacturing technologies and
construction techniques need to be altered to accommodate requirements for sustainable
construction. The life cycle cost of a product includes the manufacturing, construction,
use and maintenance, repair and renewal as well as the demolition, recycling and
disposal of these items. In the context of sustainable construction, planners and
designers must consider the effects and implications of each of these stages and their
effect on the environment (Lacasse, 1999). The often ‘neglected’ aspect of maintenance
to assets is the topic of this paper.
Chanter and Swallow (2007) state that building maintenance has consistently been
treated as the ‘poor relation’ of the construction industry, attracting only a tacit
recognition of its importance, both within the industry and amongst building owners.
This manifests itself in a general lack of understanding of both its scope and its
significance by all parties to the building procurement, construction and management
processes. They further state that a consequence of this is that the backlog of repair and
maintenance work required to bring the country’s building stock to a minimum
acceptable level continues to grow at an unacceptable rate. Over the last decades authors
on the topic of maintenance management, such as Rapp and George (1998),
Wordsworth (2001) and Westerkamp (1997), have concluded that organisations have
been forced to take a hard look at ways to reduce building maintenance costs as they
have access to fewer resources every year. Maintenance managers have had to adopt a
more systematic approach to their work by also becoming involved with the total asset
management of the organisation. Horner, El-Haram and Muns (1997) state that the goal
of the new approach is to carry out as little maintenance as possible as infrequently as
possible while at the same time preserving the availability of the services facilities, the
building elements and the whole building. In other words, maintenance should be
carried out only when necessary to ensure the continued, safe and profitable use of the
building at acceptable levels of satisfaction or when there is the possibility of extending
the useful life of the elements of the building. Finding an appropriate maintenance
strategy is the most difficult task facing maintenance management in determining an
optimal approach to reducing the financial expenditure and total life cycle costs.
All organisations should have a preventative maintenance plan to ensure that
maintenance work can be done when required. Without effective planning and
scheduling, proper management of the widely varying scope and diverse activities
performed by the maintenance organisation is impossible (Kister and Hawkins, 2006).
Analysing and estimating maintenance work seems difficult at first because there are
nearly always elements that are unpredictable (Ibid), but a proper maintenance plan
should assist in determining a fairly accurate budget for the maintenance work to be
done. Booty (2003) concludes that preventative maintenance programmes save money
and eliminate downtime. Computer-based information systems can be used to great
benefit as good quality systems provide appropriate, accurate and timely information
which is explicitly geared towards strategic corporate objectives (Barrett and Baldry,
2003). Adenuga, Odusami, Oladiran and Farinloye (2008) maintain that maintenance
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Fanie Buys, Roy Cumberledge and Gerrit Crawford, pp 658-671
planning based on more realistic assessment of needs and prioritised forward
maintenance programmes, on a rolling basis should be developed.
2. Background to study
A survey conducted by Buys (2004) indicates that management of tertiary educational
institutions in South Africa (SA) spends an extremely low proportion of its total budget
on maintenance. Maintenance managers will therefore have to produce strong and well
supported arguments if maintenance should be given a higher priority in the institutions’
overall budget plans.
Buys (2004) identified and listed various criteria that are required for an effective
maintenance management system at tertiary institutions. Following the listing of these
criteria, it was ranked in order of importance by maintenance managers at South African
tertiary institutions. This process included the establishment of benchmarks against
which maintenance managers could test their maintenance management system or
approach to benchmarking. Furthermore, maintenance managers were requested to
provide information on the performance of tertiary institutions in terms of these criteria.
Kister and Hawkins (2006) define a benchmark as “something that serves as a standard
by which others may be measured or judged”. The results of Buys’ (2004) research are
illustrated in Table 1.
Table 1. Best Practice Criteria and Performance by tertiary institutions
(Source: Buys, 2004)
Best Perfor-
Practice mance
Criteria for Best Practice in Maintenance Management
1=Bad, 1=Bad,
5=Excellent 5=Excellent
Maintenance Inspections – A proper maintenance strategy should
4.7664 2.7425
include the establishment of regular inspection cycles
Life Cycle Costing (LCC): When designing buildings, a LCC approach
should be used to achieve “value for money” i.e. avoid the “cheap-to- 4.7505 3.1309
build-expensive-to-maintain” phenomenon
Sound Maintenance Management System (Policy): This should be in
4.7410 3.0611
place to ensure that sufficient funds are available for maintenance work.
Setting Priorities: Sequence of doing maintenance work should depend
on pre-determined priorities e.g. emergency, urgent, routine, deferred 4.7132 4.0957
maintenance work
Communication: There should be an open two-way line of
communication at all levels of the organisation, including the 4.7020 3.5820
maintenance section
Top Management: Top management should be made more aware of
the importance of maintenance and the consequences of neglecting 4.6900 3.4459
maintenance
Reports: It should be possible to obtain a report of all completed,
4.6668 1.8571
current and future maintenance work when required
Maintenance Staff: There should be a suitable number of maintenance
4.6660 3.3820
staff to plan and execute maintenance work
Recording: Once maintenance work has been completed, it should be
documented (date of work, cost of work, scope of work, labour and 4.6629 3.7818
materials used, etc)
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Best Perfor-
Table 1 continued/……. Practice mance
Criteria 1=Bad, 1=Bad,
5=Excellent 5=Excellent
Maintenance Tools / Materials: The quality of tools and availability of
4.6218 2.9988
materials to do maintenance should be sufficient
Users / Occupants: Users / occupants must be aware of the important
4.5895 2.5253
function of the maintenance department
Design Input: When new facilities, buildings or extensions are being
designed, the maintenance manager should be part of the design team to
4.5857 3.5887
assist in making decisions about materials and items to be used in the
building
Organisational Structure: The organisational structure should be
flexible so that in-house labour or contract labour (outsourcing) can be 4.5775 3.6577
used for a specific maintenance task
Feedback System from User to Designer: There must be a good
feedback system from user to designer in order to assemble information
4.5733 2.4195
on both the preference of the user, and the performance of materials,
components and constructional methods
Budgeting: The maintenance budget should be based on financial
requirements as set out in the maintenance plan (and not on historical 4.5638 3.2719
figures)
Maintenance Plan - A maintenance plan should be prepared so that the
expected expenditure on future maintenance (for periods of up to 30 4.5614 1.5960
years) is provided for
Setting Standards – Standards should be set to determine the minimum
4.5469 3.4500
acceptable state / condition of the building(s)
Qualifications: The Maintenance Craftsmen should have the necessary
4.4824 3.6154
qualifications
Integrated Maintenance Management System (MMS): The MMS
should form part of the total organizational management system to 4.4743 3.6277
ensure effective total management of the organisation
Qualifications: The Maintenance Manager should have the necessary
4.4162 3.3329
maintenance management qualification
Maintenance Manual: There should be a maintenance manual for easy
4.3930 1.5055
reference to specification of materials, parts, etc
Training: More emphasis should be placed at tertiary institutions on
4.3729 2.0214
teaching students about the maintenance of buildings
Research: More research in Maintenance Management should be done
4.2961 2.0440
to improve Maintenance Management Systems
Technology: Maintenance staff should be trained continuously to keep
4.1957 2.1909
up with the latest technology
Computerised Maintenance Management System (CMMS)
4.0844 1.0188
A CMMS should be used to assist in managing maintenance
Following the results of this research, a second phase of the research project was
conducted, with the following objectives:
• To determine the current performance of tertiary institutions in terms of these
criteria;
• To compare the current ranking of the importance of the criteria with previous
results; and
• To compare the current ranking and performance with tertiary institutions in other
countries.
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Fanie Buys, Roy Cumberledge and Gerrit Crawford, pp 658-671
2 Research methodology
As this was the second phase of the research project, the secondary data is not included
in this paper. However, some reference is made thereto. A quantitative research
approach was used to gather data for the second phase of the research and consisted of
an on-line questionnaire. The questionnaire was developed and included the same
maintenance criteria that were used in the initial research to ensure that a comparative
analysis was possible. Provision was made for respondents to add additional criteria if
needed. The on-line questionnaire was pre-tested with two maintenance managers and
minor adjustments were made for clarity purposes. An internet search was conducted to
compile a list of tertiary institutions as well as the name and email address of the
facilities / maintenance manager so that the request to complete the survey could be
addressed to the maintenance / facilities manager. To compare results of South African
tertiary institutions with other countries, it was decided to do a similar survey in the
United Kingdom and New Zealand. Although the survey in the United Kingdom has
been completed, the results of New Zealand respondents are still outstanding.
The perceptions of the respondent maintenance managers on the importance of the best
practice criteria were measured on the basis of their response to a five-point Likert
scale. The five points were scaled as: 1=Not important, 2=Of little importance, 3=
Somewhat important, 4=Important, 5=Very important. A five-point Likert scale was
also used to measure the performance of the tertiary institutions in terms of the stated
criteria: 1=strongly disagree, 2=disagree, 3=neutral, 4=agree, 5=strongly agree.
Following a reminder letter to those who have not responded by the submission date,
further responses were obtained. All South African tertiary institutions were targeted
and, because of the large number of institutions in the United Kingdom (167), random
sampling was used. The simple random sampling method was chosen so as to give
equal chances to all the listed tertiary institutions (Fellows and Liu, 2008).
Table 2. Sample population and responses
Sample Respondents
Country:
Number Number %
South Africa 21 9 42.9
United Kingdom 35 9 25.7
Total 56 18 32.1
An overall response rate of 32% was achieved and this formed the basis for data
analysis and the subsequent conclusions.
3. Survey results
3.1 Ranking of maintenance management criteria
The following table illustrates the ranking of criteria for South Africa (in 2004), South
Africa (in 2009) and the United Kingdom (in 2009), as well as the variances in
rankings.
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Table 3: Ranking of Best Practice Criteria
Ranking Variance
Criteria: SA2009 – SA2009 –
SA 2004 SA 2009 UK 2009 SA2004 UK2009
Inspections 1 5 3 4 2
LCC 2 4 5 2 1
MM System/Policy 3 12 17 9 5
Setting Priorities 4 19 15 15 4
Communication 5 1 9 4 8
Top Management’s awareness 6 3 2 3 1
Reports 7 11 18 4 7
Maintenance Staff 8 17 13 9 4
Recording 9 18 8 9 10
Maintenance Tools 10 8 16 2 8
Users’ awareness 11 21 6 10 15
Design Input 12 6 10 6 4
Organisational structure 13 2 1 11 1
Feedback system 14 15 19 1 4
Budgeting 15 7 4 8 3
Maintenance Plan 16 9 23 7 14
Setting Standards 17 14 11 3 3
Craftsmen 18 22 22 4 0
Integrated MMS 19 16 21 3 5
Manager’s qualifications 20 20 7 0 13
Maintenance Manual 21 13 20 8 7
Training 22 25 25 3 0
Research 23 23 12 0 11
Technology 24 24 24 0 0
CMMS 25 10 14 15 4
An analysis of the above results shows that there are many differences in the ranking of
the criteria between the institutions. ‘Maintenance Inspections’ which was ranked as the
most important criteria in 2004 (SA), is now ranked 5th in SA and 3rd in the UK. Having
a LCC-approach when designing buildings was ranked 2nd in 2004 (SA), and now
ranked 4th in SA and 5th in the UK. The importance of having a sound ‘Maintenance
Management System/Policy’ in place to ensure that sufficient funds are available for
maintenance work has dropped from 3rd position to 12th in SA and is ranked 17th in the
UK. This may be as a result of other criteria ensuring that funding is made available,
e.g. having a sound organisational structure (ranked 2nd and 1st in SA and the UK
respectively, in 2009). The table also shows that the importance of having a CMMS has
increased from least important in 2004 (25th) to 10th in 2009 (SA) and 14th in the UK.
The importance of ‘Training maintenance management staff’ because of technology
developments have remained in the second last position since 2004, for both SA and the
UK. The importance of having a good ‘Communication System’ at all levels of the
organisation is now ranked 1st in SA while having a flexible ‘Organisational Structure’
is ranked highest in the UK. The importance of making top management aware of the
importance of maintenance is ranked fairly high by maintenance managers both in SA
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Fanie Buys, Roy Cumberledge and Gerrit Crawford, pp 658-671
(3rd) and in the UK (2nd). The biggest variances between the rankings for SA (2004) and
SA (2009) are for ‘Setting Priorities’ and having a ‘CMMS’. The biggest variances
between the rankings for SA (2009) and the UK (2009) are for ‘User awareness’, having
a proper ‘Maintenance plan’ and the importance of a properly qualified ‘Maintenance
manager’.
3.2 Performance of tertiary institutions in terms of maintaining its assets (South
Africa)
Figure 1 illustrates the following:
• Current benchmark as perceived by maintenance managers in SA (2009);
• Current performance of SA tertiary institutions in terms of maintenance
management (2009); and
• Performance of SA tertiary institutions in terms of maintenance management in
2004.
Budgeting
Users 5.0000 Communication
Top Management CMMS
Teaching 4.0000 Design Input
Technology Feedback system
3.0000
Policy Integrated MMS
2.0000
Priorities LCC
1.0000
Standards Inspections
Research Manual
Reports M Plan
Recording M Staff #
Organisation Craftsmen
Tools Managers
SA BM 09 SA PERF 09 SA PERF 04
Figure 1. Performance of SA tertiary institutions: Maintenance Management (BM=Benchmark,
PERF=Performance)
Except for ‘Setting Priorities’ for the sequence of doing maintenance work, all the
performance criteria is below best practice standards. The figure also illustrates that the
performance of tertiary institutions has in most cases improved from 2004 to 2009 (SA).
The average performance rating of all the criteria has also increased from 2.8777 to
3.2950. The performance in terms of ‘Budgeting’ and having an ‘Integrated MMS’ has,
however decreased since 2004. This is quite a disturbing factor as budgeting procedures
has a great impact on the funding for maintenance work. Although the performance in
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terms of having a CMMS in place is still below the best practice rating, the performance
thereof has improved drastically between 2004 and 2009.
The biggest difference between ‘Best practice’ and ‘Performance’ (2009) ratings is for
‘Budgeting’ methods. The following table shows the methods used by tertiary
institutions to budget for maintenance work:
Table 4. Budgeting
Respondents
Determining maintenance budget: SA-2004 SA-2009 UK-2009 ALL-2009
% % % %
Use budget of previous year and add a
28.4 50.0 57.1 53.3
percentage
Use historical figures to estimate the
16.4 - 28.6 13.3
cost of maintenance work
Estimate the actual cost of expected
37,3 25 14.3 20.0
maintenance work
Use the maintenance plan to determine
14.9 12.5 - 6.7
the cost of maintenance work
Appoint outside consultants to estimate
0.0 12.5 - 6.7
the cost of maintenance work
Other 3.0 - - -
Total 100 100 100 100
The above table shows that there has been no improvement in the method used by SA
tertiary institutions since 2004. Both the SA (2009) and UK (2009) figures show that the
majority of tertiary institutions just uses the budget of the previous year and adds a
percentage. The maintenance budget should be based on financial requirements as set
out in the maintenance plan and not on historical figures. It should be clear and well
motivated and supported by full information on the consequences of neglecting
maintenance. DiChiara (1996) opines that a computerised maintenance management
system, defined as “a computer program or interfacing programs used to manage the
maintenance function in a plant/building (Idcon, n.d.)”, should be used in preparing the
budget as “the computer’s ability to assemble and sort detailed facts and formulate them
into genuinely meaningful information for inclusion in the budget is a boon to
managers”. Idhammar (2009a) concludes that “every maintenance manager should have
a five-year plan where all big and costly maintenance jobs are listed and, hopefully,
spread somewhat evenly over the years; each year, a detailed maintenance budget
should be built based on the needs of the plant. A realistic and trustworthy budget must
be estimated starting from scratch (zero-based budgeting)”.
It is crucial that all organisations have a maintenance policy to ensure that regular
maintenance is carried out to eliminate major breakdowns in equipment or failure of
materials or components; resulting in costly maintenance work. Such a policy should
ensure that sufficient funds are provided for maintenance expenditure. Insufficient
funding was given by both the SA and UK respondents as the main reason why there are
delays in doing maintenance work. This is closely related to a study by Adenuga,
Odusami and Faremi (2007) who concluded that maintenance officers ranked
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Fanie Buys, Roy Cumberledge and Gerrit Crawford, pp 658-671
insufficiency of funding for maintenance programmes as the second most significant
factor responsible for poor maintenance management of public hospital buildings.
3.3 Performance of tertiary institutions in terms of maintaining its assets (United
Kingdom)
Figure 2 illustrates the following:
• Current best practice as determined by maintenance managers in UK (2009); and
• Current performance of UK tertiary institutions in terms of maintenance
management (2009)
Budgeting
Users 5.0000 Communication
Top Management CMMS
Teaching 4.0000 Design Input
Technology Feedback system
3.0000
Policy Integrated MMS
2.0000
Priorities LCC
1.0000
Standards Inspections
Research Manual
Reports M Plan
Recording M Staff #
Organisation Craftsmen
Tools Managers
UK BM 09 UK PERF 09
Figure 2. Performance of UK tertiary institutions: Maintenance Management (BM=Benchmark,
PERF=Performance)
Except for ‘Manager’s Qualification’ and ‘Recording’ of maintenance work, the
performance of UK tertiary institutions is less than the best practice criteria, in terms of
maintenance management. The biggest difference between ‘Best practice’ and
‘Performance’ ratings is for using a CMMS. The second biggest difference is for the
ratings of ‘Top management’s awareness’ of the importance of having a good
maintenance management system. The rating for a good ‘Feedback system’ from user to
designer is the lowest for UK performance criteria.
Computer software currently on the market makes it possible for maintenance managers
to become more efficient and productive. Computer software makes it possible to store
and retrieve maintenance data making it easier to obtain the required information in
order to make the right decisions. Corti (2001) states that it is vital to have a system
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which can respond rapidly to inquiries from senior management with accurate and
detailed information. The information system should be a scientific collection, assessing
and analysing data relating to problems of maintenance and repair. The information
system can either be one that has been developed internally or one of the commercially
available software packages. The biggest problem with the latter option is that
commercial software usually endeavours to satisfy the requirements of the general user
and does not meet the particular requirements of decision-makers of specific
organisations. Buys and Nkado (2006) argue that the implementation of a sound
computerised maintenance management system (CMMS) can assist maintenance
managers greatly in managing all maintenance aspects. It must, however, be noted that a
CMMS is only a tool to support the maintenance management system and by
implementing a CMMS may not necessarily lead to having an effective maintenance
management; other criteria must also be in place.
Table 5 indicates the extent to which maintenance functions are computerised:
Table 5. Computerisation
Respondents
Percentage of maintenance SA & UK
functions computerized: SA-2004 SA-2009 UK-2009
2009
% % %
%
0% 61.6 - - -
1 – 19% 11.0 - 12.5 6.3
20 – 39% 6.8 25.0 62.5 43.8
40 – 59% 4.1 37.5 25.0 31.3
60 – 79% 5.5 25.0 - 12.5
80 – 99% 5.5 12.5 - 6.3
100% 5.5 - - -
Total 100 100 100 100
Although the performance of SA tertiary institutions in terms of computerisation of
maintenance functions have improved substantially since 2004, only 20 – 39% of the
maintenance functions are currently computerised at the majority (43.8%) of tertiary
institutions in SA and the UK. Possible reasons for this include: good maintenance
management software does not exist, the software is too expensive, institutions do not
have the required hardware, users are not trained to use the software, institutions are not
aware of the advantages of using a CMMS or institutions do not know which CMMS to
use.
It is very important that top management should be made more aware of the importance
of maintenance and the consequences of neglecting maintenance. The building
maintenance budget should not be pruned if pressure is exerted for funds for other
purposes. It is sometimes comparatively easy to defer spending on maintenance because
the impact of so doing is seldom immediately obvious, and the subtle nature of the
needs is not fully recognised (Buys, 2004). Idhammer (2009b) states that it is not
uncommon that many reliable and maintenance improvement initiatives fail to deliver
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RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Fanie Buys, Roy Cumberledge and Gerrit Crawford, pp 658-671
expected results because of lack of top management understanding, directive and long
term support.
3.4 Comparative analysis: Performance of tertiary institutions in terms of
maintaining its assets (South Africa and United Kingdom)
Figure 3 illustrates the performance of SA and UK tertiary institutions in terms of
managing the maintenance of its assets.
Budgeting
Users 5.0000 Communication
Top Management CMMS
Teaching 4.0000 Design Input
Technology Feedback system
3.0000
Policy Integrated MMS
2.0000
Priorities LCC
1.0000
Standards Inspections
Research Manual
Reports M Plan
Recording M Staff #
Organisation Craftsmen
Tools Managers
SA PERF 09 UK PERF 09
Figure 3. Performance of SA and UK tertiary institutions: Maintenance Management (BM=Benchmark,
PERF=Performance)
The figure shows that the biggest difference between the ratings for SA and the UK is
for the performance in terms of the maintenance manager’s ‘Design Input’ for new
buildings; it seems as if maintenance / facilities managers in SA have more input during
the design stages of a project. On the other hand, it seems as if UK maintenance
managers perform much better in terms of ‘Maintenance inspections’, than the
maintenance managers in South Africa. The average performance rating for UK tertiary
institutions is marginally higher (3.2957) than that for SA tertiary institutions (3.2950).
4. Conclusions
The results of the survey show that the performance of SA tertiary institutions in terms
of managing the maintenance of its assets has increased from 2004 to 2009. However,
the 2009 performance is still far below the best practice rating (4.2536). This can also
be said about the performance of UK tertiary institutions (in terms of maintenance
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management), with an average rating of 3.2957, against an UK best practice rating of
4.1431.
The method of preparing a budget for maintenance work must be revised. The method
of using the previous budget and adding an amount or percentage is inadequate. The
institution’s preventative maintenance plan must be used to forecast the amount
required for maintenance work and, if the necessary expertise is not available in the
organisation, outside cost consultants must be appointed. When the maintenance budget
is submitted to top management for consideration it should be clear and well motivated.
Top management is often not fully knowledgeable on maintenance aspects and budgets
should therefore be supported by full information and an indication of the consequences
of neglecting maintenance. The Occupation Health and Safety Acts require that,
amongst others, ‘To provide and maintain plant in a safe condition without any risks to
health’ and ‘To provide and maintain a safe and healthy environment in which to work’.
These issues are directly related to the condition of the buildings and equipment and top
management have to take maintenance aspects much more seriously.
Tertiary institutions spend huge amounts of money on maintaining its assets. Although
the average amount spent by each institution in SA during 2008 amounted to
R49,7million (£2,4million in the UK), it seems as if it is still not sufficient as
insufficient funding was the reason given why delays in doing maintenance work mostly
occurs. These amounts represent 4,3% and 4,5% respectively of total operating
expenditure in SA and the UK.
Many tertiary institutions should invest in good computerised maintenance management
systems. The results show that, on average, only 34% of all maintenance functions
(except on-site work) is computerised. The level of satisfaction with computerised
systems in use is, however, not very high as the average rating provided by respondents
is 3.14 (1=low, 5=high). This research did not investigate why the use of CMMSs is
very limited and the reason(s) why maintenance managers are not entirely satisfied with
their CMMS. Further study can be done to investigate these matters and to identify
suitable computerised maintenance management software.
5 References
Adenuga, O.A., Odusami, K.T., Oladiran, J.O. and Farinloye, O.O. (2008), Essential Skills for
Maintenance Managers in Public Hospital Built Environment: Nigeria, Case Study. RICS
Cobra Conference Proceedings, 4-5 September 2008.
Adenuga, O.A., Odusami, K.T. and Faremi, J.O. (2007), Assessment of Factors Affecting
Maintenance Management of Public Hospital Buildings in Lagos State, Nigeria. RICS
Cobra Conference Proceedings, 6-7 September 2007.
Barrett, P. and Baldry, D. (2003), Facilities Management, Towards Best Practice. London:
Blackwell Publishing.
Booty, F. (2003), Facilities Management Handbook. London: LexisNexis.
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Buys, F. (2004), Building maintenance management systems in South African Tertiary
Institutions. Unpublished PhD thesis. University of Port Elizabeth.
Buys, F. and Nkado, R. (2006), A benchmarking model for maintenance management systems
in South African Tertiary Educational institutions. RICS Cobra Conference Proceedings, 7-
8 September 2006.
Chanter, B. and Swallow, P. (2007), Building Maintenance Management (2nd edition).
Blackwell Publications.
Corti, P. (2001), Empowering employees and the organisation by implementing and evolving a
maintenance management system. Conference Proceedings No 23. Ninth maintenance
management Conference, Juneau, Alaska, July 16-20, 2000, Washington D.C. National
Academy Press.
Department of Education (DoE) (2005), Information on the State Budget for Higher Education
2005, DoE, South Africa.
DiChiara, P.J. (1996), The Maintenance Budget. In Means, R.S. Cost planning and estimating
for facilities maintenance. Pp 427-440. United States of America: R.S. means Company
Ltd.
Fellows, R. and Liu, A. (2008). Research Methods for Construction. 3rd Edition. Singapore:
Utopia Press Pte Ltd.
Horner, R.M.W., El-Haram, M.A. and Muns, A.K. (1997), ‘Building maintenance strategy: a
new management approach’. Journal of Quality in Maintenance Engineering. Volume: 3,
Number 4. Emarald.
Idcon, (n.d.). Proposed maintenance definitions
http://www.idcon.com/maintenance-definition-C.htm (CMMS), viewed: 20/5/2009.
Idhammar, T. (2009a), Selling Maintenance to Management
http://www.idcon.com/article-Selling-maintenance-to-management.html, viewed 26/5/2009
Idhammar, C. (2009b), Why many maintenance improvement initiatives fail to deliver expected
results I. - Hedgehog or Fox?
http://www.idcon.com/article-improvement-reliability-maintenance.htm (top management),
viewed: 3/6/2009
Kister, T.C. and Hawkins, B. (2006), Maintenance Planning and Scheduling Handbook.
London: Butterworth-Heinemann
Lacasse, M. (1999), ‘Materials and technology for sustainable construction’. Building Research
& Information. Volume 26, Number 6. pp 405-408. London: E&FN Spon.
McCabe, S. (2001), Benchmarking In Construction, London, Blackwell Science Ltd.
Rapp, R. and George, B. (1998), ‘Maintenance management concepts in Construction
Equipment curricula’. Journal of education. Volume 2, Number 2, pp 155-169
Universities UK. List of United Kingdom Universities.
http://www.universitiesuk.ac.uk/Pages/Default.aspx, viewed: 12/8/2009
Westerkamp, T.A. (1997), Maintenance Manager’s standard manual. Second edition. New
Yersey: Prentice Hall
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Wordsworth, P. (2001), Lee’s building maintenance management. Fourth edition. Oxford:
Blackwell Science.
- 671 -
COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
John Lowe, pp 672-697
Capacity of the UK construction sector
1
John Lowe
1
School of the Built and Natural Environment,
Glasgow Caledonian University, Glasgow G4 OBA,
Scotland
Email: [email protected]
Abstract:
Concern has been raised if the construction sector can cope with the demands currently
being placed on it by the government and private sectors. This will paper identify three
alternative definitions of the capacity limits of the UK construction sector. The
economic limit on capacity is the point where the long-term cost curve rises as
diseconomies of scale start to impact on production. The planning limit is the point at
which the price escalation starts to become politically unacceptable. The technological
limit is the maximum output that the industry can produce.
An analysis UK of the UK construction output over the past thirty years will identify the
periods when the output of the construction sector was over the planning limit and when
it was below the economic limit. These are undesirable as it will involve escalating
tender prices in the former case and unemployment in the latter case. The more desirable
periods when output was between the economic limit and the planning limit will also be
identified.
Surveys of capacity utilization by members of the Construction Confederation will be
used to calibrate the model. Based on the analysis it is expected that the economic limit
for the UK construction sectors is around 80% of the technological capacity while the
planning limit is probably in the region of 85% of technological capacity.
The paper will conclude that the industry was operating at or near to the planning
capacity prior to the current recession. It was consequently on the margin of
sustainability. This could lead to future problems when the industry recovers.
Keywords:
Capacity, sustainability, tender price escalation, resource inputs.
1: Introduction
1.1: The capacity problem
Prior to the recent economic downturn there was concern that the Government's
programme of public service renewal would place great strains on the construction
sector with massive expenditure planned on housing (£3B), schools (£5B), hospitals
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(£4B), and defence (£5B). That is before account is taken of the railway infrastructure
renewals and the impact of the 2012 London Olympics (Brown, 2004).
The Chartered Institute of Building (CIOB) also expressed some concern about the
ability of the construction sector to meet this challenge due to skill shortage particularly
in the area of management and professional staffing. The Construction Confederation
appear confident that the industry can cope with the likely demand, however the CIOB
have argued that there should be a systematic review of the capacity of the industry to
deal with the expected demand. They further argue that strategies be developed to ensure
that the industry can expand to deliver the required workload (Brown, 2004). Similar
problems have been experienced in recruiting civil and structural engineers (Kitching,
2006).
The objective of this paper is to identify the sustainable capacity of the UK construction
by reference to economic data — notably construction output, changes in construction
costs and tender prices — over the past thirty years. The study will focus on the main
peaks and troughs in UK construction output such as the unsustainable boom of the early
1970s and late 1980s and the subsequent recessions.
1.2: Background
The construction sector is critical to the early stages of economic growth. The
construction of industrial and commercial buildings along with concomitant
developments in roads and other infrastructure are a precondition to economic
expansion. Capacity limits on the construction sector can be expected to act as a
constraining factor on overall economic growth. There are a number of examples from
recent history of attempts at economic recovery foundering due to the failure of the
construction sector to deliver.
For example, in the 1930s USA, there was the New Deal, instigated by President
Franklin Roosevelt. This was an attempt to drive the US economy out of the great
depression by ‘pump priming’ by major construction works especially hydroelectric
projects. Examples include the Tennessee Valley Authority and the Grand Coulee Dam.
The aim was to generate jobs and economic activity during the publicly funded
construction phase with the expectation that the private sector would take advantage of
the infrastructure developments and the electrification.
The policy was partially successful; however it did not achieve its main objective. Some
have attributed the failure of the new deal to end the great depression on the decision to
fund the programme by taxation rather than borrowing as Keynes subsequently argued.
It has also been suggested that ‘bottlenecks’ in the construction sector and skill shortages
were also to blame.
Similarly, in the early 1970s, there was an attempt to expand the UK economy out of
economic difficulties, the dash for growth. This expansionist approach was based, to a
large extent, on the promotion of major projects and the use of housing improvement
grants. The major projects promoted during this period included the Humber Bridge and
Concorde.
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There were also the subsequently unsuccessful attempts the build a massive integrated
airport and seaport on the Essex coast at Maplin, and the Channel Tunnel and also to
cover much of central London with concentric motorway rings. The final phase of the
new town programme was under way by this stage. This involved creating new cities
based on existing towns such as Milton Keynes and Northampton.
The dash for growth failed partially due to lack of capacity in the construction sector.
Rising tender prices — see the ‘Wood Report’ also known as the Public Client and the
Construction Sector (NEDO, 1975) — followed and in turn caused demand to be choked
off. The strategy was already in the process of collapsed by the time of the Arab-Israeli
war and the subsequent hike in oil prices. OPEC’s action on oil prices contributed to a
shift away of public and financial opinion that caused the scrapping of the Channel
Tunnel, the London motorway ‘box’, and Maplin (Hall, 1982). Subsequently the
ambitious new town programme was scaled down considerably.
1.3: Definitions of capacity
Following Hillebrandt (1975), it is possible to identify three approaches to the definition
of capacity:
i) The technological definition: the maximum sustainable output assuming all
productive units are operating to their full extent. This approach ignores economic
factors and consequentially has limited applications except under extreme conditions
such as war.
ii) The economic definition: the point at which long run average costs start to rise and
diseconomies of scale arise. This approach takes account only of economic factors. It
is based on assumptions of perfect competition that are not appropriate for the
construction sector.
iii) The planning definition: the maximum output attainable within the limits or
conditions considered ‘acceptable’ at the time. What is ‘acceptable’ in this context is
determined by subjectively by the government of the day in the context of economic
policy and political priorities.
The third definition remains somewhat of a compromise between the first two
approaches. The limiting factor is the degree of price escalation acceptable. This will be
determined by the counter-inflationary policy of the government and also by the price
elasticity of demand for the products of the industry. While this type of approach is not
as fashionable today as it was in the halcyon days of economic planning in the 1960s, it
remains an important issue for all governments. Figure Number 1 below illustrates the
distinction between the three approaches.
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Figure Number 1: Alternative definitions of capacity
Technological
Long run definition
average cost of capacity
curve Planning
definition of
Economic capacity
Unit definition
costs of capacity
Ceiling of ‘acceptable’ prices
Output
Hillebrandt (1975) argued that capacity couldn’t be considered without reference to the
time scales in question. Time would permit personnel to be recruited and trained,
material production to be built-up, plant acquired and capital to be raised. Effectively
capacity is a dynamic not a static concept. Capacity can expand to meet sustained higher
demand just as it can contract to cope with continued falling demand. Thus it might be
better to consider capacity in the context of the rate of growth of output. The capacity
limit will correspond to the sustainability of the growth rate.
Similarly account needs to be taken of policy issues pertaining to training, health and
safety, innovation, etc. These can have an impact on the ability of an industry to react to
changing demand within a short time period. It is also necessary to take account of the
mix of output.
Thus a higher output may be possible for a scenario based on new towns and large scale
civil engineering projects, characterized by that of the UK in the early 1970s, than one
based on housing improvement and inner city refurbishment more typical of the late
1970s. Thus the precise mix of work can have an impact on the output that is likely to be
delivered by the industry even with the same level of resource availability. This is tied
up with the productivity that is obtainable.
2: Approaches to the study of capacity
2.1: Time series approach
Taylor et al (1970) suggested this approach in a study of nineteen sectors of the UK
economy for the period 1948 to 1968. The output in constant price terms is presented in
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a time series as Figure Number 1 below. A trend line joining the ‘peaks’ in the time
series diagram can be assumed as the capacity. Under capacity working can be estimated
by the gap between the time series and the trend line. While Hillebrandt (1975) saw this
approach as being acceptable for a general comparative study of a variety of industrial
sectors, it is likely to as be uninformative for an in-depth study of an individual industry.
The approach is also flawed in that it rests on the assumption that what was achieved in
the past can be repeated. Thus the peak output achieved by the industry may no longer
be viable. It may not be possible to replicate past achievements if operatives and staff
have retired, or quarries have been exhausted, and materials plants closed. It is also
highly dependent on price indices to convert output at current prices to constant prices.
Errors in the price indices could distort the time series and give rise to misleading
outcomes. Also new facilities can be brought into use and new staff trained to enable the
industry to surpass previous peaks.
It is essential that the time series be based on constant price data. Errors in preparation of
the index numbers necessary to produce a constant price series could distort the trends
identified.
Time series graphs are useful in that they illustrate year-on-year changes in output
achieved in the past. This is likely to be useful in assessing potential changes in the
future.
Figure Number 2: Time series approach to construction capacity
Construction Value Added UK (£ Billions) (2002 prices)
£70
£60
£50
Capacity trend line Under capacity
working
£40
£30
£20
£10
£0
1948
1950
1952
1954
1956
1958
1960
1962
1964
1966
1968
1970
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
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2.2: Resources as determinants of output
John Parry Lewis (1967) outlined an approach to the problem by linking output to
resource inputs in a report for the National Economic Development Office. See also
Panic (1978) for a study of capacity utilization in UK manufacturing. This approach
rests on the assumption that the ratio between the key resource inputs and outputs is
relatively stable.
The Building Research Establishment carried out a number of investigations into
resource usage in the 1970s. Given the coefficients of inputs necessary to produce a
given level of output, the capacity can be modelled by a series of linear equations. It is
necessary to identify the available quantity of the resources in question. This would
include home production and, where relevant, imports.
Thus if the original question was questioning the maximum feasible output of the
construction sector, this would lead to a number of further questions as to what the
maximum feasible output of the brick industry, cement industry, the steel industry, etc.,
as well as availability of the primary inputs: labour and capital. This approach suggests
that the constraining factor on construction output will be determined by the availability
and cost of the various inputs needed for the construction process.
2.3: Input-output approach
This has parallels to those points addressed within the input-output framework
developed by Wassily Leontief. While this approach was not developed specifically to
deal with problems of resource limitation, it can be adapted for this purpose. Input-
output analysis deals with inter-industrial relationships — for example, the inputs
required from the various materials supply industries to produce construction projects —
that have similarities to the resource issue outlined above. It, again, rests on the
assumptions of fairly stable technical coefficients. These are the quantity of inputs
required to produce a unit of output.
Figure Number 3 below illustrates the inputs and inputs affecting construction using this
approach. The inputs to the construction process can be divided into primary inputs —
labour, land, and capital — and intermediate inputs such as materials, components,
transport and professional services. The approach concentrates on the relationships
between outputs and intermediate and primary inputs.
This approach facilitates the quantification of the inputs and outputs. Coefficients
representing the value of each input needed to produce a set amount of output. For
example in the UK in 1995, the inputs to construction from the structural clay industry
amounted to just under £407M. With the gross output of construction at £87,602, this
amounts to a direct input of £4.65 per £1,000 of construction output.
The approach also allows for indirect input to be computed. This would involve the use
of structural clay products by industries that supply construction. Direct and indirect
inputs of structural clay products to construction amounted to £6.65 per £1,000 of gross
output in 1995.
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The above technique allows us to identify the production of key inputs (direct and
indirect) including labour to enable the construction industry to produce a target output.
With knowledge of the supply-side input output coefficients and with information on the
availability of key resources likely to be in short supply, it should be possible to check
possible output scenarios for construction to see if they are achievable without
unintended consequences such as escalating tender prices.
Figure Number 3: Construction as an input-output process
Intermediate
Labour Maintenanc e
output
Primary
inputs
Capital Repair
T he construction
Land se ctor Educ ation
Public sector
investment
Materials Soc ial and Health
INPUTS OUTPUTS
Plant hire Inf ras truc ture
Intermediate
inputs
Private sector
Trans portation Hous ing
investment
Prof es s ional s erv ic es Indus trial
Financ ial s erv ic es Commerc ial
2.4: The industry as a bottleneck
An alternative explanation is that it is the industry and the individual firms, as organic
entities, that create the bottlenecks and escalating prices rather than the resources that
they employ. If this case it is the poor organization within the industry rather than
pressure on resource inputs that causes the difficulties.
3: Constraining Factors
3.1: Raw materials and manufactured components
Raw materials could act as a constraining factor on construction output. It used to be
thought that in the short-run, running-down stocks of materials could increase capacity.
This was limited by the amount held for each material and component — less than one
month’s supply for cement and plasterboard, and one to for months supply for bricks,
tiles and pipes — thus this will be useful only in the very short term. With current
thinking moving away from holding stocks of materials, this will no longer apply.
Some increase in output of the materials may be possible due to increased utilization of
plant in the materials supply industries. Improvement in output is also possible by
introducing additional shifts and/or weekend working. Each material will, however, have
to be considered separately with particular attention to those materials that are
anticipated to be critical. Such expansion could reduce unit costs by spreading fixed
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charges over the higher output or could increase costs because of non-productive
overtime and premium payments.
Increases in capacity for materials supply have been achieved by installing modern plant
while keeping the obsolete plant on standby to satisfy the fluctuations in demand.
In periods of high demand at home, is likely that imports will be drawn in and exports
reduced. Construction has a lower marginal propensity to import than most other
industries because of the low price/weight ratio of most building materials. Thus this
particular issue will yield little extra for raw materials, although manufactured
components may be significant. The diversion of materials and/or components destined
for export to the home market might prove more important.
3.2: Site Operatives
Shortages of labour could certainly impair the growth of the construction sector. The
increase in output would depend on the ability of the industry to recruit labour. This
might come from the ranks of the unemployed or from other sectors using the same skill
base. Given time it could come through additional training or from improved
productivity. It is more likely; however, that additional labour will be imported from
overseas. In the past, Ireland has proved a major source of labour for construction.
Now it is more likely to be from Eastern Europe. Allowance for retirements and those
moving out to and in from other sectors plus the impact of any productivity gains. Table
number 1 below summarizes these issues
If labour were assumed to be a factor likely to constrain construction output the impact
would depend on the various categories of labour likely to be in short supply. Key skills
such as joinery and plumbing would have the most impact.
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Table Number 1: Constraining Factors for the Construction Sector
After Hillebrandt (1975)
Time scale Constraining factors
Operatives Materials
Immediate short run Unemployed workers Run down stocks
Overtime, shifts Extra utilization of
Increase hours worked existing plant capacity
Future capacity with no Increase productivity Increase productivity in
major policy decisions Attract labour from: materials sector
a) Other sectors and industries Change in balance of
b) Other countries imports over exports
Additional training from:
a) Government training schemes
b) Apprenticeship
c) Other training
Reduce wastage of manpower
Improve labour productivity
Future capacity with major Mechanization and automation Change in fixed plant &
policy decisions Pre-fabrication and system buildings
building Changes in the production
Change in policy on: process
a) Distribution of labour Changes in trade policy
b) Immigration
c) Training
The above table summarizes the main points from a previous paper looking at manpower
issues relating to construction capacity (Hillebrandt, 1975). The factors are classified as
to their timescale – immediate short-run – and if governmental policy changes are
involved or not.
3.3: Managerial and administrative staff
Shortages of professional, technical, administrative and above all managerial staff is
considered by many to be the real constraining factor on capacity for the industry. This
may not apply for the individual firms since mobility of managerial staff suggests that
they can always be recruited, but will certainly affect the industry as a whole. The
approach to this question is similar to that for operatives.
Very little additional output is likely to be obtained from the recruitment of extra staff in
isolation. However, is certainly imposes limits to growth if other factors are introduced
and efficient production is to be maintained. Companies will not operate efficiently if
they lack managerial staff with the key skills needed to finish contracts on time and on
budget.
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3.4: Capital
Fixed capital should not present a problem. Plant and equipment used in construction is
unlikely to be in short supply and the level of imports of machines could be stepped up
to deal with any problems likely to be encountered in the future. Even if it became a
problem, it is doubtful if this would seriously inhibit construction output given the
ability of firms to substitute labour for capital.
Working capital could present more of a problem if firms were being inhibited by lack
of bank loans etc. This has been a problem for small to medium construction companies
with poor credit ratings particularly during periods up to the 1970s when a credit
squeeze was in operation. However, while this may impact on individual firms it is
extremely unlikely to produce a significant effect on the overall output. Larger firms
with better credit ratings would absorb such work.
3.5: Land
The availability of land has proved to be a constraining factor for private housing
development, particularly in the Southeast of England. The application of green belt
policy has resulted in a shortage of land that has been partially addressed through the
increased use of Brownfield land. Land can be seen as restraining the expansion of
speculative housing.
3.6: Services
There are significant inputs from services sectors such as transportation, professional
services (including architecture and surveying consultancy), financial services, and
hiring and lasing of plant. It is unlikely that any of these sectors could significantly
inhibit construction output.
3.7: Company and industry organization
There remains a possibility that the industry organization and companies themselves
might introduce constraints into the output. The once dominant traditional mode of
procurement separates design from construction and operates with a culture of
confrontation and conflict.
Similarly it could be that the operation of the firms themselves might not make the best
of available resources to a lack of entrepreneurship. The incidence of insolvency in
construction is the highest amongst UK industries. The industry has also been attacked
for neglecting training and helping to create one of the bottlenecks listed above.
It these points are accepted it could be argued that capacity is not entirely determined by
the resource inputs as suggested by Parry Lewis (1967). Thus the industry itself could be
seen as introducing additional constraints in the process of turning inputs into outputs.
Ball et al (2000) argue that the construction firm is the embodiment of the site
managerial and professional skills covered earlier. Thus shortages of management and
professional staff could be seen as an industry issue rather than a resource input issue.
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4: Analysis
4.1: Introduction
The approach selected for this paper is to counterpoise changes in resource input costs
with tender prices changes. If tender price escalation is running ahead of resource input
cost increases, this will be indicative that the industry is approaching ts effective
capacity. If the reverse is the case it is probably that the industry s operating below
capacity.
The theoretical justification for this is presented below.
4.2: Time series analysis
As expected, basic time series analysis does not yield much information. Figure Number
2 above illustrates the value added for the UK construction sector from 1948 to 2004 in
constant (2002) prices. It shows the output of the sector growing in a cyclical manner.
The data is included in Table Number 4 below.
The weakness of the time series approach is illustrated by the situation in the early to
mid-1970s. Over the period 1971 to 1973 construction appeared to suffer severe capacity
problems as evidenced by the escalation in tender prices. Figure Number 4 gives the
annual change in value added for construction in constant (2002) prices. This is
computed using equation (1).
ΔV t = (V t – V t-1)/V t-1 100% (1)
Where V t = Construction value added for year t
V t-1 = Construction value added for time year t-1
ΔV t = Change in construction value added from year t-1 to year t
Figure Number 4 also included the annual change in tender prices for the year in
question as presented in Table Number 3 below.
While this approach suffers from a number of severe limitations, it does present a basic
idea that is expanded on below by comparing the time series for construction output with
the changing prices for resource inputs (Inputs in Figure Three) and construction tender
prices (Outputs in Figure Three)
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Figure Number 4: Annual Change in Value Added for the UK Construction Sector (1950-2005)
Annual change in value added and tender prices
20%
Change in Value Added
15%
Change in Tender Prices
10%
5%
0%
-5%
-10%
-15%
1950
1955
1960
1965
1970
1975
1980
1985
1990
1995
2000
2005
4.3: Theoretical issues
As two of the three definitions of capacity are related to price change, the analysis will
be based on changes in price and cost indices. Construction may be seen as having a
dispersed industrial structure with few barriers to entry (Myers, 2004), Ball et al (2000)
identified three issues affecting the ability of construction companies to generate higher
than normal profits:
1. Low short-run supply elasticity in construction markets. This obviously relates to
the ability of the industry to increase its capacity in line with higher demand. The
suggestion is that mark-ups for construction companies will vary over the
economic cycle. Companies will be in a position to raise their prices during
upturns in demand when capacity limits were being stretched. However they
would also face the situation of having to cut margins during downturns in
demand.
2. Ease of entry and exit in construction submarkets. This is concerned with
economic or structural restrictions placed on the ability of firms to move from
one sector of construction to another. For example, the rundown of the council
house building programme and motorway construction in the mid-1970s forced
firms to switch into new expanding areas such as speculative house building and
offshore engineering. The more restrictions on freedom of entry to submarkets
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the more likely firms established in the growing sectors will be able to sustain
high mark-ups. One example of restrictions to entry might be a reluctance of
clients to let work a new entrant to a particular submarket on ground of risk
reduction even at the expense of cost implications.
3. The ability of construction firms to earn economic rent. This relates to the
exploitation of market position or monopoly power. Ball et al (2000) argued that
there was generally little scope for UK contractors to earn economic rent given
the structure of the industry and the limited use of plant and equipment, most of
which tended to be hired. In addition technical innovation that can yield
economic rent for manufacturing firms is unlikely to apply to contractors. Ball et
al (2000) did concede that innovation in organizational structure might give some
firms sufficient leverage in the short-run to take economic rent.
It is reasonable to assume that the above factors are more likely to apply as output
approaches the capacity limit of the industry, or the submarket in question. Rising
demand will cause the problems associated with low short-run elasticity of supply to
kick in. It may also give contractors, at least in less competitive submarkets, the
opportunity to exploit economic rent.
Thus it is proposed to use price and cost indices as proxy variables to help identify the
level of capacity working in the industry at a given point in time.
4.4: Changing Prices and Costs
The analysis in this paper will be based on the change in construction resource cost
indices (RCI) and tender price indices (TPI). RCI measure the change in prices for the
key inputs used by the construction sector such as materials, components, and labour.
TPI, on the other hand, measure the change in output prices changed by the industry.
The assumption is that if the industry is getting overheated it is likely that TPIs will rise
faster than RCIs as firms seek to capitalize on their strong market position. During a
slump in construction demand it is assumed that the rise in TPI will be less than the RCI
as firms are forced to absorb some of the cost increases to win contracts.
Hence the industry is assumed to be below economic capacity if the RCI runs ahead of
the TPI. It is assumed to be above economic capacity when the TPI exceeds the RCI. So
the definition of economic capacity is a situation where changes in RCI are matched by
changes in TPI.
The data is taken from the Quarterly series published by the Building Cost Information
(RICS, 2006) where possible. The RCI is taken from the BCIS General Building Cost
Index while the TPI is taken from the BCIS All in Tender Price Index. However as this
Quarterly series only extends back to the early 1980s, earlier data was taken from
Housing and Construction Statistics (HMSO, 1984). The RCI figures were taken from
the Building Cost Indices. The TPI figures were taken from the Department of the
Environment (DoE) data produced by the Directorate of Quantity Surveying Services
(DQSS). This is not a true tender price index as it is restricted to contracts let by the
DoE, but it is probably representative of tender prices and is the best available data.
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The two series were seasonally adjusted using a four-quarter moving average to smooth
out short-term fluctuations. The computations use equations (2) and (3) below:
ΔRCI t = (RCI t – RCI t-1)/RCI t-1 100% (2)
Where RCI t = Resource cost index for quarter t
RCI t-1 = Resource cost index for quarter t-1
Δ RCI t = Change in resource cost index from quarter t-1 to quarter t
ΔTPI t = (TPI t – TPI t-1)/ TPI t-1 100% (3)
Where TPI t = Tender price index for quarter t
TPI t-1 = Tender price index for quarter t-1
Δ TPI t = Change in tender price index from quarter t-1 to quarter t
The analysis is based on the assumption that if problems are cause by short supply of
input resources — labour, materials, etc — this will be shown by resources costs
spiralling upwards ahead of background inflation. If the problems lie with the
organization and managerial structure of the construction sector it will be indicated by
tender prices rising faster than resource costs and background inflation.
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Figure Number 5: Quarterly Change in Cost and Prices Indices for the UK Construction Sector (1971-1984)
Source: Housing and Construction Statistics (HMSO, 1970-1985)
Quarterly changes in cost and price indices
12%
10% Change in TPI
8% Changes in RCI
6%
4%
2%
0%
-2%
-4%
1971
1972
1973
1974
1975
1976
1977
1978
1979
1980
1981
1982
1983
1984
The period 1971 to 1973, illustrated in Figure Number 5, above corresponds with the
Dash for Growth instigated by the Conservative Government under Premier Ted Heath
and Chancellor Tony Barber. It was the last attempt to expand the economy out of
economic difficulties using an old fashioned Keynesian-style boom. Tender prices over
this period escalated dramatically. While there was high background inflation, it should
be noted that tender price increases were around double the increases in resource costs
(Hillebrandt, 1984).
This Dash for Growth had already failed as illustrated by the collapse in tender prices
some months before the Arab-Israeli war brought about a 400% increase in the price of
oil and plunged the world into a major recession. It appears clear that the high levels of
demand as evidenced by the booming tender prices was not reflected in a big increase in
construction output. While the output of the industry did go up in monetary terms after
allowance for inflation, the annual increase in construction value added was less than 2%
per annum over the three years in question. It would appear that either increasing tender
prices choked off the extra demand or supply-side constraints curbed output. Maybe a
combination of the two is the most likely explanation?
The industry recovered from 1974 and by 1977, tender prices moved ahead of resource
costs. The first Gulf War between Iraq and Iran heralded a period of uncertainty and a
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further oil price ‘spike’ helped push the economy into recession once more with tender
prices again collapsing.
Figure Number 6: Quarterly Change in Cost and Prices Indices for the UK Construction Sector (1984-2005)
Source: Building Cost Information Services (RICS, 1980-2006)
Quarterly changes in cost and price indices
4%
3%
2%
1%
0%
-1%
-2% Change in TPI
-3% Change in RCI
-4%
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
Over the period 1984 to 1987 it would appear that the industry was in balance at or near
to economic capacity. Towards the end of the 1980s another unsustainable boom hit the
industry. This did not affect the whole of the UK, as was the case with the Dash for
Growth. It mainly impacted on London and the South East of England plus the M4
corridor. Its epicenter was undoubtedly around Canary Wharf in the London Docklands.
In this case the industry did deliver on increased output. There was a 10% increase in
output in 1987, 8% in 1988 and a further 5% in 1989. This was achieved by the
attracting large numbers to of construction professionals and operatives to move to the
South East from as far afield as Scotland and France
Then the Government became concerned about rising inflation and started to push up
interest rates. When this failed to curb rising house and consumer prices subsequent
rounds of interest rate increases were applied. Eventually these interest rate increases
worked their way through the economy and the industry was plunged into recession. For
some firms having two, three, or four contracts let or in progress from the height of the
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boom cushioned this. This turned out to be a ‘double dip’ recession as just as recovery
seemed to be in sight, a second Europe-wide recession kicked in.
The industry experienced falling output for the next three years before some measure of
equilibrium was restored from 1994 onwards. Since then the industry has experienced an
unprecedented 11 years of growth. Over this period the TPI have tended to exceed the
RCI but by a modest 1% per quarter.
4.5: Calibration of model
To calibrate the model into actual capacity, estimates of capacity utilization from the
construction trade associations are employed. The Construction Confederation,
successor to the National Federation of Building Trade Employers, conducted surveys of
capacity utilization amongst its members. These were presented in the form of the
percentage of firms between 90% and 100% of capacity, those between 50% and 90% of
capacity and those below 50% of capacity.
The results are included in Table Number 5 below. The overall capacity utilization is
estimated assuming average capacities of 95% for the first group, 70% or the second
category and 45% for the third group. The Federation of Master Builders carried out a
similar survey. The results are illustrated in Figure 7 below:
Figure No 7: Estimated capacity utilization in the UK Construction Sector (1988-2003)
Source: Building Cost Information Services (RICS, 1990-2005)
Capacity Utilization
100%
95%
Construction Confederation
90% Estimates (moving average)
85% Federation of Master Builders
Estimates (moving average)
80%
75%
70%
65%
60%
55%
50%
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
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The results of the two surveys are similar with the FMB figures slightly lower. Also, as
expected, the FMB members were hit earlier by the 1989 recession than the larger
contractors represented by the Construction Confederation. The smaller builders would
be hit quicker by a slump due to relying on projects of shorter duration. The economic
capacity would appear to correspond to around 80% and the planning capacity at circa
85% of technological capacity.
4.6: Capacity in context
The figure of 80% may seem rather low for economic capacity in comparison with
figures quoted for other sectors of the economy. This may stem from the nature of
construction mainly as a series of limited term projects. This has parallels with the idea
of frictional unemployment in labour markets. This identifies the mobility reserve
needed facilitate employees changing jobs. Construction is particularly prone to
frictional unemployment because many operatives are employed by the contract rather
than by the company.
Frictional unemployment effectively applies to the firm as well as to labour markets.
Spare capacity is needed to cope with change over from one project to another. This is
complicated by the fact that projects run down slowly towards their completion and new
project take some time to build-up in their early stages. This suggests that construction
will run more effectively when operating at around 80% capacity. Process industries, by
comparison, can operate at much higher capacities than construction.
Cowling (1982) estimated capital utilization in UK manufacturing to be between 90 and
100% throughout the 1950s into the early 1970s. This did drop as UK manufacturing
was badly hit by competition from imports and by the economic recession in the mid-
1970s.
Table Number 2: Capacity Utilization in UK manufacturing
Source Cowling: Monopoly Capitalism (1981)
Capacity Capacity
Year utilization Year utilization
1955 98.1 1967 93.1
1956 94.6 1968 94.9
1957 93.7 1969 94.9
1958 90.6 1970 92.9
1959 93.2 1971 89.6
1960 98.0 1972 89.7
1961 95.1 1973 91.6
1962 92.0 1974 85.2
1963 93.1 1975 80.9
1964 98.4 1976 84.4
1965 98.4 1977 84.3
1966 96.6 1978 83.6
It would appear to be the case that following sustainable increases in construction, the
industry will continue to expand so as to keep output within the range of 80-85% of
revised capacity.
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5: Conclusions
5.1: Summary of analysis
Over the period it seems that construction resource costs followed movements in retail
prices quite closely while tender prices were much more volatile. They surged up and
down with the boom bust cycle and have only been stable for a sustained period in
recent years. That would suggest that the high prices in times of boom were caused by
the industry itself rather than the resource inputs of labour, materials, etc.
Table Number 3 below attempts to summarize the above analysis in terms of the level of
capacity working for the UK construction sector:
Table Number 3: Construction capacity 1971-2005
Time Period Capacity category Capacity estimate Notes
1971-1973 Over planning capacity — Dash for Growth
1974-1977 Under economic capacity — Recession following oil price explosion
1978-1979 Over economic capacity — Recovery
1980-1983 Under economic capacity — Recession following oil price hike
1984-1986 Economic capacity — Recovery
1987-1989 Over planning capacity 85% + Dockland Boom
1990-1994 Under economic capacity 65%–70% Double dip recession
1995-1998 Economic capacity 75%–80% Recovery
1999-2006 Over economic capacity 80%–85% Sustained growth
2007- Under economic capacity 65%–70%? Slump
The objective would appear to be to keep the output of the industry at or around the
economic capacity but below the planning capacity. That corresponds to between 80%
and 85% of physical capacity using the Construction Confederation figures. This seems
to have been achieved from the mid 1990s through to around 2007 but only in 4 years
out of the previous 22 years. The remainder mostly involved lurching between boom and
slump.
Over recent years the industry has been hovering near to the limit of sustainability at
around 85% capacity. However it has not so far produced the adverse effects of the early
1970s or for that matter the late 1980s.
5.2: Explanations for sustained output growth
The question remains as to why the industry has delivered increased output over ten
years or more when it failed so conspicuously thirty years ago.
One explanation could involve the removal of constraints on public sector demand. In
the early 1970s, cost yardsticks were in place. These made it difficult if not impossible
to build hospitals, schools, and social housing without extensive ‘creative accountancy’.
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By the late 1970s, cost yardsticks had been scrapped and replaced by cash limits on
public sector capital spending. This allowed the Treasury to impose controls on all
public sector new building. The advent of Public Finance Initiative and Public Private
Partnerships removed the ‘dead hand of the Treasury’ and permitted a major expansion
in public sector construction.
However, this does not explain how the supply-side constraints so apparent in the 1970s
have been overcome. Indeed they would presumably have loomed even larger without
the demand constraints on public sector work.
The industry has gone through fundamental restructuring over the past thirty years. The
shift of the private sector towards design and build and the public sector towards
contractor-led procurement systems may be one explanation. The growth of supply chain
management and partnering may provide another explanation for the remarkable
performance. This should really be no surprise as the move the reorganize construction
covered by the Latham and Egan Reports was prompted by the perceived poor
performance of the industry.
While the industry was coping, concern remains about what will happen in the build-up
to the 2012 London Olympics especially combined with the £10B London Crossrail
project (Majekodunmi, 2006). It was suggested that there was potential for a repeat of
the situation in the late 1980s when the Dockland developments sucked in construction
professionals from Scotland and the English regions. This was also likely to pose
problems for Scotland especially if Glasgow’s bid to host the 2014 Commonwealth
Games is successful.
There have been suggestions from the Office of Government Commerce, that panels be
established to anticipate construction bottlenecks (OGC, 1973). This echoes the idea of
Public Procurement Agency to smooth out the flow of public sector contracts that was
initially proposed in the 1970s in the controversial Labour Party Document “Building
Britain’s Future” (Labour Party 1977). The new Public Sector Construction Clients’
Forum (PSCCF) is intended to focus on leading the drive for further improvements in
whole-life value for money in the procurement of built environment in the public sector.
It is fair to say that the industry just about coped through the long boom but is very near
to the margin of sustainability and care needs to be taken to avoid a repetition of the
scenario from the late 1980s or even a repeat of the damaging consequences of the early
1970s boom and bust cycle.
5.3: The current recession and beyond
The credit crunch and the subsequent recession allay any fears about the consequences
of the industry being unable to deliver. However the recession has not necessarily solved
the problem but merely postponed it.
May construction firms and professional consultants have responded by cutting staff.
Some of the redundant staff and operatives could end up being lost to the industry
permanently.
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The question remains as to what will happen when the economy does start to recover.
There could be a flood of work unleashed on the construction sector that it will be
unable to satisfy and all the problems of an under capacity including price inflation as
experienced in the 1970s and 1980s.
The industry have to cope with replacing the ‘baby boom’ generation who have been a
major component in the workforce as they retire over the next five years or so. They will
also have to replace those ‘shaken out’ in the current recession.
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Table Number 4: Construction Value Added for the UK (1948-2004)
Source: UK National Accounts (HMSO, 2006) BCIS (RICS, 2006
Index of Value
Year Annual Changes (%)
Output Added (£M)
Output Tender Prices Resource Costs Retail Prices
1953 43.5 £23,831 6.67% 5.7% — 5.8%
1954 45.5 £24,926 4.40% 3.6% — 5.5%
1955 45.6 £24,981 0.22% 3.4% — 3.4%
1956 48.1 £26,351 5.20% 3.3% — 3.3%
1957 48.0 £26,296 -0.21% 3.2% — 3.2%
1958 47.9 £26,241 -0.21% 3.1% — 1.6%
1959 50.5 £27,665 5.15% 3.0% — 1.5%
1960 53.1 £29,090 4.90% 4.4% — 1.5%
1961 57.2 £31,336 7.17% 5.6% — 1.5%
1962 57.8 £31,665 1.04% 6.7% — 2.9%
1963 57.6 £31,555 -0.35% 6.3% — 4.3%
1964 63.5 £34,787 9.29% 5.9% — 2.7%
1965 66.5 £36,431 4.51% 4.4% — 4.0%
1966 67.7 £37,088 1.77% 4.3% — 3.8%
1967 70.4 £38,567 3.84% 4.1% — 3.7%
1968 72.2 £39,553 2.49% 4.9% — 4.8%
1969 71.7 £39,279 -0.70% 5.6% — 5.7%
1970 70.3 £38,512 -1.99% 8.8% — 6.5%
1971 71.6 £39,225 1.82% 14.6% — 8.1%
1972 72.9 £39,937 1.78% 14.2% — 10.3%
1973 74.6 £40,868 2.28% 12.4% — 13.6%
1974 66.9 £36,650 -11.51% 11.6% 18.3% 15.7%
1975 63.4 £34,732 -5.52% 11.4% 19.0% 16.8%
1976 62.5 £34,239 -1.44% 10.2% 16.6% 15.5%
1977 62.2 £34,075 -0.48% 14.9% 15.7% 14.8%
1978 66.5 £36,431 6.47% 16.8% 15.4% 14.6%
1979 66.9 £36,650 0.60% 11.7% 14.1% 13.5%
1980 63.3 £34,678 -5.69% 9.4% 12.7% 11.9%
1981 58.3 £31,938 -8.58% 6.6% 11.5% 10.6%
1982 63.0 £34,513 7.46% 3.7% 9.8% 8.8%
1983 67.0 £36,705 5.97% 1.8% 7.5% 6.9%
1984 70.2 £38,458 4.56% 3.7% 6.1% 5.6%
1985 70.4 £38,567 0.28% 4.6% 5.3% 4.6%
1986 73.3 £40,156 3.96% 7.0% 5.2% 4.8%
1987 81.8 £44,812 10.39% 7.5% 5.5% 5.4%
1988 89.0 £48,757 8.09% 5.1% 6.0% 6.2%
1989 93.7 £51,332 5.02% 1.8% 6.2% 6.5%
1990 96.4 £52,811 2.80% -0.3% 5.8% 6.3%
1991 88.7 £48,593 -8.68% -2.5% 5.3% 5.3%
1992 85.1 £46,620 -4.23% -2.4% 4.5% 4.5%
1993 84.1 £46,073 -1.19% 0.2% 4.1% 3.3%
1994 87.3 £47,826 3.67% 2.7% 3.7% 2.7%
1995 87.3 £47,826 0.00% 5.0% 3.5% 2.6%
1996 89.7 £49,140 2.68% 5.9% 3.5% 3.0%
1997 92.1 £50,455 2.61% 4.5% 3.3% 2.8%
1998 93.1 £51,003 1.07% 4.5% 3.2% 2.8%
1999 93.4 £51,167 0.32% 6.1% 3.1% 2.6%
2000 94.6 £51,825 1.27% 6.4% 3.6% 2.3%
2001 96.3 £52,756 1.77% 6.2% 3.9% 2.1%
2002 100.0 £54,783 3.70% 7.1% 4.4% 2.4%
2003 105.2 £57,632 4.94% 6.7% 4.8% 2.3%
2004 108.9 £59,659 3.40% — — —
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Table Number 5: Construction Confederation and Federation of Master Builders Estimates of Capacity (1989-2003)
Estimate by Construction Confederation (CC) CC Capacity FMB Capacity
Year Quarter 90% Plus 50%-90% Less than 50% moving average) moving average
Q1 61 38 2 85% 76%
Q2 53 45 4 83% 72%
1989
Q3 45 51 6 80% 70%
Q4 36 58 7 78% 67%
Q1 28 64 9 76% 65%
Q2 23 66 11 74% 63%
1990
Q3 19 69 14 72% 62%
Q4 14 71 16 70% 61%
Q1 9 73 18 69% 61%
Q2 9 73 19 68% 61%
1991
Q3 8 73 19 67% 62%
Q4 8 73 20 67% 62%
Q1 7 73 20 67% 63%
Q2 7 75 19 67% 64%
1992
Q3 6 77 17 67% 65%
Q4 6 78 16 68% 65%
Q1 5 80 14 68% 65%
Q2 5 84 20 69% 66%
1993
Q3 7 77 14 69% 67%
Q4 7 82 11 70% 68%
Q1 17 69 14 72% 69%
Q2 35 58 7 73% 71%
1994
Q3 28 64 6 74% 71%
Q4 25 55 20 74% 72%
Q1 14 84 2 74% 72%
Q2 23 76 1 75% 72%
1995
Q3 27 73 0 76% 73%
Q4 25 73 2 76% 74%
Q1 21 78 1 77% 74%
Q2 29 70 1 78% 75%
1996
Q3 45 54 1 78% 75%
Q4 35 65 0 79% 77%
Q1 34 65 1 79% 78%
Q2 41 53 2 80% 79%
1997
Q3 47 53 0 81% 80%
Q4 64 35 2 82% 80%
Q1 43 56 1 84% 81%
Q2 64 35 1 84% 80%
1998
Q3 57 43 0 83% —
Q4 49 46 5 83% —
Q1 59 40 1 83% —
Q2 51 48 1 83% —
1999
Q3 54 46 0 84% —
Q4 58 41 1 85% —
Q1 67 33 0 85% —
Q2 59 41 0 85% —
2000
Q3 53 45 2 84% —
Q4 60 37 3 84% —
Q1 61 38 1 84% —
Q2 63 37 0 84% —
2001
Q3 47 50 3 84% —
Q4 57 43 0 84% —
Q1 57 42 1 84% —
Q2 56 44 0 84% —
2002
Q3 52 47 1 84% —
Q4 59 41 0 84% —
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References
Ball, Michael, Farshchi, Competition and persistence of profits in the UK construction
Mantab & Grillo, industry, Construction Management and Economics, 18, pp 733-
Maurizio (2000) 45.
Brown, Michael A (2004) The truth about capacity, Construction Manager, October 2004
BCIS (2006) Building Cost Information Service On-line, Royal Institution of
Chartered Surveyors, London.
Cowling, Keith (1982) Monopoly Capitalism, Macmillan, London
Egan, Sir John (1998) Rethinking construction, Department of Trade and Industry,
HMSO, London
Hall, Peter (1982) Great planning disasters, University of California Press, Berkley.
Hillebrandt, Patricia The capacity of the construction industry in Turin, D A (Editor):
(1975) Aspects of the economics of construction, George Godwin,
London, pp 25-57.
Hillebrandt, Patricia Analysis of the British construction industry, Macmillan, London.
(1984)
Housing and Construction Housing and Construction Statistics, Department of the
Statistics (1970-1984) Environment, Scottish Development Department, and Welsh
Office, HMSO, London.
Kitching, Ruby (2006) Chase me chase me (skill shortages), New Civil Engineer, March
2006.
Labour Party (1977) Building Britain’s future, Labour’s policy on construction,
Labour Party, London.
Latham, Michael (1994) Constructing the team, Department of the Environment, HMSO,
London
Majekodunmi, Olufunmi The lure of the rings, Construction Manager, January 2006.
(2006)
Myers, Danny (2004) Construction Economics: a new approach, Spon, London
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RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
John Lowe, pp 672-697
NEDO (1975) The public client and the construction industry (the Wood Report)
Building and Civil Engineering Economic Development
Committees, National Economic Development Office, HMSO,
London.
OGC (2003) Increased competition and improving long-term capacity planning
in the government market place, Office of Government
Commerce, HM Treasury, London.
Panic, M (1978) Capacity utilisation in UK manufacturing industry, National
Economic Development Office, HMSO, London.
Parry Lewis, John (1967) The capacity of the building industry, Building, 12 May 1967.
Taylor, Jim; Winter, A nineteen industry quarterly series of capacity utilization in the
David; and Pearce, David United Kingdom 1948 - 1968, Bulletin, University of Oxford,
(1970) Institute of Economics and Statistics, May 1970, pp 113-131.
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Abdul-Rashid Abdul-Aziz, Mastura Jaafar, David-Ngau Pengiram, Azlan Raofuddin Hj-Nuruddin and lim Yoke-Mui,
pp 698-710
International expansion of quantity surveying consultants
from developing economies: the case of Malaysia
Abdul-Rashid Abdul-Aziz1, Mastura Jaafar1, David-Ngau Pengiran1, Azlan-Raofuddin
Hj-Nuruddin1 and Lim Yoke-Mui1
1
School of Housing Building and Planning,
Universiti Sains Malaysia,
11800 Penang, Malaysia.
Email: [email protected]; [email protected]; [email protected];
[email protected]; [email protected]
Abstract:
A study was conducted to examine the internationalisation of Malaysian quantity
surveying firms. The aspects that were looked into included their background, the
countries they have gone to and modes of market entry, modes of securing contracts and
services rendered, their competitive strengths and measures to enhance
internationalisation. Data was collected from postal questionnaire survey and follow-up
interviews. By presenting the findings, the paper highlights the challenges which
confront developing economies in exporting quantity surveying services.
Keywords:
Consultancy services, internationalisation, Malaysia, quantity surveying,
1 Introduction
The General Agreement of Trade in Services was brought under the fold of the
multilateral trade negotiations during the Uruguay Round (1986-1993) in the belief that
services was playing an increasingly important role in world trade. According to World
Trade Organisation statistics, global trade of the services sector has grown
spectacularly, from US$825 billion in 1980 to US$4.36 trillion in 2004 (De, 2006). The
services sector now contributes one-fifth to global trade. However asymmetry exists
between developed and developing countries in services trade. The developing
countries’ share in trade in services grew up until 2001, but remained static thereafter. A
study was conducted to examine the internationalisation process of Malaysian quantity
surveying firms. Recently, a similar study was conducted, looking at the
internationalisation of Singapore’s quantity surveying services (Ling and Chan, 2008).
The difference between the present study and the one that was recently concluded is that
Singapore is a developed country whereas Malaysia is not. The two studies have also
produced dissimilar results. By conducting the present study, it is hoped that
recommendations can be made to the industry so that their exports can be increased,
thereby addressing the asymmetry mentioned earlier even in a small way. The
objectives of the research were as follows:
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Abdul-Rashid Abdul-Aziz, Mastura Jaafar, David-Ngau Pengiram, Azlan Raofuddin Hj-Nuruddin and lim Yoke-Mui,
pp 698-710
- To determine the demographic profile of the quantity surveying firms which had gone
international with respect to their age and size.
- To determine the countries that these firms have gone to.
- To determine the modes of market entry these firms adopted to enter those countries,
initially as well as presently.
- To determine how these firms secure overseas contracts
- To record the types of services rendered by these firms abroad.
- To determine the competitive strengths of these firms
- To determine what actions the industry can take to promote further exports.
Data was collected from self-administered postal questionnaire survey and follow-up
interviews. Even though some of the compiled data were numerical, the entire findings
were analysed qualitatively.
Among the interesting findings of the study is that the sampled firms did not
internationalise by progressively entering neighbouring countries before venturing
further afield. Some made the leapfrog to distance locations immediately. They adopted
various market-entry modes open to service foreign markets, from the low-cost low-risk
piggybacking to the high-cost high-risk investment in local subsidiary. Their market
entry modes shifted in emphasis as the firm progressed from initial market entry to
presently. The firms were found not to really have unique competitive assets that would
have given them superiority advantage over others in the international arena. Business
networks, at home, abroad and within the business group, definitely played a vital
source of overseas contracts. The various quantity surveying services were not all
equally in demand abroad. The top two proposed industry actions that can help promote
further export of quantity surveying services were partnering with consultants from
other countries to enter third markets and to get government-linked companies to
engage them for overseas work. The findings can be used by the industry and
government to help increase the profile of Malaysia’s quantity surveying firms abroad.
2 Literature Review
There have been various studies which have examined the association between business
age and propensity to internationalise, some providing support (e.g. Burgel et al., 2001),
others not (Westhead, 1995; Autio et al., 2000). Studies have found that size of
businesses is positively related to internationalisation (Rajshekhar et al., 2003).
In terms of markets, several studies point to stepwise progression of firms entering
psychically or geographically close markets before extending further afield (Johanson
and Vahlne, 1990). Erramilli (1991) found this to be true for service firms. But there are
other studies which point to businesses that do not follow this pattern, primarily because
they follow their domestic clients abroad to far-flung places (Bell, 1995; Andersson,
2002).
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Abdul-Rashid Abdul-Aziz, Mastura Jaafar, David-Ngau Pengiram, Azlan Raofuddin Hj-Nuruddin and lim Yoke-Mui,
pp 698-710
For technical consultancy firms (Sharman and Johanson, 1987) notably, and firms in
other sectors as well (Wilkinson et al., 2000), ‘piggybacking’ with business partners is
one strategy to enter foreign markets. Studies have found that networks, whether at the
individual or firm levels, tend to expedite internationalisation (Johanson and Mattson,
1988). The firm may even be guided into the international arena by partners that have
international operations and experience, even though it may not have harboured such
aspirations previously. So powerful may the network be that Madsen and Servais (1997)
propose that it is only proper to use a firm’s network as the unit of analysis rather than
the firm itself when attempting to explain the internationalisation process. In the context
of the present study, the network can be at the project or company level, involving
compatriot, host or third countries clients or consultants. Firms may also choose to set
up their own offices in host markets. Gatignon and Anderson (1988) found that the
propensity to establish wholly-owned subsidiaries increased with experiential
knowledge, whereas Shetty (1979) found that opposite to be true.
There are various methods of securing overseas contracts, the firms could be invited by
sources at home or in host countries (Sharman and Johanson, 1987, Wilkinson et al.,
2000), responding to international tenders (Nachum, 1988), conducting its own
marketing (Albaum et al., 2004), accompanying trade delegations (Winsted and
Patterson, 1998), displaying services at trade exhibitions (Dahles, 2004), securing work
from affiliate or sister companies (Kim et al., 2004) or working on outsourced work
(Apte and Karmarkar, 2007).
The services offered by quantity surveying practices are fairly the same worldwide.
They include measurement and documentation; estimating, feasibility study and early
cost advice; financial management, procurement advice; value management;
construction economics, construction law and arbitration (Turner, 1979).
Several competitive strengths of services firms have been identified by scholars. Quality
of services is one strength as it leads to client satisfaction (Veloutsou et al., 2005). For
services firms, having quality human resources is an asset (O’Farrell et al., 1998). It was
earlier highlighted that good relationship with clients can lead to the firm being taken
along overseas, even though it may not be ready (Bell, 1995; Andersson, 2002). The
clients can be home-based or from a third country. Innovation can also provide a
competitive edge to services firms (Czarnitzki and Speilkamp, 2000). Because of the
intangibility of the product, professional services firms have to rely on their reputation
to win over new clients (Winsted and Patterson, 1998), local or foreign. Reputation
reduces the uncertainty for potential clients about the reliability, trustworthiness and
quality of a particular firm (Fombrun, 1996). The fees charged by the service provider
cannot be too high, unless the recipients are willing to pay for the premium (Altbach
and Knight, 2007). Otherwise, it will price itself out of the market. Financial capital
also provides strength for the service firm; the larger is its financial resource, the greater
is its ability to absorb the risks associated with internationalisation (O’Farrell et al.,
1998).
On what actions the quantity surveying sector can do to further export its services,
several options can be envisaged. Wilkinson et al. (2000) stress the important role
played by personal and business relations between firms within and across industry
boundaries and within and between different countries for firm internationalisation. By
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Abdul-Rashid Abdul-Aziz, Mastura Jaafar, David-Ngau Pengiram, Azlan Raofuddin Hj-Nuruddin and lim Yoke-Mui,
pp 698-710
forming partnership and consortia, limited resources which can act as an inhibitor to
internationalisation can be overcome (Winsted and Patterson, 1998). Extending the
argument that some services firms become international by adopting a client-following
behaviour, the host government can stimulate non-exporting firms into venturing abroad
by engaging them for their services overseas. It has been found the diaspora of a certain
ethnic can be made to use the goods and services from their motherland, thereby
enhancing the internationalisation of the firms producing those goods and services
(Tung and Chung, 2009).
3 Research Methodology
The research used two research instruments to collect data: self-administered postal
questionnaire survey and follow-up interviews. The questionnaire was designed based
on past studies. The questionnaire was pilot tested by a director of a large quantity
surveying practice. He went through the questionnaire in the presence of the research
team. This person was one of the board of directors of the Professional Services
Development Corporation (PSDC) formed by the government to promote the export of
Malaysia’s construction services. In fact it was through PSDC that the person got
involved at the early stages of the research. Some of the questions relied on the five-
point Likert scale. Qualitative responses were extrapolated based on the following scale:
less than 1.49 = unimportant, 1.50– 2.49 = less important, 2.50–3.49 = moderately
important, 3.50–4.49 = important, 4.50–5.00 = very important.
It was decided even before the research commenced that PSDC was the most
appropriate government organisation to work alongside to increase the response rate.
PSDC agreed to assist provided the findings of the research would be made known to
them. PSDC also provided the list of quantity surveying firms which had gone overseas,
and the supporting letter which was attached with every questionnaire. Notwithstanding
the input, the research team contacted their colleagues in the industry to come up with
another list of firms which had gone overseas. This list was then cross-checked with
PSDC’s to ensure that no targeted firm was missed out from the final list. Still to be on
the safe side, the questionnaires were sent out to every quantity surveying firm in
Malaysia. Postal survey allows the questionnaires to reach to many people
simultaneously across vast geographical distances. In the end, we were confident that 22
firms out of the 278 in the country had international experience. Of these 22, 13
returned the completed questionnaires, representing a high response rate of 59.1%. As
requested, all the questionnaires were completed by principals, partners, proprietors or
other individuals high up the hierarchy. Their responses therefore can be accepted as
reliable.
The next stage of data collection involved face-to-face interviews with four executives
who indicated their consent in the returned questionnaires. They represented different
participating companies. The interviews were structured mainly around their responses
in the returned postal questionnaires. The interviews served the purpose of seeking
clarification and elaboration. Essentially the interviews served to strengthen the data
obtained from the questionnaires. Descriptive analysis was conducted with the
quantitative data obtained.
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4 Findings and Discussion
Table 1 shows the background of the participating quantity surveying firms. The
majority of the firms were more than 15 years old and had more than 20 employees.
Number of employees can be a proxy for size. The data supports the literature that
services firms that are older (Burgel et al., 2001) and larger (Rajshekhar et al., 2003) are
positively related to firm internationalisation.
Table 1. Background of the participating quantity surveying consultancy firms
Description No Percentage
Age of firm
- Less than 5 years 2 15.4
- 5-9 - -
- 10-14 2 15.4
- More than 15 years 9 69.2
Number of employees
- Less than 5 1 7.7
- 6-10 1 7.7
- 11-15 3 23.1
- 16-20 1 7.7
- More than 20 7 53.8
Table 2 shows that the sampled firms have gone to places far and wide. They did not
conform to the theory of stepwise internationalisation of going to nearby countries,
geographically or psychically (Johanson and Vahle, 1990; Erramilli, 1991). Client-led
internationalisation (Bell, 1995; Andersson, 2002) which is elaborated later can help
explain for this phenomenon.
Table 2. Countries the surveyed quantity surveying consultancy firms have serviced
Firm Country
1 Laos PDR, Saudi Arabia, India, Kenya, Algeria
2 Singapore, Hong Kong, China, Thailand, India, Vietnam, U.A.E.
3 India, Indonesia, China, Middle East
4 Vietnam
5 Vietnam
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6 Sudan, Pakistan, Saudi Arabia
7 India
8 Jordan , Syria , Australia
9 U.A.E.
10 Australia
11 Indonesia, China
12 Pakistan
13 Thailand, Singapore, UK
For initial market entry, ‘piggybacking’ on Malaysian clients and consultants was the
most frequent method (42.9%), followed by being part of the project team with host
clients or consultants (25.7%) and own company (20.0%). After the initial market entry,
nearly half of the ventures (i.e. 18) ceased. For whatever reasons, the maiden projects
did not lead to continued business presence. Of the remaining 17 ventures, market
presence was sustained by having own companies in the host market (47.1%), followed
by piggybacking on Malaysian clients and consultants (29.4%), and joint venture
companies with Malaysian client or consultant (11.8%).
From interviews, it was found that ‘piggybacking’ on Malaysian clients or consultants
(which was frequent for initial market entry and continued presence) was common for
small as well as large firms. This tactic adopted by the sampled population resonates
with the behaviour of firms in other sectors elsewhere (Sharman and Johanson, 1987;
Wilkinson et al., 2000). Having own companies in host clients was fairly common for
both phases as well, even though it involved high cost and high risks, as opposed to
‘piggybacking’ which entailed no costs and no risks at all. Although in percentage
terms, the use of the own company mode doubled from initial to present status, in
absolute terms the increase is only by one venture. Because of almost comparable value
in absolute terms, the association between experiential knowledge and establishing
wholly-owned subsidiaries (Gatignon and Anderson, 1988; Shetty, 1979) could not be
tested. In any case, it must be recognised that having own companies may not be a
choice but an investment requirement of host countries. The second most frequent mode
for the initial phase (i.e. being part of the project team with host clients and consultants)
and the third most frequent mode for continued presence (i.e. joint venture company
with Malaysian client or consultant) point to the importance of networking (Madsen and
Servais, 1997), just like ‘piggybacking.’
Table 3. Modes adopted by the sampled quantity surveying firms for initial market entry and continued
presence phases
Modes of entry Initial Continued
(N=35) (N=17)
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Part of the project team with Malaysian client/Malaysian 42.9% 29.4%
consultant (piggybacking)
Part of the project team with host client/host consultant 25.7% 5.9%
Part of the project team with client/consultant from third country 5.7% -
Joint venture company with Malaysian client/ consultant 5.7% 11.8%
Joint venture company with host client/ consultant - 5.9%
Joint venture company with third country client/consultant - -
Own company 20.0% 47.1%
Table 4 affirms that Malaysian clients or other consultants requiring quantity surveying
services in host countries was very important to the sampled population in providing
overseas work. The clients are usually Malaysian businesses, but they can also be
government agencies, explained one interviewee. It was early noted that the sampled
firms went to countries that did not conform to the stepwise internationalisation process
of going to geographically or psychically close countries (Johanson and Vahnle, 1990).
The data shown in Tables 3 and 4 point to their overseas foray own in large part to the
clients venturing abroad. This helps explain why the progressive internationalisation by
market could not be detected (Bell, 1995; Andersson, 2002).
The responses to trade delegation and exhibition did not concur with literature (Winsted
and Patterson, 1998; Dahles, 2004). Respondents viewed both of them as unimportant.
Other variables were regarded as either moderately important or little important.
Invitation by clients and consultants in host countries affirms yet again the importance
of business networks (Madsen and Servais, 1997). As for recommendation to client by
affiliate/sister company in other countries (Kim et al., 2004), one firm in Malaysia had
link with a worldwide quantity surveying firm based in the UK. It is through this
association that it managed to get projects outside of Malaysia. The response to this
variable yet again underscores the importance of networking. The same applies for
working on outsourced jobs. Without business networks, the surveyed firms would have
been hard-pressed to secure overseas jobs in this manner. On their own, the surveyed
firms tried to secure overseas jobs by way of responding to international tenders
(Nachum, 1988) and own marketing (Albaum et al., 2004). But these options, just like
getting outsourced work, were considered of little importance.
Table 4. Methods of securing overseas contracts by the sampled quantity surveying firms
Mode of securing overseas contracts Mean Std. dev.
Invitation by client/other consultant in Malaysia 4.00 1.29
needing the quantity surveying services in host
country
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Invitation by client/other consultant in host country 2.54 1.05
Recommendation to client by affiliate/sister company 2.54 1.33
in other countries
Responding to international tenders/international 1.92 0.64
competition
Own marketing to clients in host country 1.92 1.12
Outsourcing by consultants in high cost country 1.92 1.04
Trade delegation 1.31 0.48
Trade exhibition 1.31 0.48
Note: Less than 1.49=unimportant, 1.50-2.49=little important, 2.50-3.49=moderately important, 3.50-
4.49=important, 4.50-5.00=very important.
Table 5 shows that the type of quantity surveying services most in demand overseas was
measurement and documentation (100%), whereas the least was arbitration/ mediation
(30.8%). It shows that the demand for the quantity surveying services was not uniform
across all the specialisations.
Table 5. Services rendered to overseas clients by the sampled quantity surveying firms
Types of service Percentage
Measurement and documentation 100
Estimating/ feasibility study/ early cost advice 84.6
Procurement advice/ procurement management 69.2
Financial management (e.g. cost advice, cost planning) 61.5
Value management 53.8
Construction economics 53.8
Construction law (e.g. contractual advice, contract drafting) 46.2
Arbitration/mediation 30.8
The sampled firms regarded quality of service (Veloutsou et al., 2005), and experienced
and capable workforce (O’Farrell et al., 1998) as two very important competitive
strengths. One director of a large firm said that quality of service must be good to be
able to work abroad. Another interviewee said that there was great demand for high
standard and quality quantity surveying services, even in developing countries such as
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pp 698-710
Vietnam and Cambodia. One interviewee lamented that there was lack of experienced,
capable senior Malaysian quantity surveyors to work overseas. Those who had such
qualities had gone abroad on their own in search of more lucrative employment
opportunities. To make up for the shortfall, professionals from other countries had to be
engaged.
Good relationship with Malaysian clients and multinationals were regarded as important
by the sampled firms. It is by having good relationship with clients that they received
invitation to follow their clients abroad (Bell, 1995; Andersson, 2002). The data in
Tables 3 and 4 is reinforced by this finding on the importance of clients to firm
internationalisation. Innovative work processes and ideas follows next (Altbach and
Knight, 2007). Interestingly, reputation (Winsted and Patterson, 1998; Fombrun, 1996)
at home, and even less so abroad, was not as highly rated as client relationship in
providing competitive strength. Also, competitive fees was not as important as quality
of service in providing the competitive edge (Altbach and Knight, 2007).
Of all the listed competitive strengths, only large financial capital was regarded by the
sampled firms as moderately important, contrary to literature (O’Farrell et al., 1998).
One sole proprietor said that he did not need large capital to venture overseas. His
modus operandi was to ‘piggyback’ on his clients’ overseas ventures. Each time he
followed his client overseas, all expenses including accommodation and air passage
were paid for. Hence there was no cost and risk involved in his overseas foray. Another
sole proprietor however disagreed, saying substantial amount of money was needed
(most probably when setting up offices abroad). Even then, commercial success was not
guaranteed, alluding to the high risk when adopting a certain mode of market entry.
Setting up an office abroad was the most costly and risky way of maintaining market
presence in a foreign location.
It is interesting to note that the firm-specific assets which were difficult to imitate such
as innovative work processes and ideas, and even large financial capital were not score
that highly. The findings seem to support the observation by Javalgi et al.’s (2003) that
for services firms, there is lack of distinct competitive advantages which can influence
firm internationalisation to the degree that they exert on manufacturing companies.
Table 6. Competitive strengths of the sampled quantity surveying firms
Competitive strength Mean Std. dev.
Quality of service 4.62 0.65
Experienced and capable workforce 4.54 0.78
Good relationship with Malaysian clients 4.46 0.78
Good client relationship with multinationals 4.31 0.75
Innovative work processes and ideas 4.23 0.73
Firm’s domestic reputation 4.15 1.14
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pp 698-710
Competitive fees 4.00 0.82
Firm's international reputation 3.77 1.48
Large financial capital 3.31 1.11
Note: Less than 1.49=unimportant, 1.50-2.49=little important, 2.50-3.49=moderately important, 3.50-
4.49=important, 4.50-5.00=very important.
As for measures which the industry can take to increase the export of quantity surveying
firms, partnering with consultants from other countries to penetrate third markets and
getting government-linked companies to engage Malaysian for overseas work were the
two variables which scored the highest (Wilkinson et al., 2000). Forming consortia with
other Malaysian quantity surveying firms or other Malaysian service providers were the
next two variables with the highest score and finally getting Malaysian working abroad
to use or promote their services (Tung and Chung, 2009). By forming partnerships or
consortia, the quantity surveying practices in Malaysia can pool their resources for the
mutual benefit of securing revenue from overseas.
Table 7. Proposed industry actions to promote export of quantity surveying services
Proposed industry action Percentag
e
Partnering with consultants from other countries to penetrate third 84.6
markets
Getting government-linked companies to engage Malaysian 84.6
quantity surveying consultants for overseas work
Forming consortia with other Malaysian quantity surveying firms 69.2
to overcome limitation of size
Forming consortia with other types of Malaysian service 69.2
providers to offer comprehensive solutions to foreign clients
Getting Malaysians working abroad to use/promote Malaysian 61.5
quantity surveying consultants
5 Conclusion and Further Research
This research was set out to examine the internationalisation of Malaysian quantity
surveying firms. Prior to this, no such investigation was conducted. It was hoped that
from the investigation, proposals can be made so that Malaysian export of quantity
surveying services can be enhanced. Data was collected using postal questionnaire
survey and interviews. Several interesting findings came out of the study, one being that
large and older firms have greater propensity to expand overseas, most probably
because they are better able to offer quality service, possess more experienced and
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pp 698-710
capable workforce, better able to forge good relationships with clients and develop more
innovative work processes and ideas. Good working relationship with clients allows the
sampled firms to bypass the gradual internationalisation process propounded by some
scholars. The findings also point to the various modes of initial market entry and
subsequent market presence open to quantity surveying firms. Those intending to go
abroad can therefore pick their choice, depending on the risks and costs they are willing
to absorb. Good working relationship provides the greatest source of foreign contracts.
Hence Malaysian quantity surveying firms, especially those intending to go abroad
should work at fostering good relations with clients who can provide overseas jobs.
They should take note that the entire range of quantity surveying services may not be in
demand overseas. As for industry efforts to further enhance quantity surveying exports,
forming partnerships and consortia with same-industry and different-industry
participants, at home and abroad, are tactics hold greatest promise of making an impact.
Government-linked companies operating abroad should give priority to Malaysian firms
when awarding quantity surveying jobs. And finally, the Malaysian diaspora can be
approached to engage or promote Malaysian quantity surveying firms. Returning to the
earlier finding, perhaps these actions should be targeted to large and older firms as they
stand the make impact overseas. Other developing economies with the potential to
export, or are already exporting, their quantity surveying services can take heed of
Malaysia’s experience and act accordingly.
6 Acknowledgement
The writers like to thank Universiti Sains Malaysia for funding this research and PSDC
for being a research partner.
7 References
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motivations and realities, Journal of Studies in International Education, 11 (3/4),
pp. 290-305.
Albaum, G. S., Duerr, E. and Strandskov, J. (2004) International Marketing and Export
Management, Prentice Hall, New York.
Andersson, P. (2002), ‘Connected internationalisation process: the case of
internationalising channel intermediaries’, International Business Review, 11 (3),
pp. 365-383.
Apte, U. M. and Karmarkar, U. S. (2007), ‘Business Process Outsourcing and ‘Off-
shoring’: The Globalisation of Information-Intensive Services’, In: U. M. Apte and
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Bell, J. (1995), ‘The internationalisation of small computer software firms – a further
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Burgel, O., Fier, A., Licht, G. and Murray, G. (2001), The Rapid Internationalisation of
High-Tech Young Firms in Germany and the United Kingdom, Anglo-German
Foundation, London.
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pp 698-710
Czarnitzki, D. and Spielkamp, A. (2000), Business Services in Germany: Bridges for
Innovation, Discussion paper No. 00-52, ZEW, Manheim.
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Chinese entrepreneurs in Mainland China’, Asian Journal of Social Science, 32 (1),
pp. 19-41.
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ts/negoservice_prabir.pdf+%22global+trade+in+services%22&cd=2&hl=en&ct=cln
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Turner, D. F. (1979), Quantity Surveying: Practice and Administration, Geofrey
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Alan Hore, Roger West and Alan Redmond, pp711-726
Creating a Software Marketplace for the SME Community in
the Irish Construction Industry
Alan Hore1, Roger West 2 and Alan Redmond3
1
School of Real Estate and Construction Economics, Dublin Institute of Technology, Bolton
Street, Dublin 1.
2
Department of Civil, Structural and Environmental Engineering, Trinity Collge, Dublin.
3
School of Real Estate and Construction Economics, Dublin Institute of Technology, Bolton
Street, Dublin 1
Email: [email protected], [email protected]; [email protected]
Abstract:
The Construction Industry is a sector where Information Communication Technology
(ICT) and e-Business are used to a lesser extent than in most other sectors. The high
concentration of Small to Medium sized Enterprises (SMEs) in the industry and the
typical nature of the service provided, being an on-site and often highly customised
service are generally identified as the reason for the low ICT uptake. The majority of
Irish companies in the construction sector are SMEs. E-Business has provided the
construction SME industry the opportunity to compete globally. The Construction IT
Alliance (CITA) has identified a programme that can create a digital SME community
that will promote ICT software. In creating this community CITA will be able to
provide the construction industry in Ireland with an ICT software service deployed from
a centralised data centre. This ICT concept commonly referred to as ‘Cloud Computing’
will enhance CITA’s services in providing ICT uptake to the wider Irish construction
industry.
Keywords:
Construction, eBusiness, network SMEs, software.
1 Introduction
The National Economic Social Council (2004) reported that additional housing output
had been predicted for the next decade with the balance between supply and demand
being achieved in the coming years but it was not clear when the annual housing market
output would begin to decline (NESC, 2004). Forward to 2009 and this decline is
clearly evident as a sharp downward adjustment has been recorded since the height of
the Irish construction industry boom in 2006. According to the Irish government
(NSRF, 2007) a part of the National Strategic Reference Framework is the Commission
drafted Community Strategy Guidelines (CSG) which purpose is to define key priorities
for EU Regional Policy over the period 2007-2013. Such priorities are to promote and
encourage innovation, the knowledge economy, research and ICT (NSRF, 2007). The
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significance of these priorities is now substantial with the highest unemployment figures
now reported in 11 years. This downward adjustment has made traditional Irish based
companies move to selling products and services internationally. The need for Irish
companies to be more effective and efficient with e-Business technologies to compete
with their competitors was the main incentive for this project.
According to Cartlidge (2002), the one thing that all sectors of e-Business are sure about
is that the more fragmented the market, the more efficiency benefits e-Business ventures
can bring, by uniting the disparate elements of the supply chain (Cartlidge, 2002).
The authors will present the results of a recently completed research project, the
Construction IT Alliance eXchange (CITAX) project. In 2006 CITA set about to
identify the potential for efficiencies that would lead to savings and faster delivery
through the implementation of e-Business in the construction industry. Gatautis and
Vitauskaitè (2008) posited that the use of e-Business in the construction sector is very
limited and the potential of e-Business to increase productivity and efficiency is not
exploited.
Software is very widely used today, yet its instrumental role in the modern digital
economy is often overlooked. With market revenues of over €200 billion in Europe and
growth rates of between 6 and 8%, software is the largest and the fastest growing
segment of the ICT market (European Commission, 2009).
The purpose of this paper is to promote the creation of a new digital hub which will
allow SMEs to have access to software that was previously only the domain of large
enterprises. This radical concept of a virtual market for SMEs in the construction
industry through the implementation of Software as a Service (SaaS) will enhance the
effectiveness and efficiency of SMEs. CITA’s research in identifying and analysing this
innovative concept will enable SMEs to be more competitive domestically and have the
opportunity to export their services and products globally.
2 ICT Up-Take by SMEs in the Construction Industry
According to Gallaher et al (2004), the paper system is still the most common medium
for storing and transferring information. The introduction of computer use has done
little to create the “paperless office.” The fact remains that many of the key decisions
makers in organisations do not fully appreciate the interrelated nature of the business
processes that support the construction life cycle. The report identifies that
interoperability issues occur creating a fragmented business process and organisational
structure. It was estimated that the cost of inadequate interoperability in the U.S capital
facilities industry is $15.8 billion per year. In 2002, the value of capital facilities set in
place in the U.S was $374 billion. The significant magnitude of this figure presents the
ideology that even small improvements in efficiency potentially represent significant
economic benefits.
In recognising that ICT has the potential to revolutionise the industry and streamline
historically fragmented operations the report states that tools such as computer-aided
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Alan Hore, Roger West and Alan Redmond, pp711-726
drafting technologies, 3-D modelling technologies, and a host of Internet and standards
based design and project collaboration technologies can reduce the fragmented nature of
the industry. However, the problems associated with not being able to manage and
communicate electronic product and project data between collaborating firms and
within individual companies is compounded by the large number of small companies
that have not adopted advanced ICT (Gallaher et al, 2004).
Becerik (2004), the internet connectivity and the general use of email and the World
Wide Web are viewed as being substantially high in the construction industry. However,
Becerik accepted that many other studies demonstrate that new technologies are adopted
slowly and ineffectively in the Architect, Engineering and Construction (AEC) industry.
For example, 2D Computer-Aided-Design (CAD) was in the market for almost four
decades before it became pervasive. 3D is a well-established technology that is only
now beginning to enter the main stream. 4D CAD, an incorporation of 3D CAD and
time, has started to be used by the innovators of the industry. It appears that larger
manufacturing firms are more innovative towards the adoption of new technology than
AEC firms, possibly by 3 to 5 years (Becerik, 2004).
According to an Irish government (DETE, 2004) report Ireland was identified as one of
the first countries to recognise the potential and challenges of the Internet, with the
establishment of an Information Society Commission in 1998, and publication of the
Government’s first Action Plan for the Information Society. This plan focused on the
development of the telecommunications infrastructure and regulatory environment,
developing e-Business opportunities, delivering public services electronically and
generally stimulating widespread society engagement with the Internet. The report
acknowledged that Ireland has a very strong ICT producing sector and has the potential
and opportunity to become a world leader in the emerging digital sectors. However, the
performance is less than impressive when it comes to the adoption of ICTs by existing
enterprises in the non ICT related sectors of the economy. The report suggests that as e-
Business opens up the Irish economy to international competition. The authors
recommended that Irish enterprises should use ICT as a generator of competitive
advantage in the context of the environment they currently operate in and companies
should have ICT systems that are robust and secure, in order, to obtain maximum
benefit.
In reference to the OECD’s published report ICT, e-Business and SMEs (2004), ICT
applications were recognised as having the ability to improve information and
knowledge management inside a firm and reduce transaction cost and increase the speed
of transaction for both business-to-business (B2B) and business-to-consumer (B2C). It
was repoted that 9 out of 10 SMEs were equipped with computers at the end of
2000/early 2001. However, it was noted that across the sector internet penetration was
generally higher in larger enterprises (OECD, 2004).
It was reported in an e-Business W@tch (2006) survey that the construction industry
was a sector where ICT and e-Business are used to a lesser extent than in most other
sectors. The two reasons identified for low ICT uptake were:
• The high concentration of SMEs in the construction industry and
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• The typical nature of the service provided in construction, being an on-site and
often highly customised service.
The eBusiness W@tch 2006 survey data suggested that large construction enterprises
were increasing their focus on ICT issues, such as e-procurement systems, collaborative
design systems and collaborative document sharing. However, it also stated that there
was a low percentage of firms employing ICT as well as a low adoption of Enterprise
Resource Planning (ERP) software and advanced e-procurement solutions. The survey
also mentioned that construction industry enterprises have little focus on hiring ICT
practitioners and ICT training and that the use of eStandards are limited in the
construction industry but about in line with the weighted all-sectors average (eBusiness
W@tch, 2006).
Hore and West (2005) reported that building materials account for up to 50% of all
construction costs and in the field of business to business (B2B) interactions there is a
huge untapped potential for productivity gains. Technologies such as Automatic
Identification (Auto-I) and bar coding have become widespread within manufacturing,
medicine and retail industries but in comparison with the construction industry adoption
worldwide it is very piecemeal. Hore and West carried out a survey of over 100 Irish
construction companies. The survey analysed the current level of technology uptake in
B2B purchasing transactions between building contractors and material suppliers; the
driving forces which attract firms to adopt electronic purchasing; the barriers of such
adoption and the future development in adopting technology within the Irish supply
chain. The key results illustrated a low level of awareness of appropriate technologies
and the absence of appropriate industry standards. The need for an increase in the ICT
literacy skills of purchasing staff and familiarity with electronic purchasing was also
recommended (Hore and West, 2005).
The problems associated with fragmentation of the construction process and the
adoption of Construction Collaboration Technologies (CCT) was analysed in Duffy et al
(2007). Analysing from an Irish context, the potential benefits of what CCT had to offer
the construction industry were beginning to be realised. Duffy et al, reported that the
construction industry was actively involved in the work of CITA in order to seek and
improve the use of ICT, including CCT. The lack of distinct research into the
possibilities for the adoption of CCT within the SMEs involved in project management
roles in Ireland was the main focus of the paper. From this platform an outline of future
research would be proposed taking into consideration the potential barriers to adopting
CCT within the SMEs project management roles. The expected outcome of the research
was a proposed framework for the implementation of CCT in SMEs engaged in
construction project management (Duffy et al, 2007).
3 Construction IT Alliance eXchange Project
3.1 Background to CITAX
CITA was established as a research project in Dublin Institute of Technology (DIT) in
association with the Waterford Institute of Technology (WIT) in May 2001, with the
vision of harnessing the potential of ICT in the Irish Construction Industry. CITA was
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formally incorporated into a company limited by guarantee with no share capital in
November 2005. Membership of CITA is open to all stakeholders in the Irish
construction industry who all share the CITA vision and want to participate in fulfilling
CITA’s objectives.
CITA has identified its objectives as:
• To inform the Irish construction sector of ICT developments.
• To establish and disseminate good practice in the use of ICT in the Irish
Construction Industry.
• To encourage ICT related research collaboration between Irish academia and
Irish construction practitioners.
• To establish and maintain links with relevant national and international
organizations.
• To encourage the strategic use of IT by all firms in the Irish Construction
Industry.
3.2 CITA Research Activity
In July 2006 CITA initiated the CITAX project as an industry-led networking pilot
project. The CITAX project involved a collaboration of 25 industry partners and a
government body. The project aimed to demonstrate that significant measurable
economic improvements could be achieved by using readily available ICT tools to
radically improve business processes in the Irish Construction Industry. The project was
supported by Enterprise Ireland and CITA and was completed in June 2008. The project
consisted of five separate but collaborative modules, namely:-
Module 1 – Design
Module 2 – Trading
Module 3 – Electronic Tendering
Module 4 – Project Collaboration
Module 5 – Computer Aided Measurement (CAM)
Each of the modules had clear objectives and by demonstrating these objectives their
achievements set out steps for future goals. The general conclusion was that clear
economic benefits could be achieved through the pilot projects associated with the
modules.
For example CITAX Module 3 (Electronic Tendering) team aimed to demonstrate that
there were clear economic benefits to be achieved by organisations that replaced the
traditional paper-based system with an electronic tendering process. A pilot scheme was
undertaken using FTP (File Transfer Protocol) technology and the results showed
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savings of 11% for Professional Quantity Surveying firms, which equates to a saving
across the industry of €0.74m per annum; 10% for contractors on their tender costs,
which equates to an industry saving of €4.8m per annum and 11% for sub-contractors,
which equates to an industry saving of €3.75m per annum.
The European Commission report Sectoral eBusiness Policies in Support of SMEs
(2007) commended the fact that CITAX used live pilot projects to show real benefits of
eBusiness for the industry (European Commission, 2007).
4 CITA enterprise innovation network (EIN)
4.1 Background
CITA was selected as one of the three networks in Ireland for funding by Enterprise
Ireland under the new EIN programme. The project commenced in early October 2008
and is funded by Enterprise Ireland for a three year period. The project will promote
ICT and its use in the Irish Construction Industry. The project will involve carrying out
detailed research into the particular needs of CITA SME members and other potential
new members.
Initially the objectives of this research is to identify the eBusiness and eTendering
software products tools and platforms available or potentially available to meet the
business needs of SMEs in the construction industry in Ireland. The next phase will be
to provide a development strategy for deploying these tools and platforms and the
opportunity for CITA to supply an interactive service to its members. The research will
also focus on similar work being undertaken in other countries, in order, to understand
the main directions of technology development. The knowledge extracted from previous
research will be analysed and developed to meet future requirements.
The specific services that the EIN network will provide to its members are as follows:
• An initial one-one ICT consultation IT sanity check, advice on available
software packages and backup and data protection policies.
• Access to the virtual EIN.
• Receipt of regular CITA EIN bulletins.
• An invitation to the CITA EIN intra-disciplinary workshops.
• Exclusive access to all research results.
4.2 Focus on SMEs
According to Hague and Woodburn (2006) an SME is a business that employs up to 250
employees. However, Hague and Woodburn also observed the fact that over 99% of
SMEs employ less than 50 people and that three quarters of them operate as sole
operators. SMEs operate across most industries from complex electronics to traditional
business such as manufacturing (Hague and Woodburn 2006).
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According to the European Union e-Business W@tch (2006) report, there are
approximately 2.4 million construction enterprises in EU-25, of which 97% are small
enterprises with fewer than 20 employees. The industry employs about 14 million
people, corresponding to about 7% of the European work force and 28.5% of industrial
employment.
In a recent report by DKM Economic Consultants the authors estimated that in the Irish
construction sector close to 100,000 workers or almost 40% of total persons employed
at Q2 2008 worked in companies with less than 5 people. These companies experienced
the lowest decline in employment over the past year (DKM, 2008).
According to the Irish government in 2007 the amount of SMEs in the construction
sector during the boom period was more than half of the 227,400 workforce. The
majority of this workforce was either self-employed or worked for companies with less
then 10 people. However, research has also noted that small enterprises generally make
less use of more advanced ICT than larger companies. Just under half of small
enterprises engaged in innovation activity in 2004 compared with two thirds of larger
enterprises (CSO, 2007). Nevertheless, as indicated, in a recent paper by Hore et al
(2009), the construction industry has started to shift its focus towards SMEs with
software applications such as Enterprise Resource Applications (ERP) and Product
Lifecycle Management (PLM), producing new packages to cater for SME requirements.
4.3 Methodology
The CITA EIN project will follow a formula that is similar to the successful CITAX
project discussed earlier in this paper (Figure 1).
Figure 1. CITA EIN Work Stages
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• Project planning – promoting the message of the potential of IT to the SME sector
in the construction industry and securing members of SME EIN Network.
• Analysis of needs – identifying the need of SME companies, particularly in the
areas of eCommerce and eTendering. Mapping Irish construction industry SME
supply chain (production of database).
• Research – identify leading solutions & technologies internationally
• Specify requirements – having undertaken research among our target members
and looked at international best practice, create specifications that address the
specific needs of the SME sector.
• Call for proposals – establish programmes that will deliver the specifications
created in consultation with the industry members.
• Trial – test the solutions that emerge from the process with initial adopters.
• Deployment – encourage the implementation of the solutions across the industry.
4.4 Key Performance Indicators
A number of key metrics of performance are indicated in Table 1 for the CITA EIN
project. The 6 key performance indicators are measurable and reflect the impact of the
work to be carried out. These indicators will be addressed and assessed, at CITA’s
general meetings in order to evaluate the progress of the research. In the most recent
general meeting held at the end of April 2009 it was established that CITA has attracted
16 actual members, held 2 SME ICT conferences and 4 steering committee meetings.
4.5 Progress to-date
As part of the research into defining the services that will be provided to the EIN
members, a series of interviews have already being undertaken with companies that
represent a broad spectrum of activity within the construction industry (Table 1).
This spectrum of companies included; one quantity surveying practice, three supplier
organisations, one engineer practice and four consultant architects. Most of the
companies interviewed have reasonable ICT infrastructure and the majority of the
companies have specific software to address particular elements of the construction
process. For example, in relation to the Architects 3D modeling was primarily used to
provide clients with a visual simulation appearance of their construction project. The
main problems presented from the survey were a lack of adequate disaster recovery
planning and high capacity broadband. However, the current economic climate has
made a number of companies focus on the short term revenue.
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Table 1. CITA EIN Key Performance Indicators
5 Research Finding To-Date
As part of CITAs EIN initiative to promote ICT and innovation in SMEs in the
construction industry, a software directory has been created with an index of ICT
vendors. The future process is to establish these vendors into software categories such
as; Feasibility / Design / Project Management / Quantity Surveying and Document
Control. In developing CITA’s methodology the e-Business and e-Tendering software
vendors enlisted on this directory will become participates engaging with on line
surveys and structured interviews. The results of these surveys will create a strategy to
assist in the development of the best products, services, platforms and ideas.
The ICT vendor database directory will not only act as an advisory network tool. The
software vendors from the list could adapt to creating new products built for
Application Service Providers (ASP) or provide completely new offerings. According to
SIIA, (2001) software as a service commonly referred to as the Application Service
Provider model is heralded by many as the new wave in application software
distribution. With the vendors products registered to CITA’s service an SME customer
could log on to the server and down load the vendors software paying only a rental
charge for a specific period of use (pay-as-you-go). This would allow the customer to
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have the benefit of not having to pay high capital fees for software that they may only
use from time to time. The vendor reaps the economies of scale as there will be a high
rental demand with no maintenance obligations.
6 Selected Examples of Related International Research
6.1 RICS (Royal Institution of Chartered Surveyors)
In February 2009, Building Cost information service (BCIS) conducted an e-Tendering
Survey in conjunction with RICS QS & Construction IT Business Group to update the
information from a previous survey conducted in February 2006. The report compares
the responses from the 2006 survey sample with the full 2009 survey sample and
responses from members issuing 50 or more and 100 or more tenders per year. The key
findings are:
• Electronic document transfer is increasing – the percentage in both electronic
and paper formats increased by 13%, while the percentage sent only in paper
formant decreased by 20%.The growth in electronic only documents transfers in
firms issuing larger numbers of tenders trebled.
• Increased use of physical media to distribute electronic tender documents – the
use of disks or other physical media increased by 17% and by 26% and more in
firms issuing greater numbers of tenders. The percentage of documents sent via
email fell 18% and is substantially lower in firms sending out more tenders.
• RICS member’s sentiment towards e-Tendering remains strong – 68% of
responding members felt that the ability to tender projects by electronic means
will enhance their service in the market place to some extent.
• Benefits of e-Tendering – more members than in 2006 agreed strongly that e-
Tendering offers lower administration costs.
• Concern about the costs and client’s sentiment towards Web based e-Tendering
ranked highly – lack of client demand indicated a response of 54%, client won’t
pay 48% and cost of service/software 45%.
BCIS is convinced that Web based e-Tendering minimizes the administrative overheads
associated with tendering, streamlines document handling, speeds up tender processes,
eases the demands on managerial resources, provides added security and makes it easier
to comply with best practice recommendations (Martin, 2009).
6.2 e-NVISION
In 2008 the e-NVISION consortium had decided that the main contribution to the
construction industry is not the development of another powerful platform, but the
definition and conceptualisation of new e-Business scenario and the development of a
data model that will provide the basis of standardisation of the concepts managed in
construction processes.
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The overall objectives of e-NVISION is to
• use e-Business platforms to enable SMEs to model and adapt particular business
scenarios requested by their customers and suppliers;
• to integrate all their enterprise applications following a service-oriented
architecture; and
• to incorporate legal, economical and social services, with the final goal of
facilitating their participation in the Future European e-Business Scenarios.
Four future scenarios were identified by e-NVISION based on know-how (knowledge
and experience) of SMEs involved in projects and how they would work in the future,
such as; e-Tendering, e-Site, e-Procurement and e-Quality (Tarka, 2008).
6.3 CIFE (Centre for Integrated Facility Engineering)
CIFE (based in the University of Stanford) has a mission to be the world’s premier
academic research centre for Virtual Design and Construction of AEC industry projects.
Cheng et al (2008) outlined a web service framework that connects, invokes and
integrates loosely coupled, heterogeneous information sources and platforms. The report
analysed the traditional method of conventional centralised portal systems which is an
effective tool in collaboration and interoperability in a construction supply chain.
However, the issues of information ownership rights and proprietary privacy hinder
sharing among companies, as companies prefer to have their own database system. In
distributed network architecture, each organisation has its own database and portal
system. The database and portal system are hosted by either one organisation or a third
party. The network grants the rights to view or access data and documents for a specific
period of time. SC Collaborator is the prototype web-based platform that is designed to
provide an economical and desirable platform for AEC companies, which are usually
SMEs in size and are often reluctant to invest in a system that requires frequent changes.
The report illustrates two example scenarios; Procurement interactions and material
delivery management. In the procurement interaction scenario the usual prolonged
dependency on time and configuration of communication channels between buyer and
supplier are quickly removed in the SC Collaborator due to its service architecture. The
organisation simply creates an account in SC Collaborator for their trading partner, and
exchange IP addresses which facilitates the addition, replacement and removal of
trading partners.
The second scenario (material delivery management) demonstrates the online
collaboration and information flow among a general contractor, subcontractor and
suppliers using SC Collaborator to manage material delivery. The scenario illustrates
how SC Collaborator distributes vital information (delay notices) to the required
partners and how the system analyses all options before assisting the subcontractor in
making a schedule delay for the affected task which results in the project participants
obtaining an updated schedule to plan and revise their tasks (Cheng et al, 2008).
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7 Software as a Service
The future of ICT is a service deployed from a centralised data centre across a network
providing access to the applications from a central provider (Software as a Service).
This solution offers the opportunity for companies to select their ICT priorities and then
choose from the growing menu of applications being offered through service providers.
With access to a service platform customers can use the latest technology tools
integrated with existing infrastructure. The concept of renting rather than buying
provides lower initial costs through incurring licenses for the amount that is needed
(SIIA, 2001).
For the vendors of SaaS it makes good sense because the vendor can achieve economies
of scale. The software as service vendor has a high degree of control over its application
and is thus a prime candidate for the adoption of horizontal infrastructure integration
strategies (Foster and Tuecke, 2005).
SaaS is simply software which is delivered from a server in a remote location to your
desktop. Many observers of the past would claim that there is nothing new about this
idea. In the seventies, this was called time-shared computing. It was expensive and not
very flexible because in the pre-internet era, accessing a remote server meant
implementing a private network. These networks often used whatever they had for long
periods of time because the change process was so daunting. Integration across
applications from multiple software vendors was a task for highly-skilled (and very
expensive) System Integrators. In relation to the mistakes in the late 90’s and at the turn
of the 21st century what’s different this time?
1. Market Requirements – most SaaS vendors have become much better at
listening to potential buyers.
2. Stronger Business models – today most SaaS vendors plan to monetise their
software (or 3rd party software they license for distribution) by either making a
charge for each user or reach transaction or by using an advertising model.
3. Better Financing – SaaS is now a respectable business that has an excellent
chance of generating positive cash flows and profit.
4. Market Focus – some original ASP vendors focused on SMEs, selling largely to
companies with 5 to 200 users and 20 to 500 employees.
5. Outsourcing for Outsourcers – between the ASP round and the SaaS round, most
of the vendors discovered that it was better to partner for infrastructure than to
invest in and run it yourself.
6. A better educated market – advancing from net-native applications and
partnership approach users of SaaS found that they could access applications
quickly and decisions could be made quicker as there were few up-front fees to
pay (Wohl, 2008).
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Ramanujam (2007) outlines some key points as to why SaaS/On-Demand would be a
smart choice for companies;
• No facilities – SaaS allows you to get out of the business of managing a
premise-based facility so attention can be redirected towards the customer.
• Pay As You Go – pay for usage rather than for software licenses and hardware
infrastructure.
• Easy Roll-out and Maintenance – make IP-based adoption easier by avoiding
on-site installation and maintenance.
• Spread Out Cost – avoid huge capital expenses and installation fees as you
spread subscription costs out across time.
• Frequent Updates – give yourself access to “Best of Breed” technology that will
allow a company to stay ahead of your competition.
• Focus on Growth – pass the onus of supporting growth on to the SaaS vendor.
• No Day-to-Day maintenance – pass the responsibility of system performance,
uptime disaster recovery and backup on to the SaaS vendor (Ramanujam, 2007).
In a recent Connecticut report, companies are to conversely consider SaaS especially if
the company has a limited capital budget, limited ICT support, and a distributed
workforce in a sales or service oriented business. The benefits for SMEs include;
managed growth, regulatory compliance and competition without also dealing with a
variety of challenges relating to ICT. It is more easily affordable, immediate in its
impact, and provides modular functionality in a way that is easy to extend and change,
and easy to integrate with other systems. Essentially SaaS means financial value, new
technology, and improved operations (SaaS Realities, 2008). To-date research studies
such as Rackspace and Computer Economics indicate that SaaS is widely being used
and the consumer adoption rates are increasing with economic benefits exceeding the
cost of the investment. The advantages to both consumer and vendor have been
previously identified; SaaS creates a “win win” situation for vendor and consumer alike
(Wohl, 2008).
8 Conclusion
As one looks forward, there would not be a single shared vision of the nature of
construction process and product delivery to which all future research would relate.
However, for the benefit of making our respective implicit visions more visible, it is
possible to construct scenarios of the future to which our ongoing research efforts may
relate (Amor et al, 2002).
The success and effectiveness of ICT in today’s world economies have clearly shaped
our environment. ICT has improved our supply chain management process,
communication ability and business, and still new innovative solutions are being
adapted. However, taking other industries into consideration the construction industry
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still trails behind, being reluctant to shift from traditional techniques. The downward
adjustment in the Irish construction sector has presented the industry with the new
challenge of remodelling and rethinking ICT. The largest amount of persons employed
in the construction industry in Ireland work for small enterprises. These small
enterprises make less use of more advanced ICT than large companies and are generally
credited as the main contributor to the reluctance of ICT uptake. However, it is widely
acknowledged that if SMEs increase the practice of using ICT they will develop and
become more efficient which will able them to compete more effectively both in their
domestic and overseas markets.
The aim of CITAs EIN research programme and development process methodology
clearly identifies a staged programme that has the ability to address the need to promote
ICT in the Irish construction industry and research SMEs pattern needs to develop a
strong e-Business environment. It is CITA’s vision that by creating a digital community
and carrying out research that will identify the more effective products, CITA will be
providing a service to the Irish construction SME industry that will enable them to have
the opportunity to compete on the global stage with the industry’s most enhanced and
effective ICT products. It is accepted that a specialised software provider can target
global markets; a hosted application such as CITA could instantly reach an entire
market, making specialisation within a vertical market not only possible, but preferable.
SaaS has the ability to allow SMEs in the construction industry to have access to
functionalities and markets which were previously only the domain of large enterprises.
In creating a digital SME community derived from an ICT vendor database directory
CITA will be able to provide a service to the construction industry in Ireland which will
enable software to be distributed over the internet. Cloud computing will undoubtedly
improve the competitive positions of SMEs in Ireland. Providing them with technology
investments that were previously consider unattainable due to high capital costs. As
SaaS lowers high barriers to entry it is perceived that new levels of growth,
development and opportunity will exist for SMEs in the Irish construction industry.
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SMEs, OECD publication.
Ramanujam, B. (2007), Moving SaaS/On-Demand from Dream to Successful Reality: A
Practical Solution to Real-World Problems with Contact Centre adoption SaaS/On-
Demand, available on http://www.cypcorp.com/leadership/
index.php
Saugatuck Technology (2008), SaaS Realities: Business Benefits for Small and
Midsized Business, publication by Saugatuck Technology Inc, Westport, USA,
available on http://whitepapers. zdnet.com/abstarct.aspx?docid=372344
Software and Information Industry Association (2001), Software as a Service: Strategic
Backgrounder, SIIA publication, Washington, DC, U.S
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RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Alan Hore, Roger West and Alan Redmond, pp711-726
Tarka, M. (2008), European Conference on Product & Process Modelling: eWork and
eBusiness in Architecture, Engineering and Construction, CRC Press, 2008, 691-
701.
Wohl, A. (2008), Succeeding at SaaS: Computing in the Cloud, published by Wohl
Associates.
- 726 -
COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Martin Pretorius and Hoffie Cruywagen, pp727-738
Planning for profit and reimbursable expenses in the
architecture profession
Martin Pretorius¹ and Hoffie Cruywagen2
MSc(Project management) candidate
Department of Construction Economics
University of Pretoria, Pretoria,
South Africa
Email: ¹[email protected]; ² [email protected]
Abstract: Architects function in a highly contradicting environment. On the one side
they have to be creative individuals, with exeptional capability to think laterally,
utilizing the right hemisphere of the brain. However, the need for competencies
dominant in the left hemisphere (logacal and analytical thinking) becomes increasingly
important as soon as these individuals are confronted with the daily demands of the
business environment, particularly when managing the business side of a practice. Even
though architects are creative thinkers, in order for them to be successful in the business
environment, they need to align their practices in a strategic and structured way in order
for their practices to be successful in an ever globalizing and competitive
environment.Data was collected by means of a questionnaire from South African
architecture practices in order to indicate the attitudes and extent to which these
practices plan for profit and how they approach reimbursable expenses within their
professionThe findings of the research are that South African architecture practices do
not implement systems for planning for profit, but they do recoup disbursements on
projects.
The contribution of the paper is that it highlights the need for architects to obtain better
business skills, probably through CPD.
Keywords:
Architecture profession, practices, profit, reimbursable expenses
1 Introduction
1994 Saw the building industry in one of the worst slumps in decades. Small
architecture firms closed their doors, big companies imploded to just a few workers
strong and many architects left the industry for good. Young graduates even left the
country to ensure they had work. When times are tough, it is even more important to
have an effective project accounting system in place when planning for profit.
It is important to realize that the financial success of each project does not only rely on
the project making a profit, but also financing the project through the project life-cycle.
“Statistics clearly indicate that more companies go into liquidation because of cash-flow
problems than for any other reason.” (Burke, 2000:176). The purpose of the research
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Martin Pretorius and Hoffie Cruywagen, pp727-738
therefore was to determine whether South African architecture practices plan for profit
and also how/if they recoup disbursements on projects.
2 Literature Review
Before one can start looking at how architects plan for profit, it is important to look at
what the purpose of architectural firms is. According to Page, Pearson and Pike (2001)
professional service firms (architects, quantity surveyors and engineers) are part of the
growing producer service sector that provides services to other firms producing goods
and services within the economy rather than to individual consumers. This means that it
should function as a normal business entity.
Another aspect that should be looked at is profit, as this is what will be investigated.
Hogsett (1981) defines profit as the creation of wealth in excess of that needed for mere
survival. Any business must have profits to survive and provide improving living
standards of living for humanity. A failure of profit leads to the eventual demise of the
business. Bond (1997) confirms this when he stated that “if you truly believe that your
consultancy work is important, have the courage to charge what is a reasonable rate so
you can make a profit and grow your business”. Another description is given by Curtis
(1994) when he stated that profit represents the realizable added value of the firm’s
operations, the difference between sales revenue and total costs. He warns, however,
that a profitable firm can be forced out of business if it is unable to finance its working
capital.
3 Suggested Fee Structure for Architects
3.1 Recommended fee scale
The recommended Professional Tariff of Fees in respect of services rendered by a
person registered in terms of section 19(2) of the act in private consulting practice is
stipulated in the Architectural Profession Act, 2000 (Act No. 44 of 2000). Quotations
are based on a percentage of total project cost. The fee is based on a slide rule principle
as can be seen in Table 1.
Table 1. The project cost based fee table for Architects.
(Source: Government Gazette 2009)
RECOMMENDED SCALE OF FEES FOR PROFESSIONAL ARCHITECTURAL
SERVICES (EXCL. VAT)
Fee (excl VAT) (Base + Percentage of
Cost of Project (excl VAT)
Project Cost)
A C D
1 R 1 to 540,000 R 0 + 12.5%
2 R 540,001 to 1 080,000 R 13 500 + 10.00%
3 R 1 080,001 to 2 160,000 R 40 500 + 7.50%
4 R 2 160 001 to 4 320,000 R 45 900 + 7.25%
5 R 4 320,001 to 8 640,000 R 56 700 + 7.00%
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RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Martin Pretorius and Hoffie Cruywagen, pp727-738
6 R 8 640,001 to 17 280,000 R 78 300 + 6.75%
7 R 17 280,001 to 34 560,000 R 121 500 + 6.50%
8 R 34 560,001 to 69 120,000 R 207 900 + 6.25%
9 R 69 120,001 to 138 240,000 R 380 700 + 6.00%
10 R 138 240,001 To 276 480,000 R 726 300 + 5.75%
11 R 276 480,001 to 552 960,00 R 1 417 500 + 5.50%
12 R 552 960,001 + 5.75%
The total fee is divided into six work stages as follows:
Table 2: The fee applicable to each work stage.
(Source: Government Gazette 2009)
Work Stages 1 to 6 Proportional Fee Cumulative Total
1 5% 5%
2 15% 20%
3 20% 40%
4.1 20% 60%
4.2 10% 70%
5 27% 97%
6 3% 100%
3.2 Time based fees
Architects are legally entitled to claim for reimbursable expenses. The Government
Gazette (2009) stipulations regarding time based fees is indicated in Table 3:
Table 3: Time based fees for the Architectural profession.
Category Rate per hour
Principal > 10 years experience R 1200.00
Principal < 10 years experience R 880.00
17.5 percent of each R 100.00 or part
Associates and Managers thereof of total annual cost of
employment
Staff performing work of an
Architectural nature and carry 15 percent of each R 100.00 or part
direct responsibility for one or thereof of total annual cost of
more specific activities related to employment
a project
Other staff performing work of 12.5 percent of each R 100.00 or part
an Architectural nature under thereof of total annual cost of
direction and control employment
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Martin Pretorius and Hoffie Cruywagen, pp727-738
3.3 Travelling time
• Travelling time is payable at the hourly rates as set out in “Time-based fee”.
• Where payment of the Architect’s fees is made on a percentage basis, payment
shall be made only where the round trip distance between the destination and the
Architect’s place of practice exceeds 50 km.
• Where payment of the Architect’s fees is made on a time basis, travelling time
shall be made at the full rate: Provided that travelling time outside normal
working hours shall be at half the rate unless otherwise agreed by the client.
3.4 Disbursements
Disbursements are defined as follows (Government Gazette 2009): “In addition to the
fees set out in this schedule, the client shall reimburse the Architects for all reasonable
disbursements properly incurred. The expenses contemplated may include the
following:
• printing, photocopying, maps, models, presentation materials, photography and
similar documentation including all reproduction or purchase costs of documents
excluding internal usage by the Architect.
• hotel, subsistence and travelling expenses, including kilometre allowances at
current Automobile Association rates for vehicle usage and other similar
disbursements.
• all payments made by the Architect, including fees and other charges for
specialized professional and other services which the Architect has incurred on
behalf of the client.
• telephonic, electronic and facsimile communication, special postage and courier
deliveries
• any other disbursements that may be agreed by the client”
4. The concept of cash flow on projects
As can be seen from the above, Architects and other professionals in the building
industry are remunerated after certain stages are completed, in its most rudimentary
form, the cash flow for a project in an Architect’s office would look as follows:
a
PROFIT
c
TIME
b
DESIGN SKETCH SKETCH CONSTRUCTION
BRIEF PLAN PHASE
Figure 1: Typical Cash Flow per project (own information)
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RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Martin Pretorius and Hoffie Cruywagen, pp727-738
(a) Is indicative of the stage e.g. the Sketch Plan Stage. The stage indicates a
process which has a start and an end in time.
(b) Indicates the outflow of money through the utilization of the practices resources
e.g. salaries pro-rate to the project, office and other overheads, etc.
(c) Indicates the income that is generated when the fees are collected.
From the above, it becomes clear that the longer the outflow of money continues due to
the prolonging of a stage, the less profit will be shown when the last fees are received.
Figure 2 indicates the effect on stages that take longer and cost more to complete,
keeping in mind that fees will remain constant.
a
PROFIT
c TIME
DESIGN SKETCH b CONSTRUCTION
BRIEF SKETCH PHASE
PLAN
Figure 2: Effect on stages that take longer to complete and therefore cost more (own information)
In addition to stages taking more time than was planned, unplanned levels of
expenditure per stage will also have an effect on profit.
a
PROFIT
TIME
b
DESIGN SKETCH c
BRIEF SKETCH
PLAN CONSTRUCTION
PHASE
Figure 3: Effect of unplanned expenditure on a project (own information)
Exceeding both planned stage time frames and cost per stage can have a detrimental
effect on profit.
TIME
a
b LOSS
DESIGN SKETCH
BRIEF c
SKETCH CONSTRUCTION
PLAN PHASE
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Martin Pretorius and Hoffie Cruywagen, pp727-738
Figure 4: Accumulated effect of time and cost overrun on a project (own information)
The above clearly illustrates the importance to plan for profit by accurately allocating
time and practice resources to the project. Also of importance is the monitoring of the
project lifecycle pertaining to cash flow and predicted profit.
5 Research Methodology
Data was collected from a variety of architecture practices listed with the South African
Council for the Architectural Profession (SACAP). All Architects that want to practice
as an architect must by law be registered with SACAP. In addition, all practices that
want to practice architecture in South Africa, has to be registered with SACAP. The
data collected focused on practices registered with SACAP.
A questionnaire was designed and e-mailed to a list of all architecture practices
registered with SACAP.
SACAP was responsible for distributing the questionnaires to the identified sample of
subjects (all registered Architects in South Africa). A poor response was received as a
mere 45 firms responded by completing the questionnaire.
Some respondents didn’t complete the questionnaire fully; consequently items on the
questionnaire were incomplete. Fortunately this was in the minority and not sufficient
to skew the data.
6 Findings and discussion
The outcomes of some of the questions are discussed below:
Question: What percentage of practices implements a system that estimates profit
per project?
Although 46.7% implements a system that estimates profit per project on a regular
basis, 53.3% occasionally, seldom or never do, which is alarming
Question: Reasons why respondents never plan for profit?
The majority of firms (9) indicated that they have such positive cash flows that they find
it unnecessary to plan for profit, 5 indicated that it takes too much and 2 indicated that
they intend to implement a planning strategy in future.
Question: Are respondent’s current approach to and planning for profit adequate
to ensure the business is run effectively on a financial level?
Although the majority of firms, as indicated before, occasionally or never plan for
profit, 62.3% strongly agree and agree with the above statement, with the rest either
unsure or are in disagreement.
Question: To what extent do SA Architecture practices implement measures to
curb excessive costs to produce a project in the office?
68.1% of respondents curb excessive costs regularly, while 20.5% of respondents will
do it occasionally. 11.4% of respondents seldom and never curb excessive costs.
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RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Martin Pretorius and Hoffie Cruywagen, pp727-738
Question: If there appears to be waste on project production, will the practice take
proactive steps to minimize such wastage?
Again the majority of respondents (82.4%) of respondents indicated that they regularly
take proactive steps to minimize wastage with 5.9% of respondents who will
occasionally take proactive action to curb wastage and 11.7% of respondents that
seldom or never take steps to curb wastage.
Statistical data was also procured to investigate to what extent SA Architecture practices
include reimbursable costs in accounts to Clients.
The following statistics were compiled from data received from the questionnaires:
Question: Do practices state in project quotes / appointment letters that certain
costs incurred will be billed in addition to the fees?
82.2% of firms stated that in quotes that certain costs will be billed in addition to fees.
15.5% of respondents state that only occasionally, while a small percentage (2.2%)
never indicates that certain costs will be billed separately.
Question: Which categories of reimbursable costs are billed and at what frequency
Printing costs Hotel expenses Kilometre Travelling
allowance time
Regularly 84.4% 64.4% 40% 28.9%
Occasionally 11.1% 26.7% 33.3% 24.4%
Seldom/never 4.4% 8.8% 26.7% 46.6%
From this table it is clear that printing costs and hotel expenses seem to be recovered
regularly, but less so kilometre allowance and travelling time
Statistical data were compiled to determine to what extent South African Architecture
practices recover costs that fall outside the stipulated reimbursable costs, but incurred
on behalf of the client.
Other payments made by the Architect, including fees charged for specialized
professional and other services which the Architect has incurred on behalf of the
client.
Again the majority of firms (75%) recover costs for specialized services and costs
incurred on behalf of the client regularly, 20.5% recover occasionally and 4.6% recover
seldom and never.
Telephonic, electronic and facsimile communication, special postage and courier
deliveries.
This seems not to be an important issue as only 33.4% of respondents bill for costs not
stipulated on all projects and regularly, against 22.2% of respondents who bill for costs
not stipulated occasionally and 44.4% who never bill for such costs.
Statistical data were compiled to investigate to what extent South African Architecture
practices recover time costs accurately.
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RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Martin Pretorius and Hoffie Cruywagen, pp727-738
The practice recovers time-based costs separately on projects, by billing these costs
to the client.
A small majority (51.1%) of respondents bill time-based costs separately on all projects
regularly, which might be an indication that firms do not deem it important, or such
costs do not occur on a regular basis. 20% of respondents indicated that they never bill
for time-based costs
When man-hours are billed, are the guidelines of SACAP being followed?
Only 44.2% of respondents use SACAP guidelines, 20.9% use it sometimes and 34.9%
never. It is not clear what these firms do base their fees on and whether SACAP’s
guidelines are deemed to be too high or too low
When man-hours are billed, does the practice know exactly what that person costs
the company per time unit, and bills accordingly with a known profit margin?
Again the 59.4% of respondents who know what the man-power cost is to the practice
and bills accordingly with a know profit margin, seem low with more than 40% of firms
that are unaware what their man-power costs are and whether there is a profit margin
when billing man-hours
The following reasons were given why some respondents never bill on a Time-
based basis:
• Most practices indicate that their fees are enough to adequately cover time-based
costs.
• Some practices refrain from billing for costs incurred on a time basis, and indicate
that the reason is that clients become irritated when they are billed for time-related
activities.
• None of the respondents that indicated that they never bill on a Time-based basis,
believes the reason to be the system implemented in the office to track time related
disbursements.
• Only one practice that responded and never bill on a Time-based basis indicated that
the reason is that keeping track of and billing disbursements takes too much time.
7 Summary and conclusion
In general South African Architects have greater tendency not to implement a system to
plan for profit. Main reasons stated for this phenomena was reported as being strong
positive cash flow which negates the necessity and the time constraints involved in
implementing such a system. Few practices with no implemented system have any
intention of implementing such a system. The majority of practices are satisfied with
their current approach to planning for profit, whereas very few are unsure whether their
system is adequate. Even fewer practices feel that their approach is inadequate. South
African architectural practices do however implement measures to curb excessive costs
and, in addition, respond well when they become aware of wastage on a project or in the
practice. South African architectural practices more often than not, bill for
disbursements and recover costs.
Regarding the extent to which South African architectural practices recover costs that
fall outside the stipulated reimbursable costs, but incurred on behalf of the client, it was
found that these practices in fact, more often than not, bill for specialized professional
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RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Martin Pretorius and Hoffie Cruywagen, pp727-738
services and other services incurred on behalf of the client. However, these practices
rarely bill for costs that fall outside the prescribed disbursements.
When it comes to the accurate recover of time-based costs by practices, the study has
shown that these practices recover time-based costs separately. The data indicates a
varying and flexible adherence among practices to SACAP guidelines for hourly rates.
In addition, it is apparent that these practices reflect an awareness of their profit margin
per person when billing man-hours. Respondents that never bill man-hours to clients,
state similar reasons as to the reasons why some practices never implement a system to
estimate / plan for profit on projects. Most of these practices state that the practice
realizes enough profit to adequately cover costs. Some state that they don’t, because
clients become irritated by this way of billing.
In addition the study shows that although the trends are not overly negative, taking into
account that Architects are high risk players in an increasingly competitive and litigious
society, South African architectural practices could as a group be more profit-planning
conscious and be more firm on claiming disbursements
8 Recommendations
SACAP, the governing body for architects in South Africa, have made it their mandate
to preserve and monitor the manner with which architects operate and function as
businesses. A recent requirement of SACAP is to implement a system of monitoring the
continued pursuit of further learning and responsibility in the field of architecture
known as Continual Professional Development (CPD). While this system is in place to
ensure that firms stay current and responsible in the broad field of architecture,
emphasis has been placed on the technical execution of architectural products, and not
the operations of the business. This CPD should therefore include business practice
principles such as continued and deeper understanding of business financial models.
Since SACAP is assigned with the responsibility of stipulating the recommended fees
for architects – usually a contentious issue for potential clients – this would ensure that
public opinion is aware of standards in place in the responsible management and
internal understanding of overheads and expenditures in a firm, to maximize the benefit
from fees received and add extra clarity and transparency to the fees structure proposed.
Since greater understanding and incorporation of such principles is sought at Governing
Body level, it makes sense to propose that the education and introduction of
professionals to better financial business practice should occur in tertiary education
institutions, where eventual qualifications are to be bestowed declaring suitability and
adequacy of an individual to practice in the field of architecture. It should be noted that
not all businesses are the same. Numbers of staff, varying qualifications of these staff
members, type of work undertaken and the associated variances in turnover all
contribute to different firms placing different emphasis and/or capability in the
execution of such business practices. The same can be said for the actual execution of
architectural design. That is why the same approach should be undertaken in the
education of future professionals in the field of planning for profit as is taken with
instruction of design methodology. Therefore, the foundations for understanding may be
laid in the minds of these learners, yet it should be iterated that the characteristics of
future operations and the firm itself may dictate to what extent the planning principles
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Martin Pretorius and Hoffie Cruywagen, pp727-738
may be adequately incorporated. As of yet, basic understanding in the field is
completely absent from the curriculum.
As mentioned before, various firms tend to differ from one another greatly. Levels of
internal expertise, numbers of staff etc. all contribute to different firms operating in
different ways. A large contingent of South African firms is no larger than 20 people. A
firm this size has no place for a staff contingent dedicated to upkeep and monitoring of
planning for profit and accounting of received remuneration. Furthermore, while most
firms, large and small do contain a staff contingent dedicated to administrative
purposes, e.g. receptionist or secretary, these staff members are often under-qualified to
engage in such an important role. The ‘burden’ therefore falls principally on the
shoulders of the upper management or directors, each first and foremost employed or
functioning as architects. This reiterates the need for this understanding of finance to be
included in the training and education of these professionals. Since time and
expenditure of precious man-hours seems to be a principal culprit for non-performance
in the this field, an opportunity therefore lies in the production of software tailor made
for this purpose, as means for firms to manage and control expenditure versus
remuneration in the pursuit of accurate and responsible record and distribution of hard-
earned profit.
9 References
Bond, WJ. 1997. Developing a home-based consulting business from the ground up.
McGraw-Hill.
Burke, R 2000. Project Management Planning & Control Techniques. Third Edition.
Cape Town. Technical Books
Cronje, G, Du Toit, GS, Motlatla, MDC. 2001. Introduction to Business Management.
Fifth Edition. Maitland. Clyson Printers
Curtis, T. 1994. Business and marketing for engineers and scientists. McGraw-Hill.
Faul, MA, du Plessis, PC, Niemand, AA, Koch, E. 2002. Fundamentals of Cost
Management Accounting. Fourth Edition. Durban. Butterworths
Government Gazette. 2009. SACAP: Board notice 4 of 2009. 16 January 2009.
Department of Public Works. http://www.publicworks.gov.za/Consultants.asp
Hogsett, RN. 1981. Profit planning for small business.Van Nostrand Reinhold Company
Page, M, Pearson, S, Pryke, S. 2001. Innovation, business strategy and the quantity
surveyor. COBRA Conference papers, Glasgow Caledonian University, UK.
The South African Council for the Architecture Profession.
http://www.sacapsa.com.za/ftp/2008%20Reimbursable%20Rates%20SACQSP.pdf
The South African Council for the Project and Construction Management Professions.
http://www.sacpcmp.co.za/feecpm.html
- 736 -
COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
O I Fagbenle, pp 737-753
The effect of non monetary incentives on the performance of
construction craftsmen in Nigeria
FAGBENLE, O. I.
DEPARTMENT OF BUILDING TECHNOLOGY,
COVENANT UNIVERSITY,
OTA, OGUN STATE.
NIGERIA.
E-mail: [email protected]
ABSTRACT
The study examined the impact of non-monetary incentives on the performance of construction
craftsmen in three commercial nerve centres in Nigeria, namely, Lagos, Abuja and Port
Harcourt. Questionnaires, backed up with interviews and on-site measurements, were
administered on the management and craftsmen that were randomly drawn from large, medium
and small sized construction firms in the study area. One hundred and eighty questionnaires each
were administered on the management and craftsmen in the study area, 112 and 118
questionnaires were respectively filled and returned in this regard. Descriptive and inferential
statistical techniques were used for the analysis. The results showed that non-monetary
incentives are more employed by management of the three categories of construction firms in
Nigeria (RI =0.86) when compared with the monetary incentives (RI =0.75). The results of site
measurements and observations also indicated that the applied non-monetary incentives had
significant positive effect on the performance of construction craftsmen in Nigeria. There was
also divergent of opinions in the ranking of the identified variables of non-monetary incentives
by management and the craftsmen in the three categories of firms (large, medium and small-
sized) in Nigeria. The study concluded that adequate implementation of non-monetary incentives
stimulates the performance of craftsmen on construction sites through the removal of idle time
and should therefore be imbibed by management of construction firms in Nigeria.
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RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
O I Fagbenle, pp 737-753
Keywords: Construction, Craftsmen, Incentive, Nigeria, Performance.
1. INTRODUCTION
Reconstruction works that became necessary after the civil war of 1967/1970 and the substantial
rise in the demand thrust in the 1970’s and early 1980’s as a result of the unprecedented revenue
from petroleum resources, resulted in a surge in construction activities throughout Nigeria. To
cope with this surge, several incentive schemes were being devised particularly to stimulate
greater performance from the operatives (Wahab, 1977 and Fagbenle, 2000). Despite all these
efforts, the performance of the construction industry in Nigeria is still regarded to be generally at
a lower ebb when compared with other developed countries and even some of the developing
countries of the world (Fagbenle, 2000).
Parts of the reasons adduced for the low performance of the construction industry, as given by
Wahab (1977), are:
• Short supply of both manpower and building materials.
• Complexity involved in the construction process.
• Enervating weather condition.
• Ineffective supervision
• Absenteeism on a prolonged scale.
In the same vein, Obowu (1985) in a research conducted at a staff housing site in Kano (Nigeria)
noted that the percentage performance of work done by construction workers was about 45%
daily. The remaining 55% of the 9-hour working day was lost to lateness to work and lateness
from break, idleness while waiting for materials, receiving instructions from supervisors and
correcting badly done job. Ogunlana and Olomolaiye (1992) also noted that on the average,
workers spend approximately half of their working day, after allowing for lunch breaks and
absences, on productive work while the remaining time was not spent directly on production but
rather on waiting, receiving instruction and idling. Nwachukwu (1988) again observed that a
large number of project managers and supervisors do not know how to identify operatives goals
and link them with organization rewards in order to motivate operatives. As a result, operatives
get frustrated and performance suffers.
One of the several ways of overcoming these challenges is by gearing efforts towards increasing
the performance of workers, especially the craftsmen, through the application of various forms of
incentive schemes.
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O I Fagbenle, pp 737-753
The incentive schemes can be categorized into two: monetary and non-monetary incentive
schemes. Although, the monetary incentive schemes, which is based on cost motives for its
operation, possesses the advantage of making the operatives to be dedicated to work harder, there
are some inherent dangers on their operation and these include the following (Olomolaiye, 1990,
Fagbenle et al, 2004):
• They tend to deteriorate over a period of time due to difficulties in its administration or
supervision. In fact, Olomolaiye (1990) submitted that they worked only when newly
introduced and further described them as merely “Kicks in the ass” in the motivation process.
• The targeted task or operation might not be clearly established to the satisfaction and
understanding of the operatives and this subsequently result in argument and dissatisfaction.
• There may be problem if the scheme is not fairly and reasonably administered by the
employer.
• There is every tendency that the operatives might be made to suffer because of deviation
from the planned operation that is not the making of the operatives. Such deviations include
shortage of materials, bad weather, plant breakdown, non-availability of transportation owing
to acute fuel shortage, etc. Arising from this submission, important questions were:
• What is the more preferred type of incentive scheme in the Nigerian construction
industry?,
• What are the various non-monetary incentives in operation in the construction industry
and what are the premiums attached to each of them by management and operatives in
the three categories of construction firms in Nigeria?.
• Are there any relationships between the performance of construction craftsmen and the
application of non-monetary incentives in the construction industry in Nigeria?.
It is against this backdrop that non-monetary incentives are being researched into, with a
view to knowing its impact on the performance of construction craftsmen in Nigeria.
2. LITERATURE REVIEW
It is universally accepted that the construction industry covers half of the whole field of fixed
capital accumulation. The construction industry therefore constitutes the most single sector of
capital formulation in any national economy (Ayandele, 1996). The industry is highly
fragmented and diversified with construction contractors and consultants ranging from a few
giants who employ thousands of people to the majority of contractors that employ less than ten
operatives (Fagbenle, 2000).
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The construction industry’s fortunes fluctuate with that of the general economy and its
organizational patterns change with time and at times become so varied that they are difficult to
understand. Also, the current shortage of skilled manpower (craftsmen) is posing challenges of
coping with the full workload that most construction firms now have (Olomolaiye, 1990 and
Fagbenle et al, 2004). Hassan (1992) posited that there are various factors that affect
performance in the construction industry which can be categorized as external and internal
factors. External factors are those that are outside the control of the organization and these
include weather conditions and clients’ influence. The internal factors on the other hand, can be
traced to both the management and technology in the construction industry. Maloney (1986)
believed that the design of the work determines its complexity and intricacy which in turn
influence craftsmen’s performance. He then cited failure of the management of construction
firms to provide tools, equipment, materials and information to their workers as well as
government regulations and labour itself as some of the factors affecting craftsmen’s
performance. As perceived by Olomolaiye and Ogunlana (1989), workers’ enthusiasm to
produce and achieve are undoubtedly affected by their working environment. Factors such as
type of materials, gang size, equipment, motivation level of the craftsmen, job planning and
organization method, supervision, skill and weather were therefore itemized as being influencing
performance in construction trades. Ward (1979) classified the construction firms into three
major categories: large sized; medium sized and small sized firms. He opined further that while
the small sized firms deal mainly with minor works, repair and maintenance of buildings in a
particular locality, the large sized firms on the other hand, deal with a wide range and size of
activities on a national or even global basis.
A number of studies (Maloney, 1983; Callahan, 1984; Olubodun, 1984 and Fagbenle, et. al,
2004) have attributed the low performance in the construction industry to the presence of a
number of demotivators (dissatisfiers). In the same rein, Adeyemi (2000) observed the presence
of a number of demotivators in the Nigerian construction industry, which are clogs to
performance improvement of craftsmen.
They are identified as:
• Inappropriate tools and equipment breakdown
• Materials shortage, delay and wastage.
• Incessant rework and estimating errors.
• Absence of training and safety programmes.
• Job insecurity/employee turnover.
• Non involvement of construction crew in production objectives
• Incompetent foremen.
• Predominance of Maslow’s theory X site managers.
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Olomolaiye (1990) also enumerated the various non-monetary incentives as good relations with
mates, good safety programme, the work itself, participation of work, participation in decision
making, good supervision, promotion, more responsibility, challenging task, job security and
choosing workmates Wahab (1977) further identified the various non-monetary incentives as
finish and go, prompt wage payment, satisfying working environment and management by
objectives.
Though, the works of Wahab (1977) Olubodun (1984), Hassan (1992) and Maloney (1984),
addressed some of the major factors in labour productivity in Nigeria and outside Africa, their
works were based on construction productivity and not operatives’ performance. Moreso, the
aspect of incentives was not fully addressed. Also, Olomolaiye (1990)’s work on the relationship
between productivity and bricklayer’s motivation identified some of the motivating
variables/demotivating variables on construction sites, the incentives schemes were lumped
together. Moreover, his study was limited to only the bricklayers who are not based in Nigeria
but rather in the United Kingdom. Likewisely, Fagbenle et. al (2004)’s work centered solely on
bricklayers’ productivity and not the other categories of craftsmen in the construction industry.
The objective of this study is therefore to examine the effect of non-monetary incentives on the
performance of construction craftsmen in Nigeria.
3. RESEARCH METHODOLOGY
The population for the study was randomly drawn from the construction firms within the three
commercial nerve centres of Nigeria, namely Lagos, Abuja and Port Harcourt. The three cities
represent the major commercial nerve centres in Nigeria. Moreover, over 70% of the
construction firms have their head offices located in these cities while about 80% of the volume
of construction transactions in the country is conducted in this vicinity.
The construction firms surveyed were classified into three different categories (large sized,
medium sized and small sized firms). The essence of this was to ensure homogeneity of response
and comparative analysis. The method of classification was based on the registration
categorization of the Federal Registration Board of Nigeria.
Two sets of questionnaires were prepared, on a Likert type scale of zero to four, to sample the
opinion of the construction practitioners (management and craftsmen) in the study area. Research
assistants were employed to distribute questionnaires and assist the craftsmen on site to interpret
the questionnaires. The questionnaires were designed in such a way that they could be easily
completed by the respondents. It was also assumed that the present crop of craftsmen in Nigeria
have at least junior secondary school education and received formal training in their various
trades from either the government trade schools or other acceptable apprenticeship programmes.
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Moreover, the competitive nature of the commercial centres has compelled the craftsmen to
speak fairly in English Language, which is the official communication language in Nigeria.
One hundred and eighty (180) questionnaires were distributed to each set of the aforementioned
respondents, using stratified random technique. For each set, even distribution of questionnaires
was ensured in these three cities. Out of these distributions, one hundred and twelve (112)
questionnaires were completed and returned by the management while one hundred and eighteen
(118) were duly completed and returned by the craftsmen. It must be stressed that the
preliminary studies of construction firms within the study area, coupled with an in depth study of
the characteristics of the various construction firms listed in the Directory of the construction
firms, served as guides in the determination of the numbers of questionnaires that were
distributed to large, medium and small sized firms. The craftsmen surveyed comprised of the
bricklayers and carpenters. This was decided in order to allow for an indepth study. Moreover,
bricks/blocks and timbers constitute some of the largest construction materials on sites in
Nigeria. Five activities were sampled in the bricklaying trade while the carpentry trade
comprised of ten activities.
On-site observation and measurements were also conducted on thirty building/civil engineering
projects within the study area (ten sites in each of the cities). The sampled sites are such that
non-monetary incentives are being employed in some sites (fifteen sites) while they are
completely absent in some other sites. For the sake of comparison, six out of the eighteen listed
variables of non-monetary incentives were selected.
The variables are:
• Provision of adequate working tools and equipment
• Transport to and from site.
• Free medical treatment for the workers and members of their family
• Provision of protective work devices (e.g. overalls, hard-hat, eye goggles)
• Safety plans including the provision of first aid kits on site.
• End of the year party and award night.
The fifteen sites where non-monetary incentive schemes are being employed were them serially
numbered with Roman numerals I to XV and they will be referred to as sites I to XV. The
remaining fifteen sites were numbered from XVI to XXX; and they will be referred to as sites
XVI to XXX.
The analytical tool used to find the relative incentive index (RI) of the respondents was
determined by using the following formula (Olomolaiye, 1990):
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Relative incentive index =
∑ PU
t =0
1 1
=
NX (4 + 3 + 2 + 1 + 0)
Where,
P = subjective importance of the variable
U = number of respondents
N = number of relevant incentives.
4. FINDINGS AND DISCUSSIONS
Arising from the need to identify the most widely used type of incentive scheme in the study
area, questionnaires were administered on management and the craftsmen of large, medium and
small sized construction firms in this regard. Table1 therefore shows the Relative Index (RI) of
the premiums for the management and the craftsmen in the three categories of construction firms
in Nigeria.
The table (Table1) indicates that non-monetary incentives (RI = 0.86) are more widely used in
the three categories of the construction firms surveyed when compared with the monetary
incentives (RI = 0.75). The table also indicates that the perception of usage of both types of
incentive schemes are similar. The emergence of the fact that non-monetary incentives are more
commonly employed in the construction industry in the study area further justified the need to
establish the effectiveness of the usage in increasing performance of construction craftsmen
which this study aimed to achieve.
Table 1: Relative Index of Premiums Placed on the Usage of Monetary and Non-Monetary
Incentive Schemes in the Nigerian Construction Industry.
Incentive Management Craftsmen Mean
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Schemes Large Medium Small All Large Medium Small All
Firms Firms Firms Firms Firms Firms Firms Firms
Monetary 0.88 0.71 0.70 0.76 0.74 0.70 0.77 0.74 0.75
Non- 0.97 0.79 0.85 0.87 0.85 0.78 0.92 0.85 0.86
Monetary
(Source: Field Analysis, 2008).
In line with this assertion, attempts were made to identify the various non-monetary incentives
that are in operation in the construction industry in Nigeria and also determine the premiums
placed on them. In this respect, eighteen variables of non-monetary incentive schemes were
established as prominent and listed in the questionnaires. Respondents were then asked to
indicate the extent of premiums they attach to each of the variables. The Relative Index (RI) of
incentive premiums attached to these variables by management and the craftsmen of these firms
are shown in Tables 2 and 3.
Responses from management (Table 2) showed that management of the large sized firms
attached utmost priority to the provision of adequate working tools and equipment to their
craftsmen (RI = 0.89). This is followed by the provision of transport to and from working site
(RI = 0.87) as well as ensuring the prompt payment of wages (RI = 0.85). The working tools and
equipment by the management of large sized firms is a pointer to the recognition of the
advantage of adequate tools and equipment as performance improvement measures. Job security
was assigned the least importance in the management’s priority list to their craftsmen (RI =
0.05). The issue of job security to craftsmen might not be unconnected with the one-off nature of
the construction industry. The management of the medium sized firms on the contrary are mostly
concerned with the prompt payment of wages to their craftsmen (RI = 0.86) as a way as inducing
their performance. This is followed by interesting and challenging work environment (RI = 0.83)
while the third in their ranking was supervision based on leadership by example (RI = 0.81). In
line with the large firms, Job security (RI = 0.04) takes the least premium in this regard.
Supervision based on leadership by example (RI = 0.85) was mostly employed by the
management of the small sized firms and this was followed by love and belongingness (RI =
0.83) as well as recognition through praise for significant work done (RI = 0.82).
Results from Table 3 on the other hand showed that the craftsmen working for the large sized
firms attached greatest priority to the issue of transportation to and from site (RI = 0.84) as well
as supervision based on leadership by example (RI = 0.82). Third in their ranking was the
provision of adequate working tools and equipment (RI = 0.80). In the case of the medium sized
firms, the craftsmen ranked love and belongingness (RI = 0.82) highest in the list of non-
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monetary incentives. This was followed by prompt payment of wages (RI = 0.81) and
supervision based on leadership by example (RI = 0.79). Job security was ranked least by the
craftsmen in there two categories of firms (RI = 0.06).
The management of the small sized construction firms, as ranked by the operatives, attached
utmost importance to supervision based on leadership by example (RI =0.83) followed by love
and belongingness (RI =0.81) and recognition through praise for significant work done (RI
=0.80). The pattern of the craftsmen’s relative index also indicates that small sized firms have
absolute preference for non-monetary incentives that do not involve any capital outlay. However,
the result of the test of independence of assessment between the all-firm RI of management
(Table 2) and that of the craftsmen (Table 3) indicated that:
t cale = 3.215 > t 0.05 = 1.573
The assessment of the craftsmen in all categories of firms surveyed is therefore significantly
different from that of the management.
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Table 2: Relative Index of Premiums Placed on the Identified Non-Monetary Incentive
Schemes (Management)
(Source: Field Analysis, 2008).
S/N Non-Monetary Incentives Large Medium Small All
Firms Firms Firms Firms
1 Provision of working tools and equipment 0.89 0.61 0.41 0.64
2 Employee training and development 0.82 0.51 0.48 0.60
3 Recognition through praise for significant work done 0.59 0.53 0.82 0.65
4 Encouragement to make suggestions about work 0.77 0.71 0.62 0.70
5 Free medical treatment for workers 0.67 0.62 0.41 0.57
6 Subsidized group/personal insurance against accident 0.72 0.45 0.29 0.49
on site
7 Transport to and from site 0.87 0.61 0.21 0.56
8 Provision of protective work devices 0.78 0.59 0.51 0.63
9 Supervision based on leadership by example 0.81 0.81 0.85 0.82
10 Safety plan including provision of first aid 0.75 0.78 0.71 0.75
11 Finish and go (no delay after day’s work). 0.52 0.66 0.58 0.59
12 Provision of recreation and relaxation centres. 0.56 0.57 0.45 0.53
13 End of the year cocktail party and award night. 0.71 0.47 0.66 0.61
14 Love and belongingness 0.73 0.53 0.83 0.70
15 Job security 0.05 0.04 0.02 0.04
16 Interesting and challenging work environment 0.59 0.83 0.58 0.67
17 Prompt and regular payment of wages 0.85 0.86 0.77 0.83
18 Greater freedom and responsibility at work 0.56 0.73 0.79 0.69
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Table 3: Relative Index of Premiums Placed on the Identified Non-Monetary Incentive
Schemes (Craftsmen).
S/N Non-Monetary Incentives Large Medium Small All
Firms Firms Firms Firms
1 Provision of working tools and equipment 0.80 0.65 0.78 0.74
2 Employee training and development 0.71 0.72 0.72 0.72
3 Recognition through praise for significant work done 0.79 0.75 0.80 0.78
4 Encouragement to make suggestions about work 0.78 0.69 0.69 0.72
5 Free medical treatment for workers 0.72 0.60 0.68 0.67
6 Subsidized group/personal insurance against accident 0.55 0.61 0.71 0.62
on site
7 Transport to and from site 0.84 0.71 0.77 0.77
8 Provision of protective work devices 0.81 0.77 0.78 0.79
9 Supervision based on leadership by example 0.82 0.79 0.83 0.81
10 Safety plan including provision of first aid 0.76 0.68 0.68 0.71
11 Finish and go (no delay after day’s work). 0.74 0.73 0.73 0.73
12 Provision of recreation and relaxation centres. 0.71 0.72 0.75 0.73
13 End of the year cocktail party and award night. 0.75 0.69 0.70 0.71
14 Love and belongingness 0.79 0.82 0.81 0.81
15 Job security 0.09 0.05 0.03 0.06
16 Interesting and challenging work environment 0.68 0.68 0.69 0.68
17 Prompt and regular payment of wages 0.69 0.81 0.77 0.76
18 Greater freedom and responsibility at work 0.72 0.69 0.68 0.70
(Source: Field Analysis, 2008)
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Site Observations and Measurements
The results of the site observations and measurements are shown in Tables 4 and 5. When
compared across sites, it was discovered that the mean observed outputs of craftsmen in sites I to
XV are higher than that of sites XVI to XXX. In the bricklaying activities for example, the
aggregated means for sites I to XV (Table 4) were 65 for 225mm sandcrete blocks laying and 67
for 150mm blocks while the aggregated means for sites XVI to XXX (Table 5) were 56 for
225mm blocks and 63 for 150mm blocks. In the carpentry activities for example, the aggregated
means for sites I to XV (Table 4) were 208.57m for fixing of hardwood rafters and 216.14m for
fixing of hardwood purlins compared with sites XVI to XXX which have aggregated means of
193.29m and 192.57m respectively. The same trend was observed in other activities in the two
trades and these are as shown in the two tables (Tables 4 and 5). The significantly higher level of
outputs achieved in sites I to XV (Table 4) could be attributed to increase in the productive time
of the craftsmen as idle time is minimized through the implementation of non-monetary
incentives.
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Table 4: Observed Outputs per Craftsmen in an 8-hour Day [Sites I to XV]
(Source: Field Analysis, 2008)
ACTIVITIES UNIT AGGRE MEAN OBSERVES OUTPUTS PER SITE
GATED
MEAN I II III IV V VI VII VIII IX X XI XII XIII XIV XV
A. Nos 65 64 65 66 62 - 65 - 64 - 66 - - 67 63 66
BRICKLAYING
1. Laying 225mm
sandcrete blocks
2. Laying 150mm Nos 69 68 69 - - - 68 - 70 - 68 - - - 69 -
sandcrete blocks
3 Concreting M3 2.56 - - - 2.85 - - - 2.60 - 2.42 - - - 2.36 -
ground floor slab
(100mm-
150mmthick)
4 Floor screeding M2 10.56 - - - - - 10.76 - 10.42 - - - - - - 10.50
5 plastering walls M2 9.61 - - 9.66 - 9.75 - - - 9.54 - - 9.61 - - 9.48
B CARPENTRY
-
1 Fixing of M 208.57 - - 220 - 210 - - 205 215 190 - 195 - 225
hardwood
rafters
2 Fixing of M 216.14 - - 230 - 215 - - 218 232 200 - 206 - 212 -
hardwood purlins
3 Fixing of fascia M 67.86 - - 55 - 60 - 85 92 58 - 60 - 65 -
boards.
4 Fixing of ceiling M2 11.97 - - 12.10 12.12 12.15 - 12.05 11.15 11.99 12.08 - 12.05 - 12.08 -
timbers (noggins).
5. Fixing of M2 31.18 - - 35.00 - 29.20 - 29.80 - 31.15 - 32.15 - 31.15 29.80 -
corrugated
as best as sheets
6 Fixing of M2 - - - - - - - - - - - - - - - -
corrugated iron
sheets
7 fixing of door Nos 4 5 - - 4 4 - 3 - 5 - 4 - 3 - 4
complete with lock
8 fixing of glass Nos 80 82 - - - - - 78 - - - - - - 80 -
louver blades
9 handling of flush Nos 8 - 8 - 7 - - - 9 - 7 - - - 8 -
door fix.
10 fixing of metal Pairs 17 - - - - - 17 - - 18 - - 16 - - -
louver frames.
Mean observed output =
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ACTIVITIES UNIT AGGRE MEAN OBSERVED OUTPUTD PER SITE
GATED
MEAN XVI XVII XVIII XIX XX XXI XXII XXIII XXIV XXV XXVI XXVII XXVIII XXIX XXX
A BRICKLAYING
1Laying 225mm
sandcrete blocks Nos 56 60 - 54 - - 57 - - 58 - - - 52 - -
2Laying 150mm Nos 63 70 - 62 - - 61 - - 62 - - - 59 - -
sandcrete blocks
3Concreting ground M3 1.96 1.85 - 1,90 - - 1.88 - - 2.10 - - - 2.05 - -
floor slab (100mm-
150mmthick)
4 Floor screeding M2 9.20 9.50 - 9.07 - - - - - - - - - 9.02 - -
5 plastering walls M2 8.90 - 8.50 - 8.80 - 9.05 - 9.02 - 8.98 - 9.00 - - 8.92
Table 5: Observed Outputs per Tradesman in an 8-hour Day [Sites XVI to XXX]
(Source: Field Analysis, 2008)
B CARPENTRY M 193.29 185 190 - 198 - 200 - 196 - 196 - - - 188 -
1 Fixing of
hardwood rafters
2 Fixing of M 192.57 188 189 - 190 - 190 - 198 - 199 - - - 194 -
hardwood purlins
3 Fixing of fascia M 51.43 50 54 - 60 - 51 - 48 - 46 - - - 51 -
boards.
4 Fixing of ceiling M2 9.87 10.11 9.18 - 9.57 - 10.15 - 10.11 - 9.98 - - - 9.99 -
timbers (noggins).
5. Fixing Of M2 28.84 28.15 - 29.00 - 29.18 - 29.19 - - 28.72 - 28.82 - - -
corrugated
as best as sheets
6 Fixing of M2 - - - - - - - - - - - - - - - -
corrugated iron
sheets
7 fixing of door Nos 4 3 - 4 - 4 - - 3 3 - - 4 - 4 4
complete with lock
8 fixing of glass Nos 76 74 - - 72 - 70 - 82 - 78 - - 76 - 78
louver blades
9 handling of flush Nos 7 - 7 - 8 - - - 6 - - 8 - 7 - 7
door fix.
10 fixing of metal Pairs 15 - 15 - 14 - - - 14 - 16 15 - - 14
louver frames.
Mean observed output =
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5. CONCLUSION
This study had highlighted the various non-monetary incentive schemes that are in operation on
construction sites and a number of ways in which the performance of craftsmen could be stimulated
through the application of non-monetary incentives. It has also demonstrated that a relationship exists
between the performance of construction craftsmen and the application of non-monetary incentives. The
study had also revealed that non-monetary incentives are more commonly employed in the Nigeria
construction industry (RI =0.86) than the monetary incentive (RI =0.75). The results of site observations
and measurements had also revealed that the mean observed outputs of craftsmen in sites where non-
monetary incentives were fully employed were higher than the mean observed outputs where non-
monetary incentives were absent. This could be attributed to the removal of idle time of the craftsmen
through the implementation of non-monetary incentives. In sites I to XV for example, craftsmen were
provided with all necessary tools and equipment. Also, promptness in the supply of the required materials
for construction, finish and go principle and the need to catch the company vehicle at a stipulated closing
time led to spirit de crop among the craftsmen. In addition, they were aware of insurance cover against
any major accident and every operative had good sense of belongings in their various firms.
The study therefore concluded that proper implementation of non-monetary incentives stimulates the
performance of construction craftsmen and should therefore be imbibed by management of the three
categories of construction sites in Nigeria. This study investigated the relationship between the application
of non-monetary incentives and the performance of bricklayers and carpenters in Nigeria. However, there
is still the need to test these schemes on other construction craftsmen and operatives as well as in other
parts of the country/globe for wider application.
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751
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752
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Table 3: Relative Index of Premiums Placed on the Identified Non-Monetary Incentive Schemes
(Craftsmen).
S/N Non-Monetary Incentives Large Medium Small All
Firms Firms Firms Firms
1 Provision of working tools and equipment 0.80 0.65 0.78 0.74
2 Employee training and development 0.71 0.72 0.72 0.72
3 Recognition through praise for significant work done 0.79 0.75 0.80 0.78
4 Encouragement to make suggestions about work 0.78 0.69 0.69 0.72
5 Free medical treatment for workers 0.72 0.60 0.68 0.67
6 Subsidized group/personal insurance against accident 0.55 0.61 0.71 0.62
on site
7 Transport to and from site 0.84 0.71 0.77 0.77
8 Provision of protective work devices 0.81 0.77 0.78 0.79
9 Supervision based on leadership by example 0.82 0.79 0.83 0.81
10 Safety plan including provision of first aid 0.76 0.68 0.68 0.71
11 Finish and go (no delay after day’s work). 0.74 0.73 0.73 0.73
12 Provision of recreation and relaxation centres. 0.71 0.72 0.75 0.73
13 End of the year cocktail party and award night. 0.75 0.69 0.70 0.71
14 Love and belongingness 0.79 0.82 0.81 0.81
15 Job security 0.09 0.05 0.03 0.06
16 Interesting and challenging work environment 0.68 0.68 0.69 0.68
17 Prompt and regular payment of wages 0.69 0.81 0.77 0.76
18 Greater freedom and responsibility at work 0.72 0.69 0.68 0.70
(Source: Field Analysis, 2008)
753
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Held at the University of Cape Town, 10-11 September 2009
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RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Sambo Zulu, pp 754-762
Factors impacting on project leadership performance: an
exploratory study
Sambo Zulu1
School of the Built Environment,
Leeds Metropolitan University, Leeds, LS1 3HE
United Kingdom
Abstract:
This paper is concerned with factors that impact on project leadership performance. The
exploratory study acknowledges the importance of leadership in project management as
a key driving force in delivering successful projects. In this respect the paper considers
the performance of leadership as the focus. Various leadership factors based on studies
on critical success factors were identified. In addition leadership performance was
measured by the extent to which the goals were attained and the satisfaction of the
project managers with project outcomes. Data used to explore the factors impacting on
project leadership was extracted from a project management study that explored the
impact of project management process quality variables on project performance in
which a questionnaire survey was conducted. Several factors related to the leader’s
capability, the project team and the project environment were found to have an impact
on leadership performance.
Keywords:
Project Management, Leadership, Performance, Critical Success Factors
1 Introduction
There have been many studies concerning leadership project management in
relationship to the delivery of successful projects. An examination of literature project
and project management critical success factors shows that several leadership factors
such as style of leadership, management support and leaders competence are identified
as critical to the delivery of successful projects. It is therefore important to acknowledge
the importance of competent leadership in project management. For example Hyvari
(2006) suggest that to be effective project managers need to combine their technical competence
with their ability to effectively lead the project team. Leadership can be defined as the process
of social interaction where the leaders ability to influence the behaviour of their followers can
strongly influence outcomes (Humphrey 2002 as cited in Kerr et al. 2006). The definition
suggests that the project manager as a leader has the ability to influence the performance of
projects. While several studies have focused on project performance, few have examined
leadership performance. This paper focuses on the leadership performance borrowing
concepts from general leadership studies. Firstly the paper provides a review of
literature on leadership in general and in the context of project management. It then
1
Email: [email protected]
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presents the findings from the exploratory study. Based on these appropriate
conclusions and recommendations and are made. Preliminary results of the study were
reported in xx. This paper extends the discussion and considers a different model for
measurement leadership performance.
2 Leadership & Performa
The influence project management on project performance has been studied from
various angles. Many studies have investigated factors that are critical to the success of
projects. For example Pinto and Slevin (1990) designed a project implementation profile
to categorise factors that influence project performance and found that there are certain
factors that would influence the success of the project. Many other studies on critical
success factors have been undertaken. Larson and Gobelli (1989), Alacon and Ashley
(1998), Pocock and Kim (1997), Klien et al (1996) and Deusch (1991) all studies factors
impacting on project performance. Many of the studies on critical success factors have
identified several human resource management factors including leadership issues as
impacting on project performance. For example Chan et al (2001) project team
commitment as one of the issues critical to performance in design and build projects.
Kog et al (1999) also identifies 27 project management factors that would influence
schedule performance and grouped them into four categories including, project manager
factors, project team factors, planning related factors and project controls factors. Belout
and Gauvreau (2004) were concerned with the impact of human resources management
on project performance. Pheng and Chua (2006) identified several environmental
factors that affect project managers’ performance. They found out that team-
relationships were ranked as the most important variable affecting project performance.
The impact of project managers’ leadership styles and leadership skills on performance
has also been studied. For example Muller and Turnet (2007) examined the interaction
between the project manager’s leadership style with project time and their combined
impact on project success. They concluded that project manager’s leadership style
influences project success and that different leadership styles are appropriate for
different types of projects. Skipper and Bell (2006a) in studying leadership in the
construction noted that there is a recognition in the construction industry for the need to
improve leadership skills in the construction industry. Skipper and Bell (2006b) also
suggested that leadership behaviour has attracted less attention in research concerning
performance of construction projects. Hyvari (2006 examined leadership behaviour in
fourteen managerial practices and found that planning, organising networking and
information were the most significant managerial practices in the leadership behaviour
of project managers.
The evaluation of the impact of leadership on performance and generally factors
impacting on leadership effectiveness has been a subject for research. Chen and Lee
(2007) addressed the issue of project manager’s performance arguing that there is less
concern in literature for factors related to the project manager. They used various
leadership behaviours to evaluate the performance of project managers. Many other
studies have focused on the influence of the leader on their followers. Sy and Cote
(2005), for example, examined the effects of the leader’s mood on three factors
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including the mood of the team, the effective tone of the group and other group
processes. They found that there were positive relationships between the leader’s mood
and the three factors. Mathieu et al (2008) reviewed literature on team effectiveness.
Their review suggests that there are various ways to measure team outcomes.
3 Methodology
3.1.1 Leadership Variables
This paper presents outcomes of a research contributing to the understanding of
leadership issues in project management. It uses a three way model found in Winch
(2002) to understand the influence of leadership o performance. The model in Winch
(2002) depicts appropriate leadership factors falling into three categories. These are the
leaders, the led and the project mission.
The leadership factors as discussed above are categorised into three groups. These
include the leader, the led and project characteristics. The ‘Leader’ variables are
concerned with those factors that are related to the leader and in this case the project
manager. Several factors are identified in literature as being critical to project
management leadership. For example Project leader’s qualifications, project leadership
style are identified as having an influence on the leader’s performance (Odusami 2003).
Turner and Müller (2003) argue that the owner should appoint a project manager who is
qualified with appropriate professional credentials. They also argued that the project
manager needs appropriate levels of authority entrusted by the client. Project managers
are concerned with the conceptualisation and designation of the projects organisation
structure to align the people and the resources to facilitate the accomplishment of the
vision (Cleland 1995). Winch (2002) also identified three aspects needing consideration
in project leadership. These include the capability of the leader, the task facing the
organisation and the expectations of those who are being led. It is seen in this that the
capability of the project manager is thought to be an issue that would have an impact on
project performance. The influence of top management support in quality management
literature is considered to be an essential requirement for successful quality
management initiatives (Cook-Davies and Arzmanow 2003, Kerzner 2001 and Munns
and Bjeirmi 1996). In project management it is recognised as a factor that would affect
project management performance. Cooke-Davies and Arzmanow (2003) identified
organisational leadership including commitment of upper management as measures of
project management maturity. They also identified degree of authorisation with respect
to the level of empowerment necessary to deliver agreed project strategy and capability
of project manager, which is reflected in the competency of project management staff,
as possible measures of project management maturity. The experience of the project
manager is also critical to project performance (Kog et al 1999 & Cash and Fox 1992).
Several factors related to the ‘Led’ or the project team are also identified in literature as
being critical to project performance. These include project team’s skills and
knowledge, cooperation among project team members, experience of project team
members, project participants’, understanding of the functional and technical
performance requirements, project participants understanding of their roles and duties in
the project, degree of trust between project team members, management of conflicts,
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project team members’ commitment to project and project management process,
motivation, capability of project management staff, personal friendship between project
participants, teamwork and project team members’ interdependent. The project team
construct largely represents the human resource function in project management. There
has been debate about the influence of the human resource function in project
management. Belout and Gauvreau (2004) for example found out that the personnel
factor had only a marginal effect on project success.
Winch (2002) suggests that the nature of the mission will require different management
strategies. For example projects under great uncertainty will require a different
management approach to those that are running smoothly. In this respect various factors
identified as critical to project success would have an influence. This study recognised
the type of project, contract sum, contract period, and delays as providing the context
for managing the project mission. These depict the key issues the project manager has to
deal with. Table 1 includes factors under each of the three constructs
Table 1: Correlation Statistics
Construct Variable
Type of project
Contract sum range
mission
Project
Contract period range
Delays
Roles and responsibilities of the project manager
Definition of clear goals
Level of authority given to the project manager
Experience of the project manager
Competence of the project manager
Suitability of organisation structure
The leader
Qualification of pm
Leadership style
PMs involvement in briefing
Roles and responsibilities of project team
Team skills and knowledge
Cooperation between team members
Experience of team members
Commitment of team members
Shared clear vision of goals
Capability of team
Working relationship in team
The led
Level of trust in team
Level of conflict
There are various ways in which the effectiveness and performance of leadership can be
measured. However the most used measures of effectiveness is the extent to which the
leader attains the set goals (Hyari 2006 & Andersen 2006). Several studies on
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performance on construction projects use the traditional criteria in judging project
success based on time, cost and quality performance (Zulu2007). There is recognition
however for a multi-stakeholder approach in the definition of project success including
the satisfaction of the client, project team and stakeholders. Muller and Turner (2007)
for example used qualitative measures including project team’s satisfaction as a
measure of project success. Mathieu et al (2008) in reviewing team effectiveness also
identified studies that used group member satisfaction as a performance measure.
However they noted the criticism with this method due to its self-reporting nature. This
research used both the attainment of goals, in terms of time, cost and quality (measured
by number of variations) performance, and the satisfaction of the project manager as a
measure of leadership performance. However it acknowledges that using satisfaction of
project management has limitations as cited in Mathieu et al (2008)
3.1.1 Data Collection
This paper is based on data collected for a research project which investigated the
influence of project management processes on project performance. Data was collected
using a questionnaire survey. The questionnaire included questions about the perception
of respondents concerning various project management factors. Data concerning project
leadership factors was extracted from this study. In addition project managers were
asked to rate their satisfaction on the project. The questionnaire was sent to 400 project
management firms. A total of 67 completed questionnaires were received back
representing a 17% response rate. This is within the expected response rate in
questionnaire surveys (Burns 2000 and Denscomb 2003). Of these, four questionnaires
were rendered unusable because they were largely incomplete or the answers were
deemed to be inconsistent with the perceived pattern of answering. The remaining 63
(16%) were used in the subsequent analysis.
4 Results and Discussion
The relationship between project leadership factors (categorised into the leader, the led
and project mission) and leadership performance (measured by project outcomes and
the project manager satisfaction) was investigated using Pearson product moment
correlation coefficient. An examination of the data shows a variation in correlation
between the three categories as presented in table 2. As this was an exploratory study
and owing to the nature of data collected the direction of correlation was not considered.
The results show that all project mission variables have a small to medium correlation
with project managers’ satisfaction. The data presents interesting correlations between
‘project mission’ factors and project manager satisfaction. For example data shows that
there is a higher correlation between the project contract sum and project manager
satisfaction in comparison to the correlation between contract period and satisfaction.
The findings in this respect suggest that the higher the contract sum, the less satisfied
with project outcomes are project managers likely to be. A comparison between the
correlation between project manager satisfaction and cost overrun and time overrun,
however suggest a different picture. The data shows that project managers’ satisfaction
is impacted more by time overruns than by cost overruns. Further, examination of all
‘Leader’s’ variables also suggests that they have small to medium correlation with
project manager satisfaction with an exception of qualification of the project manager
and the project manager’s involvement in the project brief drafting. An examination of
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the ‘Leader’ factors suggests that project managers’ competence, organisation structure
and clarity of goals are the top three factors impacting on project manager satisfaction.
An examination of the ‘Led’ variables suggests that there is generally a small
correlation between the ‘Led’ factors and satisfaction of the project manager. Several
factors suggested very little if any correction with project managers’ satisfaction with
project outcomes. A further examination of the ‘Led’ factors suggest that factors such as
team skills and knowledge, degree of corporation between the project team, and
capability of the team, had very little correlation with project manager satisfaction,
while all other ‘Led’ factors had small correlation with project manager satisfaction.
Table 2: Correlation between leadership and project manager performance variables
Construct Variable Performance Variables
Time Cost Variation SAT
Project Type of project 0.200 0.227 0.200 0.161
mission Contract sum range 0.119 0.064 0.239 .304*
Contract period range 0.030 0.161 .267* 0.189
Delays .455** 0.038 .523** .484**
The leader Roles and responsibilities
of the project manager 0.009 0.002 0.017 0.208
Definition of clear goals 0.157 0.095 0.114 .294*
Level of authority given to
the project manager 0.209 0.136 0.033 0.213
Experience of pm 0.077 0.024 0.119 0.208
Competence of the project
manager 0.135 0.082 0.144 .394**
Suitability of organisation
structure 0.127 0.014 0.036 .310*
Qualification of the project
manager 0.017 0.012 0.014 0.099
Leadership style 0.093 0.072 0.029 0.213
Project manager
involvement in briefing 0.094 .292* 0.062 0.062
The led Roles and responsibilities
of project team 0.050 0.006 0.008 0.119
Team skills and knowledge 0.033 0.065 0.013 0.016
Cooperation between team
members 0.009 0.089 0.063 0.094
Experience of team
members 0.139 0.013 0.137 0.237
Commitment of team
members 0.047 0.105 0.008 0.012
Shared clear vision of
goals .261* 0.155 0.222 .275*
Capability of team 0.064 0.028 0.099 0.017
Working relationship in
team 0.106 0.009 0.156 0.073
Level of trust in the team 0.110 0.027 0.011 0.111
Level of conflict 0.056 0.121 0.229 0.191
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An examination of the correlation between leadership factors and cost, time and quality
performance generally shows small to very insignificant correlation. For example only
10 out of 21 (%) shows a small to medium correlation with time performance, 7 with
cost performance and 11 (%) with variations. These correlations are in contrast to those
discovered between leadership variables and project managers’ satisfaction with
outcomes. This prompted the examination of the correlation between time, cost and
defects (quality) and project managers’ satisfaction as presented in table 3. The findings
here suggested a small to moderate correlation between the variables ranging from
0.122 to 0.405. this further suggest that project manager satisfaction is a valid indicator
of performance as it reflects time, cost and quality performance.
Table 3: Correlation between performance variables
Time Cost Defects SAT
Time 1.000 .328** .261* .398**
Cost .328** 1.000 0.063 0.122
Defects .261* 0.063 1.000 .405**
SAT .398** 0.122 .405** 1.000
5 Conclusion
The aim of the exploratory study was to examine factors that impact on project
leadership performance. The paper acknowledged several studies conducted on project
and project management critical factors. However this study considered factors
impacting on project leadership performance (measured by goal attainment and project
managers’ satisfaction). Although some studies have been conducted concerning this
issue, this exploratory study was concerned with the use of a three way leadership
model to explore the relationship. The examination of the correlation between the
leadership variables and project leadership performance showed mixed results. The
results of this exploratory study showed that there is generally a small to medium
correlation between leadership variables and project managers’ satisfaction with results.
However examination of the correlation between the leadership variables and project
performance variables (Time, cost and quality) showed small to no correlation. A
further examination of the data showed that there is a small to medium correlation
between all the performance variables despite having contrasting correlations with
leadership variables. The findings therefore suggest that although the performance
variables are related, the leadership factors that significantly impact upon them are
different. It is acknowledged here however that this exploratory study used data that was
collected for another purpose and therefore the nature of the data collected may impact
on the results attained. The results are however important as they provide a platform to
build upon future research work on leadership in project management.
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2.1 References
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analysis”. International Journal of Project Management, Vol.16, No.3, pp. 145-152.,
Andersen, J. (2006). “Leadership, personality and effectiveness”. The Journal of Socio-
Economics, Vol. 35, pp. 1078–1091.
Belout A and Gauvreau C., (2004). “Factors influencing project success: the impact of
human resource management”, in International Journal of Project Management,
Vol. 22, pp.1-11.
Bryde D. (2003). “Modelling project management performance”, In International
Journal of Quality and Reliability Management, Vol.20, No.2, pp. 229-254.
Cash, C. and Fox, R. (1992). “Elements of successful project management”. Journal of
Systems Management, Vol. 43. No 9, pp. 10-13.
Chan A.P.C. et al, (2001). “Design and build project success factors: Multivariate Comment [MTB1]:
analysis”. Journal of Construction Engineering and Management, Vol. 127, No 2,
pp. 93-100.
Chen S., and & Lee H. (2007). “Performance evaluation model for project managers
using managerial practices”. International Journal of Project Management, Vol. 25,
pp. 543–551.
Cleland, D. (1995). “Leadership and the project management body of knowledge”.
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Cooke-Davies, T. J. and Arzymanow A., (2003). “The maturity of project management
in different industries: An investigation into variations between project management
models”. International Journal of Project Management, Vol. 21, pp. 471-478.
Denscombe, M., (2003). The Good Research Guide for Small-Scale Social Research
Projects, 2nd Edition, Open University Press.
Hyvari, I. (2006). “Project management effectiveness in project-oriented business
organizations”. International Journal of Project Management, 24, pp. (2006) 216-–
225.
Kerr, R., Garvin, J., Heaton, N. & Boyle, E. (2006). “Emotional intelligence and
Leadership effectiveness”. Leadership & Organization Development Journal, Vol.
27 No. 4, pp. 265-279
Kerzner, H. (2001). Project Management, A Systems Approach to Planning, Scheduling
and Controlling, John Wiley and Sons.
Kliem R and Anderson. (1996). “H.B-teambuilding styles and their impact on project
management results”. , in Project Management Journal, Vol. 276, No.1.
Kog Y.C., Chua, D.K., Loh, P. & Jaselskis, E. (1999). “Key determinants for
construction schedule performance”, in International Journal of Project
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Larson E and Gobelli D., (1989). Significance of project management structure on
development success, in IEEE Transaction on Engineering Management, Vol.36,
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Mathieu, J. Maynard, T, Rapp, T & Gilson, L. (2008). “Team effectiveness 1997-2007:
A review of recent advancements and a glimpse into the future”. Journal of
Management, Vol. 2008; 34, pp.410.
Muller, R and& Turner R. (2007). “Matching the project manager’s leadership style to
project type”. International Journal of Project Management, 25, pp. (2007) 21–32.
Munns A and Bjeirmin B., (1996). “The role of project management in achieving
project success”. International Journal of Project Management, Vol. 14, pp. 81-87.
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Odusami, K., Iyagba, R. & Omirin, M. (2003). “The relationship between project
leadership, team composition and construction project performance in Nigeria”.
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Pheng L and Chuan Q.T., (2006). “Environmental factors and work performance of
project managers in the construction industry”. International Journal of Project
Management, Vol. 24, pp 24-37.
Pinto J and Slevin D. (1987). “Critical success factors across the project life cycle”.
in Project Management Journal.
Pocock J and Kim M. (1997). “Impact of management approach on project interaction
and performance”. ASCE, Journal of Construction Engineering and Management,
December, pp. 411-418., ASCE
Skipper, C., and& Bell, L. (2006a). Assessment with 360° Evaluations of Leadership
Behaviour.
Skipper, C., and& Bell, L. (2006b). “Influences impacting leadership development”.
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Sy, T., Coˆte´, S., and & Saavedra, R. (2005). “The Contagious Leader: Impact of the
Leader’s Mood on the Mood of Group Members, Group Affective Tone, and Group
Processes”, in Journal of Applied Psychology Vol. 90, No. 2, pp. 295–305.
Turner, R. & Müller, R. (2003) On the nature of the project as a temporary
organization”. International Journal of Project Management, Vol. 21, No. 1, pp.1-8
Winch, G. (2002). Managing Construction Projects: An Information Processing
Approach, Blackwell.
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Zulu (2007). “Impact of Project Management on Performance: A Structural Equation
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Keneilwe Ntshwene, Jacob Kashiwagi and Dean Kashiwagi, pp 763-774
The new role of the construction manager/client
engineer/quantity surveyor
Keneilwe Ntshwene1 and Jacob Kashiwagi2 and Dean Kashiwagi2
1 2
Faculty of Engineering and Technology Performance Based Studies Research Group
University of Botswana, Gaborone, Arizona State University, Tempe, AZ, United
Botswana States
Email: [email protected]; [email protected]; [email protected]
Abstract:
The traditional contracting/delivery system in Botswana, introduced by the US, UK, and
European educators, consultants, and practitioners, has not been working well in Botswana.
The poor project delivery system results have forced the organization of a new group, the
Government Implementation Coordination Group (GICO) to attempt to solve the problems.
In the fall of 2008, the University of Botswana (UB), through the US State Department
sponsored Fulbright program, brought professor Kashiwagi, and the best value Performance
Information Procurement System (PIPS) technology, the Information Measurement Theory
(IMT), and the Industry Structure Analysis to the UB project management section. This
paper proposes that the client’s professional representative requires a new, more effective
role. The role includes using performance information, transforming the client’s
expectations into a design/construction intent by using expert vendors, ensuring the vendors
manage and minimize the risk that they do not control, outsourcing the technical
responsibilities, and doing quality assurance instead of quality control. This paradigm will
minimize project risk, maximize project value, and increase the professionalism of project
management, construction management, and quantity surveyors. These concepts will be
tested on three test projects in Botswana.
Keywords: new quantity surveyor role, new paradigm for construction management
1 Introduction: Management is an Inefficient Practice
Client construction/project management and quantity surveyors have an inherent theoretical
problem in delivering construction. Management is a practice that is a “necessary evil”
based on principles of inefficiency (a client’s manager directing an expert) and having no
accountability for results (contractors are often blamed for the failures.) Deductive logic or
“common sense” leads to the following concepts:
1. Management is not required if the vendors are experts in their areas.
2. It is inefficient for a client/buyer to manage, control, and direct an expert vendor.
3. Organizations that have expertise are lean and minimize the need for management.
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4. When organizations get too large or the number of partnering organizations is too
many, there will be an increased flow of information, management, and transactions.
Increased flow of information, transactions, and management are signs of inefficiency.
2 Literature Review
One of the possible reasons why the construction industry has not improved its
performance radically over the past ten years is that the industry experts and consultants are
proposing that the answer to becoming more efficient and effective lies with more and
better management techniques, functions and practices (Hamel, 2007). This has not been
proven, and goes against results and deductive logic. More management leads to (Deming,
1982, J. Kashiwagi, 2007):
1. More people making decisions, directing, and controlling instead of doing expert work.
2. More expertise required in management than those doing the work.
3. No transfer of risk and accountability to the workers/vendors.
4. The use of minimum standards and the movement toward lower quality of work.
5. The commoditization of construction work and the decrease in quality and expertise.
6. Reactive on the job training instead of proactive quality education and training.
7. Less preplanning, and more reactive management.
8. Repeated and wasted work effort.
Edward Deming (1982), the father of continuous improvement, and follow on Six Sigma
and Lean movements in the manufacturing sector, gave 14 points of management which
identified why the solution that the construction industry has used will not solve the
problems:
1. Minimum standards are meaningless, counterproductive, and should not be used.
2. The price based system cannot work and should be abolished.
3. Inspection by experts is too late, costly, inefficient and nonproductive.
4. The management system is the problem and not worker nonperformance.
5. Production improves as quality control improves.
2.1 Case Study of Botswana Construction Industry
In 2008/2009, Fulbright Scholar (FS) Dean Kashiwagi was brought into the University of
Botswana (UB) project management (PM) section to bring improvements to the Masters of
Project Management (MPM) program in the Faculty of Engineering and Technology (FET)
(Kashiwagi et al., 2008). The FS proposed to implement a futuristic PM/CM model that
minimized management, direction, control, and risk functions by using alignment and
preplanning. He proposed that this would:
1. Minimize overall management activity and risk.
2. Implement simplistic measurements that minimized decision making.
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3. Change the mindset of the industry by using “common sense” concepts.
4. Show dominant performance of 98% and reduction of management function by as much
as 90%, while increasing vendor profit by as much as 100%.
The project management and construction management results is a major concern in
Botswana, as the British implemented system of management, direction, control, and price
based structure has not worked well, resulting in the government setting up a special
oversight group, the Government Implementation Coordination Office (GICO), tasked to
address project management concerns in construction and other industries (Adeyemi et al.,
2009). The authors are proposing that the traditional model of client management,
direction, control, decision making, and inspection using highly technical engineers in a
management and control role has been ineffective. The management approach that has
been used in the U.S., in Europe, and in the U.K., has shown problems in delivering
performance (on time, no contractor generated change orders, and meeting the initial
expectations of the client) and has not resulted in increased construction technical training
of craftspeople and the number and skill level of craftspeople (Adrian, 2001; HC&O,
2004).
2.2 Problem
The traditional functions of project managers, construction managers, and quantity
surveyors may be directly or indirectly connected to the price based environment and
project nonperformance (Sullivan et al., 2009). Instead of minimizing vendor caused risk,
the client’s professional representative may be part of a structure that motivates poor
performance. A change in construction management structure and process is required to
make the construction manager, project manager, or quantity surveyor a practitioner of
quality assurance, forcing vendors to practice quality control and deliver high performance.
2.3 Hypothesis
The authors propose that the future construction delivery structure will be the best value
environment and client’s construction manager (CM), project manager (PM,) and quantity
surveyor, must be transformed from management, control, direction, and inspection roles
into a quality assurance role to ensure that risk is transferred to the contractor and the
contractor practices quality control.
3 Research Methodology
The paper will use the following models and propose how it affects the clients’ CM/PM’s
future role in construction:
1. Construction Industry Structure (CIS chart) and the transfer of control and risk to the
vendor.
2. The difference between the price based environment and the best value environment.
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3. Quality Assurance/Quality Control.
4. New risk model.
5. KSM model.
6. Best Value Performance Information Procurement System (PIPS) and Best Value
Performance Information Risk Management System (PIRMS) test results.
4 Findings and Discussion
4.1 Construction Industry Structure
The Construction Industry Structure (CIS) (Figure 1) (Kashiwagi, 2009) identifies and
simplifies the current problem.
Figure 1. Construction Industry Structure
Due to the worldwide competitive environment, buyers of construction services have
moved over to the right hand side (Quadrant I – Price Based Award and Quadrant II –
Value Based or Best Value.) In the price based environment (Goodridge et al., 2007):
1. The client’s management directs, controls, and inspects.
2. There is no transfer of control and accountability to contractors.
3. Client’s CMs, PMs, and quantity surveyors use minimum standards to identify the
requirement and try to deliver projects by enforcing the specified minimums.
4. The minimum standards are turned to maximums by the vendors due to the price based
environment and driven downward by vendors (Figure 2.)
5. Contractors who are short on experience, reactive, and only do what they are directed
become more competitive because they can give a lower initial price.
6. Contractors who manage and minimize risk and who are the better value when
considering total project cost, become noncompetitive because they do not fully take
advantage of the change order or deviation system (reactive behavior.) This raises the
perceived cost of construction and has the impact of making fair and compete prices
look high due to the incomplete pricing of the low performing competitors (Figure 3).
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Figure 2. Minimum/Maximum Dilemma Figure 3. Price-Based Award (Kashiwagi, 2009)
(Kashiwagi, 2009)
The change order system, the reactive nature of the price based system, the pointing of
fingers, the lack of preplanning and minimization of risk that the contractor does not
control are all congruent to the price based environment, inexperienced vendors, and the
client’s control oriented CMs, PMs, and quantity surveyors. The client’s CM, PM, and
quantity surveyor are in control in the price based environment but are not accountable for
nonperformance. They make the decisions and they control the vendor. In the best value
environment, the risk is transferred to and minimized by the high performance vendor
(Figure 1). The only vendor personnel who can reasonably accept the risk are the
experienced, high performing individual(s) because they minimize the risk with their
expertise. In the best value or value based environment, contractors must do the following
to be awarded work (Figure 1):
1. Compete based on past performance of the company and key contractor components
including project manager and site superintendent and critical subcontractors.
2. Quantify the scope of work and the risk that they do not control and how they will
manage and minimize the risk.
3. Interview of their site superintendent and project manager to identify if they can create
a baseline of the project from beginning to end, if they can manage and minimize the
deviation and risk from the baseline schedule, and if they can be accountable.
4. Price. The price is determined by the vendor, and it must still be competitive. Higher
prices must be justified and validated by the presentation of dominant added value.
Each price is connected to a level of quality and value, and cannot be compared against
someone else’s perception of the price or cost. There is no client party to double check
their price and determine if they know what they are doing. Contractors must accept
accountability and liability for submitting a correct price.
The best value contractor is then required to:
1. Have a baseline plan based on time and cost.
2. Create a risk management plan (RMP) to manage and minimize all concerns and risks
before the project starts.
3. Sign a contract that includes the above.
4. The entire team’s performance will them impact their future performance rating by
50%.
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In the best value environment, the contractor is selected based on performance and price.
Performance includes the ability to manage and minimize the risk that the contractor does
not control (nontechnical risk which includes client’s over-expectations, incorrect and
incomplete directions, risk caused by the client’s representatives during the project, and
unforeseen risks.) High performance contractors have great experience and technical
expertise which minimize the technical risk, and result in the management of the only
remaining risk that can minimize their profit: the risk that they don’t control (Figure 4).
Contractors, who are successful, attempt to minimize the deviation from their preplanned
baseline, instead of meeting minimum standards (Deming, 1982.) Performing contractors
provide high quality at the lowest possible price due to their technical expertise (best
value). The combination of lowest price and high quality by utilizing expertise and
preplanning is a lost art in the construction industry.
Figure 4. Inexperienced vs. Experienced Vendor Risk Model
A major problem with the traditional client management is the generation of inefficient
transactions (meetings, documents, emails, approvals, negotiations, surprises or deviations.)
This leads to the increased attempt to control the vendor and increases the number of
participants and flow of information in the process. It clouds accountability by sharing all
the information and increasing decision making by parties other than the accountable party.
Industry shows the profit margin of contractors at 2 – 5%, while the change order rate is
between 5 – 10 % (Adrian, 2001). Production of construction workers is in a downward
trend, the only industry to show a decreasing performance (Adrian, 2001; HC&O, 2004).
Deductive logic identifies the task of client’s representatives validating, managing and
controlling the contractor’s cost under these conditions as a transaction. It adds very little
value and results in poor performance. Even if the task is identified as a very important
function of client’s management and quality surveyors, it is nevertheless a reactive,
inefficient transaction.
4.2 Test Results of Best Value Environment
The Performance Based Studies Research Group (PBSRG) at Arizona State University, the
home of the International Council for Research and Innovations in Building and
Construction (CIB) W117 Performance Measurement in Construction, has been testing best
value procurement for the last 15 years (600+ tests, $2.3B of delivered services, 98% client
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satisfaction, on time, and minimized contractor generated cost change orders.) Test results
show that in the best value environment, the following characteristics are evident when
compared to the price based environment (Kashiwagi, 2009; PBSRG, 2009):
1. Efficient (up to 90% less CM/PM management required).
2. Performance is very high (98%), making risk negligible.
3. The number one cause of risk, if it occurs, is the client or client’s representative.
4. Contractors make more profit (up to 100% more) without charging more.
5. There is no consistent relationship between performance and increased price.
6. At one test site, over 60% of the awards are made to the submitter with the lowest price.
The best value environment has also been moved outside of the construction industry into
areas of food services, Information Technology (IT) Networking, Professional Services,
and the delivering of commodities ($1.4B of services) (Sullivan, 2009, Kashiwagi, 2009).
PIPS/PIRMS has also been tested in areas where the construction has been based on price,
and minimized change orders and time delays by 50%. The research results show that the
delivery of construction may be no different from other delivery of service or products.
4.3 New Risk Model
A new risk model has been developed that shows a major source of risk in project and
construction management (PM/CM) is the inaccurate expectations and decision making by
the client and their representatives (Mselle et al., 2009.) Risk is caused by decision
making, an inaccurate perception of the initial project conditions (requirement in terms of
time and cost, accurate baseline plan on how to meet the requirement) and the client hiring
vendors who do not have the expertise required. Instead of risk being caused by the
vendors, the risk is being generated by the client and client representatives and increased by
hiring nonperforming vendors. As the project proceeds, it becomes more obvious that the
client’s expectations are not being met, and this deviation is called risk and made the
responsibility of the vendor. Thus, instead of managing and controlling risk, the client and
construction manager may actually be creating risk and then increasing the risk by hiring a
nonperforming contractor. The end result is poor project performance. The risk model
proposes that project risk should be minimized at the start by (Mselle et al, 2009):
1. Minimizing decision making.
2. Using vendors who have expertise in understanding both the requirement and the
accomplishing of the requirement.
3. Transferring risk and control to the contractor who can most accurately identify the
requirement and a baseline plan to accomplish the project with minimal deviation.
4. To replace the client’s expectations with the accurate assessment by the expert vendors,
and allowing the experts to self regulate and measure the deviations.
4.4 Quality Assurance/Quality Control
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Concepts of efficiency called quality assurance and quality control have been practiced in
the manufacturing industry for the past 20 years (Deming, 1982.) Quality control is where
the expert workers minimize risk of failure by constantly ensuring quality during the
manufacturing process (Erturul and Aytac, 2009). Quality assurance is where the
management ensures that the workers through their expertise in their job minimize risk of
nonperformance, downtime, and inspection requirements during the manufacturing process
by practicing a structure of quality control (measurement of deviation from the optimal.)
The Corps of Engineers are trying to establish quality control and quality assurance, but are
having difficulty due to the paradigm of client management, control, and direction that they
practice over the vendors (Chong et al., 2007.) These practices can only be done in the best
value environment structure. In the price based award environment, the client’s
construction manager is directing, controlling, and inspecting the price based vendor’s
minimum standard work instead of allowing the vendor to manage their work based on
deviation from a preset baseline plan. Quality assurance is to assure the client that the
contractor has their quality control process or a process whereby the contractor minimizes
deviation from a baseline plan (cost, time, and quality.) Quality control can only be
practiced only by the vendors or contractors. To make this possible, control must be
transferred to the contractor (best value environment.) In the price based environment,
control is not transferred. The client’s representative maintains the control, managing,
directing, and inspecting the contractor’s work (Figure 1).
Deming (1982), the father of quality assurance and quality control, identifies the major
difference between the quality control/assurance approach and the management approach as
the first regulates by minimizing deviation, and the second measures against minimum
standards. The result of using minimum standards is the lowering of quality and the losing
their high quality craftspeople through attrition, and having difficulty in replacing them due
to the lack of requirement for craft-people and managers who have the understanding,
experience, and high quality of work. Over time, on the job training replaces technical
training, and minimal standards replace high quality and ability to preplan work. It also
brings more importance to client management, direction, control and inspection of
contractor’s work. It also makes construction a price based commodity, as there is no
difference in quality and expertise, but is merely an inspected minimum requirement.
4.5 KSM
The Kashiwagi Solution Model (KSM) (Figure 5) is a theoretical model that uses the
change rate of individuals and a two way chart that relates the extremes of characteristics of
people. The KSM uses an extreme comparison between the very visionary, information
using, proactive, fast changing “Type A individual,” and the very shortsighted person, who
has less ability to perceive information to predict the future outcome, reactive, slow
changing “Type C individual.” Extremes are used to make the differential obvious, or
dominant (easy for anyone to see despite different backgrounds and experiences.) A
complete description on the KSM is available in the textbook “A Revolutionary Approach
to Project Management and Risk Minimization” (Kashiwagi, 2009.)
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Figure 5. Rate of Change and KSM Example (Kashiwagi, 2009)
The objective of the KSM is to identify which characteristics are on the top side or related
more to the “Type A” than the “Type C.” The opposite characteristic is then identified with
the “Type C” individual. For example, by definition, the “Type A” characteristic is “use
information,” the Type “C” characteristic is “not to use information) (Figure 5). Another
characteristic is “control.” The Type “A” individual knows that there is no evidence that an
individual can control another individual. However, individuals without the experience and
information, try to control other individuals. There is no evidence of success of this model
in any industry, while the failure of this perception can be found in world history, our
criminal system, rehabilitation programs, and other attempts to change and control other
people (Kashiwagi, J, 2008, Deming, 1982.) A third characteristic is decision making.
Type “A” individuals realize that decision making takes place in the absence of
information, and decision making has never been as successful as using information
(Snijders et al., 2003). Type “C” individuals perceive decision making as a use a major use
of expertise and their professionalism. A major practice of Type “A” individuals who are
efficient is delegating the responsibility to the lowest levels, where experts can apply
information to minimize risk and decision making (Deming, 1982.)
4.6 Future Roles of Client Construction/Project Managers, and Quantity Surveyors
The future role of the client’s professional will align with the best value environment
(Chong et al., 2008; Kashiwagi, 2009):
1. Doing quality assurance and not quality control functions.
2. Using performance measurements of vendors during selection, construction, and after
the project is completed.
3. Proactive by running best value procurement on designers and contractors.
4. Using alignment and not management, direction, and control of vendors.
5. Minimization of the flow of information to dominant information that measures
performance and forces vendor accountability.
The future role of the client’s professionals (CM/PM) will move toward quality assurance
(non-technical) and away from the technical management (quality control.) Along with this
transformation will come the realization that the “perceived value” that they were providing
in doing management, control, and direction is inefficient and one of the sources of
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construction nonperformance. The concept of using a set of drawings and specifications is
still needed in the design-bid-build process, but the assumption that the client’s professional
can efficiently prequalify contractors, manage and direct them, and deliver construction
effectively and efficiently is not logical and will be exposed as inefficient.
Figure 6. PIPS/PIRMS Closed Loop Structure
Using the above theoretical discussion, the future CM/PM model will require a structure
that allows the CM/PM function to perform quality assurance (QA) and force the
contractors and vendors to do quality control (QC.) The authors are proposing that the
Performance Information Procurement System (PIPS) and the Performance Information
Risk Management System (PIRMS), which have been tested together or separately, meet
the above requirements, and has proven very successful in tests over the last 15 years. PIPS
has three phases: selection, pre-award and preplanning, and risk management. The closed
loop structure is shown in Figure 6. PIRMS uses a weekly risk report (WRR) and a risk
management plan (RMP), that becomes a documentation of all project deviations (Pauli et
al., 2007). The WRR and RMP (QA) ensure a QC is being implemented.
4.7 University of Botswana Is the Implementor
The FS proposed that the UB would be the only vehicle to facilitate the change in Botswana
due to the required change in paradigm, the redefinition of roles of the industry participants,
and the university is the only group without a biased agenda and the capability to develop
and implement a theoretically based concept. The FS accomplished the following to start
the change (Mselle et al., 2009):
1. Set up three major groups for testing: the Bank of Botswana, the UB IT department,
and the U.S. Embassy.
2. Set up a group of UB PM Section faculty for implementation.
3. Identified a group of organizations in Botswana who are interested in cooperating with
the research group, potentially running tests in their organizations.
The FS proposed that the Botswana professionals who were trying to solve the problem,
may be an integral part of the problem, and therefore cannot solve the problem due to a
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“conflict of interest.” The professionals are using a highly managed, controlled, directing,
and inspecting approach, which minimizes the impact of high performing vendors, and
confuses the accountability issue if anything does go wrong. The UB will be the
implementor through a research program. The mechanism will be the graduate students
working in partnership with the UB faculty, bringing the projects from their organizations
to the university for testing, and documenting the test and test results. The graduate
students will then become experts in their organizations, slowly changing the culture and
the delivery process.
5 Conclusion and Further Research
Extensive research work has been accomplished to show that the future client construction
management and project management model will be one that utilizes a best value
environment, uses quality assurance and contractor quality control, transfers risk and
control to the contractor and vendors, manages risk by forcing the contractor to minimize
deviation of time, cost, and quality, instead of directing and inspecting based on minimum
standards, and understands that the major source of risk is the client’s inaccurate perception
of the initial conditions. This change in paradigm can only be developed and tested through
universities, who are not a critical part of the current industry structure or paradigm. These
issues in Botswana will be addressed at the University of Botswana (UB) and industry
organizations in Botswana over the next year through research partnerships started this last
year. The testing at the UB will complement testing in the U.S. and the Netherlands.
6 References
Adrian, J.J. (2001), Improving Construction Productivity, Construction Productivity
Newsletter, Vol.12, No 6.
Adeyemi, A., Ssegawa, J., Kashiwagi, D. and Sullivan, K (2009), Botswana Construction
Procurement Process: A New Approach, Fifth International Conference on Construction
in the 21st Century, Istanbul, Turkey (May 20-22, 2009).
Chong, N., Sullivan, K., Egbu, C. and Kashiwagi, D. (2007), The Influence of an
Information Environment on Contractors’ Performance through IDIQ Procurement
delivery, Construction Management and Economics: past, present and future,
University of Reading, United Kingdom, CME25-CD (July 16, 2007).
Chong, N., Sullivan, K., Sullivan, M. and Kashiwagi, D. (2007), Cultural Revolution,
Naval Post-Graduate School (NPS) 4th Annual Acquisition Research Symposium,
Monterey, CA, USA, Panel 15 (May 16, 2007).
Deming, E.W. (1982), Out of the Crisis, Massachusetts, Massachusetts Institute of
Technology.
Erturul, I and Aytac, E. (2009), Construction of quality control charts by using probability
and fuzzy approaches and an application in a textile company, Journal of Intelligent
Manufacturing, London, Apr 2009, Vol. 20, Iss. 2; pg. 139, 11 pgs.
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RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Keneilwe Ntshwene, Jacob Kashiwagi and Dean Kashiwagi, pp 763-774
Goodridge, S., Sullivan, K. and Kashiwagi, D. (2007), Case Study: Minimization of Best
Value Issues in the Procurement of Construction Services at the City of Miami Beach,
COBRA 2007 - Construction and Building Research Conference, Georgia Institute of
Technology, Atlanta, GA, USA, CD-T68 (September, 6, 2007).
Hamel, G. (2007), The Future of Management, Harvard Business School Publishing,
Harvard, Massachusetts.Kashiwagi, D.T., (2009), Best Value. Tempe: Performance
Based Studies Research Group (PBSRG).
HC&O Editor (2004), Survey Reveals Construction Challenges and Trends. HC&O, 3 [1],
pg
Kashiwagi, D., Sullivan, K. and Ssegawa, J. (2008), Movement of the Latest Cutting Edge
Project Management/Delivery Systems to the University of Botswana, First
International Conference on Construction In Developing Countries (ICCIDC–I
“Advancing and Integrating Construction Education, Research & Practice” August 4-
5, 2008, Karachi, Pakistan.
Kashiwagi, J., Sullivan, K., Kashiwagi, D., and Badger, W. (2008), Is Project Management
Alignment or Influence/Control? 4th Scientific Conference on Project Management
(SCPM) & 1st International Project Management Association (IPMA) / Mediterranean
Network (MedNet) Conference on PM Advances, Training & Certification in the
Mediterranean, Chios Island, Greece, pp. 186-191 (May 29-31, 2008).
Michael, J., Sullivan, K. and Kashiwagi, D. (2008), Leadership Based Project Management
Model Tested on Food Services at Arizona State University. 4th Scientific Conference on
Project Management (SCPM) & 1st International Project Management Association
(IPMA) / Mediterranean Network (MedNet) Conference on PM Advances, Training &
Certification in the Mediterranean, Chios Island, Greece, pp. 234-238 (May 29-31,
2008).
Mselle, P., Kashiwagi, J., Kashiwagi, D. and Sullivan, K. (2009), How to Jumpstart a
University of Botswana Project Management Group, Fifth International Conference on
Construction in the 21st Century, Istanbul, Turkey (May 20-22, 2009).
Mselle, P., Muatjetjeja, M., Kashiwagi, J. and Sullivan, K. (2009), US Embassy Botswana:
Research Test of Best Value Procurement, International Conference on People in
Construction, Port Elizabeth, South Africa, (July 12-14, 2009).
Pauli, M., Sullivan, K. and Kashiwagi, D. (2007), Utilization of Risk Management to Show
Value and Increase Competitiveness, COBRA 2007 Construction and Building
Research Conference, Georgia Institute of Technology, Atlanta, GA, USA, CD Track
59 (September 6-7, 2007).
PBSRG (2009), Performance Based Studies Research Group. Retrieved February 23, 2009
from PBSRG Web site: http://pbsrg.com/overview/documented-performance/
Snijders, C., Tazelaar, F., and Batenburg, R. (2003), Electronic decision support for
procurement management: evidence on whether computers can make better
procurement decisions, Journal of Purchasing and Supply Management, 9 (2003) 191-
198.
Sullivan, K., Kashiwagi, J. and Kashiwagi, D. (2009), The Optimizing of Design Delivery
Services for Facility Owners, Unpublished Manuscript.
774
COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
John Lowe, pp 775-783
An analysis of the changing structure of the contractor in the
UK construction sector using New Institutional Economics
John Lowe1
1
School of the Built and Natural Environment,
Glasgow Caledonian University, Glasgow G4 OBA,
Scotland
Email: [email protected]
Abstract:
There have been considerable changes in the organization of the UK construction sector
over the past fifty years. This paper will describe these changes attempt to explain them
in terms of the framework of New Institutional Economics as developed by Oliver
Williamson and others.
This will focus on the procurement interface and also on the supply chain interface as to
how contractors employ subcontractors, suppliers, plant hirers, etc. This analysis will
rely on Williamson’s schema for contracting and will assume that contractors will
organize so as to minimize transaction costs.
Assuming there are no major contractual hazards the default position would be to go for
an unassisted auction market solution. If hazards are present such as uncertainly or
complexity then some contractual safeguards may be employed to protect the
contractor. These safeguards could involve integration along the supply chain or some
form of the form of partnership arrangements such as framework agreements.
It will be shown that UK contractor operated a largely integrated form in the 1950s
dealing with most if not all trades. This gradually evolved to the situation by the 1980s
where the contractors often operated as a management shell with most work being hived
off to subcontractors with work let on an auction market approach.
During the sustained boom in construction output, the contractors sought to secure
commitment from suppliers and subcontractors using partnerships. Some of the current
partnerships of this type may not survive the current recession. A return to unassisted
auction market solutions may suit the main contractors better in the current economic
climate.
Keywords:
Procurement, supply chains, subcontractors, contractual hazards, New Institutional Economics
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1. Introduction
1.1 Objectives of paper
This paper intends to try to explain the changes in the structure of contractors and
subcontractors in construction by reference to the contractual arrangements in place at the time
in question.
The paper will rely on the theoretical framework of New Institutional Economics as
presented by Oliver Williamson (2000). Using this approach of contractual scheme from
Williamson (2000), it will be argued that both the contractual systems and the shape of
the contractor will be determined by economic forces and the level of capacity that the
industry is operating at. The main contracting system has been the dominant structure in
the UK over the period studied.
1.2 The main contracting system
The current system of contracting used for construction throughout the UK and the much of the
world involves having a single main contractor to whom the contract is let. The main contractor
will in most cases sublet part or even all of the work to a number of subcontractors. This
evolved from the previous nineteenth century trade contracting system1 where the project was
procured as a series of trades contractors covering traditional trades such as masonry, carpentry,
plumbing and plastering.
The system developed into one where a dominant or lead contractor would emerge dealing with
the core structural trades. Eventually the lead contractor metamorphosed into a single contractor
while the other trades contractors became subcontractors. The assumption was that the main
contractor would have completed the bulk of the core structural trades. Subcontractors would be
confined to specialized areas such as engineering installations and in some cases the finishing
trades.
Figure 1: below illustrates the relationship between the main stakeholders:
Figure 1: The main contracting system
SUPPLIERS
Supply chain interface
Procurement interface
SUBCONTRACTOR
CLIENT MAIN CONTRACTOR
SUBCONTRACTOR
DESIGN TEAM
The diagram indicates the two contractual interfaces in the process. Analysis of the above might
give some insight into how the structure arose in the first place and how it was likely to evolve
in the future.
1
The trades contracting system continues to be employed in France, Germany, Denmark, Austria and much of
continental Europe and was even used in Scotland until comparatively recently.
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1.3 The Firm as a Governance Structure
The paper will examine the two key contractual interfaces in the process. The first is that
between the client and the main contractor – the procurement interface – while the second is that
between the main contractor and the subcontractors and their suppliers – the supply chain
interface. In both cases, Williamson’s (2000) simple contractual schema is used. This has a first
choice of governance is determined by the variable, h, denoting contractual hazard such as asset
specificity. The second choice is determined by the variable, s, denoting contractual safeguards.
In both cases the decision taken can be seen as reflecting the trade off between the lower
standard costs of basic auction markets with the lower transaction costs (Williamson, 1979)
implicit in the more complex governance systems.
Figure 2: Simple contracting scheme
Source: Williamson (2000)
A (Unassisted market)
h=0
B (Unrelieved hazard)
s=0
h>0
C (Credible
commitment)
Market safeguard
s>0
Administrative
D (Integration)
The assumption here is that an unassisted market will generally provide the cheapest way of
letting the subcontract or the supply agreement unless there are significant transaction costs in
not entering a longer-term commitment.
1. Asset specificity will apply where the resources required to carry out a particular task
are somewhat unique either in terms of the skills needed or the fixed capital assets
employed (plant machinery, etc).
2. Uncertainty in terms of the availability of resources that might encourage firms to
secure supplies by longer-term contractual arrangements.
3. Complexity such that the company will again seek to ensure that they can obtain the
management expertise needed to complete the task. This relates to asset specificity in
that a complex task is more likely to involve asset specificity than a simple task.
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John Lowe, pp 775-783
Where this above hazards apply in most cases either long-term complex contractual
arrangements will be made or the company may seek to use vertical integration to secure the
necessary assets.
In either case the objective is to minimize transaction costs arising through legal disputes,
breakdowns in arrangements, etc. This would also include such issues as costs sunk in fixed
capital investment or staff training specific to a particular client or main contractor.
2. The Procurement Interface
2.1 Vertical Integration
Traditional contractual procurement will be found at Node C or Node D. There is a limited
extent of vertical integration with the roles of contractor and client effectively fused.
The first category concerns speculative development. This is generally found in new house
building and also in office and industrial units. This may be thought of as backward integration
of the contractor into development. Rather than waiting for contracts to be awarded, the
contractor-developer will buy up land and builds houses or units ahead of demand and then sells
or leases them on completion. This enables the contractor to have greater control over their
workload and also to eliminate transaction costs.
The second example is that of direct labour and is generally restricted to the area of repairs and
especially responsive or unplanned maintenance of existing buildings. Sometimes direct labour
organizations engage in planned maintenance or even new build but this is less common. Most
examples of direct labour organizations are found in the local government sector although many
private sector companies – notably Cadbury and ICI – have had sizable works divisions. The
motivation for forward integration by the client is to eliminate transaction costs and to secure
supply. This is particularly the case with small messy repair and responsive maintenance tasks
that are difficult to tender for in the conventional way. In addition such works tend to be less
profitable that new build and speculative work so the client sometimes may have problems
letting such contracts during periods when the construction sector is near to full capacity.
2.2 Credible Commitment
Construction projects may involve a limited degree of asset specificity. For example there may
be a limited number of firms will and able to build the project within the locality (site
specificity). Most construction projects will be characterized by uncertainty and complexity.
There may also be reputational constraints. This will generally eliminate the option of
procurement at Node A in all bar the most basic types of project.
Construction projects have been subject to legal action. The industry has traditionally operated
using lowest price competitive tendering. Often the firm that wins the project is the one who has
made the most mistakes with the tender. A company winning a project under such conditions
and facing a loss will often then scrutinize the contract documentation to find a pretext for a
claim to claw back the lost profit. This led to the culture of claims that was endemic throughout
construction.
Because of the above, construction contracts have evolved to deal with this type of situation.
The main standard contracts used in construction2 over the past fifty years in the UK are
2
Joint Contract Tribunal, GC Works 1, Institution of Civil Engineers Contract, and New Engineering Contract
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sophisticated and provisions for compulsory Arbitration are present. In addition most contracts
include for optional Adjudication to reduce the risk of litigation. This ensures that the
unrelieved hazard at Node B will not apply to most traditional construction projects.
Thus the bulk of traditional construction projects, not subject to forward or backward
integration, covered above will be procured at Node C (Credible commitment).
3 The Supply Chain Interface
3.1 Subcontracting
Applying the same model to the supply chain interface produces very different results. Taking
the contractual safeguard first, while standard subcontract forms are available – for example the
Joint Contract Tribunal form – they are not always used. Main contractor/subcontractor
relations may be dealt with using ad hoc or less sophisticated, maybe one-sided documentation.
The relationship is generally not equal between the parties given the dependence of the
subcontractor on the main contractor for work. There may also be asymmetric information with
the main contractor likely to know more about issues such as the specification and the design of
the project. Extracts from the tender documentation sent to the subcontractor during the bidding
phase frequently missed out key specification clauses.
Each party may have their own ‘standard conditions’ that they will wish to apply to all
transactions. It is not unknown for subcontractors to slip a sheet of standard conditions in with
their tender in the hope that this will ensure the provisions included apply instead of the default
position or common law.
3.2 Hazards in Subcontracting
There are hazards in subcontracting but probably less than for main contracts. There will
certainly be uncertainty and complexity. This will be less than for the main contract as it is
broken down into a number of tasks. The main contractor is more likely to be held responsible if
things go wrong. The will be little or no asset specificity in this case. Plant and equipment used
will not be an issue as all will be available to hire from several sources. Many tasks are likely to
be standardized via the specification.
In cases where highly specialized task are involved, the client and the design team have often
specified the use of a nominated subcontractor to perform the task. This occurs when there is a
reputational constraint. The theory is that the main contractor would not do the work themselves
so the design team would like to nominate exactly who undertook the work. The same
contractual position as for the main contract will apply for nominated subcontractors. The use of
nominated subcontractors has declined over the years.
3.3 Suppliers
The same criteria will apply in the case of suppliers. Materials and components used will
generally be homogenous and covered in the specification. Specialized materials have been
specified in the past using a nominated supplier in response to reputational constraints. The
provisions of the Sale of Goods Act will generally apply to suppliers.
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3.4 Contractual organization
In most cases, the above issues should logically point to Node A (Unassisted market) or Node B
(Unrelieved hazard) for main contractor/subcontractor and contractor/supplier relationships.
However, in the 1950s, most UK contractors were highly integrated, at Node D, employing
operatives in most trades and owning most of the plant they required. There was limited use of
manufactured components or off-site prefabrication with most tasks being undertaken on site
using traditional materials. Components and materials tended to be sourced from builders’
merchants and manufacturers with whom the contractor had a long term working relationship.
3.5 Vertical Disintegration
The response over the next twenty years was vertical disintegration. This took a number of
forms:
1. Subcontracting was increased beyond the traditional services and finishing trades to
cover core structural trades.
2. Plant hire increased in scope with many construction firms hiving off their plant
divisions to form separate plant hire companies. Contractors increasingly relied on hired
plant with only regularly used items being owned by the companies.
3. Labour only subcontracting came in, initially as a tax-saving exercise, as an alternative
approach to employing labour on a self-employment basis. This came into trades such
as bricklaying, traditionally the preserve of the main contractor.
4. Use of ready-mixed increased as the expense of contractors using on-site batching plant.
5. Off-site prefabrication and use of manufactured components were used more at the
expense of traditional building materials.
This process culminated with the emergence of the modern contractor. Essentially this took the
form of a fully vertically disintegrated shell structure. The firm would only employ site
management staff plus head office staff. Subcontractors generally employed all site operatives.
Most supply and subcontract arrangements will be at Node A or Node B.
This brought things almost full circle back to the original trades contracting system with the
work carried out by subcontractors operating on a trade basis and the main contractor reduced to
a management organization. Procurement routes – management contracting and construction
management – emerged to institutionalize this situation.
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4 Recent Developments
4.1 Background
The adversarial model applied and generally it was the subcontractors and suppliers who came
off the worse. Subcontractors were often subjected to one-sided contracts and along with
suppliers could be kept waiting for months if not years for payment.
Inevitably this situation ends up harming all concerned. Companies holding a reputation as
‘subby-bashers’ or who were known as slow payers would be likely to encounter problems. This
would apply to hiring subcontractors on favourable terms or obtain materials at good prices.
Even the site managerial staff were often employed for the duration of the project rather than on
permanent employment terms.
This would be on top of the transaction costs associated with the numerous operations including
materials supply, plant hire, subcontract, and labour employment. These transaction costs will
tend to be more significant as the industry becomes busier. The costs of hiring labour and
employing subcontractors will be higher as the industry nears capacity. Paradoxically the
transaction costs of employing subcontractors can also rise during a slump for the construction
industry. This is because of the increased risk of insolvency on the part of the subcontractors.
Having a subcontractor go bust part way through a project will leave the main contractor with a
substantial transaction cost.
4.2 Decline of Traditional Procurement
The traditional procurement route has declined in importance over the years. The private sector
has increasing gone over to design and build contracts. It is not that different in structure to
traditional procurement except that the design construction functions are fused under the control
of the contractor. This is a form of partial integration but had little effect on the actual
construction process.
The public sector has also shifted away from traditional procurement in most cases towards
design build maintain and operate contracts styled as the Private Finance Initiative (PFI) or
Public Private Partnerships (PPP). This could be seen as integration in that the contractor will
take over traditional client roles such as maintaining and operating the building throughout its
life. The contractor would also assume the developers’ role of raining the finance and ‘renting’
out the facilities to the NHS or the public sector agency concerned. An alternative known as
prime contracting is used for most public sector contracts the above is ruled out. For example it
would not be deemed appropriate for many defence contracts to be let on a PFI/PPP basis.
4.3 Partnering Agreements
On the issue of dealing with subcontractors and suppliers, there have also been major
developments. The key is partnering as a means of getting away from adversarial relationships.
The process was encouraged by two major Government sponsored reports: the Latham Report
(1994) and the Egan Report (1998)
The complimented the emerging area of supply chain management. In this context, supply chain
management has little to do with logistics but is concerned with managing the relationships
between the contractor, subcontractor and suppliers. This is clearly aimed at reducing the
transaction costs involved.
The solution suggested by partnering is that long-term relationships should be encouraged
between the contractor and the supply chain on the basis of cooperation rather than conflict.
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Clearly the culture of the industry will not be changed overnight. Any contractor facing a loss
because of a mistake by one of his subcontractors will usually think of a claim and if necessary
legal action as his first course of action.
As a possible means of transition, the Joint Contract Tribunal has produced a standard form of
subcontract and also a framework agreement. The suggestion is that the parties would sign the
long-term framework agreement and a contract for the first project. Subsequent projects would
involve further contracts. However one the fourth or fifth project the assumption is that the
emphasis should shift from the contract towards the framework agreement as trust is built up.
Other contractual forms in particular the New Engineering Contract has increased in usage
because it has evolved specifically in line with the recommendations of the Latham Report. It is
now the preferred choice for most public sector projects in the UK.
Partnering arrangements are intended to create a long-term agreement that comes close to a joint
venture. This could be seen as a form of vertical integration. Joint ventures are seen as
integration. An example of a joint venture is TransManche Link, a consortium of ten British and
French contractors and five banks that was set up for the purpose of constructing the Channel
Tunnel. The long-term joint venture implicit in partnering can equally be seen as vertical
integration (Monahan, 2006).
This sort of relationship involves a much higher degree of asset specificity. The demands for
higher quality and stronger safety regulations also provide a push towards an element of
integration. The move towards design & build and design build maintain & operate provides a
further incentive.
The fundamental structure of construction firms appears to be clearly influenced by the type of
contracts used. This confirms the suggestion that viewed through the lens of contract; the firm
becomes reconceptualized as a governance structure (Williamson, 2002).
The various pressures on the industry have in turn forced it to a vertically integrated structure
and then to a highly disintegrated structure. Later the pressures appeared to be pushing the
governance structure back towards integration. The first circle appeared to have been
completed.
4.4 The current recession
The signs are that the recession over the last couple of years has slowed down the development
of partnering agreements at the supply chain interface. Indeed there is some evidence, albeit
anecdotal, that contractors are starting to abandon such agreements with a return to lowest
competitive tendering. This corresponds to a move back to Node A or Node B of the
Williamson model above.
The priority has shifted from securing supplies for the short to medium term towards cost
cutting. The likelihood is that an open auction market will come up with a cheaper price in
situations when the construction sector is below capacity. This will not necessarily apply in
situations where the industry is near to capacity (Gardner, 2009).
There are also some shifts at the procurement interface with some clients reverting back to
traditional procurement These trends seems to signify a rolling back of the changes from the
1990s (Latham, 2008). It remains to be seen what will happen after the recession.
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References
Egan Report (1998), Re-thinking construction: the Construction Best Practice
Programme, Department of Trade and Industry, HMSO, London.
Gardiner, J. (2009), ‘Frameworks: will they stay or will they go?’ Building,
http://www.building.co.uk/story.asp?sectioncode=627&storycode=3142727,
viewed: 12/06/2009.
Latham Report (1994), Constructing the team - "The Latham report": Final report of
the government/industry review of procurement and contractual arrangements in
the UK construction industry, Department of the Environment, HMSO, London.
Latham, M. (2008), ‘Bad old days’ Building,
http://www.building.co.uk/story.asp?sectioncode=31&storycode=3128535, viewed:
12/06/2009.
Monaghan, A. (2006), ‘BAA launches 10-year procurement strategy’ Building,
http://www.building.co.uk/story.asp?sectioncode=284&storycode=3073483,
viewed: 12/06/2009.
Williamson, O.E. (1979), ‘Transaction-Cost Economics: The Governance of
Contractual Relations’, Journal of Law and Economics, Volume 22 No 2, pp 233-
261.
Williamson, O.E. (2000), ‘The New Institutional Economics: Taking Stock, Looking
Ahead’, Journal of Economic Literature, Volume XXXVIII, pp 595-613.
Williamson, O.E. (2002), ‘The Theory of the Firm as Governance Structure: From
Choice to Contract’, The Journal of Economic Perspectives, Volume 16, No 3, pp
171-195.
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Nzeni Udumu-Olugu, Henry Onukwube and Abimbola Bakare, pp784-798
Work empowerment as an antecedent to organisational commitment
of architects and quantity surveyors in consultancy firms in Lagos
state, Nigeria
Nnezi Uduma-Olugu1 Henry N. Onukwube 1 and Abimbola T. Bakare 1
1
Faculty of Environmental Sciences,
University of Lagos, Akoka, Yaba, Lagos.
Nigeria.
Email: [email protected]; [email protected]
Abstract:
The realization of the construction projects, involving multiple constituent with conflicting goals,
values and perceptions, often require a dynamic structuring of power among the major actors.
This arises from the mismatch between responsibility and power. A perpetuated power-gap is
then created between the amount of power granted by the position of individuals, teams and
organizations, and that actually required to get their jobs done. This study is set to investigate the
impact of empowerment on organisational commitment amongst architects and quantity
surveyors in consultancy firms in Lagos State. Data were obtained through questionnaire surveys
administered to a population of fifty five architects and forty quantity surveyors in Lagos state.
The data analysis included relative index technique and correlation matrix.The results of the
analysis from the questionnaire survey showed that Work empowerment have significant impact
on Organisational Commitment. It was recommended among others that managers should
formulate and implement empowerment policies that encourage employees to respond to work
related problems.
Keywords: Nigeria. Organisational commitment, Work empowerment.
1 Introduction
Commitment is defined as the relative strength of an individual’s identification with and
involvement in a particular organisation (Mowday et al, 1982).They mentioned three
characteristics of commitment: a belief in and acceptance of the values of the organisation, a
strong willingness to put in effort for the organisation and the desire to remain in the
organisation. These three characteristics show that commitment is not only an attitude, but also a
behaviour. Consistent with this view, Allen and Meyer (1990), defined employee commitment as
the psychological attachment of workers to their work places. Organisational commitment has
emerged as a very important construct in organisational research owing to its relationship with
such important work related constructs as absenteeism, turnover, job satisfaction, job
involvement and leader-subordinate relations (Tett and Meyer, 1993). Commitment to
organisations is positively related to such desirable outcomes as motivation, (Mowday, Steers
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and Porter,1982) and attendance (Mathieu and Zajac,1990) and negatively related to such
outcomes as absenteeism and turnover ( Hackett, 1989).It is believed that motivating and
empowering employees can enhance their productivity, commitment and performance
(Schein,1980).Power-sharing behaviours have been found to significantly relate to project
participants motivation commitment ad performance(Liu and Fang,2006). Power-sharing
behaviours include employee empowerment. M41 (2000), contend that the lamentable
performance record of the construction industry reflects an underutilization of empowerment.
First the empowerment concept is conceptualised as comprising two distinct and complementary
perspectives within a process approach, and thus takes empowerment beyond the traditional view
of power-sharing. Structural empowerment refers to organizational policies, practices and
structures that grant employees greater latitude to make decisions and exert influence regarding
their work (Mills and Ungson, 2003). Legge (1995) submits that it can be viewed in terms of a
power redistribution model, whereby power equalisation produces trust and collaboration.Eylon
and Bamberger (2000), cited access to information, support, resources, knowledge and skill
development, responsibility as empowering as this gives employees greater autonomy in the
performance of their work roles.Sprietzer (1995), described psychological empowerment in
terms of intrinsic task motivation manifested by four dimensions. An employee is then
psychologically empowered when he or she (1) finds meaning in his or her work role (ii) feels
competent with respect to his or her ability and capacity to perform (iii) has a sense of
determination with regard to achieving desired outcomes and (iv) believes that he or she has
impact on the larger work empowerment. Earlier studies of commitment focus on the effect of
commitment on employee turnover(Mowday et al;1982),Lawler et al;(1995),examined the
relationship between commitment and satisfaction of employees and found out like Gallie and
White (1993),that committed employees are more satisfied. Research relating work
empowerment and organisational commitment is limited most especially in the construction
industry, hence the need for this study.
The aim of this study is to establish the effect of work empowerment on organizational
commitment of quantity surveyors and architects in consultancy firms in Lagos State. This will
be achieved through the following objectives:
To establish the level of relationship between organizational commitment variables and
empowerment variables employed by architectural and quantity surveying consultancy
firms in Lagos state, Nigeria.
To determine the impact of work empowerment on organizational commitment of
quantity surveyors and architects in consultancy firms in Lagos State, Nigeria.
To compare the ranking of work empowerment and organisational commitment of quantity
surveyors and architects in consultancy firms in Lagos state, Nigeria.
2 Literature Review
2.1 Characteristics Affecting Organisational Commitment
Mowday et al; (1982), suggest four categories of variables affecting commitment: personal
characteristics, job characteristics, work experiences and structural characteristics that are most
frequently mentioned. Morris et al ;( 1993), observed that personal characteristics do not appear
to play a major role in determining commitment. From many studies it is concluded that job
characteristics are the most important to predict commitment (Gallie and White, 1993).Allen and
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Meyer (1990), found that factors that contribute to job challenge are highly correlated with
commitment. The study carried out on employee involvement in decision making in the
discharge of their duties by Lawler et al;(1995),revealed that when employees at all levels are
given the authority to influence decisions concerning their own work, such high involvement
practices not only help to build employee commitment, but also foster their development.
According to Mowday et al;(1982),decentralization and participation in decision making are the
most important organizational characteristics that influence commitment. Human resource
policies are also considered as an organizational characteristic. Good career prospects and
possibilities for further training and education are found to relate to commitment (Morris et al;
1993).
2.2 Empowerment as a Management Tool
Conger and Kanungo (1988) analysed the management literature on empowerment. They
grouped the studies into three themes, essentially around the relationship of power: 1)
empowering subordinates enhances managerial and organizational effectiveness; 2) as superior
share power and control with their subordinates, organizational effectiveness actually increases;
and 3) empowerment efforts enhance attempts to implement effective teams within the
organization. Based upon this analysis, they defined empowerment as “a process of enhancing
feelings or self-efficacy among organizational members through the identification of conditions
that foster powerlessness and through their removal by both formal organizational practices and
informal techniques of providing efficacy information.
Argyris (1998), however, viewed empowerment in just two capacities. First, empowerment was
examined as a managerial act of power sharing. The person who traditionally possesses power
within the organization actively seeks to give some of that power to the employees at the lower
levels of the organization either by offering them a greater role in decision making or greater
access to information.
Second, empowerment was examined as a means to motivate the employee and increase
employee support for the organization, often through participative management techniques
(Wilkinson, 1997). Lawler et al; (1995), from their research believed that “empowering
individuals may result in higher levels of work satisfaction, organizational commitment, and job
performance” and that “empowerment appears to complement relationships with the immediate
supervisor and co-workers in the determination of commitment and performance. They also
found that empowered employees express more positive expectations, less depression, and more
persistence in their positions. Conger and Kanungo (1988) examine work empowerment as a
relational construct and as a motivational construct. As a relational construct, work
empowerment concerns influences of managerial practices on employee participation.
Empowerment occurs when power of the superior is relinquished to subordinates, and with it
authority and responsibility. The subordinates experience a sense of ownership and control over
their jobs. Sullivan (1994) suggests that a working environment encouraging participation,
mentoring and training has to be created for joint decision making. In essence, empowerment is
similar to the concept of delegation; however, empowerment gives continuous authority in
contrast to temporary authority. Work empowerment refers to the perception of employees on
their power, autonomy and control. Employees feel energized and a sense of control of their
career if they are empowered(Ripley and Ripley, 1992).In such sense, power sustains self-
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determination (Deci, Connell and Ryan, 1989), self-worth (Nielson, 1986) and a belief in self-
efficacy (Bandura, 1997). Thomas and Velthouse (1990) suggested that, as well as self-efficacy,
a sense of impact, meaningfulness and choice are feelings enhanced on successful
implementation of empowerment. Work empowerment is, therefore, multi-dimensional in nature,
involving delegation of power by managers and how individuals perceive and internalise such
power. Liu and Fang (2006), hypothesized that leaders who are able to communicate high
expectations and confidence in their followers would have followers that accept the goals of the
leader, attempt to contribute to the organization, and “strive to meet specific and challenging
performance standards”. Thomas and Velthouse (1990) believed that empowered employees
demonstrate flexibility in controlling their own tasks, initiate new task in response to problems or
opportunities, and demonstrate resiliency to obstacles, thereby sustaining motivation in the face
of problems or ambiguity.
3 Research Methodology
A questionnaire survey was used to determine the opinion of architects and quantity surveyors in
consultancy firms in Lagos state, Nigeria, regarding the impact of work empowerment on
organisational commitment of architects and quantity surveyors in consultancy firms. The design
of the questionnaire was based on a combination of an extensive review of literature dealing with
work empowerment and organisational commitment. Using a stratified sampling technique the
questionnaires were distributed to 60 architects and 60 quantity surveyors. Data for the
respondents were obtained by probabilistic sampling technique because the population is
defined. Overall, 55 architects and 40 quantity surveyors returned completed questionnaires in a
usable format.
4 Findings and Discussion
To determine the level of relationship between work empowerment and organisational
commitment of Architects and Quantity Surveyors in consultancy firms in Lagos state, Nigeria, a
correlation matrix was computed with work empowerment and organisational commitment
variables. The variables are listed below:
Organisational commitment variables
V1 = Employees perception of organisational importance
V2 = My attachment to the organisation is due to their value perception
V3 = Organisational values influences my personal values
V4 = I am proud to market my organisation to others
V5 = In this organisation I have a sense of ownership
V6 = I maximize my effort to produce result on my job
V7 = I make personal sacrifice for my organisation beyond normal expectation
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V8 = I accept my organisations problems as mine
Work empowerment variables
V9 = I have much access to information
V10= The level of support I get in my organisation is adequate
V11= I have the ability to make decisions relevant to my job
V12= The level of authority given to me in my place of work is adequate
V13= The responsibility attached to my job is challenging
V14= My level of self determination at work is adequate
V15= My level of influence on what happens in my office is adequate
V16=The level of control I have on what happens in my office is adequate
Bivariate Pearson correlations between organisational commitment and empowerment variables
are shown in Table 1. As the table shows, employees perception of organisational importance
(v1) is significantly related to the level of authority given to quantity surveyors to discharge their
duties in their work place (v12), (r= 0.427, p = 0.01).This result is in agreement with previous
studies done by Wilkinson (1997) and Lawler et al;(1995).The practical implication of this result
is that by empowering employees through enhanced authority their commitment to their
organisation will also increase. My attachment to the organisation is due to their value perception
(v2) is significantly related to giving adequate authority to the employee (v12) and employees self
determination at work (v14).Their respective correlation coefficients and p-values are:( r= .541,p
= 0.01) and (r =0.325,p = 0.05).This result agrees with the study done by Conger and
Kanungo(1988) in that by delegating authority to subordinates, which implies sharing power, the
subordinates get more committed to the organisation and this increases organisational
effectiveness. The influence of organisational values on employee values(v3) is significantly
related to employees ability to make decisions relevant to their job(v11),giving adequate authority
to the employee(v12),employees self determination at work(v14) ad having adequate control in my
work role(v16).Their respective correlation coefficients and p-values are r = 0.454, p =0.01), ( r
=0.426, p = 0.01),(r = 0.522, p = 0.01) and (r = 0.367, p = 0.05).This result is supportive of the
work done by Wilkinson(1997) in that the empowerment given to employees through enhanced
authority and control resulted in employees aligning their values with organisational values.
Marketing my organisation to others(v4) is significantly related to employees access to
information(v9), giving the employee adequate support in the organisation(v10),employees ability
to make decisions relevant to their job(v11),giving the employee challenging
responsibility(v13),giving employees opportunity to influence their work role(v15) and having
adequate control in my work role(v16).Their respective correlation coefficients and p-values are :
(r = 0.328, p = 0.05),(r = 0.361, p = 0.05),( r = 0.498, p = 0.01),( r = 0.346, p = 0.05),( r = 0.495,
p = 0.01) and( r = 0.593, p = 0.01). This result is consistent with the views expressed by Lawler
et al ;( 1995).
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Table 1: The Relationship between Work Empowerment and Organisational Commitment Variables in Quantity Surveying
Consultancy Firms.
V1 V2 V3 V4 V5 V6 V7 V8 V9 V10 V11 V12 V13 V14 V15 V16
V1
V2 .468**
V3 .356* .400*
V4 .337** .522** .535**
V5 .371* .478** .466** .384*
V6 .360* .467** .368* .382* .513**
V7 -.0.87 0.40 .382* .478** .208 .238
V8 .389* .384* .307 .407** .464** .691** 463**
V9 .109 .131 .238 .328* .397* .411** .452** .546**
V10 .207 .206 .091 .361* .308 .503** .326** .661** .551**
V11 -.020 .167 .454** .498** .202 .274 .702** .540** .462** .396*
V12 .427** .541** .426** .617 .558** .375* .241 .506** .500** .421** .314*
V13 .301 .216 .138 .346* .180 .372* .178 .286 .148 .298 .245 .386*
V14 .209 .325* .522** .711 .217 .234 .569** .373* .299 .219 .693** .512** .257
V15 .049 .277 .133 .495** .199 .318* .561** .585** .598** .579** .589** .508** .561** .472**
V16 .013 .186 .367* .593** .224 .149 718** .497** .563** .516** 723** .537** .275 .735** .772**
*.Correlation is significant at the 0.05 level (2-tailed).
**. Correlation is significant at the 0.01 level (2-tailed)
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Employees sense of ownership in their respective organisation(v5) is significantly related to
employees access to information(v9),giving adequate authority to the employee(v12).Their
respective correlation coefficient and p- values are : ( r = 0.397, p =0.05) and( r = 0.558, p =
0.01).This result is in agreement with the result of the study done by Lawler et al;(1995).In that
by empowering employees through enhanced authority, their believe that they have a future in
the organisation is facilitated. Employees ability to give maximum effort in the discharge of their
duties is significantly related to employees access to information(v9),giving the employee
adequate support in the organisation(v10),giving adequate authority to the employee(v12), giving
the employee challenging responsibility(v13) and giving employees opportunity to influence their
work role(v15).Their respective correlation coefficients and p- values are:( r = 0.411, p =0.01),( r
= 0.503, p = 0.01),( r = 0.375, p = 0.05) and ( r = 0.318, p = 0.05).This result agrees with the
result of previous work done by ( Mowday et al;1982) in that by giving employees access to
information, adequate support and authority, this generates a strong willingness to put in effort
for the success of the organisation.
Extra ordinary sacrifice made by employees for their organization (v7) is significantly related to
employees access to information (v9), giving the employee adequate support in the organization
(v10), employees ability to make decisions relevant to their job (v11), employees self
determination at work (vi14), giving employees opportunity to influence their work role (v15) and
having adequate control in my work role (v16). Their respective correlation coefficients and P –
values are: (r – 0.452, P = 0.01), (r = 0.326, P = 0.01), (r = 0.702, P = 0.01), (r = 0.569, P = 0.01),
(r = 0.561, P = 0.01) and (r = 0718, P = 0.01). This result is consistent with the observation of
Allen and Meyer (1990) in that when employees are psychologically attached to their
organization, such employees can make personal sacrifice for their organization beyond normal
expectation. Personal acceptance of organizations problems by employees (v8) significantly
related to employees access to information (v9), giving employee adequate support in the
organization (v10) employees ability to make decisions relevant to their job (v11), giving adequate
authority to the employee (v12), employee self determination at work (v14), giving employees
opportunity to influence their work role (v15) and having adequate control in my work role (v16).
Their respective correlation coefficients and P – values are: (r = 0.546, P= 0.01), (r = 0.661, P =
0.01), (r = 0.540, P = 0.01), (r = 0.506, P = 0.01), (r = 0373, P = 0.05), (r = 0.585, P = 0.01) and
(r = 0.497, P = 0.01). This result is consistent with the result of the study done by Spreitzer
(1995), because for an employee to take the problems of his or her organization as personal, such
an employee must be psychologically empowered.
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Bivariate Pearson Correlations between organizational commitment and empowerment variables
of architects in consultancy forms are shown in Table 2. As the table shows, employee’s
perception of organizational importance (v1) is significantly related to employees access to
information (v9), giving the employee adequate support in the organization (v10), employees
ability to make decisions relevant to their job (v11), giving adequate authority to the employee
(v12), giving the employee challenging responsibility (v13), giving employees opportunity to
influence their work role (v15) and having adequate control in my work role (v16). Their
respective correlation coefficients and P – values are: (r = 0.452, P = 0.01), (r = 0.474, P = 0.01),
(r = 0.393, P = 0.01), (r = 0.475, P = 0.01), (r = 0.439, P = 0.01), (r = 0.554, P = 0.01) and (r =
0.501, P = 0.01). This result is supportive to the result of study done by Eylon and Bamberger
(2000). In their study they pointed out that access to information and challenging responsibility
are empowering factors that encourage the commitment of employees to their respective
organizations.
My attachment to the organization is due to their value perception (v2) is significantly related to
giving the employee adequate support in the organization (v10), (r = 0.301, P = 0.05). This result
agrees with the outcome of research done by Mills and Ungson (2003). The influence of
organizational values on employees values (v3) is significantly related to employees ability to
make decisions relevant to their job (v11), giving adequate authority to the employee (v12, giving
employees opportunity to influence their work role (v15) and having adequate control in my work
role (v16). Their respective correlation coefficients and P – values are: (r = 0.281, P = 0.05), (r =
0.348, P = 0.05), (r = 0.352, P = 0.05) and (r = 0.283, P = 0.05). This result is in agreement with
the result of the study done by Wilkinson (1997) in that empowerment given to employees
through enhanced authority and control resulted in employees aligning their values with
organizational values.
Marketing of my organization to others (v4) is significantly related to giving the employee
adequate support in the organization (v10), and giving the employee challenging responsibility
(v13). Their respective correlation coefficient and P – values are: (r = 0.291, P = 0.05) and (r =
0.351, P = 0.05). This result is consistent with the views expressed by Lawler et al (1995) in their
study in that that empowerment given to the employees resulted in extreme commitment to their
organization which resulted in their ability to market their organization to others.
Employees sense of workship in their respective organization (v5) is significantly related to
employees ability to make decisions/relevant to their job (v11), giving adequate authority to the
employee (v12), giving the employee challenging responsibility (v13), giving employees
opportunity to influence their work role (v15) and having adequate control in my work role (v16).
Their respective correlation coefficients and P = values are: (r = 0.317, P = 0.05), (r = 0.428, P =
0.01), (r = 0.403, P = 0.01), (r = 0.370, P = 0.01) and (r = 0.293, P = 0.05). This result is in
agreement with the result of study done by Argyris (1998).
Employees ability to give maximum effort in the discharge of their duties in significantly related
to employees access to information (v9), giving the employee adequate support in the
organization (v10), employees ability to make decisions relevant to their job (v11) and employees
self determination at work (v14). Their respective correlation coefficients and P = values are: (r =
0.408, P = 0.01), (r = 0.287, P = 0.05), (r, 0.307, P = 0.01) and (r = 0.465, P = 0.01). This result
is consistent with outcome of the study done by Spreitzer (1995). He pointed out that when an
employee has access to information and is given adequate support, the employee develops self
determination at work and this facilitate the commitment of the employee to the organization.
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Extra ordinary sacrifice made by employees for their organization (v7) related to employees
access to information, giving the employee adequate support in the organization (v10), employees
ability to make decisions relevant to their job (v11) and employees self determination at work
(v14). Their respective correlation coefficients and P – values are: (r = 0.378, P = 0.01), (r =
0.336, P = 0.05), (r = 352, P = 0.05) and (r = 0.376, P = 0.05). This result is consistent with the
observation of Allen and Meyer (1990) in that when employees are psychologically, attached to
their organization, such employees can make personal sacrifice for their organization beyond
normal expectation.
Personal acceptance of organizational problems by employees (V8), Significantly related to
employee access to information (V9), giving employee adequate support in the organization
(V10), employees ability to make decision relevant to their job (V11), giving adequate authority to
the employee (V12), giving the employee challenging responsibility (V13), giving employee
opportunity to influence their work role (V15), and having adequate control in my work role
(V16).
Their respective correlation and P-values are: (r=0.306, p=0.05), (r=0.448, p=0.01), (r=0.308,
p=0.05), (r=0.380, p=0.01), (r=0.460, p=0.01), (r=0.282, p=0.05), (r=0.297, p=0.05). This result
is in agreement with the result of the study done by Spreitzer, (1995). In his study he believed
that access to in formation, giving adequate support and authority as well as challenging
responsibility are factors that guarantee Psychological empowerment of employees and this
ensures commitment of employees to their organization.
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Table 2: The Relationship between Work Empowerment and Organisational Commitment Variables in Architectural
Consultancy Firms.
V1 V2 V3 V4 V5 V6 V7 V8 V9 V10 V11 V12 V13 V14 V15 V16
V1
V2 .141
V3 .262 .183
V4 .377** .137 .253
V5 .429** .100 .525** .509**
V6 .291* .274* -.065 .116 .049
V7 .253 .255 -.052 .103 -.010 .300*
V8 .551** .241 .328* .222 .434** .191 .307*
V9 .452** .266 .109 .151 .140 .408** .378** .306*
V10 .474** .301* .269 .291* .191 .287* .336* .448** .619**
V11 .393** .151 .281* .226 .317* .307* .222 .308* .381** .498**
V12 .475** -.035 .348* .189 .428** .081 .096 .380** .377** .375** .660**
V13 .439** .084 .235 .351* .403** .205 .352* .460** .453** .398** .268 .258
V14 .276 .116 .071 .186 .203 .465** .376* .252 .273* .387** .193 .120 .373**
V15 .554** -.041 .352* .207 .370** .135 -.001 .282* .300* .551** .606** .691** .190 .257
V16 .501** .128 .283* .204 .293* .260 064 .297* .421** .622** 685** .652** .202 .332* .785**
*.Correlation is significant at the 0.05 level (2-tailed).
**. Correlation is significant at the 0.01 level (2-tailed).
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The study hypothesized that empowerment has no impact on organisational commitment of
architects and quantity surveyors in consultancy firms and an alternative hypothesis was
developed to test the hypothesized statement. The result is shown in table 3.
Table 3: The Impact of Work Empowerment on Organisational Commitment of Architects
and Quantity Surveyors
Source Sum of Df Mean Square F Sig
Squares
Between 5590.605 1 5590.605 2226.582 0.000
groups
Within groups 181.646 18 10.091 4.019 0.01
Total 5772.351 19
The result in Table 3 above is represented as F (1, 19) = 2226.582; P < 0.01
The P-value (sig) for the F ratio of 2226.582 is listed as 0.000, which means that it is less than
0.05, therefore H0 which states that work empowerment has no impact on organisational
commitment of architects and quantity surveyors in consultancy firms in Lagos State is rejected
and the alternative hypothesis which states that Work empowerment has impact on
organisational commitment of architects and quantity surveyors in consultancy firms in Lagos
State is accepted.
Table 4: Organisational Commitment variables in Architectural and Quantity Surveying
Consultancy Firms in Lagos state, Nigeria.
Organisational Commitment Q.S Firms Arch Firms
Variables
M.I.S. Rank M.I.S Rank Average Average
M.I.S. Rank
I make personal sacrifice for my 0.81 2 0.77 1 0.79 1
organisation beyond normal
expectation.
I am proud to market my 0.79 3 0.77 1 0.78 2
organisation to others.
I maximize my effort to produce 0.82 1 0.74 3 0.78 2
result on my job.
Employees’ perception of 0.79 3 0.65 8 0.72 4
organisation importance.
In this organisation i have a sense of 0.75 5 0.67 7 0.71 6
ownership.
My attachment to the organisation is 0.71 7 0.68 6 0.70 7
due to their value perception.
Organisational values influence my 0.69 8 0.71 5 0.70 7
personal values.
Average M.I.S 0.76 0.71 0.73
M.I.S = Mean item score
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Table 4 ranks eight important organisational commitment factors of architects and quantity
surveyors in consultancy firms, in Lagos state, Nigeria. While this list is common to the two
groups, the order of importance varies from group to group. These factors will now be discussed
individually.Personal sacrifice for my organisation: personal sacrifice made for my organisation
was ranked as the most important factor when the average of the two groups was computed. This
result is supportive of the work of Van Scotter and Motowidlo (1996). Proud to market my
Organisation to others and employee effort n executing job task. These two factors were ranked
as the second most important factors that must be into consideration by top management as these
actors are antecedents to employees’ commitment. For further details see (Table 4). Quantity
surveyors with an average mean item score of (0.76) is more committed to their organisation
than Architects with mean item score of (0.73).
Table 5: Empowerment variables in Architectural and Quantity Surveying Consultancy
Firms in Lagos state, Nigeria.
Organisational Commitment Q.S Firms Arch Firms
Variables
M.I.S. Rank M.I.S Rank Average Average
M.I.S. Rank
My level of self determination at 0.76 1 0.92 1 0.84 1
work is commendable.
The responsibility attached to my job 0.73 2 0.91 2 0.82 2
is challenging.
The level of support I get in my 0.72 4 0.85 3 0.79 3
organisation is encouraging.
I have the ability to make decisions 0.70 5 0.82 5 0.76 4
relevant to my job.
I have much access to information in 0.68 7 0.83 4 0.75 5
my organisation.
The level of authority given to me 0.73 2 0.74 7 0.74 6
in my place of work is adequate
My level of influence on what 0.69 6 0.75 6 0.72 7
happens in my office is adequate.
The level of control I have is 0.65 8 0.71 8 0.68 8
Commensurate with my position
Average M.I.S 0.71 0.82 0.76
M.I.S = Mean item score
Table 5 indicates eight empowerment factors that were ranked based on the responses of
architects and quantity surveyors in consultancy firms in Lagos state, Nigeria.The ranking of the
two groups differs in some factors and are similar in some factors. The average ranking for the
two groups indicates that self determination of employees with mean item score of (0.84),was
ranked first, this is closely followed by level of responsibility given to the staff with mean item
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score of (0.82).Thirdly ranked is the level of support the staff gets in the office. (For details see
Table 5).
The inference that can be drawn from the values of mean item score of empowerment factors is
that the first two factors are very important factors while the rest are important factors. All the
factors can have a positive influence on commitment of employees to their respective
organisations if used effectively. The average mean item score for architects is (0.82), while that
of quantity surveyors is ( 0.71).This means that architects are more empowered by their various
organisations than quantity surveyors.
Conclusion and Further Research
The study has been able to establish the relationship between Organisational Commitment and
Empowerment variables. Empowerment of employees has a positive influence on their
commitment in their respective organisation. The study suggests that in empowering employees,
policy makers of various architectural and quantity surveying consultancy firms should lay
emphasis on Empowerment variables that are significantly related to organisational commitment
variables. The study only examines architects and quantity surveyors in consultancy firms.
Further studies may examine the impact of empowerment on organisational commitment of
structural engineers and services engineers or other professions within the built environment.
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798
COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Isilay Tekce and Attila Dikbas, pp799-812
Competitiveness in construction: a literature review of
research in construction management journals
Isilay TEKCE1 and Attila DIKBAS1
1
Project Management Centre,
Istanbul Technical University, Ayazaga Kampusu, Istanbul, 34469,
Turkey
Email: [email protected]; [email protected]
Abstract:
Increased competition, customer demands, and higher quality requirements in the global
environment have all forced the construction industry to pay much more attention to the
concept of “competitiveness” over the last three decades. Since its conception,
“competitiveness” has been studied by researchers/ practitioners from a variety of
perspectives using different contexts and methodologies across a wide range of
industries. As a result, there is a substantial body of literature on competitiveness in the
discipline of construction management. This paper analyses the most recent literature on
competitiveness and issues related with the concept published in top-ranked
construction management journals to identify the aspects and features of
competitiveness studied in different contexts. Peer-reviewed articles published in major
construction management journals are included while grey literature has been excluded.
The objective of this research was to examine and classify systematically the literature
dealing with different facets of the construction competitiveness research domain by
using a meta-analysis instrument as methodology. Based on this meta-analysis findings,
the paper maps research trends and identifies gaps in current knowledge for future
research.
Keywords:
Construction Industry, Competitiveness, Literature Review, Meta-analysis.
1 Introduction
“Competitiveness” in construction management has been the subject of considerable
research, especially over the last two decades with the development of a wide variety of
innovative management philosophies, fashionable espoused improvement recipes and
techniques and approaches such as continuous improvement and just-in-time; and
improvements in total quality management concept, business process re-engineering,
and lean construction that have resulted in marginal improvements in construction.
Competitiveness has been adopted as a management or economics idea that is superior
to the traditional economic indicators such as profitability, productivity or market share,
which are seen as being insufficient to enable continuous improvement of performance
(Lu, 2006; Flanagan, 2007). This can be partly explained by the growing trends as
mentioned above.
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In any discipline, academic journals play a vital role because they are the primary
context for communicating and exchanging research experience, shaping educational
programs and assessing academic careers (Pietroforte and Stefani, 2004). Scholarship is
a cumulative concept; no matter what is studied or written, researchers are standing on
someone else’s shoulders and scholars must say something new while connecting it to
what has already been said by others. A systematic process was used to classify the
literature along salient conceptual and research methodological dimensions as part of a
research study.
The historical analysis of mainstream academic journals’ content can show patterns of
evolution within a discipline, thus enabling assessment of the impact of contributions,
setting more rigorous research efforts, mapping existing areas of research and changes
in a discipline, detecting emerging research topics and patterns of collaboration, and
controlling research policies at a national and institutional level (Pietroforte and Stefani,
2004; Betts and Lansley, 1993).
Within all fields of study there is a need for knowledge of the ways in which an
academic discipline develops and for strategic overview of main dimensions
representing the subject matter and classifications of relevant research methods and
tools. In many disciplines, studies that address these concerns are termed meta-analysis
(Betts and Lansley 1993).
In each academic discipline, there are major journals that have high impact scores
resulting in them receiving the largest number of submissions and which therefore can
be selective in choosing their content. An established refereed academic journal is a
repository of good and novel insights gained from data-based research, scholarly
enquiry, rigorous analysis of experience and careful logical debate about an issue or
phenomenon (Betts and Lansley 1993). As Betts and Lansley (1993) indicated, the
analysis of a large number of papers can reflect important patterns and biases in a
discipline. Also, studies of research patterns can be important indicators for
understanding researchers’ preferences and mainstream themes related with the subject.
In this regard, this paper addresses the following three objectives; a) To assess recent
competitiveness research in construction management journals. b) To map patterns in
the articles that concerned competitiveness against proposed meta-analysis framework
constructs. c) To look at some major issues in competitiveness research literature and
present a structured framework for classification and analysis.
Scholars are also provided with research references to existing studies on
competitiveness in the construction sector. This investigation considered patterns of
published output from peer-reviewed articles in mainstream construction management
journals.
2 Competitiveness Literature: Scope of the Research
“Competitiveness” related research looms large in the field of construction
management discipline, yet there have been few traditional literature reviews only
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Isilay Tekce and Attila Dikbas, pp799-812
addressing competitiveness-related issues and which do not address aspects and features
of competitiveness studied in different contexts.
Since Porter’s landmark book “Competitive Strategy” was first published in 1980, the
word ‘competitiveness’ quickly gained popularity and has become common parlance
both in business and in research (Flanagan et al., 2007).
Different interpretations (taxonomic, empiricist, nominalist) of competitiveness and
competitive strategies have been adopted and adapted from the strategic management
research area. The paradigm’s theoretical propositions have also attracted intense debate
in construction. Also, there are many theories about competitiveness and the related
inter- disciplinary fields of strategy and economics.
This paper sets out not to review the competitiveness literature at length per se, but
rather to contribute to a systematic classification through the presentation and use of a
framework for the categorization of literature linked to the subject of competitiveness.
A recent study (Flanagan et al., 2007) summarized the latest developments in research
on the concept of competitiveness in construction through a comprehensive review that
presented the state-of-the-art development of competitiveness research in construction,
identified research gaps, and proposed new directions for further studies with a special
focus on the different construction industry levels.
Almost every paper on this subject struggles with the definition of competitiveness
(Belkacem, 2002). Some studies handle this by emphasizing measurable,
benchmarkable and improvable dimensions and aspects as characteristics of the concept
(cf. Momaya and Selby, 1998; Shen et al., 2006; Flanagan et al., 2007) and some
propose new perspectives, viewing competitiveness as a set of mutually supporting
discourses that are directly implicated in shaping the reality within which firms, and
actors within firms, operate (Green et al., 2008). Green et al. (2008) advocated an
alternative perspective (a more pluralistic and contextualized perspective) versus the
dominant interpretation of competitiveness as currently mobilized within the
construction management research community. Alternative arguments for understanding
competitiveness and competitive advantage cannot be reviewed and discussed with the
limitations of this paper. More discussion can be found in the foregoing references.
One study was conducted to measure the competitiveness of the construction industry in
three selected countries: UK, Sweden and Finland (Flanagan et al., 2005). Interesting
points were made in this study about different perspectives on competitiveness. Another
research team adopted the same methodology as Flanagan et al. (2005) for the Turkish
construction industry and proposed a research project to the ITU Research Fund. This
literature review is a part of the initial step of this research by means of investigating the
recent literature on competitiveness.
As Flanagan et al. (2007) stated, “competitiveness” has become a hot topic and
consequently a large number of research studies have been published. Also, improving
the construction industry’s competitiveness has long been of interest to the international
construction management research community (Green et al., 2008). There can be little
dispute that “competitiveness” is an area of importance in the field of construction
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Isilay Tekce and Attila Dikbas, pp799-812
management research. Thus, many quantitative and qualitative studies at different levels
have been published. To our knowledge, however, there have been no attempts at
pooling the information from these studies differently from traditional literature
reviews. This meta-study pools information from sources according to determined
inclusion and search criteria, codifies qualitative data and underlying studies that are not
uniform and tries to capture the universe of studies, however, unlike the case with meta-
analysis in medical research and social sciences.
This research study intends to make a disciplined examination of the peer-reviewed
articles published in major construction management journals in order to identify
commonalities and differences in method and/or content and to classify articles within a
pre-determined tentative taxonomy called a meta-analysis framework.
3 Research Methodology
There has been a substantial body of literature on the subject of “competitiveness” and
in the discipline of construction management. In view of the large literature on the
subject, this study includes the most recent literature on the subject published in top-
ranked construction management journals to identify the aspects and features of the
concept studied in different contexts. In order to obtain the most recent research in the
field, the review time frame was limited to a ten year period (1999-2008) of publication.
To ensure higher academic standards, peer-reviewed articles published in six major
construction management journals are included while grey literature has been excluded.
They are analyzed and classified through structured meta-analysis framework
constructs.
3.1 Meta-Analysis
One of the most-used approaches for integrating the findings of quantitative studies is
that of meta-analysis, described by Glass (1976). Glass (1976) uses the term meta-
analysis ‘to refer to the statistical analysis of a large collection of analysis results from
individual studies for the purpose of integrating the findings’. The meta-analysis which
was carried out in this paper is different from Glass (1976)’s definition and can be
defined as a disciplined analysis of published research in order to identify
commonalities and differences in method and/or content, and to classify papers within a
pre-determined taxonomy or to abstract a new taxonomy (Clark, 2000).
Advantages of meta-analysis procedures for reviewing literature include enabling one to
see the "landscape" of a research domain, and identifying focused research questions
while considering statistical significance in perspective. The traditional approach to
literature review is to collect together all that can be reached and to summarize, in
narrative style, the researches and the key points arising from them. Literature reviews
can be more helpful and serve their purpose better if certain procedures are used for
minimizing subjectivity in the process of selecting and reporting findings. In this regard,
as emphasized by Betts and Lansley (1993), an important methodological issue is in
constructing a classification framework for the content and style of papers. The research
method and instrument utilized in this meta-analysis was based on multiple independent
classifications adopted from Betts and Lansley (1993).
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3.2 Establishing Search Strategy and Journals Analysed
The keywords for “searching” were designated as “competitive, competitiveness,
competition” in the keyword and title section of selected journals. These keywords are
widely-known for their use in competitiveness related research in order to represent the
scope of the study. The procedures for retrieving papers were as follows; the journals
were searched with the keywords. There were 52 articles that contained at least one of
the keywords in the default areas. A brief review of the abstracts of these papers was
conducted in order to exclude articles that might have contained the related keywords in
the title but essentially have a non-performance focus.
For instance, some papers had a “competitive, competitiveness, competition” word in
the keywords section but with a less related content (e.g. Liu et al., 2006; Traska, G.,
2007; Bjorn S., 1999) on the subject, while other papers were outside the construction
context (e.g. Chapman and Ward, 2000; Judgev et al., 2007; Chapman et al., 2000) or
related with client innovation issues (e.g. Ivory C., 2000) and therefore could not be
considered as related papers. Additionally, papers published in these journals that were
very closely related to the subject of performance research were taken into consideration
to supplement the literature search even though they were not reached by search
keywords (e.g. Dikmen and Birgonul, 2003).
Table 1: Journals Analysed and Inclusion Criteria
Journals Abbreviation Inclusion criteria
1 Construction Management and CME Harvey et al. (2008), Chau (1997), Björk and
Economics Bröchner (2007)
2 ASCE Journal of Construction JCEM Chau (1997), Björk and Bröchner (2007)
Engineering and Management
3 Engineering Construction and ECAM Harvey et al. (2008), Chau (1997), Björk and
Architectural Management Bröchner (2007)
4 ASCE Journal of Management in JME Chau (1997), Björk and Bröchner (2007)
Engineering
5 International Journal of Project IJPM Chau (1997), Björk and Bröchner (2007)
Management
6 Building Research and BRI Chau (1997), Björk and Bröchner (2007)
Information
In this study, six major construction management journals were considered to map the
development of the body of literature on competitiveness-related research in the
discipline of construction management. The selection of journals was based on the
studies of Chau (1997), who found that these journals had the highest scores for quality,
and Björk and Bröchner (2007), who analysed author attitudes and perceptions of
leading journals in construction management and recommendations of the ABS
Academic Journal Quality Guide (Harvey et al. 2008) (Table 1).
3.3 The Meta-Analysis Framework
The assessment of academic and scientific publications is not a new undertaking
(Pietroforte and Stefani, 2004). Betts and Lansley (1993) asserted that meta-models are
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important for the classification and analysis of a discipline inter-relating different areas
of study and identifying emerging and neglected themes.
Table 2. The Meta-Analysis Framework *Adapted from Betts and Lansley (1993)
Dimensions Criteria Constructs
Level of Analysis* Firm
Industry
Industry /National
Industry/ International
Project
Project/Firm/ Industry
Professional/Individual
Content Research Focus Competition in Construction
Oriented Competitive Bidding/Tendering
Criterions Competitive strategy
Competitive Strategy-Competitive Advantage
Competitiveness in Construction
Measuring Competitiveness
Competitiveness Research
Competitiveness of Contractors
Related Issues and Strategies
to Competitive Advantage
Sources of Information* Reviews
Case Studies
Style
Empirical Data
(Research
Process) Contribution of Article* Framework Building
Oriented General Insights and Descriptions
Criterions Measurement Instrument Development
Model Building
Model/Framework Testing or Fitting
Author (s) Author(s) Name
Oriented
Country of Author(s)’ Affiliation
Criterions
The justification for the use of a meta-model grow out of a theoretical understanding
that the main determinants of the nature of construction management research come
from the multi-disciplinary background, its knowledge bases, the many organisational
levels within the industry, the multiple stages through which projects move in their life-
cycle, the professional differentiation that exists between parts of the sector, and the
distinctions within the types of research process (Betts and Lansley, 1993). The meta-
analysis framework has three dimensions, one concerned with content-oriented
criterions, the second with style (research process) oriented criterions adapted from
Betts and Lansley (1993), and thirdly, author oriented criterions. The use of established
methods and tools was a critical design aspect and lends to the credibility of the meta-
analysis and its contribution to the body of knowledge. Betts and Lansley (1993)
proposed that the content and style dimensions are the two principal means of
characterizing research. In the content-oriented dimension, the first criteria concern the
research focus, which defines the focus of competitiveness research addressed in the
article. The second is the level of analysis, which determines the level where research
takes place. In the style (research process) oriented dimension, the first criteria is the
source of information which indicates the input type of the research where the
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constructs are reviews, case studies, and empirical data. The second is the contribution
of the article determining the outputs of the research. The third is the author-oriented
dimension where the articles analysed through the criteria are the author name and
country of author(s)’ affiliation. The country where the research was undertaken can
provide indicative insights about the contribution of countries and global distribution of
performance related research in construction management. In the move towards
developing the meta-analysis framework dimensions, criteria and constructs, some are
described within the search and analysis process. The meta-analysis framework,
dimensions, criteria and constructs are given in Table 2.
4 Analysis and Results
The results show the analysis of 46 articles published on the competitiveness research
domain in the chosen journals. A total of 46 articles were retrieved and analysed in
terms of structured meta-analysis framework dimensions. Table 3 provides the number
of papers published in each journal according to their publication years. CME published
the most papers on competitiveness-related research.
The chronological distribution of articles shows that there has been a continuous interest
in competitiveness research in the mainstream construction management journals. The
analysis results show that there is a general interest although uneven distribution in the
years indicating that competitiveness research in construction is a well-established
research area in construction management. The analysis reveals a growing interest that
occurred in the first quarter of 2008.
Table 3: Chronological Distribution of Articles on Performance Research
Years
1st Q
Journals
Total
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
CME 1 2 2 1 2 2 2 6 18
JCEM 1 1 2 1 1 6
ECAM 2 1 1 2 1 1 8
JME 1 1 2 4
IJPM 1 1 1 3
BRI 1 1 1 2 2 7
Total 3 5 4 4 8 2 2 5 2 11 46
3.1. Content-Oriented Criterions
The criteria analysed under content-oriented criterions is the level of analysis and
research focus, which is the most diversified (Figure 1). As the analysis reveals, an
important amount of the competitiveness research focus is on competitive bidding/
tendering (28%) and competitiveness of contractors (21%). The number of articles
focusing on competitive bidding/ tendering and competitiveness of contractors is much
greater than the others as an anticipated result of the project-oriented nature of the
construction industry. The contribution of the vast majority of articles with a
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competitive bidding/ tendering focus is their general insights and descriptions, with the
main source of information being empirical data. Groupings between constructs of the
research focus can elicit some valuable insights. For example, competitive strategy,
competitive strategy/competitive advantage constructs can be evaluated together and
this means that articles with a competitive strategy focus (19%) follow most in
frequency the competitive bidding/ tendering and competitiveness of contractors-
focused articles. Related issues and strategies (construction education, strategic
implications of e-commerce, environmental competence, ICT tools, integrated services
and cooperation) to Competitive Advantage also constitute a large portion of the articles
(10%) and are also discussed in depth. Sources of competitiveness (key constructs,
assets and processes) that provide competitive advantage and linkages with performance
were examined in the content of the articles. Competition in Construction, Measuring
Competitiveness, and Competitiveness Research articles attracted less attention. The
low level frequency of this research focus may indicate future research areas.
Competitiveness Research Focus
14
number of articles
12
10
8
6
Total
4
2
0
Competition in
Competitive
Competitive
Competitive
Bidding/Tendering
Contributed/Related
Competitiveness in
Competitiveness of
Competitiveness
Competitiveness
Construction
Strategy-
strategy
Competitive
Construction
Measuring
Strategies to
Contractors
Research
Issues and
research focus
Figure 1: Distribution of Articles by Competitiveness Research Focus
The second criteria of the proposed framework is the level of analysis. Flanagan et al.,
(2007) and Betts and Lansley (1993) proposed different levels (national/industry,
professional/individual, firm/organisation) for the subjected analysis. Also, Buckley et.
al., (1988) proposed national, industry or product for the level of analysis of measures
of competitiveness in their review. Ambastha and Momaya (2004) reviewed
competitiveness-related literature by classifying it at three levels, emphasizing the firm
level in the context of the software industry. The literature review identified that the
firm level has received the maximum attention among the levels. Most of the articles
under different contexts investigated the application of some specific dimension of
competitiveness frameworks or models.
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Distribution of articles by level of analysis
number of articles 30
25
20
15 Total
10
5
0
Project/Firm/
Firm
International
Project
Nation
Professionals
Industry
/Individual
Industry/
Industry
level of analysis
Figure 2: Distribution of articles by level of analysis.
Figure 2 shows the distribution of articles focusing on different levels of analysis. From
the level of analysis, we see that the number of articles focusing on firm level (52%).
The articles with this research focus involve the evaluation and assessment of different
aspects that affect firm level competitiveness. Following this are industry (22%) and
project (15%) level researches. The high contribution for firm and industry level for the
subject concerns is not surprising. Flanagan et al., (2007) stated that research into
competitiveness at industry level is relatively less reported compared to the firm or the
project level. The findings of this investigation partially proved the statement. The
contribution for Industry/International, Project/Firm/Industry, Professionals /Individual
accounts for 2%, 2%, and 4% of the papers, respectively. National level of analysis
attracted less attention. In large part, the level of analysis in the industry level research
studies is more often adopted as an analytical context rather than an entity for
investigating competitiveness. Despite this, country-specific industry competitiveness
investigations were merely using the empirical or descriptive data extracted and sourced
from firms as the subjects of this level.
Another interesting result is that research studies that define competitiveness by using
productivity could not be reached by the investigation in the context of construction
management journals and fall outside the inquiry. This situation mostly arises from the
established search strategy and the timeframe mismatch with the foregoing studies. The
identification of competitiveness-related research focuses was one of the most important
findings of this paper.
3.2. Style (Research Process) Oriented Criterions
In the style dimension, the articles were firstly analysed for their source of information.
The constructs for this criterion were determined as case studies, empirical data and
reviews. 25 articles (54% of the total) used empirical data as their source of information.
A wide variety of techniques were used to collect the data including field surveys,
interviews, secondary data analysis, expert panels, focus groups, field experiments and
multi methods. 9 of the articles (20% of total papers) were classified as case studies and
10 articles (10% of total papers) were based on reviews (Figure 3).
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Distribution of Articles by Sources of Information
30
number of articles 25
20
15 Total
10
5
0
Case Study Case Study, Empirical Data Reviews
Empirical Data
sources of information
Figure 3: Distribution of articles by Sources of Information
The analysis of articles by sources of information revealed that most of the research is
empirical data based. This result is an indication of the integral nature of
competitiveness and measurement. Few of the studies attempt to model testing or
fitting. The second style-oriented construct is the contribution of articles analyzed by
means of their output to the research process (Figure 4). It should be noted that multiple
research methods are also adopted in articles demonstrating the potential complexity in
this area. Contributions related to general insights and descriptions account for 70% of
total papers (32 articles) most of which were empirical data (53%) sourced.
Distribution of Articles by Contribution
35
30
25
20
15 Total
10
5
0
Model/Framework
Framework
Development
Measurement
Testing or Fitting
General Insights
Building
and Descriptions
Instrument
Model Building
Figure 4: Distribution of articles by contribution
Various cross-classifications of the papers reveal other significant associations. For
example, papers pitched at industry, nation, and industry (international) level are most
often based on reviews rather than other sources while those at firm level and project
level are most often based on empirical data. The relationship between the source of
information and contribution is strong. Reviews tend to provide general insights and
descriptions (67%). Empirical data contribute most often to model building, general
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insights and descriptions, and measurement instrument development, whereas 8 articles
(17% of papers) offered model building, mostly arising from the empirical data used.
One remarkable result is that there was only 1 framework building contribution and
only 2 model testing or fitting contributions among the articles analyzed. 3 articles (7%)
were concerned with Measurement Instrument Development based on empirical data.
3.3. Author-Oriented Criterions
The last dimension of the meta-analysis framework proposed is author-oriented
criterions. This analysis generates one of the most remarkable results, showing that the
research on competitiveness in construction is mostly dominated by particular countries.
North America, Europe and Asia Pacific are in the leading position of studies in this
area. Within the Asia Pacific region, more studies were identified from Hong Kong and
Singapore; and in Europe, the UK is far ahead of all others. From the geographical
distribution of the articles (Figure 5) in terms of the location of the authors’ affiliation
for the 46 selected papers, it can be seen that competitiveness research is the focus of
academicians globally.
Geographical Distribution of Competitiveness Research
12 11
number of articles
10 8
8 6
6 5
4
3 Total
4 2 2
2 1 1 1 1 1
0
country
Tu ds
th a n
ng ina
ng
n
a
So gap y
ey
A
Co a ly
lia
UK
ut or
r
ai
ric
US
Si unt
n
Ne Taiw
rk
Ko
ra
Ho Ch
Sp
t
la
I
Af
st
er
Au
h
n
ti
ul
M
e
Th
Figure 5: Geographical Distribution of Competitiveness Research
That the 46 articles analysed involved 60 authors from 16 countries may reflect the fact
that competitiveness is a global phenomenon. This reveals the geographic span of
interest in competitiveness in the construction management community. Research on the
subject has been dominated by authors from the UK, USA, Hong Kong, and Singapore.
Findings also show that contributions were made by countries fairly evenly, with the
exception of the UK, USA, Hong Kong and Singapore. Of the 46 papers, 9 were written
by single authors, 13 by two authors, 18 by three authors, 4 by four authors, 1 by five
authors, and 1 by six authors. In addition, analysis of the data reveals that of 46 articles,
there are 11 articles (24%) that include collaboration in authorship between authors
from different countries. It is clear that more collaboration between authors from
different countries would bring different perspectives and contribute to the improvement
of research in the field. Only 9 papers (20% of the total) were found to have a single
author. This result shows that most of the research is done in collaboration.
Collaboration in research is an essential element for developing a related research area
and also for deepening and widening the research area dimensions and domain. On the
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other hand, in the context of the “competitiveness” phenomenon unique to itself,
benchmarking the practices and lessons learnt from different applications and new
approaches to the concept itself can provide very gainful insights.
Distribution of Articles by Number of Authors
20 18
18
16
number of article
14 13
12
10 9
8
6 Total
4
4
2 1 1
0
1 2 3 4 5 6
number of authors
Figure 6: Distribution of Articles by Number of Authors
5 Conclusion and Further Research
Regarding the meta-analysis framework dimensions, significant findings were reached
in order to identify the trends, research approaches and primary research objectives
focused upon. This study was also an attempt to design a preliminary tentative
taxonomy for competitiveness research in the construction management discipline. As a
result of analysing the content of the articles, it is apparent that some aspects of
competitiveness are examined more than others. To enhance and extend the
competitiveness-related research knowledge base, future research must consider
different aspects of competitiveness in the construction management discipline.
Analysis of the research focus in the articles indicated a dearth of published work on the
topics of competition in construction, competitive strategies, measuring competitiveness
and competitiveness research itself, which are very limited.
Complimenting the large amount of research carried out at the project, firm and industry
levels of analysis, the seldom-investigated Industry/National, Industry/International,
Project/Firm/Industry, Professional/Individual levels of analysis are open to
investigation in a broad manner.
The review reveals that competitiveness-related research is mostly empirical-descriptive
in nature. Research by survey was the dominant method employed and almost all of the
research approaches employed in the empirical articles included in the study can be
characterized as traditional approaches reflecting a positivist orientation tradition within
construction management. This analysis generates one of the most significant results,
showing that the research on competitiveness in construction is mostly dominated by
authors from the UK, USA, Hong Kong, Singapore and China (also authors added
separately under multi-country ).
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The identified shortcomings include a lack of research focused on some specific area of
competitiveness, as indicated in the analysis section, notably, the lack of articles
contributing to framework building, measurement instrument development,
model/framework testing and fitting, system building and the absence of articles relating
to industry (international), nation, and professional/individual levels of analysis. Future
research directions are suggested in order to address the identified shortcomings. This
analysis essentially provides both academics and practitioners with a map of existing
research trends and also points out opportunities for future research. Scholars are also
provided with research references to existing studies on competitiveness in the
construction sector.
The competitive era in the last few decades has created the need for an explicit
management and understanding of competitiveness. Consequently, considerable
research has been undertaken on competitiveness issues at different levels. After the
economic crisis that we have been through, it is obvious that the next hyper-competitive
decade will make competitiveness researches necessarily in the forefront of research
agendas in the construction industry at all levels. The turbulent start of the second
decade of the century has brought new challenges for firms, industries and countries.
Performance and success under these circumstances is demanding new perspectives on
competitiveness.
6 Limitations of the Study
The generalizibility of the study at hand is limited due to the delineation of the research
field. The employed research design focuses only on published articles. Non-published
papers, conference papers or PhD studies for example are not analyzed. For future
research it would be advisable to expand the scope of the research strategy. A broader
scope could provide the tools to nuance the findings of this study or provide insight in
the latest research developments within the field.
7 References
Ambastha A. and Momaya K., (2004) ‘Competitiveness of Firms: Review of Theory,
Frameworks, and Models’, Singapore Management Review, (26)1, 45-60.
Anita M.M. Liu M.M.A., Shuibo Z., Meiyung L., (2006), A framework for assessing
organisational culture of Chinese construction enterprises, Engineering,
Construction and Architectural Management, 13 (4), pp. 327-342.
Belkacem, L. (2002), Meaning and definitions of competitiveness, posting at E-
Conference on Arab Competitiveness, The Arab Planning Institute, Kuwait,
available at www.arab-api.org/ecac/posting_e2.htm (accessed: 16 April 2004).
Betts, M. and Lansley, P. (1993), Construction Management and Economics: a review
of the first ten years. “Construction Management and Economics”, 11(4), 221–45.
Björk B. C. and Bröchner J. (2007), The Value of Construction Management Journals to
Submitting Authors. “Construction Management and Economics 25th Anniversary
Conference”. 16-18 July, 2007 University of Reading. Reading, UK, 8.
Bjorn S., (1999), Sustainable development for industry and society, Building Research
& Information, 27(6), pp 424–430.
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Buckley, P.J., Pass, C.L. and Prescott, K. (1988), Measures of international
competitiveness: a critical survey. Journal of Marketing Management, 4(2), 175–
200.
Chapman, C.B., Ward S.C., Bennell J.A., (2000), Incorporating uncertainty in
competitive bidding, International Journal of Project Management , (18),pp 337-
347.
Chapman C. and Ward S., (2000), Estimation and evaluation of uncertainty: a
minimalist First pass approach, International Journal of Project Management, (18),
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Chau, K. W. (1997), ‘The ranking of construction management journals’, Construction
Management and Economics, 15(4), 387–98.
Clark, R. (2000), http://www.anu.edu.au/people/Roger.Clarke/SOS/DLR.html.
Dikmen I. and Birgonul, T., (2003), Strategic Perspective of Turkish Construction
Companies, Journal of Management in Engineering, 19(1).
Flanagan, R., Jewell, C., Ericsson, S. and Henricsson, J.P.E. (2005) Measuring
Construction Competitiveness in Selected Countries, Final Report, School of
Construction Management and Engineering, the University of Reading.
Flanagan R., Lu W., Shen L. and Jewell C., (2007), ‘Competitiveness in construction: a
critical review of research’ Construction Management and Economics vol.25, 989–
1000
Glass, G. V. (1976), Primary, secondary and meta-analysis of research. “Educational
Researcher”, 5(10), 3–8.
Green, S., Harty, C., Elmualim A. A., Larsen, G. D. and Kao C.C. (2008), ‘On the
discourse of construction competitiveness’, Building Research & Information,
36(5), 426–435.
Harvey C, Morris H, Kelly A. (2008), The Association of Business Schools, Academic
Journal Quality Guide, Journals Classified by Field and Rank.
Ivory C., (2005), The cult of customer responsiveness: is design innovation the price of
a client focused construction industry, Construction Management and Economics
(October 2005) 23, pp 861–870.
Judgev K., Mathur G., Fung T.S., (2007), Project management assets and their
relationship with the project management capability of the firm, International
Journal of Project Management, (25),pp 560–568
Momaya, K. and Selby, K. (1998) International competitivenessof the Canadian
construction industry: a comparison with Japan and the United States. Canadian
Journal of Civil Engineering, 25(4), 640–652.
Lu, W. S. (2006), A system for assessing and communicating contractors’
competitiveness, thesis submitted to the Degree of Doctor of Philosophy in the
Department of Building and Real Estate, the Hong Kong Polytechnic University,
Hong Kong.
Pietroforte, R. and Stefani, T. P. (2004), ASCE Journal of Construction Engineering and
Management: review of the years 1983–2000. “Journal of Construction Engineering
and Management”, 130(3), 440–8.
Shen, L.Y., Lu, W.S. and Yam, C.H.M. (2006), Contractor key competitiveness
indicators: a China study. ASCE Journal of Construction Engineering and
Management, 132(4), 416–24.
Traska, G., (2007), Designing renovation: the building as planning material, Building
Research & Information, 35(1), pp 54–69.
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Nthatisi Khateli and David Root, pp 813-826
Obstinate agents or maturing stewards? The private sector’s
commitment to BEE policy in South African PPPs
Nthatisi Khatleli1 and David Root1
1
University of Cape Town Department of Construction
Economics and Management; Room 5.20, Fifth Level; Centlivres Building; University Avenue
South; Upper Campus; Rondebosch; Cape Town
Email: [email protected]; [email protected]
Abstract:
South Africa’s Black Economic Empowerment (BEE) policy, largely depends on the
previously privileged white-owned companies for its implementation due to practical
exigencies. This arrangement requires the government to adopt a management disposition
consistent with principal agent (PA) theory. The major tenet of PA theory is that the agent
cannot be completely trusted; a pertinent tenet in a country with a history of insitutionalized
racial economic policy. It could rationally be assumed that psychological factors could
predispose most traditionally white-owned main contractors (agents) who lead PPP
consortia to be resistant to BEE. However it is shown in this research that these agents can
transcend their own self-interests, and resolve their internal inter-motivational conflicts and
align their motives with the government’s (principal) for greater positive externalities
associated with trusted stewards.
With trust at the centre of contractual relationships, the principal steward (PS) theory
differs fundamentally to PA theory in the level of trust bestowed on the agent. Stewards can
be ‘trusted’ and given a degree of managerial discretion, particularly where target
adherence has been demonstrated through a long-term interaction with the principal.
Although trust is not the default position adopted by the government (principal), it is
demonstrated through a PPP case study that consortia can have mutually beneficial
transcendental motives which are not purely utility maximizing. This paper demonstrates
that agents in PPPs, as a result of pre- and post-contractual interactions are able to evolve
and adopt a posture more akin to a trusted steward on BEE implementation, and thereby
provides insights for policy-makers and practitioners on the utility of PPPs in delivering
socio-economic benefits.
Keywords:
Trust, Black Economic Empowerment, Principal Agent Theory, Principal Steward Theory,
transcendental motives
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Nthatisi Khateli and David Root, pp 813-826
1 Introduction
Black Economic Empowerment (BEE) is an overarching economic transformation policy,
which seeks to reverse 350 years of economic marginalisation of the black population in
South Africa, which began with the dispossession and dislocation of the indigenous
Khoikhoi inhabitants by the Dutch Cape settlers. The need for more labour in the new
colony led to the importation of slaves from South East Asia. The inland penetration by
European settlers resulted in the coercive removals of African inhabitants from most fertile
lands and the abrogation of all independent black polities in the sub-continent (Worden,
2007).
After wining the election in 1994, the ANC adopted BEE as a policy to redress the situation
where a minority white population owned the majority of capital and dominated formal
economic activities. The strategy attempts to alter the racial structural composition of
existing companies and capital ownership in general by opening up opportunities for new
black-owned businesses to participate in the formal economy. For example, the government
uses preferential procurement practices which compels the traditionally white-owned main
contractors to subcontract their work packages to ensure the involvement of Affirmable
Business Enterprises (ABEs) (Department of Public Works, 2002). In so doing the
government cedes the empowerment of ABEs to the white-owned private sector creating a
Principal-Agent (PA) relationship in BEE delivery.
In this context the government is the principal and the white-owned main contractor is the
agent. Wherever a Principal-Agent relationship exists there is the possibility of ‘shirking’
on the intent of the contract -“moral hazard” - and/or the risk of a principal picking an
unsuitable agent from the start- “adverse selection”. In the South African construction
sector all contracts incorporate BEE elements, contractors who do not comply are not
eligible to tender for government contracts. Although the requirements for BEE compliance
are extensive there remains a low level of black participation other than at the lowest
entrance level of the industry. This may reflect the PA problem manifesting itself pre-
contractually in various forms of strategic misrepresentation of the true beneficiaries of the
BEE contractual ‘set asides’, or post-contractually through ‘tokenism’, and other forms of
superficial inclusion of black enterprises/individuals in peripheral roles in the execution of
the contract. It is in this context that the Public Private Partnerships (PPPs) have been
identified as a suitable vehicle for delivering BEE; chiefly because their long term nature is
considered to provide an adequate incubatory environment for the ABEs (National
Treasury, 2004).
1.1 Research Overview
Contractual compliance may be induced or it may be voluntary. Where it is induced
monitoring has to be intensive thereby increasing the transaction costs, whilst too much
control and monitoring of a willing agent can “crowd out” his good intentions and stifle any
proactive initiatives during contract execution. The aim of this study is to see if the
mechanisms in the PPP arrangement are adequate to create and maintain an environment
where it is in the best interest of the agent to comply whilst minimising inducements. The
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objectives were to see if the PPPs are suited for skills transfer; whether they provide
sufficient incentives to induce better delivery of BEE and whether the environment created
by the government fosters cooperation and innovation in BEE delivery by the private
sector. As this research is concerned with the nuances of human behaviour, a
phenomenological approach was considered most appropriate to capture the intricacies of
that phenomenon. A case study in a 850-bed referral hospital PPP in Kwazulu Natal –Chief
Albert Luthuli Hospital- was identified and interviews were held with stake-holders from
provincial and local government, leading partners of the consortium and black-owned sub-
contractors working within the consortium.. Although the case was considered to be
extreme in case of its extensive inclusion of the sizable number of sub-contractors and
because it has been running for the last seven years, other studies should follow this one to
confirm the validity of the findings in other settings in order to come up with an all-
encompassing conclusion.
1.2 Research Findings
The principal findings from this research are as follows:
a. Agents in PPPs behave differently than in traditional contracts because of
the strict monitoring regime put in place.
b. Agents adopt steward characteristics towards BEE delivery because it is at
the core of a highly lucrative contract.
c. Agents will still behave opportunistically if they identify loopholes which
they can defend, provided that such behavior does not jeopardize the overall
contract.
d. A friendly but firm stance towards BEE in contractual interactions creates
innovative agents throughout the duration of the project, whose behavior is
depicting an apparent transformation from agents to stewards.
This study will benefit policy makers on the effectiveness and usefulness of PPPs as an
empowerment tool. It will also help inform consortia who are interested in undertaking
PPPs in South Africa of the practicalities of BEE delivery, and the intricacies of dealing
with the government as the principal. It also provides wider lessons where secondary
socio-economic goals are targeted beyond the primary PPP infrastructure provision.
2 Literature Review
Contextual changes at the national and local levels have occasioned transformation around
the world from governance by authority to governance by contract (Slyke, 2007). Given the
practical exigencies of redressing the legacy of Apartheid policy makers in South Africa are
enacting decisions that not only restrict but in many cases remove the government from
direct service provision. Scholars involved in efforts to understand the effectiveness of
market-based alternatives to government provision, have focused on the extent to which
contracts are designed and incentivized to better capitalize on the advantages associated
with contracts emanating open competition (Savas, 2005). Two theories are explored here
to see which one provides a better explanation and utility for the usefulness of PPPs in BEE
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delivery. Both Principal Agent (PA) theory and Steward Agent (SA) theory emphasize
accountability in relationships where one party delegates authority to another. The
‘delegator’ in both theories is the ‘principal’. In the PA theory the delegated party is the
‘agent’ whereas in the PS theory they are referred to as the ‘steward’.
2.1 The Principal Agent Theory
Principal Agent theory, sometimes called ‘agency theory’, is a major theoretical framework
utilized in contracting-out literature (Esenhardt, 1989). The agent is normally contracted
with for reasons of cutting cost and/or his/her superior expertise. Once the decision is made
to hire in expertise both parties agree on the terms and conditions of contract, including
contract processes, deliverables, service level agreements, monitoring and performance-
reporting requirements, remuneration mechanisms and performance penalties (Slyke,
2007).
According to the PA theory, agents are usually motivated by personal goals and focus on
extrinsic tangible rewards, which invariably have a measurable market value (Davis et al,
1997). PA theory views agents and principals as competing utility maximizers and works
on the assumption that actors have bounded rationality and can always act opportunistically
(Eisenhardt, 1989). Williamson describes opportunism as “a lack of candour or honesty in
transaction, to include self-interest with guile” (1975:9). This opportunism reflects the
difficulty and costs involved in monitoring all the activities of the agent. The first
Principal’s problem which is pre-contractual is adverse selection or ‘hidden information’,
and this refers to a situation where an agent has hidden information about his/her ability, or
the true intent in the execution of the contract which may not be congruent with the
principal’s best intentions. After the contract has been entered into the second challenge
facing the principal is moral hazard or “hidden action”, and this is a situation where the
principal cannot ensure whether the agent has put maximum effort in the execution of the
contract (Arrow, 1984).
These two challenges are encapsulated under the problem of information asymmetry that
always bedevils agency relationships, particularly when it favours the agent. When an agent
knows more about the product or service than the principal there is a high risk for the
principal to purchase a product or service of low quality, invariably at variance with the
agreed-upon contractual expectations. The basic tenet of the agency theory is that there is
always a conflict between the power (bureaucratic and political) and budget/wealth-
maximising behaviour of the principal and the utility-maximising behaviour of the agent
(Pastoriza and Arino, 2009). According to PA theory the principal should always adopt a
posture that clearly demonstrates suspicion, because the agent is never to be trusted. To
reduce the uncertainty associated with the unobservability of the agent’s actions, the
principal has to introduce a mix of incentives and sanctions, information systems and
monitoring mechanisms.
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2.2 The Principal Steward Theory
Principal Steward Theory was presented as an alternative to agency theory by Donaldson
and Davis (1991 & 1993) to challenge the prevailing assumption about human motivation
that was derived from PA theory described above. Rather than the pursuit of divergent
personal goals, PS theory assumes that individuals and organizations strive for collectivist
ideals. The theory examines the relationships and behaviours often discounted in
organizational economic theories and could be regarded as a management alternative to PA
theory. Whereas PA theory is always identified as critical to managerial behaviour (Ross,
1987), PS theory can be regarded as its counterweight concentrating on organizational
behaviour and was developed specifically for that purpose (Davies, et al, 1997).
In PS theory a steward places greater value on cooperation over defection and other self-
servicing tendencies, even when his/her own goals are not perfectly realized. This view
differs sharply with the original disposition of PA theory where the intentions of the agent
were never to be trusted. PS proposes that initially the transaction costs for a PS may be
higher compared to a traditional PA relationship (Slyke, 2007). This is because of the
increased investment in time on the part of the principal by involving the steward in
problem formulation, joint decision-making, information exchange and steward’s needs
assessment, in order to achieve a collective management environment with the steward
(ibid).
PS views the steward’s motivation as being driven by intrinsic rewards, such as reciprocity
and mission alignment, rather than solely by extrinsic rewards. In contrast to the agent, the
steward values collective goals over individual goals, in that the steward observes the
success of the organization as his/her own. This portrayal of the steward distinguishes the
two theories as the agent in PA theory is viewed as having extrinsic motivations whereas in
the PS theory stewards motivations are not so easily quantifiable, such as growth,
achievement and duty (Pastoriza and Arino, 2009). This directly affects the way the two are
monitored. Whereas the agent is watched closely, the steward never uses private
information surreptitiously for self-interests but for goal alignment, and as a result he/she is
being monitored less and receives rewards of enhanced reputation and involvement in goal
setting and programme evaluation (Slyke, 2007).
2.3 Monitoring
Monitoring and oversight are integral to PA and PS theories (Lambright, 2009).
2.3.1 Monitoring and the Principal Agent Theory
Both PS and PA depend on the use of monitoring, trust, reputation, incentives and sanctions
in the contract in order to establish goal congruence between the contracting parties. PA
theory suggests that a robust monitoring regime will raise the agent’s productivity and has
to be applied provided the associated transactions costs are low. Although it has its critics
PA has contributed to a better understanding of different aspects of organizational function.
Its traditional proponents assert that its main assumptions can be relaxed given the context,
length of time, programmability of the service/product and the level of cooperation that
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exist between the contracting parties (Eisenhardt, 1989). Principals who provide
unambiguous incentives, like contract renewal and stability, discretion and flexibility in
program implementation, and vigilant monitoring that employs formal and informal
mechanisms would experience less agent opportunism and goal incongruence (ibid.). If
from the onset the principal invests in entrenching lasting contractual relationships in the
proper use of and enforcement of agency mechanism, the potential for enhanced alignment
is increased and over time this could lead to reduced transaction costs. The agent gains by
increasing the trust bestowed on him/her and an enhanced reputation, which could free up
resources previously allocated to meet reporting requirements.
2.3.2 Monitoring and Principal Steward Theory
The PS heavily relies on the significance of the principal’s and steward’s initial trust
disposition, in the belief that trust leads to the realization of collective interests. Trust and
incentives are deployed to achieve alignment, and monitoring is not coercive but is
intended to direct towards a proper relational alignment (Slyke, 2007). The notion of trust,
never considered a virtue in PA theory, is critical in PS theory, because the steward’s
attitude towards the contract is regarded as personal (psychological) rather than purely
economic. Increased monitoring could be perceived by the steward as a lack of trust and
can be demotivating for him/her (Bruno, 1993). Reduced monitoring for fear of creating
the “crowding out effect” dominates when the relationship is personal or psychological,
while the “disciplining effect” of monitoring dominates in the abstract relationship of a
normal PA transaction, which is impersonal in character. The notion of trust has to be
interrogated in order to elucidate the unique characteristic of PS’s lack of rigorous
monitoring.
2.4 Trust
Mayer et al (1995) describe trust as the willingness and risk of being vulnerable, on the part
of both actors, to the possibility that one actor in the contract may pursue his/her own self-
interest to the exclusion of the collectively agreed upon goals of the contract. It is a major
psychological and social process that lies at the root of the development, maintenance,
change or discontinuance of contractual relations (Rousseau, 1995). There are different
types of trusts, but in contracting, strategic trust is a very useful concept as it is based on the
knowledge and experience with the other party and a legitimate mutual expectation of
reciprocity (Slyke, 2007). While the PA theory assumes the agent is always inward looking
and as such can never be trusted, the PS theory assumes that the steward has noble
intentions and can be trusted. Trust is never regarded the default position of principals, but
it is here proposed that this disposition can evolve over time, out of a purely legal
transaction consistent with PA theory, to an involvement-oriented steward-type
relationship.
2.4.1 A Transition From Agents To Stewards
Proponents of either PA or PS theories have deliberately tried to portray them as “one best
way” to the understanding of organizational behaviour (Davis et al, 1997). However a
blending of the two can enrich the understanding of the natural behaviour in reality. Agents
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are not static but can when necessary deviate from an agent position towards being
stewards (ibid).
Under PA theory the ‘model of man’ is a rational, self-interested actor who seeks to
maximize his own utility, and the company is considered a nexus of contracts that are able
to motivate, reward and supervise agent’s efforts (Pastoriza and Arino, 2009). Conversely,
PS theory is humanistic in its approach and does not adopt such simple and reductionist
managerial propositions and as such does not proffer sharp and testable propositions. The
rational economic man of PS theory is ordered such that individual’s behaviour is preceded
by pro-organizational behaviours (Davis et al, 1997). The agent might have higher-order
motivations, better disposition to identify with the objectives of the firm, value commitment
and greater use of personal power as a basis for influencing others to share the firm’s vision
(ibid.). The decision for an agent to make the transition to become a steward is firstly
driven by the interaction both parties to the relationship have. Secondly, the psychological
and cultural background of each party plays a major role in an individual’s choice in
deciding to be either an agent or to transit to become a steward.
What is of interest to researchers in this field is the underlying mechanisms that make an
individual opt towards one position or the other, or to find the role played by psychological
and situational factors in influencing the agent to transcend his/her own self-interests and
resolve internal inter-motivational conflicts. Agents are not naturally altruistic but there are
situations where serving the interests of the principal benefits the agent in the long run and
is good as serving ones own interests (Pastoriza and Arino, 2009). Davis et al (1997)
describes such a situation as where a principal has shown that he/she is also a steward and
reciprocating by the agent results in a PS relationship. But should one of the parties not
reciprocate, then mechanisms are put in place to monitor the behaviour of the other and the
relationship is a typical PA relationship. If the principal is betrayed by a lack of reciprocity
from the agent, the relationship over time develops to a typical PA one as both parties end
up behaving like agents. This places great importance on the initial interactions. In a
situation where the principal behaves like an agent and the agent does show any steward
characteristics, there is a low risk of betrayal, as the principal would have put in place
control measures to curb opportunism.
Pastoriza and Arino, (2009) argue that the preceding argument is static and does not
accommodate the fact that in a choice of agency versus steward relationship, agents are
capable of learning as they interact with the principal throughout time. There are a number
of different elements that influence the choice to become an agent/steward beyond pure
rationality, and the principal plays an important role in that learning process. It is likely in
most contracts that at the first stage PA is the most likely explanation of the behaviour of
the parties, however the transaction cost could decrease due to increased cooperation
between the parties especially as the agent understands the principal’s motives (ibid). This
means the PA theory offers little explanation after the alignment of the interests has been
achieved, because there will emerge benefits that could be associated with PS relationship
as there will be fewer contracts revisions and strict monitoring.
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The dynamics of the interaction between the two parties largely determines how and why
an individual decides to act as an agent or as a steward. According to Patroriza and Arino
(2008), the PA theory relies on rather reductionist assumptions on one hand and on the
other the PS assumptions are too simplistic. Everyone one acts with some degree of
selfishness together with some degree of altruism. It is therefore impossible to find a person
who is purely a steward or purely an agent. The reality is that each person is located on a
continuum (ibid). For any action by the principal (active agent-AA) a reaction is induced in
the agent/steward (reactive agent -RA) and this could lead to one of three results:
Extrinsic results - observable outcomes
Intrinsic results - unobservable outcomes within the AA that comes as a result of
the response of the RA. They are inferable as they affect future decisions of the AA in
relation to RA
Transcendental results – that happen within the RA (whoever he/she may be) as a
result of the AA action. They are identical to intrinsic results but are caused by the other
party.
The intrinsic result is the learning the AA gets in the interaction, whereas the transcendental
result is the learning the interaction produces in the agent. This learning can be operative,
where it is acquiring new skills, or relational where one party learns about the motives and
intentions of the other party as they interact. These interactions reflect the underlying
motivations. Part of the relational learning is to learn about the position on the
agent/steward continuum adopted by the other party. This is because an individual will
consistently make certain decisions because they are interested in an extrinsic result, an
intrinsic result or a transcendental result. Depending on which one they choose they will be
acting out of extrinsic, intrinsic or transcendental motivation. Under normal circumstances
Pastoriza and Arino (2008) argue that any motivation to act is a combination of all three
motivations. Any decision to act more like an agent or steward depends on the relative
weight of the three motivations each person has. Someone with a tendency towards
stewardship will include a good measure of transcendental motivation in their acts. A chain
of actions and reactions between the two parties eventually leads to forging of a contractual
relationship and its position in the agent/steward continuum. If this logic is applied what
started as a steward-agent relationship, will evolve into a steward-steward relationship, if
the principal who behaves as a steward produces positive relational learning in the agent. If
he/she fails it will end up as agent-agent relationship, even though the motivational quality
of the active agent (AA) is towards stewardship, the relationship with the reactive agent
(RA) will essentially be an agency relationship.
It is one thing to abstractly understand the most appropriate attitude but quite another to
embrace it. Because of selfishness it is easier to embrace an agent role whereas being a
steward is difficult. It is spontaneous for an agent to act under a selfish motivation, but to
choose to finally have a transcendental result does not naturally lead to spontaneous
actions. This requires a high level of rationality in thought and action (Pastoriza and Arino,
2009) to understand that there is virtue in pursuing someone else’s goal. Virtuousness is
described by Pastoriza and Arino, (2008), as the “capacity to control the spontaneous
impulse to pursue our own goals, in order to pursue the transcendental results that
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rationality tells us are worthy of pursuing.” Thus two parties who enter a relationship with a
long-term perspective can deviate from their original position as either stewards or agents
as a result of their interaction. In other words agents can learn to become stewards by
repositioning their internal motivation, from extrinsic towards transcendental motives.
3 Research Methodology
A phenomenological approach has been selected for this problem because the study of the
behavior of agents in PPPs settings is fundamentally one of human behavior. As a very
complex dynamic area, human behavior cannot easily be investigated mechanistically with
numerical data derived from observations. The researcher has to be embedded in the
environment of the subjects in order to grasp a deeper meaning of the data and must gain
the perspective of the subjects about aspects of the subject under investigation. The
positivist approach could explain the prevalence of the phenomenon or the frequency of its
occurrence with the assistance of the statistical techniques, but the principal reason for
undertaking this research was to develop a deeper and richer appreciation of the
phenomenon. It was also chiefly to find patterns in the data collected and make appropriate
propositions based on the contextual data and the research subjects’ perspectives. A
qualitative approach was deemed to be best suited to yield the desired results because the
intention is to draw meaning from the research subjects’ perspective and the artifacts found
in their environment. Such an approach is holistic in orientation and treats the phenomenon
as a whole system, as it searches for patterns that lie within the boundaries of the research
environment whereas a positivistic approach would fail to grasp ‘meanings’ that are
embedded in an environment (Filmer et al, 1972).
Grounded Theory approach, emanating from a Case study was adopted for this research.
Glaser and Strauss (1967), and to a great extend Strauss and Corbin (1998 a, 1998b)
emphasize theory generation, through the construction of conceptual categories or
properties from data rather than the other way round. This makes for an inductive approach,
which moves from the specific to the general. According to Glaser (1998) what
distinguishes this method from others is that the theory generated is explicitly emergent, as
it is discovered in the data. The method does not attempt to test a hypothesis, rather is sets
to find out what theory accounts for the research situation as it is. It provides an
understanding of the research situation by discovering the theory implicit in the data.
Grounded theory specifically attempts to investigate the real world mainly through the use
of interviews as the source of data. It does this by discovering concepts ‘grounded’ in the
data. Those concepts ‘grounded’ in the data are used to build theory; this is because data
analysis involves searching for concepts behind the actualities, recorded in the data.
Consequently interviews played a prominent role in this research as it was chiefly people
and their behavior the research was concerned about and that can only be known through
talking to them. Grounded Theory method, originally called ‘constant comparative data
analysis technique’ is useful in creating theory, which addresses the main criticism of ‘lack
of generalizability’ leveled against a case study, were it to be deployed alone in this
inquiry. A case study was used because case studies are the preferred method when the
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‘how’ and ‘why’ questions are being asked, when the researcher has minimal control over
activities and when the main focus of the inquiry is on a contemporary phenomenon in the
real-life every day context (Yin, 1994). The same is also true if there is no strong
theoretical base for the research, i.e. if it is a theory building research project.
This research combines both methods. When precautionary measures are taken to mitigate
weaknesses in these two methods separately, their combined strengths will bolster their
case against their traditional detractors. In other words to have the case study as a main
method, but using grounded theory in the ‘critical case’ to generate theory gives the
‘critical case’ even a wider acceptance. This approach is supported by Allan (2003)
especially where the phenomenal being investigated is a contemporary one in a real-life
context, where the boundaries between phenomena and context are not clear. Such a
situation exists with the phenomenon under investigation in this research.
4 Findings and Discussion
The bulk of data collected for this study was from interviews with members of the PPP
consortium who were involved at the various tiers of the contract. The Albert Luthuli
Hospital PPP is arranged in three tiers. The first tier is for shareholders and has a stipulated
BEE involvement, the second is for the operators who are in charge of major elements of
the hospital and the third is for sub-contractors who are predominantly BEE companies.
The three players at the second tier respectively supply medical equipment, install and
operate all the computer systems, with the third acting as facility manager (FM). The
medical staff in the hospital is directly employed by the government. Because of the high
technical nature of their work the companies who supply medical equipment and computer
networking and imaging were not required to have BEE sub-contractors, but they were
expected to implement employment equity, something they appear to have adhered to
efficiently. The bulk of the BEE sub-contractors were involved in facilities management,
which was divided into soft and hard services. Hard services are engineering works and
maintenance e.g. lifts, sterilizing machines, etc. and soft-services which are sub-contracted
to about 20 companies, range from landscaping, cleaning, catering, pottering, mail delivery,
waste management, security to unique activities such as surgical instruments sterilization.
As would be expected the introduction of BEE policy has faced resistance from white-run
companies resulting in attempts to circumvent its requirements through fronting and
tokenism. The nature of PPPs and the mechanisms leading to contract closure affords the
government a good opportunity to formally articulate their expectations in the delivery of
BEE. The key requirements of delivery are: black equity involvement, black management
control of the consortium, black involvement in operational sub-contracting and local
socio-economic benefits. From the interviews it was clear that the government was very
clear and serious from the onset about BEE, and despite attempts to relegate it as a side-
issue, the government insisted on its centrality to the contract.
During the early days of operation a lot of tensions and conflicts existed between BEE sub-
contractors and main consortium players requiring government intervention, however all
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the sub-contractors affirmed a much improved working environment. The size of the
project and the financial benefits to be gained in the long term persuaded the main players
in the consortium, to be accommodating to this key requirement of the client (government),
and clearly attested to their willingness to be involved in similar schemes. There was
evidence of proactive attitudes towards BEE, in the entire project at Albert Luthuli hospital.
For instance the FM operator is in the process of making all the sub-contractors’ staff
computer literate at the operator’s own expense. There are regular training courses to
improve the professionalism of staff and relevant players from the BEE companies are
encouraged to attend.
The main FM Company shares their facilities and office space with the co-managing BEE
Company facilitating skills transfer. All the managers of BEE companies commended the
working environment at the hospital as conducive to their professional growth, and of
improved working conditions with the main contractor. One person who started working
for a BEE sub-contractor when the hospital opened in 2002, and left for another job with a
private hospital operator 3 years ago has returned because the other operator’s environment
was much less accommodating to BEE beneficiaries. Most BEE sub-contractor managers
said that when they leave Albert Luthuli hospital they would like to get financial assistance
in order to start their own business. Although the professional standards at Albert Luthuli
are very high and demanding, all of them said the monitors and supervisor from the main
FM contractor are proactive, friendly and helpful in building their careers.
The government officials interviewed clearly demonstrated a lack of trust in the consortium
on BEE, but due to high mobility of staff at the government and limited resources, the
monitoring of BEE had not been to the standard and extent that they expected. However
due to the fact that the contract is self-monitoring and there has not yet been any major
complaint on BEE, they are busy trying to rectify their monitoring and dedicating a
completely new monitoring office for the project. On the other hand the agent on the
ground has made strides in improving and delivering BEE. Although initially not wholly
committed to BEE, after negotiations, and ironing out of the early practical and operational
problems on BEE they have clearly improved their position on BEE and show tendencies
consistent with stewards even amidst a deteriorating government’s monitoring regime.
Poignantly it was stressed by most of them that any major default is unwelcome as the
contract is currently half-way through its 15 years tenure, and all of them mentioned that
they considered this to be one of their most lucrative contracts and would want to be
involved in any possible extension.
4.1 Theoretical Explanation Of The Findings
According to Eisenhardt (1989) PA assumption can be relaxed given the context, length of
time and the level of cooperation between the contracting parties. That enables the
transaction costs involved in monitoring the agent to be reduced. In this case the monitoring
regime was relaxed through lack of capacity and high staff turnover in the government but
regardless of the intent, it would appear that the contract has evolved from a classic PA
situation into relationship akin to PS. What was found in this project was that the PPP (and
PPPs generally) invested heavily in pre-contractual interaction, through RFP, RFQs and
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negotiations before contract closure. This gives the agent a clear picture of what is expected
of him/her. Rigorous monitoring with an uncooperative agent might not necessarily
improve contract delivery, but investing in entrenching a good contractual relationship
which is viable for both enhances the agent’s productivity because ultimately agents are in
it for the money.
Although the PS theory asserts that the initial disposition of parties should be of trust, there
does not seem to have been any trust between the Albert Luthuli contracting parties. What
brought about alignment of the parties on the issue of BEE was the government’s insistence
on its undiluted execution, and the realization by the consortium that compromising it
would jeopardize a lucrative business opportunity. Rather than wait for punitive
government measures they adopted innovative solutions and initiatives of implementation
to avoid being “crowded out” by contract revisions. Although the early post-contractual
interactions were acrimonious they have helped in assisting the agent to adopt
transcendental motivations. These specifically, have given the FM operator a posture more
akin to a steward than an agent, although this is not purely a case of either or, the
consortium is at any rate generally behaving more like a steward in a agent/steward
continuum. This is manifested through consistent and improving compliance despite a
deteriorating government monitoring regimen.
The results seem to be consistent with those of Pastoriza and Arino (2008) who discount
the pure PA and PS dispositions as being static and narrow views of the behavior of
agents/stewards. Nobody is purely a steward or an agent, and there is always a mixture of
altruism and selfishness. In business that selfishness could be maximizing profits, and the
consortia’s initial reluctance to accommodate BEE players could be interpreted as an
attempt to do this. Successive interactions have however led to the evolution of the
relationship, and have led to the main contractor becoming increasingly virtuous in their
BEE compliance demonstrating a repositioning of their internal motivation from mostly
extrinsic towards transcendental motives.
5 Conclusion and Further Research
The South African exclusive policy of Apartheid led to a skewed development favoring
whites at the expense of the majority of the population. The introduction of BEE depends
on the well-resourced and experienced white companies as a matter of practical exigency,
to impart skills and empower firms run by the previously disadvantaged. With that
approach a lot of covert circumvention in form of fronting and tokenism has bedeviled the
implementation of BEE policy. PPPs were identified by the government as a viable vehicle
for effective implementation of the BEE policy. This research has used the seemingly
conflicting theories of Principal Agent and Principal Steward to establish the effectiveness
of the PPPs in BEE delivery within a case study of a 15-year hospital PPP project that has
been running for 7 years. It was found in the research that although the consortium major
players behaved in a way consistent with agents at the beginning of the project; continuous
interaction with the principal (government) induced an evolution of their posture to that
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more akin of a steward on BEE. This was regarded as a positive sign that the policy is
having beneficial results towards attaining BEE.
It is proposed that the similar study be repeated in other settings and to see if similar
findings are generated, before broader generalizations can be made. If there is consistency
with the findings in this research, this will greatly assist policy-makers in the selection of
PPP consortia and in the adoption of PPPs as suitable and effective vehicles for BEE. This
study will also assist industry players who are keen to enter into the South African PPPs to
know the appropriate theoretical posture that will endear them to the government and
possibly lead to a successful and mutually beneficial contract.
6 References
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Bruno, S.F. (2000), ‘Does Monitoring Increase Work Effort? The rivalry with trust and
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Glaser, B.G. and Strauss, A.L., (1967). The Discovery of Grounded Theory: Strategies for
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Lambright, K.T. (2009), ‘Agency Theory and Beyond: Contracted Providers’ Motivations
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Mayer, R. C., Davis, J. H. and Schoorman. F. D. (1995), ‘An integrative model of
organizational trust’, Academy of Management Review, Volume (20), pp. 709-34
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Nthatisi Khateli and David Root, pp 813-826
National Treasury (2004), ‘The Code of Good Practice for Black Economic Empowerment
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Pastoriza, D. and Arino, M.A., (2008), ‘When Agent Become Stewards: Introducing
learning in the stewardship theory.’ In 1st IESE conference on: Humanising the Firm
and the Management Profession, Barcelona, IESE Business school, June 30-July 2,
2008.
Rousseau, D.M. (1995), Psychological contracts in organization: Understanding written
and unwritten agreements, Thousand Oaks: CA., SAGE Publications.
Savas, E.S. (2005), Privatization in the city: Successes, failures, lessons, Washington, DC.
CQ Press.
Slyke, D.M. (2007), ‘Agents or stewards: using theory to understand the government-
nonprofit social service contracting relationship.’ Journal of Public Administration
Research and Theory, Volume (31), p 157.
Strauss, A., and Corbin, J., (1998a). Basics of Qualitative Research Techniques and
Procedure for Developing Grounded Theory (2nd ed.). Thousand Oaks, CA: Sage
Strauss, A., and Corbin, J., (1998b). ‘Grounded Theory Methodology and Overview’. In
N.K. Denzin and Y.S. Lincoln (Eds), Handbook of Qualitative Research (pp. 158-
183). Thousand Oaks, CA: Sage.
Williamson O.E.(1975) Markets and Hierarchies: Analysis and Antitrust Implications,
New York, Free Press.
Worden, N. (2007), The Making of Modern South Africa: conquest, apartheid, democracy.
3rd ed. Oxford, UK, Blackwell publishing.
Yin, R.K., (1984). The Case Study Method: An annotated bibliography (1983-1984 ed.).
Washington, DC: COSMOS Corporation.
- 826 -
COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Ioanna Keki and Hedley Smyth, pp 827-840
Investigation of market management in construction:
The importance of influence and referral markets in business
development
Ioanna Keki1 and Hedley Smyth1
1
School of Construction and Project Management
Bartlett Faculty of the Built Environment,
University College London, Torrington Place Site, Gower Street, London WC1E 6BT,
United Kingdom
Email: [email protected]; [email protected]
Abstract:
The paper investigates relationship marketing in construction. The conceptual starting
point is provided by the IMP Group’s six markets model: customer, supplier,
recruitment, internal, influence and referral markets. This paper focuses upon influence
and referral markets in a major contractor. A number of relationship marketing
principles are introduced, the most important of which include: (a) repeat business, (b)
the long term value that core customers represent for the contracting business, (c) the
network of relationships within the customer’s decision making unit and (d) the broader
network of relationships for delivering added value. Soliciting customer satisfaction and
loyalty are significant aims. The objectives are to build market share and profitability.
In the current economic context, the strengths and weaknesses of these principles are
considered against short term survival versus long term potential growth. The paper
explores in practice how a contractor can begin to implement these principles by (i)
mapping the key influencers and referrers, (ii) identifying their respective decision
makers, and (iii) harnessing the inter-relationships within the broader network of
external stakeholders and the key internal project stakeholders especially the customers
and supply chain members. These steps provide a basis for improving effective
relationships in business development and for projects.
Keywords:
Business Development, Customers, Influence Market, Referral Market, Relationship
Marketing
1 Introduction
Construction industry has undergone and is undergoing major changes especially
during the last two decades. Changes include fluctuations in demand, more demanding
clients, and fierce competition, also the dynamics of businesses crossing regional or
national borders add a more global dimension (Preece et al, 2009). Economic cycles
have forced most construction enterprises to experience oversupply in relation to
capacity in boom periods and undersupply that leads to fighting for survival during
recession (Skitmore and Smyth, 2007). However, extremes need not be the case for
firms that focus on long-term growth rather, sacrificing short-term profitability to invest
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Ioanna Keki and Hedley Smyth, pp 827-840
in long-term strategic positions. The paradox is that the necessary investment can
increase short-term survival risk if faced by economic shocks to the system. However,
it is possible that the main shocks of the “credit crunch” are now behind the industry.
During the early 1990s, there had been widespread interest about the role that
relationships and networks can play in service marketing practices. The value that can
be added to products or services was making marketing more efficient and effective.
The Industrial Marketing Purchasing (IMP) Group, as cited in Christopher et al (2002,
p.xi-xii) summarized relationship marketing as “a move from functionally based
marketing to cross-functionally based marketing; an approach which addresses six
market domains not just the traditional customer market; and a shift from marketing
activities which emphasize customer acquisition to marketing activities which
emphasize customer retention as well as acquisition”.
The fragmented construction sector has shown little real service differentiation (the
end-product being designed independently), a dominant market position with distinct
competitive advantage only being achieved by investing in intangible valuable assets
that the company owns and seeks to develop. This is motive is self-interested, yet such
market management requires an external focus – increased benefits delivered and
satisfaction received from clients or customers. Too many initiatives have been pursued
on a “something for nothing” basis over the last decade, whereas the economic reality of
a constrained market is that a return is only yielded on an investment. This is tension-
laden when customers will seek to drive down price; yet, sophisticated procurers that
represent 80% of all customer expenditure are interested in improving value for money,
of which price reduction is only one dimension. Investing in intangible assets includes
employees, networks; hence, relationships with industry key players and clients. A
relationship approach to construction project management and also marketing has been
crucial as a means to provide the construction customers with better value for money.
Returns have been higher and projected relationship value considerable (Smyth and
Fitch, 2009).
This paper examines referral and influencer market management by a major UK
contractor, mainly undertaking Civil Engineering projects. The research first addresses
the literature supporting relationship marketing and management as a core competency,
followed by a detailed discussion on the importance of influence and referral markets
for construction business development. The paper presents findings so as part of a two-
year research programme, conducted through a Knowledge Transfer Partnership, which
embodies observation and action research for empirical evaluation and prescriptive
development.
2 Background and Literature Review
Globalisation and current economic forces led many pan-sector senior managers to
seek for core competencies to add value in order to be able to “stay ahead their rivals”
(Mintzberg et al, 2003, p.16). A core competency, such as relationship marketing for
market management, needs to be developed to a sustainable inimitable level in order to
gain a dominant position. Project Management tools and techniques add value through
people, behaviours and most frequently through their relationships. The relationship
approach towards project management helps such core competency development (Pryke
& Smyth, 2007). The relationship approach adds value initially through relational
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Ioanna Keki and Hedley Smyth, pp 827-840
contracting, then transitioning to internally initiated relationship management across
employers, employees, companies, (multi-)organisational teams and ‘project actors’
(Pryke & Smyth, 2007). This can yield direct effectiveness and indirect efficiency gains,
resulting in improved client satisfaction. The recession provides both a major challenge
and an opportunity. History shows in times of economic difficulty and uncertainty it is
the ‘smart’ organisation that emerges as winners by building market share (cf.
Chambers et al, 2009). Investing in relationship marketing and management involves
allocating resources (cf. Wernerfelt, 1984) to facilitate and support:
• Investment in relationships (Ford et al, 2003);
• Identifying a clear view of the value (Ford et al, 2003), especially customer and
project specific value (Smyth and Fitch, 2009);
• Creating new value with individual customers (Gordon, 1998);
• “…identifying and sharing the benefits from this over a lifetime of association”
(Gordon, 1998, p.9);
• Inducing client satisfaction, hence loyal customers and increased repeat orders;
• Higher profit margins and continuous workload (Smyth, 2000), although repeat
business to build market share may be more pertinent in recessive times.
Repeat business induces a steady workload, providing a stable income stream,
reducing risk levels, lowering transaction costs and accelerating the circulation of
working capital to increase the return on capital employed (ROCE). Repeat business
through customer retention builds market share. This contrasts with practice during
periods of economic uncertainty, companies tending to think of the short-term by
cutting investments and reducing costs in order to focus on price on a project-by-project
basis rather than a client basis (Chambers et al, 2009). According to Grönroos price is
never a sustainable advantage, an issue confirmed in construction during the last major
recession in construction (Smyth, 1998; cf. Skitmore and Smyth, 2007).
2.1 IMP Group Stakeholder Market Framework
Networks and developing relationship strength across networks are important
dimensions of relationship marketing – beyond dyadic relationships – covering a range
of commercial stakeholders (Freeman, 1995). The IMP Group developed the six
markets model (Christopher et al, 2002) for application across stakeholders in business-
to-customer and other business-to-business markets. Figure 1 depicts the key
stakeholder markets, five of the markets serving the customer from a dyadic relationship
perspective, on which senior managers should focus to review market performance. The
figure consists of customer, internal, supplier/alliance, recruitment, influence and
referral markets and enterprises should determine which market domains are most
relevant to improving their performance and start developing relevant strong
relationships.
The scope of the research focuses upon customer; referral and influence markets,
but also examines the impact that other stakeholder markets (internal, recruitment and
supplier/alliance) may have on understanding and building relationships with them.
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Ioanna Keki and Hedley Smyth, pp 827-840
Source: Christopher et al, 2002, p.80
Figure 1. IMP’s six stakeholder market model
2.1.1 Referral Markets
Referral is an oral or written action, which effects main contractor selection, usually
word of mouth, sometimes by letter of recommendation or endorsement. Referral
markets are divided into:
1. Customer referrers increase the reputation of the firm and advocate appointment to
other customers.
2. Non-customer (third party) referrers recommend the company to customers:
a. general referrals,
b. reciprocal referrals,
c. incentive-based referrals,
d. staff referrals (Christopher et al, 2002).
2.1.2 Influence Markets
Influence markets are the most diverse range of groups, including shareholders,
financial analysts, stockbrokers, supply chain members, business press and other media,
user, consumer groups, environmentalists and unions. Each of these groups can have
potential influence over the organisation and also over prospective customers and may
vary over time. Most of the time companies need to address the few important influence
groups:
1. Financial and Investor influence markets, especially for organisations listed in the
stock market, non-listed insurance companies and building societies.
2. Environmental influence markets, especially for firms operating in petrochemicals
or mining.
3. Competitors influence market, especially those dominant in their sector.
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Ioanna Keki and Hedley Smyth, pp 827-840
4. Political and Regulatory influence markets crucial for companies working in the
infrastructure or utilities sector.
Design team members can be particularly significant as both referrers and
influencers, requiring a plan to map the actors, build and monitor relationship building.
2.2 Construction Industry facts and needs
Construction has been a traditional, low margin sector. Arising out of collaborative
practices over the last decade, many large construction enterprises have begun looking
for positive service differentiators. To complement procurement drivers, marketing
requires careful planning before selling the services (Preece, 2003). Selling, typically
referred to as Business Development (BD) within construction, is a complex activity
where the number of clients is limited yet typically comprise a range of decision-makers
supported by consultant advisors managing a portfolio of programmes and projects. BD
managers should seek for opportunities for future work that are informed by detailed
information in a stratified manner prior to the invitation for tender submissions in order
to be able to build relationships with preferred consultants (defined by supplier or
customer) and clients. This creates more effective working relationships by reducing
transaction costs and having a deeper understanding of customer expectations,
frequently involving making the tacit explicit, in order to add value and aid project
problem solving. Price remains important, sometimes paramount, yet is not the only
factor and less likely to be the sole or only decisive key to securing business, inducing a
more sophisticated approach to achieving better value for money that is more in line
with other business-to-business (B2B) environments customers experience in other
sectors. Thus, intelligent clients are looking for suppliers or contractors that will offer
them with a bundle of extra benefits that will provide them security and reduce
uncertainty and risk rather than the cheapest price. Whilst initial investment may be
higher, transaction costs are lower, not only for project delivery but for marketing and
BD too. Smyth (2000) claims that it is five times more expensive to secure a new
customer than keep an existing one, while Preece et al (2003) comment that the cost for
retaining satisfied customers is 1/6 of the cost of acquiring new ones.
Marketing and BD includes influencing particular stakeholders, especially if
they are indirectly influencing the buying decision of the client or even directly
referring to the customer. Understanding these markets includes:
• The company aligning with parties that will improve the strike rate, e.g.
preferred design consultants by key clients.
• Preventing the company from becoming too “me orientated” and also bolstering
its image with a reputation for sending benefits outward, rather than as a company that
is only interested in its own bottom line.
• Appreciation is gained, relationships are improved, and company is respected
and acknowledged as an expert in the activity field.
• Building partnerships with people who can get the company to its preferred
clients.
• Iterative evaluation being made to clients, and to referral and influence markets
in terms of value adding to the business. (It should be a cost benefit analysis).
• The Pareto effect concerning customer satisfaction in the construction industry
relies about 80% on intangible assets and only 20% on tangible elements.
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Ioanna Keki and Hedley Smyth, pp 827-840
• Referral and influence markets leading to increases in the size of order book by
managing customer relationships effectively.
• Exploring referrals and influences to suggest future actions to stimulate more
referrals, which lead to repeat business and securing future projects with targeted new
clients.
3 Research Methodology
The research concerns influencer and referral networks for projects, programmes
and sector portfolios; an under-researched area in project markets and in civil
engineering. The research was conducted six months into a two-year Knowledge
Transfer Partnership primarily focusing upon referral and influencer marketing in the
Civil Engineering section of VINCI UK plc. The Knowledge Base Partner, University
College London, pioneered relationship management theory and behavioural codes of
conduct in construction. This action research is for the first time producing consistent
longitudinal data on relationship marketing in construction. Theoretical knowledge and
conceptual principles have been transferred, yet referral and influencer networks are
highly complex, requiring continuity of strategic and tactical competency development
at a fine grain of implementation: spreading and embedding relationship management.
The action research and observation mainly utilised qualitative methods to collect
and analyse company data, reports and semi-structured interviews information. The case
study context is provided by VINCI Construction UK Limited, particularly the Civil
Engineering Division, the current form comprising the 2008 acquisition of Taylor
Woodrow Construction and Norwest Holst that has been part of VINCI for a period,
drawing upon datasets prior to the recent acquisition as well as the current context. The
data primarily comes from internally generated documents and reports, some of which
arose from research team interviews and data collection, plus observation through action
research.
Following a period of initial reporting, especially regarding customer markets
(Smyth and Fitch, 2009), these findings are the first and preliminary findings for referral
and influence markets, covering six months of the two-year period.
4 Findings and Discussion
VINCI Construction UK Ltd was created in January 2009 resulting from the merger
of the civil engineering businesses of former Norwest Holst (NWH) and Taylor
Woodrow (TW). NWH has been part of VINCI SA since 1991. TW was acquired in
September 2008 by the UK branch of VINCI SA, namely VINCI PLC. The integration
process has started in February 2009, including implementation of the IMP six market
framework. Being able to understand and explore the dynamics of referral and influence
markets, it was first necessary to understand the internal politics in the Civil
Engineering division and the level of integration of the BD team internally and also with
cross-functional operations. New BD needs were identified, reviewing customer
strategies and relationships in the light of current integration of the BD team:
- Understanding attitudes, behaviours, strengths and weaknesses of the BD team.
- Implementation gaps analysis marketing strategy-cum-processes and BD practice.
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Ioanna Keki and Hedley Smyth, pp 827-840
- Appraising office variability in conduct and performance in practice on its ‘own terms’
and conceptually filtered through the literature.
A relationship approach for adding value began in TW prior to acquisition. VINCI
SA accommodated the approach being interested to learn lessons. The Marketing Plan
for Civil Engineering stresses the relationship marketing in applying the mission, vision
and values of the company, that is, to “be the preferred civil engineering contractor for
our clients to be the benchmark against which competitors are measured”. Relationship
marketing is being used to come closer to customers and offer added value high quality
differentiated services to induce customer satisfaction.
Recent feedback from a major rail sector client confirms the strategic mission is
inculcating everyday practice, while feedback to the MD from customers is that the
procedures and processes used on site with VINCI Construction UK are now required as
standard for other subcontractors and competitors in other rail projects. Hence, the
vision of the company, namely “exceed the expectations of all stakeholders”, is being
communicated across the company and to the broader network of customers and
stakeholders. The company has seen early results yet aims to refine and develop its
processes internally, especially across all stakeholder markets. Internal communication
systems and through communication ‘roadshows’ the mission has been clarified through
communication and feedback. It was emphasized that all actors in the construction
industry both company internal and external should be treated in line with the
company’s values in everyday work practice at all levels. Company values are described
as: “Professionalism, Respect, Openness, Fairness, Innovation, Teamwork and Safety”.
These values can be described as behavioural ‘pillars’ for relationship marketing and
management. The latter suggests that the company is beginning to align its orientation
and market position with relationship marketing, recognising the fact that it has still to
become everyday practice in across the whole organisation at all levels.
First stages of the present research included contextually identifying current efforts
towards implementing a relationship marketing strategy, not only at a corporate level,
but also at the individual level. Therefore the general climate and culture amongst BD
team and Divisional Directors and Senior Managers has to be explored, in order to
indentify current needs, identify any gaps and be able to suggest the methodology of
implementing the behavioural code of conduct, which is the final outcome of the present
research which will be completed by December 2010. BD managers have appeared to
be good in building one-to-one relationships, but mainly focussing on specific
opportunities and not B2B, specifically for customer programmes and customers as
represented by their whole programme and project decision making units (DMUs).
Contract and project directors have been really proactive in strengthening relationships
with customers but again some of those network contacts were lost when projects were
completed. Moreover, there was no integrated approach as to what is considered as
value in a customer or referral relationship. Customers and suppliers espouse the
importance of added value without necessarily explicitly articulating the expectations to
be met. On the one hand having trust-openness-honesty and respect are perceived as
important; so are low price, payment on time and general fulfilling ‘hard’ contractual
promises. Sometimes ‘hard’ contractual promises are easier than the ‘soft’ ones made
during pitches and bid stages. The latter finding suggests the need to demonstrate the
effectiveness of relationship marketing to all civil engineering employees and make
them aware that the customers should be the centre of the business, as one project
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Ioanna Keki and Hedley Smyth, pp 827-840
director commented that one competitor is really perceived to be “fighting for the
customer” (Chambers et al, 2009).
How realistic is this type of promise fulfilment to add value in business terms?
Careful research in previous successes and failures has been conducted amongst both
TW and NWH, in order to demonstrate strike rate levels during the last five years of
operation of the two companies in civil engineering projects. Figure 2 is presenting
those results as a comparison of relationship and transactional approach between the
two companies. Success rates for the last five years were approximately 14% on average
for the transactional approach, giving turnover of £455.54m, and 45.63 % on average
for the relationship approach, giving turnover of £713.41m. These figures were
calculated in terms of value of won bids to total value of all bids. NWH has had a
reactive approach to win opportunities that appeared in the market, by responding to
tender invitations. It was transactional, moreover it was conducted according to some
of the employees in a diluted “scatter gun” approach being ill prepared and without
having adequate resource support to win bids. The relationship approach initially
commenced within TW, although it remained more project focussed, was proactive in
by focussing only on specific opportunities and putting all its effort to win as much as
possible by heaving resource commitment from early stages. These opportunities were
approached by careful consideration of the relationships, requirements that were of
particular importance to the customers and raised added value opportunities. Currently,
the integrated company is trying to shift the attention from specific projects or
opportunities to identifying (i) sector growth plans, (ii) identifying key customers
according to their long programmes, and then (iii) selecting which opportunities are of
greater interest for the company both in terms of importance for the client but also in
terms of complexity and possibility to win the bid. Results so far, strongly suggest that
estimating and planning effort is 3.65 times more effective for ‘customer focussed’
relationship marketing (Figure 2).
Comparison of value of won bids (%)
100.00%
Value of won bids/ Total
80.00%
60.00% Relationship
Value (%)
Approach
40.00%
Transactional
20.00% Approach
0.00%
2004 2005 2006 2007 2008
-20.00%
Year
Source: Keki and Smyth, 2009, p.6, Figure 1
Figure 2. Comparison of relationship and transactional approach by bid value
Repeat business was explored using the same sample data of the last five years.
Bids of both companies were collected and analyzed exploring the levels of repeat
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Ioanna Keki and Hedley Smyth, pp 827-840
business or even negotiated contracts. One the one hand the transactional approach
seems to be more scattered towards securing repeat orders, though there was
participation in a few long-term frameworks for specific clients. The results suggest that
repeat business for transactional approach was worth of £163.8m, being 40.21% of total
value of won bids and aiming to serve the needs of 6 clients including both private and
public bodies. On the other hand the relationship approach for the last five years
resulted in total value of £671.79m repeat business, which forms 94.17% of total value
of won bids. The latter was highly concentrated, a result of focussing mainly in the rail
sector and having repeat work for three repeated clients and also in the energy market
by providing work to two major customers. Indicatively it is mentioned that since 2004
when relationship approach was first applied in the rail sector in TW, it has grown from
£40m per year in 2004 to £160m in 2008.
The first stages of identifying and mapping referrals included identifying main
focus groups, which included consultants and supply chain members. This has been
achieved by reviewing the collected data forming the sample of the last five years of
secured bids, in order to indentify repeat collaboration with certain consultants and
potentially link certain consultancies with customers that may have closer relationships
and therefore a higher influence on them. For the transactional approach there were four
different consultancies identified though these consultancies were not used more than
three times. The referral data was extremely partial in NWH, yet this can also be seen as
a reflection of a transactional and project-specific approach to BD. For the case of
relationship approach four consultancies were indentified as having repeat business,
which included one architect specializing in rail projects that has worked with the
company for over than large complex projects and according to BD it has really good
relationship with the company. Another multi-disciplinary consultancy was awarded
about four contracts of total value of £150m. However, soft issues regarding previous
experience with those consultants were different amongst civil engineering personnel,
mainly due to the level of previous service offered by specific teams, a reflection of
consultants also being transactional at times. Some consultant companies were seen as
good by some of the interviewees mainly because of the good teams involved in
previous projects. In other cases, conflict issues, differences in culture and sometimes
dispute resolution plus contract enforcement costs have been a hindrance in developing
relationships further. Under the relationship approach, BD with consultant ties were
frequently developed either wisely in response customer requirements or passively by
being too slow to identify and align with consultants. Moving from a passive to
proactive position requires in the future identifying preferred consultants and sometimes
preferred consultant teams in particular markets for particular customers.
However, a primary issue that arises from this research to date, is that consultants,
trade bodies and supply chain members were not mapped even in an informal list, in
order to mange those relationships effectively. Moreover, by some of the interviewees it
was considered that all those actors are regarded as only source of information about
future customer programmes or projects and not as key decision makers, making
recommendations to prospective clients that are influencing their decision. This research
is now attempting to indentify the power of those actors in influencing customer
decisions and allocating them according to the level of impact they have on company’s
future work and existing customers. In order to develop those referral maps, semi-
structured interviews are to be conducted with selected consultants, mainly those that
are known to be client’s preferred consultants and consultants that have worked with the
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Ioanna Keki and Hedley Smyth, pp 827-840
company frequently in the past, with the view of expanding that group of interviewees
to other network contacts recommending the company for future work. The importance
of having a preferred consultant list for the company and also a referral map is seen as
crucial to help BD managers liaise with consultants when preparing a win strategy for
project opportunities and also to manage referral sources accordingly and bring more
work to the business.
Figure 3 presents the proposed three level mapping of relationships between DMUs
and strategic organisational decision makers, namely organisational level, programme
level and project level. Relationships are also to be mapped “internally within the DMU
of the customer organisation including consultants – lines of internal communication
and joint working” (VINCI Construction UK, 2009b, p.9) and between VINCI
Construction UK Civil Engineering and related DMUs. The DMU provides the primary
focus for relationship development, Figure 3 depicting an idealised multi-organisational
DMU structure for a project or programme.
THE CUSTOMER Strategic
ORGANISATION organisational level
Programme
level
THE DMU
Project
level
Consultants
VINCI
(Source: VINCI Construction UK, 2009b, p.9)
Figure 3. Three levels of relationship mapping between customers- preferred consultants and VINCI
Construction UK Civil Engineering Division.
Concerning influence market, not much work has been done in the case of the
present research since the research is running for only six months to date. The first
stages of developing an influencer map are to indentify potential sources of influence
that have greater impact on the company and also the company’s customers. Some
groups identified are, client advisors, political and regulatory markets since procurement
processes with public clients are subjected to various restrictions and regulations in
some case making directly negotiating impossible. Other groups include,
environmentalists, especially for the new nuclear sector that the company is aiming to
expand and also sub sectors including projects categorized as energy or waste from
energy related. Groups such as investors are also crucial because in some case they are
defining the customer’s spending for utilizing proposed programmes and especially in
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Ioanna Keki and Hedley Smyth, pp 827-840
times of economic difficulty or uncertainty it should be known which clients are
vulnerable in cutting their spending and calling off their frameworks or programmes.
Further stages of research include exploring the level of impact of those influence
groups on clients by interviewing clients and also some influence groups and analyzing
those results in developing influence maps.
5 Conclusion and Further Research
According to Preece et al (2003), the reputation of the UK construction industry
was unhelpful for all those involved in BD in construction enterprises. The fragmented
character of the industry, low profit margins together with the adversarial and traditional
behaviours were a hindrance in improving the reputation of a construction enterprise
and regardless of any individual efforts, they were regarded as “inefficient,
confrontational, unreliable”, with a short term strategy, lacking innovation by most
clients, supply chain members, consultants, trade bodies and other influencers. The
relationship marketing concept is providing a solution to this problem by helping
construction enterprises liaise close with clients and other network contacts and provide
them with extra benefits, together with trust, openness and honesty to establish a good
reputation in the industry. Construction Industry in the UK is slowly starting to move
away from its pure transactional character, and makes efforts to innovate with the
service and the experience offered to clients by collaborating closely with
subcontractors and supply chain members. The “credit crunch” renders this fragile, yet
provides increased opportunities to build market share in a constrained market.
This paper reviewed the importance of relationship marketing as a core competency
in general and also referral and influence markets in particular. It has explored links
with the modern construction industry in the sense of meeting expectations of
sophisticated clients. From this it has examined the needs of construction business
development as a tool to improve reputation of the firm and secure more repeat
business, while increasing order book size and turnover. An in-depth case study has
provided the vehicle for the research. The Civil Engineering Division of the case study
is trying to apply a relationship marketing strategy among all sectors of projects.
Implementation is in the early stages, a long-term view being taken. There are
behavioural issues, especially due to the recent acquisition and merger and cultural
differences among different employees in the BD team, together with the lack of
guiding principles of linking closely to customers and moving away from a project
focussed relationship to close customer relationships. Moreover there are issues
regarding the importance of referral and influence markets among key civil engineering
personnel, who believe them to be source of information and not key decision makers
for clients. Last but not least the importance of repeat business is neglected by some
employees, either due to bad previous experience in frameworks or because it is
considered as low margin work required to spread the risk of one-off complex and big
jobs. The findings do not substantiate this perception and therefore require careful
explanation and reinforcement to all employees repeat business has been proved to
provide high profit margins in the recent past and will build current market share as a
minimum – important features of market management to position the company
favourably in the current economic conditions as well as the long-term.
This paper focused upon a single company. This provides richness of data and
depth of analysis, although generalising conclusions for other organisations carries
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Ioanna Keki and Hedley Smyth, pp 827-840
some limitations, yet it is expected that some of the issues posed here are replicated for
many companies in a largely undifferentiated construction industry aiming at re-
establishing the strategy of business development. The importance of relationship
marketing is now widely accepted, and increasingly in the construction industry, which
should utilize the close relationships with clients and network contacts and build
relationships with referral and influence stakeholder markets (cf. IMP six market
model). In summary and in line with the broader management and marketing literature,
relationship marketing will foster more referrals and increase customer retention and
acquisition, especially in times of economic difficulty when other firms will be
struggling to survive.
6 Acknowledgement
This research was conducted as part of a two-year government funded Knowledge
Transfer Partnership between University College London and VINCI Construction UK
Limited.
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Hendrik Prinsloo, pp 841-851
Marketing of built environment South African SMME
Professional Consultancy Firms
Hendrik F. Prinsloo
Department of Construction Economics,
University of Pretoria, Pretoria, 0001
South Africa
Email: [email protected]
Abstract:
Marketing your professional services has long been a problem for most Small, Medium and Micro
Enterprise Professional Consultancy firms. The object of this paper is to do an analysis of all the
avenues that is available on the market for these firms to engage in new contracts and to investigate as
to which of these avenues are the best to follow. To obtain an answer to this problem questionnaires
were send to consultancy firms, studying what is available on the market today and finally analysing
these options as to how easy they are to access. The finding has shown that there is a lack of
understanding of marketing strategies within consultancy firms in the construction industry and this
directly leads to many firms spending a lot of time, effort and money on unsuccessful proposals.
Keywords: Contracts, Consulting, Marketing, Tenders
1 Introduction
In many professions, the idea of marketing has traditionally not only been foreign but downright
distasteful. After all, what so-called professional would even need to go out hustling for business?
While this view may still hold true in some people's minds, it is definitely rapidly receding before the
forces of today’s economic reality. Over the last decade, competitive advantage has become very
difficult to achieve and maintain in all the economic sectors including the construction industry.
(Ganah, 2008) As more and more professions become overcrowded, competition for customers is ever
increasing and it can be asked exactly how professionals should go about drawing favourable attention
to themselves?
By first recognizing the special problems they face in marketing their services. (Bloom, 1984) Among
the obstacles identified by Bloom are client uncertainty about obtaining professional services, the
difficulties in distinguishing between firms and lastly the immeasurable benefits of advertising.
Luckily for most professional consultancy firms involved in the building industry most, if not all
contracts awarded have to undergo a tender process making it much easier for newcomers to the
market to compete with the well established firms. This doesn’t necessarily mean that everything is
rosy in this industry, tenders may be a lucrative source of income for small business, but can be a
minefield to negotiate, particularly since legislation changes regularly and requirements differ
between organisations and government sectors. Getting the process right not only saves time and
effort but has the potential to set up lucrative income streams. (Business Day, 2007) A sound
marketing strategy is also needed to differentiate your firm from the next.
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In the next section different marketing techniques to make you stand out from your competitors will
be discussed before delving deeper into the South African tender process.
2 Literature Review
2.1 Creative Marketing Techniques
For decades, professional consultancy firms were reluctant marketers. They thrived in a cosy world
where networks of personal relationships and word-of-mouth brought them enough new clients to
grow a profitable business. Those days aren't gone, but they are fading fast. (McLaughlin, 2005)
Professional marketing has only recently been recognised as an important factor for business success
in the construction industry. (Walker, 2007) To compete for and win the most profitable work,
professional service providers must rethink familiar marketing practices and focus their marketing
strategies on the issues that really matter to clients. Beginning that shift in the marketing mindset
should start by challenging three common myths. (McLaughlin, 2005)
Myth 1: Great work speaks for itself
Some believe that delivering outstanding results in the present is the foundation of a successful
marketing strategy. While true that flawless delivery is essential for long-term success, you can't
assume in today's business environment that word of your great performance will travel through your
client's organization, and beyond that to others, without a sustained effort on your part. To get the
word out, you need client-level communication plans for your current clients, and you need to
integrate the details of the success you have helped clients achieve into your overall marketing plan.
(McLaughlin, 2005)
Myth 2: It's safe to follow the leader
Of course there is value in learning from the success of others. Many firms face similar marketing
challenges, so using the ideas of those who share your plight may seem like a good way to accelerate
the development of your marketing strategy. Unfortunately, relying on the marketing programs of
others blurs the subtle differences between professional service firms, leading to client perception that
very different firms have the same characteristics. You don't have to stop using those market
differentiators completely but lead your marketing with something more client-focused, such as your
detailed understanding of the client's problem followed by how you helped others in a similar
situation. (McLaughlin, 2005)
Myth 3: A Web site is just a promotional tool
The vast majority of prospective clients head straight to your Web site before they call you. Often,
that Web site visit is the prospective client's first step in a business relationship with you. With a
virtual handshake, your site has the power to create a positive first impression that can mean the
difference between getting a follow-up call from the client or losing that opportunity. Your Web site
should be a critical part of your strategy to initiate and sustain relationships with clients, instead of just
a promotional tool. Nothing substitutes for the power of personal interaction with clients, but your
Web site can and should re-enforce your commitment to clients. Professional consultancy firms differ
from one another in many ways, including size, scope of services, culture, client management
philosophies and people and yet, to clients, their Web sites make them look like clones of one another.
Your Web site should help you gain clients' trust. Build your site's content around specific client
problems and issues, not your qualifications or generic mission statements. Give clients what they're
looking for, a way to see that your firm understands exactly what they need. (McLaughlin, 2005)
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Let’s be fair, selling intangibles is hard work and putting together a successful Web site that tries to
sell these intangibles is even harder. Yes, Web sites for professional consultancy firms have a limited
purpose, but even if they exist mostly to soften the sale, shouldn't professional service sites do that
well? (Stern, 2006) A good Web site may or may not land you that big contract but a bad one will
definitely loose you an opportunity. At best it will make it harder to cash in, and in today’s day and
age, who needs things to be harder than it already is?
It is clear that the marketing of professional services is evolving, with many new ways to attract and
retain clients. Some marketing strategies have lost their magic, while others are emerging as winners.
Social networking websites such as Facebook and LinkedIn is showing a dramatic increase in
professional marketers considering a presence on these sites as beneficial to their company profile. In
a recent study it was also clearly seen that attitudes towards accessing Facebook and LinkedIn in
office hours have undergone a massive change since 2007.
LinkedIn is now seen as:
• Beneficial by 64%
• Harmless by 22%
• A problem by only 6%
• 7% had no opinion.
Facebook, by contrast is seen as:
• Beneficial by 24%
• Harmless by 22%
• A problem by 38%
• 16% had no opinion.
18 months ago, no-one saw these sites as beneficial. (Chaplin, 2009) On the other hand, another
popular social site Twitter is turning out to be a fad that has peaked according to numerous research
studies. (Bodine, 2009) Luckily in South Africa we are always slightly behind the curve as far as new
technology trends are concerned and only time will tell if using one of these approaches will be
considered as the new killer marketing strategy to use.
One marketing truth won't change however: Clients will continue to buy from trustworthy and
competent people who can demonstrate, beyond a reasonable doubt, that they can produce the results
they promise. Demonstrate that to the market and you'll have clients lined up to work with you.
(McLaughlin, 2005)
2.2 The South African Procurement Process
One of the main focus areas of this paper is to analyse the South African procurement process. In
general, procurement policies describe the method or rules by which public sector institutions procure
goods and services from the private sector. Essentially, it means setting up a fair system of
adjudicating between the many competing bids received from consultants, suppliers, service providers
and contractors. As tax is essential for all governments, every country's procurement policy insists that
all individuals or companies submitting bids must be fully up-to-date with their tax payments. There is
thus usually a requirement for tax clearance certificates to be submitted with each bid.
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The language of procurement in South Africa differs radically from that employed by the World Bank,
and the SA government does not use the term International Competitive Bidding. The combination of
the vast amount of information available on the government websites and the difficulty of finding an
authoritative person to clarify its policy, makes the SA government’s procurement policy the hardest
one to understand in Southern Africa. (Tenderscan, 2008)
The black economic empowerment (BEE) procurement policy governing the procurement of goods
and services by the South African state today is the result of policies and legislation introduced over
the past 15 years. With regard to tendering, the most important law passed is the Preferential
Procurement Policy Framework Act (5 of 2000) and the accompanying Preferential Procurement
Regulations, 2001. This law (the PPPFA) introduced a system of evaluating tenders in terms of a
package of adjudication criteria with a maximum total of 100 points. Each bid is evaluated according
to how much it scores in terms of each criterion, and the highest scoring bid in terms of all the criteria
combined wins the appointment. The preference point system introduced by the PPPFA is based on
the definition of a “Historically Disadvantaged Individual” (HDI): any SA citizen who had no
franchise in national elections prior to 1994, who is female, or who has a disability. (SouthAfrica.info,
2008) What makes the system fairly complicated is the fact that not all kinds of disadvantage receive
the same number of points, and at present there is a proposal to remove HDI points for white females.
The second law of importance is the Broad-Based Black Economic Empowerment Act, 53 of 2003.
According to this law, the Minister of Trade and Industry is to issue codes of good practice on BEE,
and must issue a strategy and a plan for the financing of broad-based black economic empowerment.
The Minister must also publish transformation charters for a particular sector of the economy once the
major stakeholders of that sector have been consulted. With the publication of a number of codes of
good practice by the Department of Trade and Industry in December 2006, a measure of certainty has
been achieved with regard to how tenders are to be adjudicated in those sectors. (SouthAfrica.info,
2008) However, this certainty must be tempered with the additional complexity that the codes have
added with the introduction of the new 100 point scorecard system with seven areas of BEE
opportunity: equity ownership (20 points), management control (10 points), employment equity (15
points), skills development (15 points), preferential procurement (20 points), enterprise development
(15 points), and socio-economic development (5 points). A number of transformation charters have
also been published, providing further certainty in some sectors. (SouthAfrica.info, 2008)
The Prevention and Combating of Corrupt Activities Act, 12 of 2004 is the third piece of legislation of
importance for the South African procurement process. There is no reason why a service provider
should be preferred over his competitors because of the size of his gifts. This is precisely what the Act
seeks to avoid. (Wakefield, 2005) According to this law, both the person who offers a bribe and the
official who accepts the bribe are guilty of the offence of corruption. The bribing of foreign public
officials is also a crime under this law, as is the offering of inducements for the awarding of a tender.
The maximum sentence that can be imposed by a High Court for the offence of corruption is life
imprisonment or a fine. Once a person is found guilty of such an offence, his or her details are to be
entered in the Register for Tender Defaulters (which is established by the Minister of Finance within
the National Treasury). This registry is open to the public, municipalities and government departments
in order to prevent those listed in the register from tendering in the future. Although disputes over the
awarding of tenders often end up in court because one bidder appeals against the award, this is not the
only way that corruption is exposed. An alternative method of uncovering corruption in the awarding
of tenders is by reporting the matter to the National Director of Public Prosecutions (of the National
Prosecuting Authority of SA), who then appoints a special investigator to look into the matter.
Apart from the laws governing tendering, the government has published guidelines to assist members
of the public service to run the tender process in a fair way. According to these guidelines, the five
pillars of procurement are: value for money, open and effective competition, ethics and fair dealing,
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Hendrik Prinsloo, pp 841-851
accountability and reporting, and equity. It is only with the fifth pillar (equity) that the issue of BEE
preferential procurement points comes into play. (Tenderscan, 2008)
In South Africa, most tender advertisements are published in the media on Fridays. The State Tender
Board publishes its weekly tender bulletin (online and hard copy) on Fridays, as are most of the
provincial tender bulletins. Simultaneously, many of the tenders are published in the local, provincial
or national newspapers on Fridays. (Tenderscan, 2008) Since 2004 the new term introduced by the
National Treasury to refer to the procurement or tendering system is ‘supply chain management’.
Although an adjudication panel is set up for each tender in the provinces, the Provincial Treasury’s
departmental bid committee must approve the awarding of the tender before it is finally awarded in
public. With regard to openness and transparency in the acceptance of tenders, the following general
practice is observed: On the closing date of the tender, the tenders are opened in public, and the names
of the bidders are read out. Only in the construction industry are the prices read out.
Most municipalities and government departments have drawn up registers of consultants and suppliers
who have been pre-qualified to undertake work for the authority concerned. In some cases the
authority concerned may refuse to accept a bid on the grounds that the bidder is not registered on its
supplier database. In order to ensure that their tenders are accepted, it is a good idea for consultants to
register on such databases before submitting their tenders. Although municipalities and provincial
departments may restrict suppliers in terms of the work they are prepared to award them, such
restrictions must be forwarded to the National Treasury, so that they can be recorded on the National
Treasury’s database. (Tenderscan, 2008)
3 Research Methodology
A survey was conducted via email in the form of an interactive questionnaire in PDF format to
establish how successful professional consultancy firms go about securing new contracts and securing
ongoing business. Whereas a personal interview method would have facilitated greater flexibility and
in-depth questioning, internet based questionnaires offers several advantages that includes lower costs,
increased speed and improved data quality. The disadvantages of this method include problems with
sampling bias and a higher level of technical expertise required (Reaney, 2001) but these negatives
were deemed to be acceptable.
Questionnaires were emailed to both practices and individuals, using the directory of registered
practices of the Association of South African Quantity Surveyors (ASAQS) with the total survey size
amounting to 621 emails being sent out. Due to inaccuracies in the database 59 emails returned as
unreachable resulting in the total sampling size being reduced to 562 firms or individuals. One
hundred and two replies were received, of which 87 were suitable for analysis. This constituted a
response rate of 18% which was considered acceptable for a survey of this nature.
The instructions accompanying the questionnaire stressed the relatively small demand in time and
effort that completing the questionnaire would make upon respondents. The instructions also indicated
the purpose of the survey and importantly also guaranteed their anonymity in the published results.
The cover letter requested that the completed questionnaires should be returned within 10 days of the
receipt of the email but due to messages being ignored after a couple of days of lying in an inbox the
importance of replying as soon as possible was also pertinently made clear.
4 Findings and Discussion
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Unfortunately the ASAQS database didn’t contain any information regarding the registered firms’
Small Medium and Micro Enterprise (SMME) status and since the main aim of this paper was targeted
towards this sector, the first 2 questions in the survey covered the firms’ SMME status and annual
turnover. This was not only done to determine if companies actually knew what a SMME is
considered to be but also helped the author to better understand the results. Out of the 87 respondents
only 14 firms did not considered themselves to be a Small, Medium or Micro Enterprise. This result
was largely expected, although percentage wise the figure of SMME’s represented was on the low
side of expectations.
Examining the yearly turnover figures, it was very interesting to note that although 16% of
correspondents deemed themselves as large corporate firms, technically only 5% of them fell in this
category. According to Black Economic Empowerment classification all firms with a turnover of more
than R35 million per annum is considered as a Large Corporation, firms with an annual turnover off
less than R5 million is considered Small Enterprise and finally firms with a turnover of between R5 –
R35 million would be considered to be Medium Enterprise. These results were much closer to the
expected number of SMME’s responding to the survey.
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Even more interesting to note would be the fact that more than 24% of all correspondents didn’t
actually know what their firms BEE status is.
In these days of economic crisis it was enligtening to notice that less than 40% of the companies who
responded felt that there was a huge decline in available contracts.
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It was also quite interesting to note that the larger the firm the less reliant they become on looking for
contracts via the tender process. Instead it seems as if the longer established, larger turnover
companies relies almost exclusively on spin-of contracts from existing ones as well contracts coming
their way simply out of pure reputation.
A lot of firms out there also rely solely on the Government roster system for the generation of new
contracts but overall it seems as if at least two-thirds of all professional consultancy firms needs to
look for tenders to keep generating an income. Out of the 57 respondents who make use of the Tender
process to generate new contracts close to three quarter of them still rely on the finding their
information either via the Government Tender Bulletin system or through newspaper and magazines.
Approximately half of them visit the websites of local municipalities or city councils while only about
one fifth makes use of alternative methods of finding tender information. This “other” method would
involve subscription tender service websites such as Sabinet (TenderWorld), Leads2Business,
Tenderscan, OnlineTenders and SATender. Only 5 out of 13 respondents who make use of these
services responded positive to the question “Do you think the service offered is good value for
money?” i.e. given the fact that most of these subscription services cost between R500 and R1500 per
month most of the correspondents felt that these services are too expensive.
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Most professional consultancy firms are strugling to land contracts. With close to 80% of companies
only being succesfull in getting the winning bid in less than 1 in 4 attempts . If this an ongoing trend it
might be a good idea to sit down and try to figure out why? This is a very good question and might
actually form the backbone of a further study into this matter.
Lastly, with so many unsuccessful attempts at landing a contract it is no wonder that most consultancy
fims who rely on tenders find that Tender Document costs are spiralling out of control. Many firms
believe there is already such huge costs involved in putting your bid together that these documents
should simply be available for download via the internet, free of charge. If you have to include
traveling costs to fetch and deliver these documents at sometimes the most outlandish little towns it
starts to make a lot of sense to be able to simply download the documents via the internet.
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5 Conclusion
This study revealed that there is a lack of understanding of marketing and marketing strategies within
consultancy firms in the construction industry. In most instances marketing strategies were non-
existent or purely outdated. The construction industry is different from other industries in that its
product is unique and different from one project to another and clients, most of the time, are the same
ones. Consequently, building a good relationship with existing clients is often as or if not more
important than attracting new ones. One could argue that these new consultancy firms may benefit
from becoming more customer focussed in order to acquire new clients by satisfying and retaining
existing ones. Certainly by looking at the more established firms this does seem to be the case.
A lot of firms spend a lot of time, money and effort on unsuccessful tender bids. This subject could
turn into a research study of its own but most firms would be advised to simply refer to some of the
innovative marketing techniques mentioned in this article to maybe start turning things around. It was
also clear that some firms have no understanding of South African Legislature regarding the
procurement process and it would be advisable for them to maybe get clued up to certain laws and
regulations rather than plod along, business as usual without any great success.
6 References
Bloom, P.N. (1984), Effective marketing for professional services, Harvard Business Review, Vol.
62(5), pp 102-110
Bodine, L. (2009), Twitter’s Growth Screeches to a Halt – It was all Hype, Law Marketing Portal,
http://www.lawmarketing.com/pages/articles.asp?Action=Article&ArticleCategoryID=13&ArticleID=
892, viewed 18/06/2009.
Bowen, P., Rwelamila, P. (1995), Marketing of professional service by quantity surveting consultancy
practises in South Africa, COBRA, RICS, Edinburgh Scotland, 8-9 September 1995.
Businessday. (2007) Winning Tenders, Business Day, http://www2.businessday.co.za/bmietenders/,
viewed: 21/03/2009
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Hendrik Prinsloo, pp 841-851
Chaplin, R. (2009), LinkedIn rules OK, PM Magazine.Vol. 16, Issue 10,
http://www.pmforumusa.com/magazine/current_issue.aspx, viewed: 05/06/2009.
Ganah, A., Pye, A. and Walker, C. (2008), Marketing in Construction: Opportunities and Challenges
for SMEs, COBRA, RICS, Dublin Ireland, 4-5 September 2008.
Lowe, S. (2004), Competing in the Professional Services Arena, Law Practise Today,
http://www.abanet.org/lpm/lpt/articles/mkt11045.html, viewed: 12/05/2009.
McLaughlin, M.W. (2005), The Four Myths of Professional Services Marketing, MarketingProfs,
http://www.marketingprofs.com/5/mclaughlin7.asp, viewed: 24/06/2009
Reaney, M., Pinder, J. and Watts, J. (2001), The use of internet questionnaires in construction and
building research, COBRA, RICS, Glasgow Scotland, 3-5 September 2001.
SouthAfrica.info. (2008) Black Economic Empowerment, SouthAfrica.info,
http://www.southafrica.info/business/trends/empowerment/bee.htm, viewed: 18/04/2009.
SouthAfrica.info. (2008) BEE Codes Simpler, More Fexible, SouthAfrica.info,
http://www.southafrica.info/business/trends/empowerment/bee-071206.htm, viewed: 18/04/2009.
SouthAfrica.info. (2008) Codes for Better BEE, SouthAfrica.info,
http://www.southafrica.info/business/trends/empowerment/BEE-codes.htm, viewed: 18/04/2009.
Stern, D. (2006), The 7 Deadly Sins of Marketing Professional Services Online, MarketingProfs,
http://www.marketingprofs.com/6/stern1.asp, viewed: 24/06/2009
Tenderscan. (2008) Tendering and Procurement Policy in Southern Africa, Tenderscan,
http://www.tenderscan.co.za/Procurement/Procurement.aspx, viewed: 21/03/2009.
Tenderscan. (2008) Tendering in South Africa, Tenderscan,
http://www.tenderscan.co.za/Procurement/SouthAfrica.aspx, viewed: 21/03/2009.
Wakefield, R. (2005), No Free Lunches, Bregman Attorneys, http://www.roylaw.co.za/Index.cfm
?fuseaction=home.article&PageID=3331276&ArticleID=5109126, viewed: 04/06/2009
Walker, C., Ellis, R.C.T., and Mulcrone, J. (2007), Construction Marketing –A Knowledge
Transfer Partnership Case Study, COBRA, RICS, Atlanta USA, 6-7 September 2007.
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Ridhaa van der Fort and Karen Le Jeune, pp 852-864
Innovation in the South African quantity surveying profession
Ridhaa van der Fort 1 and Karen Le Jeune 2
1
Group Five Building (Pty) Ltd,
Gabriel Road, Plumstead,
South Africa
2
Department of Construction Econmics and Management,
University of Cape Town,
South Africa
Email: [email protected]; [email protected]
Abstract:
The construction industry is notoriously characterized by its resistance to change and reluctance to
embrace innovation (Maqsood, 2006; Blayse & Manley, 2004). Research conducted by Page et al
(2004) aimed at gathering evidence of all types of innovation that might be implemented by
professional service organisations such as the quantity surveying profession. This research study
focussed on organisational innovation within the quantity surveying profession. The research study
investigated the perceptions and general awareness of South African quantity surveyors towards
innovation, paying specific attention to the structures, systems and processes implemented in their
professional organisations. Key conclusions drawn from the study were that the majority of South
African quantity surveying organisations associate innovation with the continual improvement of
their organisation and therefore regard innovation as a benefit. However, the current structures,
cultures, processes and systems present within South African quantity surveying organisations are
not conducive to innovation as they are lagging behind in keeping up to date with current global
innovation trends.
Keywords:
Innovation, Organisation Innovation Quantity Surveying Profession
1. Introduction
The construction industry, and therefore the quantity surveying organisations operating within the
industry, is often stereotyped as stubborn, risk averse and highly traditional and when compared to
other industries such as manufacturing, slow at adopting innovation (Lu & Sexton, 2006; Lenard,
1996; Lenard & Bowen-James, 1996). The dawdling behaviour of the construction industry towards
innovation may be attributed to the discontinuous nature of project-based production processes
which do not promote knowledge cultivation and learning culture (Gann & Slater, 1998); the
traditional organisational structure of construction industry organisations which operate on limited
resources and suffer reduced opportunities as a result (Sexton & Barrett, 2003 cited in Lu & Sexton,
2006); the adversarial culture of the industry which leads to economic, legal, institutional and
cultural obstacles to innovation (Tatum, 1989); and unsuitable innovation measurement and
modelling tools, usually geared towards short-term financial performance indicators, being applied
to gauge innovation in the construction industry (Blayse & Manley, 2004). In an economic
environment that is constantly changing, the need and ability to adapt or innovate becomes
increasingly important. The scepticism surrounding the sustainability of the quantity surveying
profession is fuelled by factors such as the dissatisfaction of clients with the traditional bouquet of
services and the demand for more comprehensive and diverse services (Page et al, 2004); the
relatively slow uptake of technological advancement and consequential restructuring of
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Ridhaa van der Fort and Karen Le Jeune, pp 852-864
organisations and processes to maximise the benefit of advanced software applications (Nkado,
1999; Smith, 2006; Page et al, 2004); and unsustainable business models which react to the highly
volatile, turbulent and competitive industry by reducing profit margins (Blayse & Manley, 2004;
Newson, 2003).
The research study sought to determine whether the South African quantity surveying organisations
were traditionalist and resistant to change or whether current structures, systems and processes were
conducive to innovation, with specific reference to innovation types, sources and trends.
2. Innovation
To determine the essence of innovation in the context of the quantity surveying profession, a
combined definition is assembled from a variety of sources: innovation requires the invention of
products, processes, systems or services to start the ball rolling, followed by the implementation of
new concepts as well as the renewal and continuous non-trivial improvement of products,
processes, systems or services (Freeman, 1998; Slaughter, 1998; Szmytkowski, 2005; UP, 2006).
Innovation occurs for the most part within organisations (UP, 2006). Organisational structure and
human resource management play an important role in the innovative process with an
organisation’s ability to turn invention into innovation being dependant on the organisation’s
knowledge and market awareness and awareness of external environment; skills; processes;
service/product; information and communication distribution systems and resources (Ibid).
Innovation in the construction industry also relies on public and private policy makers and research
institutions.
The successful measurement of innovation is dependent on the classification of its types, sources
and extent at which innovation is present within the profession. The time period that elapses
between invention and innovation is considered an indication of the efficient or inefficient
structures and conditions present within the organisation (Szmytkowski, 2005).
2.1 Innovation Types
The following five types of innovation were developed and defined by Schumpeter (1934) and
adopted by Page et al (2004) to apply to the quantity surveying profession and include service-
product innovation, organisational innovation, market innovation, process innovation and resource
innovation. As organisational innovation may be considered a source of competitive advantage, the
types of organisational innovation, namely process-re-engineering; information and communication
technology (ICT) implementation; organisational structure and knowledge management are
reviewed in the context of South African quantity surveying organisations.
2.1.1 Process Re-engineering
Hammer & Champy (1997) defined process re-engineering as “the fundamental rethinking and
radical redesign of business processes to achieve dramatic improvements in critical contemporary
measures of performance, such as cost, quality, service and speed”. Process re-engineering views
the business from the process perspective rather than the functional or organisational perspective
(Klien, 1994 cited in Nelson et al, 1999) and is intended to align the business processes with the
strategic objectives and customers’ needs. Process re-engineering is a top-down approach, led by
top management, and aimed at rapid and dramatic performance improvement (Ardhaldjian &
Fahner, 1994). The benefits of process re-engineering include improvement in productivity and
competitiveness, which lead to more secure and rewarding employment opportunities (Betts &
Wood-Harper, 1994). According to Nelson et al (1999) process re-engineering is a relatively new
concept within the construction industry, however, its principles have been implemented in the
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Ridhaa van der Fort and Karen Le Jeune, pp 852-864
manufacturing industry for many years. Latham (1994) cited in Nelson et al (1999) attribute this
slow uptake of process re-engineering to the fragmented nature of the construction industry. The
adoption of process re-engineering in the construction industry may result in the redesign
professional roles, job tasks and functions in line with a view of generalist and innovative
professionals and design new educational models to support these new roles (Betts & Wood-Harper,
1994).
2.1.2 Information and Communication Technology (ICT)
Recent technological advancement has contributed significantly to quantity surveying profession by
automating a large portion of the profession’s technical functions (Smith, 2006). However, even
though technological advancement has vastly improved the speed and extent of information and
communication flow between project participants, it is still considered an inherent problem
plaguing the construction industry. The basis of the problem has largely been attributed to the
industry’s fragmented nature (Barthorpe, 2000) with Ibbs (1985) suggesting that if the construction
industry is to improve its communication and information flows between project participants and
simultaneously reap the potential benefits of IT, then existing processes should first be re-
engineered (Ibid). Furthermore, recent research into cross-project learning led by Newell (2004),
cited in Davis et al (2007), concluded that “there is accumulating evidence that the medium of
capture and transfer through ICT such as databases and corporate intranets is limited in terms of
how far such technology can actually facilitate knowledge sharing”. Furthermore Newell’s (2004)
study found that where transfer of learning had occurred, it had depended far more on social
networks and a process of dialogue, than on ICT (Davis et al, 2007). Thus, the mere application of
IT to the existing organisational processes of the construction industry will not solve the inherent
communication problems that currently exist.
2.1.3 Organisational Structure
Professional service organisations are knowledge based and projects form the general business
activity (Page et al, 2004). Therefore, the organisational culture and structure implemented should
ensure that the knowledge within the organisation is harnessed, as knowledge forms the central
focus of innovation within professional organisations. However, no “ideal” organisational structure
and culture has been coined. Barlow (2000) suggested that organisations that do not penalise
employees for introducing new ways of working and not succeeding; that endorse employees to
consistently question organisational systems and processes; and that create a shared perception that
all participants and employees are striving towards achieving sustainable goals, are considered
conducive to innovation. Hence, quantity surveying organisations should move away from
centralised bureaucratic structures and in turn implement horizontally integrated structures.
2.1.4 Knowledge Management
The concept of ‘knowledge management’ is relatively new to construction organisations. Informed
companies realise it is an important non-monetary asset to the organisation and can assist in
maintaining competitive advantage. Davis et al (2007) recognized that an organisation’s
competitive edge lies mostly in the brainpower and intellectual capital of their employees and
management. Egbu et al (2001) cited in Maqsood (2006) suggests that knowledge management may
also be seen as the mobilization of intangible capital, which is often of greater significance to the
organisation than tangible capital. Teece et al (1997) agree that in a knowledge-based economy, an
organisation relies less on tangible resources and more on intangible resources. Two opposing
views have been recognized when discussing knowledge management as an innovation initiative.
The first view categorizes knowledge management as a technological initiative (codification
approach) whereas the alternate view categorizes knowledge management as a human resource
initiative (personalisation approach). However, the purpose of knowledge management remains the
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same, which is to create a thriving working and learning environment that fosters the continuous
creation, assimilation, use and reuse of both personal and organisational knowledge in the pursuit of
a new business value (Kikawada & Holtshouse, 2001). Davis et al (2007) and the RICS (1991)
believe the implementation of a knowledge management system to be the quickest and most
effective way to enhance the organisation if compared to “reformatting” the organisation.
2.2 Innovation Sources
The sources of innovation are contributing factors that shape innovation at an organisational level.
Two broad categories of innovation sources have been recognized, namely external and internal
innovation sources.
2.1.5 External Sources of Innovation
Davis et al (2007) noted that in order for survival and growth to be achieved quantity surveying
organisations have to respond quickly to social, technological, economic, regulatory and
environmental changes. Figure 1 below illustrates the external sources of organisational innovation.
Figure 1 External Sources of Innovation
External
Factors
Competition Client Government Technology Regulations
Competition
“Understanding competition is the key to understanding economic change” (Lee, 2004).
Competition gives rise to entrepreneurial ability, which constantly seeks to improve organisational
processes and products to maintain a sustainable competitive advantage (McConnell & Brue, 2001).
Furthermore, according to Lee (2004) innovation is most important in maintaining a competitive
advantage as it redefines the way that profits can be made and in doing so, reshapes the structure of
the market.
Client
“In the best companies, the customer drives everything. These companies provide exactly what the
end customer needs, when the customer needs it and at the price that reflects the product value to
the customer. Activities that do not add value from the customers view point is regarded as waste
and eliminated” (Eagan,1998).
Clients within any industry sector or organisation are the purchasers and users of products, services
and processes and therefore their needs and demands bring about the need for innovation (Blayse &
Manly, 2004). Winch (1998) expressed the view that the client is the leader in stimulating
innovation in an industry. However, two opposing views have been noted concerning the client’s
role as a source of innovation in the quantity surveying profession; the “traditional” view supported
by Kulatunga et al (2006) and Egemen & Mohammed (2006) which identifies the client as an
innovation barrier and the “alternate” view which suggests the client to be a positive influence on
innovation which is supported by Nam & Tatum (1997), Ivory (2005), Blayse & Manley (2004),
Hillebrandt (2000) and Green (1999).
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Findings by Nam & Tatum (1997) revealed that greater client involvement and commitment to
projects realises positive innovation outcomes, therefore underlining the importance of possibly re-
engineering current business practice to become more client orientated. Systems that allow for
greater client involvement in construction projects yield positive innovation outcomes (Blayse &
Manly, 2004).
Government
The survey report prepared by Price Waterhouse Cooper (2002) on the Australian construction
industry, identified four ways in which governments exert an influence on innovation, namely, as a
client, regulator, educator and custodian. However, according to Masinda (1999) and Dubois &
Gadd (2002), one of the key influences inhibiting innovation in the Sub-Saharan African
construction industry is the inadequate macro-economic policies imposed by government. For
greater innovation to take place in the construction industry, more flexible policies need to be
implemented (Ibid).
Technology
Smith (2006) states that the Australian quantity surveyors’ response to the development of
information technology has been the primary reason for the changes that have occurred in the
Australian quantity surveying profession. According to Smith (2006), it is inevitable that
documentation and data will increasingly become automated to the point where measurement and
technical processes will require minimal human intervention.
However, there are two opposing views on the impact of technology on innovation and in turn the
quantity surveying profession. Cox (2005) proposed that increased technological development may
result in the demise of the “traditional” quantity surveying profession by removing all the technical
responsibilities held by the quantity surveyor, whereas Smith (2006) suggests that technological
advancement would only strengthen the quantity surveyors’ position by removing the technological
responsibilities and re-defining its core business functions.
Malone (1987), Osterman (1986) and Zuboff (1983) highlight the fact that technology has allowed
for most middle management functions to become automated, thereby eliminating centralized
organisational cultures which are considered not to be conducive to innovation.
Regulations
Regulation and policies exert and strong influences on demand and in turn impact on change (Gann
& Salter, 1998 cited by Blayse & Manley, 2004). However, according to Dubois & Gadd (2002)
this has generally been a negative influence internationally, with many regulations and industry
standards hampering innovation.
The impact of any regulation or industry standard depends on the capabilities of the regulators
therefore the process of developing regulations is complex, relying upon the knowledge of key
players. Regulators need sector specific knowledge relating to market conditions, advanced
practices and technologies, organisational competencies, industry structure, competition and
technical infrastructure. Thorough investigation must be conducted within the sector before
implementing any regulations with the objective of achieving positive innovation outcomes. (Gann
& Slater, 1998)
2.1.6 Internal Sources of Organisational Innovation
Contrary to Davis et al (2007), Page et al (2004) indicated that greatest innovation is found within
organisations therefore the organisation must be susceptible in identifying and maximizing internal
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innovation sources. Figure 2 on the following page illustrates internal organisational sources of
innovation:
Figure 2: Internal Sources of Innovation
Internal Factors
Knowledge
The Organisation Employees Management Social Diversity
The Organisation
Barthorpe et al (2000) concurs with Egbu et al. (2001) by suggesting that the culture of resistance
present within organisations is the main contributing factor resulting in industries slow uptake of
innovation and slow harnessing of intellectual capital in order to produce innovation. The role of the
organisation as a source of innovation relies on two key aspects: the competitive role (external) as
well as creating an (internal) organisational synergy (Page et al, 2004). The construction industry is
project-based therefore with each project the professional is confronted with different demands,
work is conducted under different conditions and the projects differ by specification (Page et al,
2004), which emphasises the importance of managing knowledge effectively and adopting a sharing
culture between individuals to bring about innovative ideas (Barlow, 2000). However, with all
external and internal conditions being favourable for innovation, the organisation still needs to have
processes, structures and attitudes that are conducive to innovation, if the profession is to achieve
favourable innovative outcomes (Blayse & Manly, 2004).
Employees
According Maqsood (2006) the construction industry does not have a good reputation of valuing its
employees’ individual and collective contributions. Barlow (2000) along with Winch (1998) and
Nam & Tatum (1997) refer to the necessity of ‘champions’ within organisations as an important
ingredient for innovation.
Innovations need champions. Ideas are carried by people, and ideas are the rallying point around
which collective action mobilizes. Unless the ‘systems integrator’ is convinced of the merits of the
new idea, and has the skills to incorporate it into the system as a whole, change is likely to be slow.
(Winch, 1998 cited by Blayse & Manley, 2004:274-5)
Social Diversity
One of the most important challenges and opportunities for organisations today is the increasing
diversity of society. This results in a more diverse knowledge base along with a more diverse
cultural and ethnic background among employees. Increasing diversity in the knowledge base
increases the need for interaction and communication within the organisations. Therefore, employee
diversity might create a broader search space and make the organisation more open towards new
and creative ideas. Ideally, diversity should increase an organisation’s knowledge base and increase
the interaction between different types of competences and knowledge thereby creating the
possibility for new combinations of knowledge and innovation. (Østergaard et al, 2007)
Knowledge Management
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Knowledge management as an internal source of innovation can be defined as the systematic
management approach to identify and capture the 'knowledge assets' of an organisation so that they
can be fully exploited and protected as a source of competitive advantage (Scarborough & Swan,
1999). Egbu (2001) further defines knowledge management as the identification, optimisation, and
active management of intellectual assets to create value, increase productivity and gain and sustain
a competitive advantage. Kamara et al (2002) recognizes knowledge management to be the vehicle
through which innovation and improved performance within organisations is possible, whilst
Maqsood (2006) cautions that achieving innovation within the construction industry is dependent
upon how knowledge is managed within organisations.
2.3 Formal Measures of Innovation
Innovation as a business initiative can also be measured (Burrage, 2006). Traditionally financial
performance indicators were used to measure innovation performance. However, Blayse & Manley
(2004) noted that measuring innovation performance only on the basis of financial performance
indicators suggests that the organisation’s business decisions are focused on short-term solutions. A
survey conducted by BRITE (2004) cited by Hardie et al (2005) revealed that there has been an
increase in senior management abolishing this narrow focus of financial performance measurement
and including intangible, philosophical issues in their performance reports, for example the
effectiveness of knowledge management systems applied to organisation, etc. The survey further
revealed that 13% of quantity surveyors operating in Australia indicated that the innovation
intervention they considered to be the most successful, had no influence on costs and profitability
(ibid).
3. Research Methodology
The findings needed to illustrate innovation perceptions of the broader South African quantity
surveying community therefore appealing to South African quantity surveyors situated nationally
and abroad. The aforementioned objective was achieved by implementing quantitative research
methodology using closed-ended questions in a web-based questionnaire. The distribution of the
web-based questionnaire was via the international database of the Association of South African
Quantity Surveyors (ASAQS). The database consists of approximately 3500 registered members, of
which 61 members (2%) responded to the survey and formed the sample population. It was assumed
that the respondents were in a position to comment knowledgably on their organisations, whether it
was due to the seniority of their positions or the duration of employment, and therefore qualified to
express the opinion of the organisation as it were.
The multifaceted questionnaire sought to determine the organisational profile of the respondents
and extract data pertaining to sources, types and trends of innovation, the perceptions associated
with innovation as well as determine the extent of the application of knowledge management, ICT
and process re-engineering in South African quantity surveying organisations. The final section of
the questionnaire investigated the use of innovation performance indicators within South African
quantity surveying organisations. The data was analysed using statistical analysis and cross
tabulations to generate descriptive data analysis.
4. Findings and Analysis
4.1 Organisational Profile
The organisational profile investigates and focuses on the social, age and gender make up of the
organisation, as well as identifying the organisational structure and culture implemented. Current
research associated with gender distribution indicates that the more “balanced” the organisations
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gender ratio (ratio of men to women moves towards being equal) the more conducive the
organisation is to innovation. However, the South African construction industry has commonly been
stereotyped as male dominated. The findings suggest that the stereotype is fairly consistent with the
survey sample’s view with 57% of respondents indicating that their organisation is “concentrated”
around one gender. Yet, the findings further indicate a correlation between the age of the
organisation and its gender distribution, with younger organisations indicating to be more balanced
than older organisations. The conclusion drawn from the survey is that younger organisations are
more aware of the importance of a correct gender balance within the organisation, and that a
positive perception shift is occurring within the quantity surveying profession with regards the male
dominated stereotype view associated with the construction industry.
The age distribution of an organisation plays a role in indicating greater or lesser susceptibility
towards innovation, where concentration around one age group within an organisation leads more
likely towards innovation (Østergaard et al, 2007). The findings of the survey reveal the exact
opposite scenario with 75% of the respondents reporting “fairly dispersed” employee age
distributions within their organisations. The conclusion drawn from the survey is that South African
quantity surveying organisations are not conducive to innovation, should they be judged on the
criteria of age distribution within organisations alone.
South African quantity surveying organisations fared better on the criteria of social make-up within
organisations, with 85% of respondents indicating that their organisations could be considered
“culturally diverse”, which, according to literature, is a pre-requisite for innovation.
Champy (1995) suggests that there is a correlation between the size of the organisation and
bureaucracy, stating that as an organisation’s employee population increases, so the organisation
shifts from a horizontal, integrated model to a more vertical, bureaucratic organisational structure,
which hampers innovation (Johnson & Scholes, 2002 cited in Davis et al, 2007). The findings of the
survey reveal no correlation between the size of the organisation and the “traditional” bureaucracy
structure of the organisation, illustrating that larger South African quantity surveying organisations
tend to maintain a flexible horizontally integrated organisational structure, which is conducive to
innovation.
The final criteria of innovation in terms of organisation profile, is the focus of business strategy
(Page et al, 2004). Organisations that focus their business strategies around their core business
functions are less likely to embrace change (Hammer & Champy, 2004). The findings of the survey
reflect positively on South African quantity surveying organisations as the majority of respondents
indicated that their business strategies are focused around client demand (79%), followed by
business processes (46%) and core business functions (30%).
4.2 Innovation Perceptions
The construction industry, whether it be locally or internationally, and those professions operating
within its ambit, such as quantity surveying, tend to be tarnished with the same brush and are
therefore stereotyped as traditionalist and resistant to embrace change. The opportunity afforded by
this study was to investigate the current perceptions of South African quantity surveying
organisations towards innovation, and hopefully “bust the myth”.
The findings of the study reflect a near unanimous recognition (93%) by the respondents of the
benefits of innovation. A further breakdown of this result revealed a near 50:50 split among those
respondents who where of the opinion that the benefits of innovation definitely exceed the
associated or perceived risk of innovation, and those who tempered their enthusiasm with the
acknowledgement that an element of risk still prevails. Those respondents who deemed innovation
to be too risky, concurred with the reasons stated in Blayse & Manley (2003), namely that the
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Ridhaa van der Fort and Karen Le Jeune, pp 852-864
subject of innovation is poorly defined, too diverse, that innovation performance cannot be
measured and that innovation is not applicable to the construction industry.
When correlating the age of the respondents’ organisation and their perceptions towards innovation,
the study revealed that “older” organisations being more likely to associate innovation with risk
than younger organisations. Therefore it can be concluded that the new cycle of “younger” South
African quantity surveying organisations have a more positive outlook on innovation.
The findings of the study revealed that South African quantity surveying organisations believe
external stimuli exert greater influence on innovation uptake than internal stimuli. Technology
(external stimulus, 88%) and client demand (external stimulus, 84%) is perceived to have to the
greatest influence on innovation implementation within the organisation. Furthermore, the client
(54%) is seen to exert the greatest influence on service diversification and the way the organisation
is structured, followed by government (39%). With regard to business processes, the findings
revealed that majority of the respondents believe technology to have the biggest influence on the
organisations business processes (63%), followed by the client (41%). Contrary to the opinion that
internal organisational innovation sources lead to greater innovation than external sources (Page et
al, 2004), South African quantity surveying organisations perceive external stimuli to be the greater
providers of innovation.
4.3 Knowledge Management
The findings of the study reveal that the majority of the respondents indicated that there is no
knowledge management system present within their organisation. However, some of these
respondents (23%) indicated that they are striving towards the implementation of a knowledge
management system, whilst 28% of the respondents indicated that knowledge management is not
applicable to their organisations. The non- implementation of a knowledge management has mainly
been attributed to the lack of understanding thereof (Davis et al, 2007). While the survey revealed
that South African quantity surveying organisations had not embraced a key innovation, the
findings indicate that there is no resistance amongst top management to implement knowledge
management in their organisation, and that the general perception towards knowledge management
is that is more a human capital initiative than a technological one, indicating that South African
quantity surveying organisations are on the right track by supporting the personalisation approach,
at least in theory.
4.4 Information and Communication Technology (ICT)
The construction industry is perceived to be a low-tech industry, mainly due to its slow uptake of
ICT (Atkin, 1999). However, the findings of survey revealed that 98% of respondents thought that
technology has contributed positively to their organisation and that at least one form of ICT was
being used in their organisation. The conclusion drawn from the findings is that the South African
quantity surveying organisations are receptive to innovation in terms of ICTs.
4.5 Process re-engineering
The findings of the survey results revealed that 35% of respondents were of the opinion that their
organisation’s processes can be re-engineered, whilst 60% believed it was only a possibility
(“maybe”) and 5% thought it an impossible task. Therefore, the conclusions drawn from these
findings are that South African quantity surveying organisations are not resistant to and do not
discount the possibility of re-engineering current processes. However, the findings do suggest that
they have not investigated the possibility of re-engineering existing processes. Furthermore, 62% of
the respondents revealed that their organisations do not employ a standardized system with which
they can measure process performance, thereby indicating that South African quantity surveying
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Ridhaa van der Fort and Karen Le Jeune, pp 852-864
organisations conduct ad hoc process evaluations and does not form part of the organisations’
strategic business decisions or functions.
4.6 Formal Measurement of Innovation
The findings of the survey revealed that 50% of the respondents measured innovation performance
in terms of financial performance. The other 50% indicated that the reason their organisations’ did
not measure innovation was due to the subject of innovation being too diverse, poorly defined and
lack of time. These findings are consistent with the findings of Blayse & Manley (2004) as well as
Page et al (2004). The conclusion drawn from the survey is that South African quantity surveying
organisations do not see the importance of measuring innovation performance, nor contemplate
measuring intangible, philosophical issues such as the impact of knowledge management on the
organisation.
5. Conclusion
The major conclusion drawn from the survey findings is that South African quantity surveying
organisations are willing to embrace change, as the majority of the sample quantity surveying
organisations perceive innovation in general to be more of a benefit than a risk. Furthermore, the
findings reveal that a positive transformation in innovation risk perception is taking place among
the “younger” sample South African quantity surveying organisations. Rather than the “risk”
perception being as a result of the scepticism of the benefits of innovation, the sample quantity
surveying organisations indicated a lack of detailed knowledge concerning the diverse subject of
innovation, and particularly organisational innovation and how it affects and applies to the core
business of quantity surveying.
South African quantity surveying organisations are aware of the sources and factors that influence
change within their organisations, thus indicating that South African quantity surveying
organisations are not closed off and narrow minded with regard to the subject matter. However, the
sample quantity surveying organisations indicated that most organisations were uncertain of how to
best employ these sources to maximum benefit to achieve innovative outcomes.
When analysing the data concerning the structures, processes and systems implemented within
South African quantity surveying organisations, the findings of the survey sample reveal that the
results of the queries concerning intangible “hidden” concepts/factors (such as age, gender,
knowledge management and process re-engineering) point towards South African quantity
surveying organisations not being innovative in these areas, whilst the results of queries concerning
tangible and more apparent concepts/factors (organisational structure, ICT implementation and
business strategies) point towards South African quantity surveying organisations being innovative
or conducive to innovation in these areas.
In conclusion, the study revealed that the reason for the non-implementation of organisational
innovation concepts is mainly due to the lack of knowledge and understanding of the subject matter
of innovation, therefore emphasising the importance of South African quantity surveying
organisations constantly keeping track of global innovation trends in order to maintain continual
improvement and sustainable innovative outcomes. Innovation should be regarded as an attitude of
continuously seeking and wanting to improve.
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Kathy Michell, Natalie Ginsberg and Keith Catell, pp 865-872
The role of organisational culture in workplace planning and
design: a Cape Town case study
Kathy Michell1, Natalie Ginsberg2 and Keith Cattell1
1
Department of Construction Economics and Management,
University of Cape Town, Rondebosch,
Private Bag 7701, South Africa
2
Alliance Group (Pty) Ltd, 201 Soho on Strand, 128 Strand Street,
Cape Town 8001,
South Africa
Email: [email protected]; [email protected];
[email protected]
Abstract:
Organisations tend to overlook the vital role that organisational culture plays in the
workplace in today’s business environment. Work itself has evolved over the years and
consequently, the requirements for an effective workplace has changed. The workplace
is required to adapt to those changes in order to benefit the productivity of the
organisation. The purpose of this paper is to report on the findings of a completed case
study of a property and asset services company in Cape Town, South Africa. The aim of
the research was to establish the extent to which organisational culture affects the
workplace planning and design. The findings established that the organisational culture
of a company has a direct affect on the planning and design of the workplace. The
findings further established that the culture of the organisation positively promoted the
change in the workplace and acted as an enabler of this change. The paper speculates
about the effects of organisational culture on workplace planning and design. The paper
concludes that further research into the exact impact that organisational culture has on
workplace planning and design needs to be undertaken in order to establish the
maximum potential increase in worker productivity that can be achieved.
Keywords:
Facilities management, Organisational culture, Workplace planning, Workplace design
1 Introduction
The workplace environment of the modern era is changing. Work is no longer confined
to space and time constraints and as a result, workplace design has taken priority and
traditional workplace planning and design is considered outdated (McGregor, 2000).
Changes in workplace planning and design is considered to be as a result of the changes
in organisational strategies and the impact of political, technological and economic
factors on business (Muir, 2003). In addition, the nature of the work and the workforce
itself is evolving in that on the one hand, the workplace has opened up to a more global
standard and on the other hand, it has gradually become more ‘home-based’ (Langdon
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and Marshall, 1998). Moreover, the workplace is required to adapt to changes in the
market and the organisation with ease and with minimum disruption to worker
productivity.
Hence, the workplace is now seen as a critical factor in the improvement in individual
employee performance and in organisational staff retention rates. In achieving this
objective, the workplace is required to be more flexible, adaptable, compatible,
sustainable, capable and controllable than ever before (McGregor, 1994). Consequently,
the workplace is evolving into a more efficient, flexible and satisfactory environment
for employees and employers alike (Muir, 2003). The end result for facilities in the
future is the essential requirement of flexibility, agility and fluidity in terms of both
building design and the floor plans within buildings (Robertson, 2000).
Implementation of these strategic space changes can be costly to the organisation but
have the potential to be beneficial to the organisation in the long term. Worker
productivity is largely affected by the workplace environment in which they perform
their daily tasks. If worker productivity improves, the resultant cost of workplace
change is negligent.
Facilities managers are responsible for monitoring the changes made and the space
required (Muir, 2003). Muir (2003) places emphasis on the link between the quality of
the workplace and worker productivity. The greater the exposure to natural light, greater
accessibility of storage space, and reduction in noise and workplace design are all
driving factors that improve worker productivity and in turn job satisfaction.
Conversely, in later works by Steen et al. (2005); Blombergsson and Wiklander (2006);
Markhede and Steen (2006) cited by Steen and Markhede (2008) it was revealed that the
average levels of communication between employees is not influenced by the degree of
openness within various workplace designs, but rather is influenced by their level of
visibility. In the main, organisations are unaware of the extraordinary costs related to
workplace planning and design. Considering the continuous changes that have been, and
will be made to the workplace within an organisation, it is necessary to minimise the
operational costs by implementing a workplace strategy (Muir, 2003).
2 Organisational culture
Organisational culture is comprised of beliefs, values and knowledgeable ways of
dealing with experiences that have developed during the course of an organisation’s
existence, and which tend to be evident in the behaviour of the organisation’s members
(Brown, 1995). Hudson (2002) argues that an organisational culture does not simply
come into existence, but rather, once it has been established it rarely fades away.
Robbins (2001) citing Harrison and Carroll (1991) argues that once a culture is in place,
there are practices within an organisation that act in order to maintain the status quo.
Robbins (2001) argues there are three primary forces that play a fundamental role in the
implementation and maintenance of an organisational culture, namely: the selection
practices; the actions of top management; and, the socialisation methods. In this context
it is clear that the design of the workplace is likely have an impact on the
implementation and sustainability of an organisation’s culture. What is not clear, is the
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extent of the impact of the workplace design on organisational culture. Cummings and
Huse (1989:421) produced a composite model of culture which comprises four
fundamentals existing at different levels of awareness. These four levels are:
• Basic, taken•for•granted assumptions on how organisational problems should
be solved.
• Values about what ought to be in the organisation.
• Norms that exist just below the surface of cultural awareness and guide
members’ behaviours in specific situations i.e. the verbal rules of behaviour.
• Artifacts as visible manifestations of the other levels of cultural elements and
may include the structures, procedures, systems, rules and physical facets of the
organization.
It is proposed that in line with Cummings and Huse (1989) “artifacts” a fourth
dimension, namely, workplace design, could be added to Robbins (2001) forces that
have been outlined above.
Hence, the purpose of this paper is to report on a case study of a Cape Town based
company that was in the process of an organisational culture change and the subsequent
impact this had on the design of the workplace. To this end it was intended to
investigate to what extent organisational culture influences workplace planning and
design.
3 Research Methodology
A qualitative research methodology in the form of a single case study was employed in
this research study. The selection of the case study was based on three criteria, namely:
• Very little literature to date on the correlation between organisational culture and
workplace design;
• The company under investigation had just changed over to an open plan design
and therefore it was possible to see the struggles relating to the change, the
reactions of colleagues and the before and after affects of the change; and, lastly,
• The researcher was provided with complete open access to the company.
In the context of the case under investigation, use was made of both qualitative and
quantitative techniques. Semi-structured interviews with senior management were
conducted with the aim of gaining an understanding of the organisation and its inherent
culture. In addition, pictorial evidence of the new workplace design was gathered. In
total six interviews were conducted with senior management. More specifically,
interviews were conducted with the Human Resource Manager, Chief Executive
Officer, Regional Manager, Head of Marketing, Chief Financial Officer, and the
Procurement and Office Manager who was responsible for the management of the
workplace design and implementation.
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An employee survey was undertaken with all 86 employees of the company. Fifty-four
surveys were returned and analysed. Hence, a 63% response rate was achieved. In
addition, documentary evidence was also gathered on the company in the form of its
newly formed strategic goals and objectives, company values, mission statement, brand
manifesto and its core business principles.
4 Findings and Discussion
4.1 Organisation culture and branding
The case under investigation is a highly team orientated organisation. The mission
statement of the company is “To create wealth and value for our stakeholders by
providing innovative asset solutions”. This statement is underpinned by fundamental
corporate values that are focused on teamwork, passion, improvement, client-focused,
honesty and integrity. These core values are further expressed in the brand manifesto for
the organisation, which they have made into a song entitled “Ahead of the Game”. The
CEO describes the company culture as being dynamic, innovative, young, aggressive
and transparent. Hence, the design of the new workplace incorporated these principles
with the introduction of an open-plan office environment.
It can be seen from Figure 1 that some of the key features of this design were the use of
colour to encapsulate the “dynamic, young and aggressive”, the use of glass to
encapsulate the culture of “transparency” and the use of chess pieces throughout the
office layout in order to encapsulate being strategically “Ahead of the Game”.
Figure 1. The Entrance Hall or Foyer
4.2 Semi-structured interview findings
The workplace was first operating with an open plan layout on the third of March 2008.
The reason for change was that senior management insisted on the change of workplace
design nationally in order to create an open plan environment. Once the open plan
environment was implemented, the company culture evolved into a more open door
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policy with fewer titles in management. As a result of the change, interaction among
team members improved. All the interviews conducted revealed an innate awareness of
the long-term goals and objectives of the company. All of which echoed a sense of
teamwork and positivity. It is clear that management is in the process of building a
company to last, which in the CEO’s opinion, is the difference between a ‘good
company’ and a ‘great company’. Having discussed the strategic importance of
workplace planning and design, it became apparent that there was consensus among
senior management that it is a strategic tool that can be utilised by management to
entrench corporate culture. Senior management clearly expressed a link between the
culture of the company and the layout of the workplace. It was the overall consensus of
senior management that an open plan workplace assists employees in improving
communication, sharing of knowledge and promotes a general improvement in the vibe
of the company. In conclusion, there is agreement that the company’s culture was not
coincidental and the workplace was changed to accommodate the change in culture.
4.3 Employee questionnaire survey findings
The survey instrument was divided into two sections. The first section probed
employees understanding of the embedded culture within the company. Section two
related specifically to the workplace design within the company.
Respondents were asked to indicate how they would define the company’s culture.
Eighty four percent (84%) of the respondents believed the culture to be one of
teamwork and sixteen percent (16%) of the respondents believed the company’s culture
to be individualistic. Some employees commented that although the company desired a
team culture, there was an individualistic culture embedded within the company whilst
other employees were of the opinion that the company worked as a team and worked in
an environment where teamwork and excellence were rewarded. It was further noted
that in the current economic environment, a team culture was relied upon in order for
the company to succeed and in turn for more to be achieved in a more effective manner.
Elaborating on the first question, employees were asked to indicate to what extent they
believed the company wished to have this culture. Eighty nine percent (89%) of the
respondents believed the culture chosen in question one to be the culture the company
wished to have. Employees who commented were of the opinion that although the
company wished to have a team culture, the management style did not allow for a
positive environment to grow.
Employees were asked to indicate to what extent the company culture had contributed
to its success. Ninety seven percent (97%) of the respondents believed the culture
chosen in question one has contributed to the company’s success and three percent (3%)
of the respondents believed the company’s culture chosen in question one had not
contributed to the company’s success. Some respondents stated that the company had
been successful as it had grown and is growing dramatically since the team culture was
introduced.
In answering questions related to the workplace layout and design, eighty eight percent
(88%) of the respondents believed the workplace change to be successful and twelve
percent (12%) of the respondents believed the workplace change was unsuccessful. The
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majority of respondents believed the open plan layout of the workplace had improved
communication, visibility and the working environment. In addition, the workplace
provided for better energy and flow of information. Another comment noted that the
team enjoyed the fact that the CEO and managers walls had come down. Some
respondents commented that despite their loud voices and there being no walls, the
change was successful.
However, it was felt by some employees that the open plan workplace was not
appropriate for those who needed to concentrate on report writing. Additionally, another
comment suggested open plan was not for everyone as some people felt as if their
privacy was intruded upon. However the open plan culture fosters an open honest
environment in which problems are easily detected and solved.
Finally it was noted that the company is still in the early stages of its culture that is
becoming more open and addressing the problems that may have been there before the
new layout was introduced. In terms of it bringing the company and employees closer
together and being more comfortable with one another it is achieving that goal every
day. It is important to note that a handful of employees were new recruits and would not
be able to answer specified questions,
Interestingly, forty four percent (44%) of the respondents believed there was an element
of ‘resistance to the workplace layout change’ and fifty six percent (56%) of the
respondents believed there was no resistance to the change. Depending on the length of
employment, various employees responded differently. Employees, who were recently
employed after the implementation of the change in the workplace layout and design,
were unaware of any resistance.
Depending on the position of the employee, their opinions differed. Management who
were situated within private offices prior to the change were initially against it but they
now enjoy the new workplace layout. In addition people who were more independent by
nature tended to resist the change. It required a bit of coaching, but generally the
employees were of the opinion that they could see the positive change it had brought. In
addition, it was noted that it is often the ‘old school’ that reject change. It was of the
overall opinion that people fear change and once change is completed, they embrace the
change. In general, employees feared the close proximity to the person next to them and
the possible distractions resulting from that. It was noted that in a place where ‘big
personalities’ exist, noise levels and different ways of operating in the work
environment could be a problem.
It is of the general opinion that the employees prefer confidentiality. In addition, the
levels of distraction in an open environment are regarded as a disadvantage. Depending
on the role of the employee, some employees require being able to concentrate, hence
those employees were generally somewhat reluctant to change.
4.4 Discussion of the findings
The case study has been successful in implementing workplace planning and design.
The case study results from Robbins’s (2001) continuum revealed the company’s
characteristics of innovation and risk taking, attention to detail, people and team
orientation and aggressiveness scored high levels, whereas stability attained a low level.
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The team members interviewed defined the organisation’s culture as a team and family
oriented, open door, young, dynamic, passionate, everchanging culture. Upon applying
the Cummings and Huse (1989) model of different levels of culture to the case study,
basic core assumptions of the company included the open door policy, team
environment, open communication and shared atmosphere within the workplace, the
company’s values are identified as teamwork, passion, improvement, honesty and
integrity and client•centric. The organisation’s norms included the recruitment of
young and dynamic individuals, focusing on the client needs, and the company’s need
to continuously grow and improve. The artifacts of cultural elements such as the
physical workplace structure and the organisational structure, display deeply rooted
tendencies towards teamwork and organisational learning.
Literature continuously debates the ability of an organisation to change its culture to a
culture more suited to the organisation. At one stage the CEO was concerned the
company culture was becoming one of arrogance. The CEO and the Marketing Director
built the culture of the organisation by defining it in words, recruiting like•minded
people, developing various systems of processes and marketing the brand of the
company. From the company’s point of view, this change was necessary and the
company’s culture today, although not fully matured, is more suited to the organisation.
5 Conclusion and Further Research
This research study investigated the relationship between organisational culture and the
workplace planning and design in an asset sales and services company. The team
members interviewed defined the organisation’s culture as a team and family oriented,
open door, young, dynamic, passionate, ever-changing culture. The organisational
norms identified included the recruitment of young and dynamic individuals, focusing
on the client needs, and the company’s need to continuously grow and improve. The
artefacts of cultural elements such as the physical workplace structure and the
organisational structure, display deeply rooted tendencies towards teamwork and
organisational learning.
Top management’s open door policy allows for greater levels of communication. Top
management are involved in all decision-making and were responsible for the creation
of the ‘Blue Recruit’ recruitment policy. Through the above mentioned, top
management have evolved the company’s culture into a positive culture which
effectively reduces resistance to change. The overall consensus of the interviewees
believed workplace planning and design to be a strategic tool within the company.
Furthermore, the design of the workplace supports the culture within the company.
In conclusion, while this study might not have provided a definitive answer to the
research question, it does provide a useful opportunity to speculate in respect of the
likely impact that workplace planning and design together with organisational culture
can have on worker productivity. In addition, an extension of this initial research would
include an investigation into the influence of cross-border cultural influences on
workplace design.
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Kathy Michell, Natalie Ginsberg and Keith Catell, pp 865-872
6 References
Blombergsson, M., Steen, J. and Wiklander, J. (2005), ‘Useful Buildings for Office
Activities’, Facilities, 23 (3/4), pp 176•186.
Blombergsson, M. and Wiklander, J. (2006), ‘Spatial Support for Key Usability Factors:
Spatial Influence on Interaction Patterns for 800 Office Workers’, in Proceedings of
CIBW70 International Symposium on ‘Changing User Demands on Buildings’,
Trondheim, June, pp 542•550.
Brown, A. (1995), Organizational Culture, Pitman, London.
Cummings, T.G. and Huse, E.F. (1989), Organization Development and Change, 4th
Edition, West: St Paul.
Harrison, J.R. and Carroll, G.R. (1991), ‘Keeping the Faith: A model of cultural
transmission in formal organizations’, Administrative Science Quarterly, December,
pp 552-582.
Hudson, K.M. (2002), ‘Transforming a conservative company – “One laugh at a time”’,
Harvard Business Review on Culture and Change (Eds B. Munck, R. Kegan, L.L.
Lane, D.E. Meyerson, D. Sull, K.M. Hudson and P.F. Levy), Harvard Business
School Press, Boston, MA, USA.
Langdon, A. and Marshall, P. (1998), Organisational Behaviour, Longman, Australia.
Markhede, H. and Steen, J. (2006), ‘Analysing Open Space Offices’, in Proceedings of
CIBW70 International Symposium on ‘Changing User Demands on Buildings’,
Trondheim, June, pp 533•541.
Markhede, H. and Steen, J., (2008), ‘Creativity demands new office designs’, in
Proceedings of CIBW70 International Conference on ‘Facilities Management’,
Edinburgh, June, pp 313•320.
McGregor, W. (1994), ‘Designing a ‘Learning Building’’, Facilities, 12 (3), pp 9•13.
McGregor, W. (2000), ‘The future of workplace management’, Facilities, 18 (3/4), pp
138•143.
Muir, A. (2003), ‘Space Management’, In Best, R. Langston, C. and De Valence, G.
(Eds.), Workplace Strategies and Facilities Management: Building in Value, pp
81•103, Butterworth•Heinemann, Oxford.
Robbins, S.P. (2001), Organizational Behaviour: Concepts, Controversies Applications,
9th edition, Prentice-Hall, New Jersey, USA.
Robertson, K. (2000), ‘Work transformation: integrating people, space and technology’,
Facilities, 18 (10/11/12), pp 376•382.
Steen, J., Blombergsson, M. and Wiklander, J. (2005), ‘Useful buildings for office
activities’, Facilities, 23 (3/4), pp 176-186.
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Ayodeji Oke and Joseph Abiola-Falemu, pp 873-884
Relationship between building collapse and poor quality of
materials and workmanship in Nigeria
Ayodeji Oke1 and Joseph Abiola-Falemu1
1
Department of Quantity Surveying,
Federal University of Technology, Akure, Nigeria.
E-mail: [email protected] ; [email protected]
Abstract:
The continued incidence of building collapse in Nigeria called for a need to study the
competency and effectiveness of construction sites workers in Nigerian construction
industry as well as a need to investigate the quality, durability, performance and other
quality assurance criteria of building materials and components used for building
construction in the country. This research investigated the effects of poor quality of
materials and workmanship on building collapse in Nigeria and their consequences.
Data for the study were obtained through well-structured questionnaires administered to
building professionals in Nigeria and historical data of past building collapse in Nigeria
were also collected. The study revealed that the quality of materials and workmanship in
Nigerian building industry is not satisfactory and that the problem lies in the use of
inappropriate materials supplied to site, inadequate materials and inefficient supervision
of workmen. It is to be noted that most of the collapsed buildings are private residential
ones constructed by indigenous contractors. It was concluded that poor quality of
materials and workmanship has a very high and positive effect on building collapse in
Nigeria. The paper finally recommended the need for involvement of skilled workmen,
quality check of materials before incorporation into building works, sanitization of
building materials and proper supervision of workmen.
.
Keywords:
Building, Collapse, Building Collapse, Materials, Workmanship, Nigeria
1 Introduction
Construction industry plays an important and dynamic role in the process of sustainable
economic growth and development of any nation and more than 50% of the gross fixed
capital budget in Nigeria normally takes the form of construction output (Wase, 2004).
Building industry (a sub-sector of the construction industry) is the most complex of all
the industries in Nigeria economy today (Akindoyeni, 2002). The basis of its
complexity is on the fact that all other industries (whether small scale or large scale) and
sectors of the social-economy depend on it for the environment in which they operate.
Building failure occurs when there is a defect in one or more elements of the building
caused by inability of the material making up the components of such building elements
to perform its original function effectively, which may finally lead to building collapse.
A research was carried out by Bamidele (2000) and in Fadamiro (2002) on the causes of
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Ayodeji Oke and Joseph Abiola-Falemu, pp 873-884
building collapse in Nigeria based on the following five (5) major causes viz. Natural
phenomenon, design error, poor material and workmanship, procedural error and poor
maintenance and abuse of use of buildings showed that poor material and workmanship
contribute about 45% to the overall causes of building collapse in Nigeria. A study by
Ogunsemi (2002) showed that poor workmanship amount to about 18.4% of the total
causes of building collapse while the use of sub-standard materials amount to 18.4%.
Every kind of building has a lifespan and all components and elements put together to
make it functional are expected to sustain this lifespan. Based on this premise, Odulami
(2002) grouped building materials failure into the following categories of building
elements and workgroups: -
i. Those that should last the life span of the building (foundation, frame, wall and
upper floor falls into this category);
ii. Those whose lifespan can be prolonged by periodically replacing some part at
regular and specific time (such as roof covering);
iii. Those that are subjected to wear by human or mechanical agencies (such as floor
finishes);
iv. Those that as a result of technological improvement become obsolete (such as
finishing and fittings);
v. Those that are affected by exposure to weather after a period of time, they may
fail or need to be changed because of appearance (such as roof covering and wall
cladding).
In Nigeria, materials and components are displayed in the market without Standard
Organisation of Nigeria (SON) quality certification number. It is also noted that quality
continues to decline (Akingboungbe, 2002). More so, there are insufficient testing
laboratories where most building materials and components are tested before standard
are established for good practice and use. Sometimes, specimens of materials sent to the
laboratories have better strength than those on production sites (Odulami, 2002).
The following problems were further stated:
• A bag of cement that should weigh 50kg arrives on production site in 40-45kg.
This affects the volume of cement in such mixture of concrete and may result
into building collapse.
• Sand and aggregate brought to production sites sometimes come with certain
percentage of impurities which may be injurious to cement and the reinforcing
rod. This will lower the strength of concrete made of this type of materials.
• The various reinforcing rods come to site with varying diameters and strength.
This affects the structural strength of structural members of buildings where they
are used.
• The production of undersized and unseasoned timber that is mostly taken for
granted may lead to deflection of beams and slab made from such materials. The
interaction of problems resulting from the above will lead to building failure and
eventual collapse.
Additionally, poor quality of workmanship makes it difficult or impossible for workers
to perceive and apply the concepts of quality control and limits of tolerance for building
production thereby, resulting in poor construction which may finally lead to building
collapse (Ogunsemi, 2002). The site of building collapse scattered across the length and
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Ayodeji Oke and Joseph Abiola-Falemu, pp 873-884
breadth of Nigeria is quite alarming that it is unimaginable what effects it will have on
the building industry and Nigeria economy as a whole. Therefore, Nigeria especially
Lagos state is the “world’s junk-yard” of collapsed buildings worth billions of naira
(Famoroti, 2005).
This incidence of building collapse therefore called for a need to study the competency
and effectiveness of construction sites workers in Nigeria and also to investigate the
quality, durability, performance and other quality assurance criteria of building
materials and components used for building construction. The aim of this paper is to
investigate the relationship between poor quality of materials and workmanship and
building collapse in Nigeria.
2 Literature Review
2.1 Quality of building materials
In 2007, a building collapsed in Lagos state during construction and it was attributed to
the use of sub-standard materials especially the sandcrete block used in the construction.
Quality of concrete, for instance, has been badly affected as a result of sub-standard and
poor material and this is the reason why many buildings of reinforced concrete members
collapse with loss of lives and injuries (Olusola, Ata & Ayangade, 2002). The issue of
confirmation of quality of building materials when used in the construction process
must be taking serious so as to avoid situations where majority of buildings fail in
meeting safety obligations to the general public which may finally result into building
collapse. Before any material should be incorporated into building works, there is a
need to establish its quality and such thing as quality control (QC), quality assurance
(QA) and quality level (QL).
Building materials are various substance or items that form the basic components of
various elements of a building. They are usually naturally occurring while some others
are mixture of one or more of these materials in the proportion to suit the purpose it is
intended. From the beginning to the end of building construction, materials of varying
shapes and sizes are extensively used. Materials that are primarily used on site are
cement, sand, aggregate (of various classes), iron rods, water and timber (hard or soft
wood). These are referred to as star materials (Odulami, 2002) and they are usually
mixed together to give different components and elements found in the erection of any
building structures. For a good structure, these components must be of some specific
ultimate strength, which must have been tested and certified.
However, materials of secondary importance and application are glass, aluminum and
ceramics. Where improved building techniques are a necessity, due care must be taken
in the selection of materials as the two of them i.e. primary and secondary, are not
separable (Bolaji, 2002). It is on record that, good building techniques are enhanced by
building materials of good quality (Adebayo, 2000). Building materials, no matter how
good they may be (whether primary or secondary), can be seriously vulnerable if not
properly handled and stored.
2.2 Quality of workmanship
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Ayodeji Oke and Joseph Abiola-Falemu, pp 873-884
The quality, cost and timely delivery of products in the construction industry very much
depends on workmanship (The Hindu, 2006). The skill, experience and personal ability
of the workmen go a long way in determining the quality of the workmen, which is a
measure of their effectiveness and efficiency.
Workmanship is “skill in an occupation or trade of different workmen based on their
training or profession” (Adetayo, 1995). Workmen according to Ogunmakin (2005) is
the most important factor of production since it is the only factor that creates value and
sets the general level of productivity. Labour was further defined as contractor’s men
comprising of all operations on the site executing the project. These labourers include
the main craftsmen, apprentices of various trades under qualified tradesman and
labourers performing all kinds of labour work that does not require training.
2.3 Building collapse in Nigeria
Over the past three decades, massive investments have been made by different arms of
government (local, state and federal) in Nigeria to produce buildings as part of the
national, social and economic infrastructure. These assets include schools, hospitals,
administrative buildings, as well as residential buildings in public ownership.
“In the current unfavourable economic climate, the Federal Government is
finding it increasingly difficult to allot substantial financial resources for
fixed capital formation, particularly for construction of buildings to add to the
existing one and replace old structure, let alone of replacing collapsed
buildings. In the latter, the consequent loss of lives and investments
associated with building collapse in the face of the current unfavourable
climate leaves much to be desired” (Dare, 2002).
A heavy downpour, may for instance, imply that one or two uncompleted buildings,
somewhere, would carve in and this in turn would mean that scores of passersby taking
shelter under the building would fall victim (Adebayo, 2000). Building collapse occurs,
with or without warning, from design and/or construction faults and this incidence has
become a familiar occurrence, even to the layman on the street of Nigeria major cities.
It is usually a disastrous occurrence frowned at and viewed by responsible governments
worldwide with a great concern.
Building collapse, though a common phenomenon in the world over is more rampant
and devastating in the developing countries (Sodare and Usman, 2006). Many cases of
building collapse have been recorded in Nigeria and have been observed to cut across
all building categories (private, corporate and public). Chinwokwu (1999) cited in
Fadamiro (2002) shows that of the twenty three (23) reported cases of building collapse
between 1980 and 1999 in Lagos state, 76%, 12% and 12% were respectively private,
corporate and government or public buildings. This shows that private buildings are
more prone to building collapse than all other forms of buildings.
Building collapse according to Bamidele (2000) as cited in Ogunsemi (2002) is
classified into:
• Practical collapse: This occurs when part of a building is affected and a small
fraction of the building fails.
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• Progressive collapse: In this type of collapse, there will be signs of weakness
noticeable either by seeing cracks which become widened with time.
• Total or sudden collapse: This is a situation where the building falls down
suddenly without giving any sign.
3 Research Methodology
Relevant and necessary data were collected from both primary and secondary sources.
The data were collected through well-structured questionnaires and historical data of
past building collapse in Nigeria. The historical data (regardless of the location and
based on the available information) were partly gotten from The Nigeria Institution of
Building, previous research works and various newspapers. All the available incidences
of building collapse – as at the time of analysis - were included in the historical data.
Five structural building materials (cement, fine aggregate, coarse aggregate,
reinforcement bars and timber) and three types of skilled workmen (bricklayers,
carpenters and welders) were listed for assessment by the respondents in order to
determine their level of satisfaction with their quality.
The analysis of the collected data was carried out using descriptive and analytical
statistical methods: percentiles, mean, relative index ranking, Pearson product moment
correlation and regression analysis methods. Pearson Product Moment Correlation was
adopted in this research to assess the causal relationship between building collapse and
poor quality of materials and workmanship.
4 Findings and Discussion
4.1 Characteristics of the respondents
Table 1 on the profession of the respondent shows that 22% were Architects, 21% were
Builders, 24% were Structural Engineers and 33% were Quantity surveyor. The analysis
in this study was based on this number of respondents.
Table 1: Respondents’ professions
Profession Frequency Percentage
Architecture 19 22.09
Building 18 20.93
Engineering 21 24.42
Quantity surveying 28 32.56
Total 86 100.00
Table 2 shows that the mean years of working experience of respondents is
approximately ten years, which depict that they are competent enough to supply reliable
and up to date data needed for the study
Table 2: Respondents’ years of working experience
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Year Frequency
1-5 31
6 - 10 24
11 - 15 12
16 - 20 13
Above 20 6
Total 86
Mean = 9.94
.
4.2 Assessment of building materials quality
The quality of structural building materials falls below “very high satisfactory level” i.e.
0.9 – 1.0 (relative index value), it can therefore be generalized that “quality of Nigerian
structural building materials is not satisfactory” since such materials are expected to be
of very high level of satisfaction because of their importance.
Table 3: Respondents’ level of satisfaction with quality of Nigerian building materials
Mean Relative
MATERIALS Rank
Arc Bldr Eng. Qs index
Cement bagged in Nigeria 4.11 4.28 4.09 4.11 0.83 1
Fine aggregate (sand) 3.50 3.83 3.99 4.20 0.79 2
Coarse aggregate 3.90 3.86 3.95 3.98 0.78 3
Reinforcement bar (high yield) 3.75 3.86 3.88 3.76 0.76 4
Timber 3.74 3.82 3.50 3.60 0.75 5
4.3 Assessment of quality of workmanship by workmen.
This section examines the quality of workmanship by various workmen that are
concerned with structural elements of buildings in Nigerian building industry.
Table 4: Respondents’ level of satisfaction with the quality of workmanship of Nigeria
building industry workmen.
Mean Relative
SKILLED LABOURERS Rank
Arc Bldr Eng. Qs index
Bricklayers 3.99 4.01 3.90 3.94 0.79 1
Carpenters 3.88 3.92 3.73 3.94 0.77 2
Welders (fitters) 3.65 3.82 3.77 3.60 0.74 3
From the result observed in table 4, it can be observed that the quality of workmanship
by Nigerian building industry workmen falls below “very high satisfactory level” i.e.
relative index value of 0.9 – 1.0, it can therefore be generalized that “quality of
workmanship obtainable in Nigerian building industry is not satisfactory” since they are
expected to be of very high level due to their importance. Such factors as inefficient
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supervision, use of inappropriate materials, non-availability of necessary, effective and
up-to-date equipment and machines, inexperience, etc. can be responsible for this.
4.4 Quality of materials and workmanship and building collapse.
This section examines the overall impact of poor quality of materials and workmanship
on building collapse in Nigeria based on the stated hypothesis.
Ho = Quality of materials and workmanship has no significant effect on building
collapse in Nigeria.
H1 = Quality of materials and workmanship has significant effect on building
collapse in Nigeria
In order to assess the causal relationship between quality of materials and workmanship
and building collapse in Nigeria, two test statistics were employed i.e. regression
analysis and Pearson product moment correlation coefficient. Number of collapsed
buildings as a result of poor quality of materials and workmanship (X) were recorded
against the total number of collapsed buildings (Y) within the range of the years as
shown in table 5.
Table 5: Causal relationship between quality of materials and workmanship and
building collapse.
Y X
YEAR
No Rank No Rank
1984 – 1988 7 4 3 4.5
1989 – 1993 11 3 5 3
1994 – 1998 5 5 3 4.5
1999 – 2003 15 1 9 1
2004 - 2008 13 2 6 2
A mathematical model (linear regression equation) was generated to show the
relationship as shown below:
Y = 2.06 + 1.56X
Where Y is the number of building collapse and
X is building collapse due to poor quality of materials and workmanship.
In order to further test the strength of the model, Pearson product moment correlation
coefficient was calculated to be: N= 5: Rcal = 0.95: Rcritical = 0.81 for p < 0.05 (0.05
level of significance)
Rcalculated > Rcritical at 5% level of significance hence, the null hypothesis is rejected
and the alternative which state that “Quality of materials and workmanship has
significant effect on building collapse in Nigeria” is accepted. The relationship is of a
very high and positive type.
4.5 Analysis of the historical data
Table 6 show the summary of information on past building collapse in Nigeria. Five
factors that are responsible for building collapse were adopted as highlighted by
Bamidele (2000) in Fadamiro (2002). Sixty cases of collapsed buildings were
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summarized out of which poor quality of materials and workmanship led to thirty-one
of them, representing about 52%.
It could be observed that out of these sixty buildings, forty-six of them were private
while the remaining fourteen were public. Of these buildings, poor quality of materials
and workmanship led to collapse of twenty-five private and six public buildings
respectively. This is a very significant factor as it represents 54% and 43% respectively,
showing that the factor has more effect on private than public buildings.
More so, it was observed that out of the sixty collapsed buildings, poor quality of
materials and workmanship was responsible for twenty-one of the thirty-eight
residential buildings (representing 55%), six of the fifteen commercial buildings
(representing 40%), three of the five religious buildings (representing 60%) and one of
the two educational buildings (representing 50%). This showed that this very factor has
more effect on religious buildings, followed by residential buildings while it has the
least effect on commercial buildings. This can be justified since most of the religious
buildings are erected without consulting any professionals neither are they ready to
search for appropriate materials, but make use of the available one all in the name of
getting a place of worship.
Table 6: Building collapse in Nigeria and their causes
Building
Total type Major building use Calamities Contractor
No CAUSES
No % Priv Pub Re Co Rel Ed Death Injury I N
1 Poor
maintenance 4 6.67 3 1 3 1 0 0 23 10 4 0
culture (PMC)
2 Design error
9 15.00 6 3 6 1 1 1 125 41 8 1
(DE)
3 Poor materials
and
31 51.67 25 6 21 6 3 1 111 112 28 3
workmanship
(PMW)
4 Natural
phenomenon 4 6.67 3 1 2 2 0 0 72 40 3 1
(NP)
5 Excessive
12 20.00 9 3 6 5 1 0 95 28 12 0
loading (EL)
Total 60 100.0 46 14 38 15 5 2 426 231 55 5
Source: Historical data of building collapse in Nigeria (Authors’ field work)
KEY: Priv: Private; Pub: Public; Re: Residential; Co: Commercial; Rel: Religious; Ed:
Educational; I: Indigenous; N: Non-indigenous
Four hundred and twenty-six (426) deaths and two hundred and thirty-one (231) injuries
were observed as resultant calamities out of which poor quality of materials and
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workmanship accounted for one hundred and eleven deaths (representing 26%) and one
hundred and twelve injuries (representing 45%) respectively.
The type of contractor that executed these collapsed buildings was viewed from two
perspectives i.e. indigenous and non- indigenous. The former accounted for 55 cases of
the collapse (representing 92%) while the latter accounted for five cases (representing
8%). Poor quality of materials and workmanship lead to collapse of twenty-eight
buildings by indigenous contractor (representing 51%) and 3 of non-indigenous
(representing 60%) respectively. Buildings erected by indigenous contractors are more
prone to building collapse than non-indigenous and this can be as a result of the
following factors: inexperience, lack of trained personnel, lack of technical know how,
lack of exposure, etc. which were factors affecting quality of materials and
workmanship in Nigerian building industry as identified earlier.
4.6 Discussion of findings
The discussion is based on the analysed data above, from the distributed questionnaires
and the historical data of building collapse in Nigeria. Relationships were drawn
between the observed information through the analysis and past studies relevant to the
research work.
It could be observed that quality of Nigerian structural building materials is not
satisfactory. This is in agreement with earlier study by Olusola et al (2002), Odunlami
(2002) and Fadamiro (2002). Olusola et al (2002) attributed poor material quality to
virtually all the incidence of building failure in Nigeria which is in agreement with the
findings of the research.
The analysis carried out on building industry skilled workmen concerned with structural
building members showed that the quality of their workmanship is not satisfactory. This
confirmed Mangino (2006) assertion that, workmanship in the construction industry of
developing countries (including Nigeria) has been on a low end due to inexperience,
lack of motivation and inefficient supervision.
Further to the study by Akindoyeni (2002), Chinwokwu (2000), Dare (2002) and
Ogunsemi (2002) on building collapse in Nigeria, the findings confirmed that poor
quality of materials and workmanship has a very large and positive causal effect on
building collapse in Nigeria i.e. there is a very high causal relationship between them.
Ogunsemi (2002) asserted that poor quality of materials and workmanship accounted
for over 36% of building collapse in Nigeria (the highest of all the examined factors)
while Chinwokwu (2000) confirmed that failure to investigate the quality of materials
and workmanship in Nigeria building industry will certainly continue to result into
building collapse.
The findings revealed that poor quality of materials and workmanship has accounted for
about 50% of total building collapse in Nigeria. Contrary to this finding, Ogunsemi
(2002) confirmed that this factor has been responsible for only 37% while it accounted
for 27% in another study by Fadamiro (2002). This is due to the fact that this research
relies on a larger number of past building collapse in Nigeria for its finding (making use
of sixty cases and five major causes) while Ogunsemi (2002) made use of seven (7)
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cases of building collapse and ten different causes. Due to increased population sample
for this finding, the result of the research could be said to be more comprehensive than
that of Fadamiro (2002) despite the fact that the same number of factors were adopted
as the causes of building collapse.
In furtherance to Chinwokwu (2000) assertion that, private buildings are more prone to
collapse than public ones, the analysis also confirmed that poor material and
workmanship is the most significant factor of all the causes of collapse in all type of
buildings regardless of neither their developer nor the use subjected to. In Dare (2002)
view, buildings executed by indigenous contractor are more prone to building collapse
than that executed by non-indigenous ones, the study confirmed this and also revealed
that poor quality of materials and workmanship is the most significant cause of collapse
of buildings executed by these contractors in Nigeria.
5 Conclusion and Further Research
The study concluded that quality of Nigerian structural building materials is not
satisfactory neither is the quality of workmanship of Nigerian workmen. Moreover, the
study concluded that poor quality of materials and workmanship has a very high and
positive effect on building collapse in Nigeria (r = 0.95) with respect to the
mathematical model (linear regression equation) generated from the findings of the
research.
Y = 2.06 + 1.56X
Where Y is the rate of building collapse in Nigeria
X is the effect of poor quality of materials and workmanship
Finally, the study revealed that poor quality of materials and workmanship contributed
to about 52% of building collapse in Nigeria with most of them being private residential
building. Based on the findings, the following are recommended:
i. The Nigerian Institute of Building (NIOB) and The Nigerian Institute of
Structural Engineer (NISE) members should be involved in the building
materials sanitization process by the federal government. Material
Engineers should also be attached to large building projects by their
developer.
ii. Building professionals should also ensure proper and efficient
supervision of workmen as well as efficient checking of materials before
incorporation into building works.
iii. The design team in any building work should be very careful when
selecting supplier of building materials i.e. nominated supplier. Materials
supplied to site by such should also be checked and vet appropriately in
conformance to the contract specification.
iv. Workmen with the appropriate training should be employed for building
works especially those working on the structural members. The
personnel manager of building firms in Nigeria should also employ site
management education scheme charged with the responsibility of
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Ayodeji Oke and Joseph Abiola-Falemu, pp 873-884
organizing workshops and other forms of trainings for site personnel on
regular basis.
6 References
Adebayo, S. O. (2000). Improving building techniques. Proceedings of a workshop on
Building collapse: Causes, prevention and remedies (pp. 48-51). The Nigerian
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forward. Retrieved February 12, 2006 from http//www.dailysunngr.com
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(pp.12-28). The Nigerian Institute of Building, Lagos State.
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- 884 -
COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
S A Makanjuola, A O Aiyetan and A E Oke, pp 39-48
Assessment of fire safety practices in public buildings in western
Nigeria
Makanjuola, S. A1, Aiyetan A. O1 and Oke, A. E1
1
Department of Quantity Surveying,
Federal University of Technology, Akure, Nigeria.
E-mail: [email protected]; [email protected]; [email protected]
ABSTRACT
Fire safety culture and practices has been a thing of neglect in most public buildings in Nigeria and
this has been a contributing factor to incessant fire incidents. This issue has generated a lot of concern
among the public as well as construction professionals. The aim of this research work is to assess the
level of fire safety provisions in public building and the level of fire safety awareness of users and
occupants of public buildings. To achieve this, well structured questionnaires were sent out to users
and occupants of public buildings in the some selected cities of the western part of the country. From
the analysed data, it was discovered that most of the highlighted fire safety equipment are either not
available or where available, they are oftentimes not functional, or that the occupants are not even
aware of their availability, functionality or usage. The level of trainings received by occupants of
building in respect to fire safety, first aid fire fighting and evacuation procedure are found to be low,
lack of effective government policy on administration and implementation of fire code and ignorance
of building designers and professionals are among the militating factors against the integration of fire
safety equipments in public buildings. The study recommends adequate training of building occupant
and effective administration of the existing fire code and regulation should be improved upon, this
will in turn reduce the case of fire incident.
Keywords: Fire safety, fire safety awareness, fire safety practices, public buildings.
1.0 INTRODUCTION
There has been great emphasis on the provision of fire fighting equipment for the fire service offices
in the country, million of money are been spend to train fire-men in fire combat, but little had been
done to look at fire safety practices in the buildings where there is likely to be occurrence of fire. In
most time, fire-fighters are been blamed for fire incident in public building, and all their possible
loopholes seriously explored (Oludare, 2000) but little has been said or explored about the activity of
the other stakeholders in the construction and use of public buildings, who oftentimes responsible for
the causes of fire outbreak.
Fire safety practices is an aspect that have suffered great neglect among designers and users of public
buildings, this may be due to uncared attitudes and ignorance on the part of building owner and users.
Aqua group (1984) stated that loss of property by fire most commonly occur because of ignorance
about the nature of fire and its behaviours, possibly lethal in circumstances that normally appear
perfectly harmless. If a successful campaign is to be conducted against fire and its dreadful
consequences, then the adverse must be fully understood.
Hassan (1999) concluded that the safety of occupants in building should be the main concern for all
professionals bodies involved in both design and construction of buildings. Nevertheless, the design
and safety in buildings will not be enough if adequate preparation is not put in place by the occupant
and users of constructed facilities. It was further reiterated that that the awareness and safety
consciousness is beginning to have effect on the mind of the generality of the public, fire and safety
could not be divorces from each other because once there is fire occurrence, safety of life and property
becomes very essential.
Fire safety practices and awareness is very necessary as it is anonymously said “to be forewarned is to
be fore armed” adequate knowledge of fire, cause, prevention and suppression is very important to all
building occupant, also provision of adequate fire fighting equipment is very important. Coleman
(1982) said that an estimate of the annual bill for fire damage in the UK in 1981 came to over
£350,000,000 in 1980, fire brigade attended over 352 outbreaks, while in the same year, 1035 people
lost their lives and 8770 received injury as a result of fire. In Nigeria, Guardian (2006) reports that
about N900, 000,000,000.00 loses to fire incident were recorded in the country as at 2005 with scores
of live lost in various incidents. This effect of fire makes it necessary to think on how to avoid the
problem rather than coping with it. This research work tend to assess the fire safety practices in public
building, the level of fire safety constructions in public building and the possibility of effective fire
fighting with the available mechanism in place, the level of observation of fire safety precaution
among occupant and the action and reaction of occupants of these buildings in case of fire.
2 LITERATURE REVIEW
2.1 FIRE
A popular adage says fire is good servant but a bad master; also, it is known to be a good friend but a
better enemy. Hassan (1999) describes fire as chemical reaction of three elements. The rapid
combination of the three elements; Oxygen, Heat and Fuel result in the production of heat and light.
Before fire can occur, the Aqua group (1984) notes that there must be presence of the three basic
element or ingredient of fire, which is referred to as fire’s own Eternal triangle.
Oxygen
Heat Combustible material
(fuel)
Figure 1.1 – Fire Triangle
Source: Aqua Group (1984)
It was further observed that when these three elements exist in the appropriate relationship,
combustion would occur. Cladderton (1995) and Aqua group (1984) pointed out that the removal of
one or more of the fire element or the triangle causes an established fire to be extinguished. Causes of
fire in buildings can be attributed to various factors; it has been observed according to Hassan (1999)
that the causes of fire can be grouped under three headings and they are carelessness, accident and
wilful act or arson.
2.2 CAUSES OF FIRE
Causes of fire in buildings can be attributed to various factors; it has been observed according to
Hassan (1999) that the causes of fire can be grouped under the following headings.
1. Carelessness.
2. Accident.
3. Willful act or arson.
2.2.1 CARELESSNESS
These are causes of fire, which is due to failure of occupant of building to follow necessary safety
precaution against fire outbreaks. The fire from this source starts from a point and continue to spread
around the building if not quickly controlled causes of this source may arise from the following
means:
i) Careless handling of combustible materials
This are causes of fire resulting from carelessness of occupants in building, it includes careless
handling of matches and lighter, indiscriminate disposal of cigarette, stump by smokers, children
playing with matches and other glowing splint. They may throw it in a corner and when it comes in
contact with other element of fire it consequently result in fire outbreak.
-2-
ii) Candle sticks
Many people use candle as a substitute for lights in case of power outage, careless handling of candle
stick, placing candle on unstable base, leaving candle unquenched or allowing candle to fall off to a
nearby combustible agent will result in fire outbreak.
iii) Cigarette End
Some smokers are careless in handling cigarette stump by not using the ashtray, throwing them on a
combustible material will result in fire outbreak.
iv) Careless Handling of Inflammable Liquid
This is one of the most common sources of domestic and industrial fire, careless handling of gas pipe,
stops valve e.t.c. using of hot plate indiscriminately and in time of power outage are common sources
of fire outbreak in buildings.
2.2.2 ACCIDENTS
Kwenku (1987) defined accident as an unplanned act, event or occurrence within a sequence of
events, which can cause an unintended personal injury or death, or property damage or both. Ogunjobi
(2002) assert that accident is an unplanned event, which has the capacity to cause injury or damage,
and is attributed to either unsafe act or an unsafe condition. He also stressed that it could result to
damage on plant or product, lo0ss of production, increase cost pollution of the environment and injury
to person, few of which may prove fatal and can lead to death. From the above definition, it can be
said that an accident is anything that happens unexpectedly which result in shock, injury, damage to
life and property. Fires resulting from accidents are fire outbreak that is resulting from emergency or
unlimited source of combustion, fire from this source can be as result of:
i) Thunder Struck
This often arises when there is excess thunderstorm and the building is not well protected with
adequate lighting arrester, causes of fire through this medium is often rare.
ii) Faulty Electrical Equipment and Wiring System
Fault arising from electrical equipment like fan, air-conditioner, lighting fittings and power fittings
often cause fire in buildings, when occupants do not follow all necessary safety precaution in handling
electrical equipments and also faulty wiring system, fire outbreaks is always imminent.
iii) Fire Spread
Fire spreads from adjacent buildings can often affect another and cause outbreak in the building if not
properly checked.
Indiscriminate burning of bushes or debris could cause fire outbreak especially where there is wooden
electric pole. The pole could ignite and burn the 415v power lines, which could cause more harm than
good. Fire also spread in the bushy area during the dry season; therefore, people should be given
orientation that burning of bushes is not a good practice.
2.2.3 Willful Act or Arson
This are causes of fire resulting from willful and intentional acts of occupants or another person. The
Aqua group (1985) purport that nearly one-third of all fire resulting from Arson is difficult to prevent.
They include:
i) Willful Act Due to Fraud: - Due to the fraudulent act of one officer or to the other occupant
in a building, they may willfully ignite fire to the building in other to cover up their fraudulent acts by
destroying valuable documents that may reveal their activity. This may be the major causes of fire in
government own buildings and commercial centers in recent times.
ii) Act of Jealousy / Revenge: This can be due to friction between the owner of a building
and other personality, they may result in willful and deliberate action of the other rival to initiate fire
in the building or the other, this often cause a great damage before they can be brought under control.
iii) Political Motives: Due to many political crises that often arises as a result of friction and
misunderstanding and misrepresentation between various political parties, many of the politicians
often employ the use of political taut and thugs to deal with their opponents, this often result in setting
ablaze the building and property of their opponents, this was the case of various fire outbreaks in 1983
during the NPN and UPN political crisis, the Abacha crisis in 1998 also left many buildings in rubble
as a result of fire attacks.
iv) Religion and Ethnic Crisis: in recent times a country like Nigeria slumps series of
religious and ethnic crisis, example include the Tiv – Jukun crisis in 2002, religious crises in the
north, 2001, 2006; many of this crisis often result in fire attacks on their opponent, thereby causing
fire outbreak in buildings.
-3-
v) Terrorist Attack: This is most common in the middle east where suicide bombers would
detonate a bomb in a building or other places, the aftermath often result in fire outbreak, the
September 11 attack on the world trade center in New York also result in fire outbreak which later led
to the collapse the twin tower in 2001.
2.3 CLASSES OF FIRE AND THEIR EXTINCTION
Hassan (1999) classified fire into four classes:
Class A is a type of fire involving burning materials e.g. wood, paper, textile and other combustible
materials. Fire in this class are best extinguished by water agent in form of jet or spray, this blanket
(fire blanket) can be used to cover the fire in an enclosure.
Class B fire involves flammable substances e.g. petrol, kerosene, paint and other inflammable
solvents. This class of fire is best extinguished with foam or dry powder, carbon dioxide (CO2).
Class C is a type of fire involving combustible gases or liquidified petroleum gases in form of liquid
or gas leak e.g. propane, butane, methane, e.t.c. This can be extinguished with foam, dry powder, and
CO2 water agent spray to the container.
Class D is a type of fire involving metals e.g. calcium, potassium, aluminium e.t.c. Powdered granite,
limestone, dry sand and dried powdered extinguisher are best used for this class of fire.
Hassan (1999) further reiterates that electrical fire does not constitute a class of fire since any
fire involving electricity may involve one of the classes of fire mentioned above.
2.4 FIRE SAFETY AWARENESS AND MANAGEMENT
Powell Smith and Billington (1991) reiterated that the Part B of schedule 1 to the building regulation
1985 is concerned with means of escape from building and fire spread within and between building
must therefore be constructed so that in the event of fire:
- Occupants are able to reach a place of safety.
- They will resist collapse for a sufficient period to allow evacuation of the occupants or
prevent further rapid fire spread.
- The spared within building is spread to a minimal level.
The first requirement is met by providing an adequate number of exits and protected escape routes,
the second is met by setting reasonable standards of fire resistance for the structural elements of the
building, and the third is met by dividing the building into components and requiring higher standards
of fire resistance of the walls and floor bounding a component.
Many a times, when all this are put in place, the advent of fire also wreck havoc because of ignorance
of occupants and users of buildings. The havoc wreck by fire is often blamed on the inefficiency of
the federal or state fire service; lack of equipments, ineffective communication, lack of water supply
and competent fire fighter was earmarked as the possible problem of fire incident at the domestic
wing of the Muritala Mohammed Airport Lagos on May 10, 2000 (Oludare, 2000). He also attributed
the same cause to the razed down Clean John House on same date. Nevertheless, the author fails to
enumerate what the occupants of the buildings were able to put in place before fire incident went out
of hand. Generally except in case of wilful act or arson, fire usually start from a point and spread to
other part of the building. (Makanjuola, 2000)
The Aqua group (1984) highlighted that the understanding of combustion will help in understanding
how fire spread, and also the major fuel of fire is provided by the building contents, when there is
adequate fire safety awareness, the tendency of fire outbreak can be greatly reduced, or even in case
of fire, the occupant will know what to do in other to escape from the building and also how to initiate
a fire fighting approach before the fire service men will arrive at the scene.
Fire safety awareness can be achieved by employing necessary training of building occupants about
the possible causes of fire, use of fire fighting equipment in the building, the evacuation procedure,
and possible fire attack procedure. All these are part of major activities of fire service department in
the developed country. Websites were developed and monthly e-newsletter is always available to
educate the people about fire occupants training and other relevant information, example is the
monthly e-newsletter of division of fire safety, Vermouth Department of public safety; fire and
evacuation guideline publication of Queens Land Government, department of emergency services;
this publications are aimed at bringing fire and safety awareness to the public. Levitt and Samuelson
-4-
(1987) reports that the clearest finding of their research is that training and orientation of workers and
managers in safe working practices reduces accidents
The designer must have an understanding of the necessity and problem of management. The manager
in turn must have a detail knowledge and understanding of the building, its services and its
safeguards, to assist not only in the day-to-day running of the building but also to help in any
emergency that may arise.
Fire safety management entails:
- Regular maintenance of the warning system
- Regular maintenance of the direction and escape signs.
- Regular maintenance of fire appliances.
- Maintenance of unimpeded escape routes.
- Training of staff and occupant in evacuation on procedures and
- Training of staff and occupants in first aid fire fighting. (Aqua group 1984).
3 RESEARCH METHODOLOGY
This research work is a survey into fire safety practices in public building, the study focused on low,
medium and high-rise buildings. The target population for this research are designers, users and
occupant of public buildings, the information were collected from private and Public Corporation and
educational institution
Primary and secondary data were adopted for use in the research work, secondary data were obtained
from textbook, journal, thesis, seminar papers, and new paper, others were from archive and data base
of institution, the Internet were also contracted as well as information downloaded from various
website. The primary data was collected using a well structure Questionnaire administered to various
categories of people within the target population, the response of the respondent form a greater part of
the research. This is in line with the assertion of Allen (1973) that, if the data can not be collected, the
research cannot be conducted. Physical observation of 10 public buildings within the study area was
also carried out.
Out of 90 questionnaires administered, 64 were returned and only 57 (45 non-professionals and 12
construction professionals) were found suitable for analysis representing 63.3%. This is considered
sufficient for the study base on the assertion of Moser and Kalton (1971) that the result of a survey
could be considered as biased and of little significant if the return rate was lower than 30-40%.
Descriptive statistics were used for the questions that are with string variable, frequently and
percentage table were used in presenting the data while data with numeric variables were analyzed
using means score. However, the statistical package for social science (SPSS) software was used in
analysis of the questionnaire, the returned questionnaire was coded in SPSS Data edition and the
descriptive, statistics, mean score and ranking were performed on the data; the result were displayed
in the out put viewer, this were use in discussion of finding from various set of questions.
4 DATA ANALYSIS AND DISCUSSION OF FINDINGS
4.1 Responses of non-construction professionals
4.1.1 Demography and Background information
Table 1: Type of Organization of Respondent.
5
Frequency Percent
Contracting 3 6.7
Consulting 2 4.4
Business 8 17.8
Computing 3 6.7
Government 14 31.1
Paramilitary 2 4.4
Educational 13 28.9
Total 45 100.0
Table 1 shows that the respondent occupying various public buildings cuts across different
organization with various day to day activity.
Table 2: Type of Building
Frequency Percent
bungalow 7 15.6
1-2 floors 13 28.9
3-4 floors 24 53.3
above 4 floors 1 2.2
Total 45 100.0
Table 2 shows that 53.3% of the respondent uses Building that fall within 3-4 floor, while 28.9%,
15.6% and 2.2% of respondent uses building of 1-2 floor, above 4 floors and bungalow respectively.
The average year of experience of respondent from Table 4 is 11 years meaning that the data is
reliable for analysis. Table 5 shows that 20 respondent which represent 44.4% of the total response
uses general office while 33.3% and 22.2% of the respondent to have single user and 2-3 user type of
accommodation.
Table 3: Academic Qualification
Frequency Percent
HND 23 51.1
B.SC 14 31.1
PGD 3 6.7
M.SC/M.TEC 3 6.7
H
PHD 2 4.4
Total 45 100.0
Table 4: Year of Working Experience
6
Frequency Percent
1-5yrs 14 31.1
6-10yrs 4 8.9
11-15yrs 19 42.2
16-20yrs 3 6.7
21-25yrs 3 6.7
26-30yrs 2 4.4
Total 45 100.0
Table 5: Type of Accommodation
Frequency Percent
single user 15 33.3
2-3 users 10 22.2
general off 20 44.4
Total 45 100.0
4.1.2 Fire provision, awareness and functionality of equipment
Table 6: Witness of Fire Incident
Frequency Percent
yes 31 68.9
no 14 31.1
Total 45 100.0
Table 6 shows that only 31 of the respondents which represent about 70 percent have witnessed fire
incident.
Table 7: Extent of Damage Cause by Fire Accident
N Sum Mean Rank
destruction of property 39 103 2.64 1
structural defect 39 84 2.15 2
injury 38 81 2.13 3
collapse of building 40 77 1.92 4
death 38 70 1.84 5
permanent disability 38 69 1.82 6
loss of prestige 39 69 1.77 7
7
Table 7 shows the mean score of respondents’ responses to the extent of damage cause by fire
incident, Destruction of property rank highest while structural defect and injury to person ranks
second and third respectively. Loss of prestige and permanent disability were ranked lowest.
Table 8: Availability of Fire Protection Means and Equipment
Equipments N Sum Mean Rank
portable fire extinguisher 43 116 2.70 1
fire alarm 41 103 2.51 2
emergency lighting
41 91 2.22 3
system
fire exits 39 86 2.21 4
fire safety signs 40 84 2.10 5
fire hose reel 41 83 2.02 6
flame detector 41 83 2.02 6
fire buckets 38 75 1.97 8
smoke detector 41 80 1.95 9
sprinkler system 41 75 1.83 10
heat detector 41 75 1.83 10
wet riser 41 75 1.83 10
fire hydrant 40 69 1.72 13
dry riser 41 70 1.71 14
halon gas system 41 68 1.66 15
fusible link door 40 65 1.62 16
Table 8 shows that potable fire extinguisher ranks first among the type of equipment available in the
buildings of various respondent while fire alarm and emergency lighting system ranks second and
third. This implies that in most of the respondent’s buildings, fire extinguisher and fire alarm are
mostly available with a mean score approximately equal to 3. Fire exist, safety signs, fire hose reel
and flame detector rank 4th, 5th and 6th respectively while fusible link door, halon gas system, dry riser
and fire hydrant rank the 16th, 15th, 14th and 13th respectively. This infers that most of these fire safety
equipments are not available in the buildings under consideration.
Table 9 shows that portable fire extinguisher ranks highest in term of functionality of equipments,
while fire alarm and fire exit rank 2nd and 3rd, Halon gas system rank 16th while wet riser, fusible link
door, sprinkler system ranks 15th, 14th and 12th. Looking into the ranking scale, it can be deduced that,
portable fire extinguisher, fire alarm and fire exits are the only functional fire safety equipments in
most of the building with a amen score tending towards 3, while other equipment are mostly not
functional.
Table 9: Functionality of Equipment
8
Equipments N Sum Mean Rank
portable fire extinguisher 38 113 2.97 1
fire alarm 34 89 2.62 2
fire exits 35 88 2.51 3
emergency lighting
system 35 84 2.40 4
flame detector 34 76 2.24 5
smoke detector 35 74 2.11 6
fire safety signs 35 74 2.11 7
fire hose reel 34 67 1.97 8
heat detector 34 66 1.94 9
fire buckets 34 64 1.88 10
dry riser 34 58 1.71 11
sprinkler system 34 57 1.68 12
fire hydrant 34 57 1.68 12
fusible link door 34 55 1.62 14
wet riser 34 54 1.59 15
halon gas system 34 51 1.50 16
Table 10: Frequency of Attendance of Fire Safety Training
Frequency Percent
frequent 5 11.1
often 5 11.1
rarely 14 31.1
never 21 46.7
Total 45 100.0
Table 10: Frequency of Attendance of First Aid Fire Fighting Training
Frequency Percent
frequent 4 8.9
often 4 8.9
rarely 13 28.9
never 24 53.3
Total 45 100.0
From table 9, 10 and 11, it was discovered that majority of the respondent have never attend any
training in regard to fire safety, first aid fire fighting and evacuation procedure.
Table 11 – Frequency of Attendance of Training on Evacuation Procedure
9
Frequency Percent
frequent 2 4.4
often 4 8.9
rarely 13 28.9
never 26 57.8
Total 45 100.0
Table 12: Respondent Knowledge of Emergency Call Numbers
Frequency Percent
yes 6 13.3
no 39 86.7
Total 45 100.0
Table 12 shows that 39 out of the 45 respondent, which represent 86.7% of the total responses, did not
know fire emergency call telephone numbers, some does not know that they even exist.
Table 13 – Level of Responsibility
N Sum Mean Rank
building occupants 42 166 3.95 1
fire fighters 43 159 3.70 2
designer 43 154 3.58 5
regulatory body 42 146 3.48 4
service org, PHCN, 42 140 3.33 5
building owner 39 125 3.21 6
When making reference to level of responsibility, table 13 shows that building occupant ranks first
with a mean score of 3.95 followed by fire fighters and designer with a mean score of 3.70 and 3.58
respectively building owner, service organization e.g. PHCN and regulatory body has a mean score of
3.21, 3.33 and 3.48 respectively.
4.3 Responses of construction professionals
4.3.1 Demographic information
Table 14 – Academic Qualifications of Respondent
Frequency Percent
HND 2 16.7
B.SC 1 8.3
PGD 4 33.3
M.SC/M.TECH 4 33.3
PHD 1 8.3
Total 12 100.0
10
Table 14 shows the academic qualification of respondents in that they possess HND and above and
this makes the data from them reliable.
Table 15 – Professional Qualifications of Respondent
Frequency Percent
MNIOB 2 16.7
MNIA 2 16.7
ANIQS 3 25.0
MNSE 2 16.7
OTHERS 3 25.0
Total 12 100.0
Table 15 shows that 75% of the respondents are qualified as construction professionals while the
remaining 25% are from other fields of discipline.
Table 16 – Year of Working Experience
Frequency Percent
6-10yrs 8 66.7
11-15 yrs 2 16.7
16-20 yrs 2 16.7
Total 12 100.0
Table 16 implied that all the respondents have quite reasonable year of professional practice in
various field of construction.
4.3.2 Fire Provision, Awareness and Functionality of Equipments.
Table 17 – Provision of Fire Safety Devices
Frequency Percent
yes 12 100
no - -
Total 12 100
Table 17 shows that the entire professionals normally provide fire safety equipments at the design
stage of construction of building.
Table 18 shows the ranking of the respondents’ frequency of provision of fire safety equipment, fire
alarm, portable fire extinguisher and fire hose reel, ranked first, second and third respectively, this
shows that high preference is given to this equipment by designers of public buildings. Provisions
made fusible link door, wet riser, halon gas system, smoke detector and heat detector are at the lowest
ebb, this shows that the building designer rarely consider these equipments in their design.
From tables 20, it was discovered that the composition of the design team of the various respondent,
architects are the most active with a mean score of 3.83; civil/structural engineer, mechanical/service
engineer and quantity surveyors are also prominent in their involvement with a men score of 3.33.
Builders, fire fighters and estate managers ranked lowest in their involvement in the design team
composition. Table 4.23 shows the factors that are relevant to the integration of fire safety devices in
building design, size of building ranked highest, purpose and complexity of building ranked second
while type occupant ranked lowest. Table 4.24 Shows factors militating against the integration of fire
safety devices and all the identified factors were ranked important except for carelessness of
professional ranked lowest among the factors.
11
Table 18 – Frequency of Provision of Safety Equipments
Equipments
N Sum Mean Rank
Fire Alarm 12 44 3.67 1
Portable Fire
Extinguishers 12 41 3.42 2
Fire Hose Reel 12 36 3.00 3
Fire Exits 12 34 2.83 4
Sprinkler System 12 33 2.75 5
Emergency
Lighting System 12 33 2.75 6
Fire Safety Signs 12 32 2.67 7
Fire Buckets 12 31 2.58 8
Flame Detector 12 31 2.58 9
Fire Hydrant 12 30 2.50 10
Dry Riser 12 25 2.08 11
Heat Detector 12 24 2.00 12
Smoke Detector 12 24 2.00 13
Halon Gas System 12 21 1.75 14
Wet Riser 12 21 1.75 15
Fusible Link Door 12 17 1.42 16
Table 19 – Composition of Design Team
N Sum Mean Rank
Architects 12 46 3.83 1
Mechanical/Service
Engineer 12 40 3.33 2
Civil/Structural Engineer 12 40 3.33 2
Quantity Surveyor 12 40 3.33 2
Builders 12 32 2.67 5
Firefighters 12 20 1.67 6
Estate Manager 12 16 1.33 7
Table 19 – Factors Affecting Integration of Safety Devices in Building
N Sum Mean Rank
Size of Building 12 46 3.83 1
Purpose of Building 12 44 3.67 2
Complexity of Building 12 44 3.67 2
Type of Building 12 39 3.25 4
Clients' Brief 12 32 2.67 5
Financial Capability of
12 30 2.50 6
Client
Type of Occupant 12 29 2.42 7
12
Table 20 – Factors Hindering the Integration of Safety Devices in Building
N Sum Mean Rank
Maintenance Cost 12 41 3 1
Initial Cost 12 39 3 1
Government Policy 12 34 3 1
Ignorance of client 12 33 3 1
Ignorance of
Professionals 12 31 3 1
Attitudes of End Users 12 31 3 1
Carelessness of
Design Team 12 26 2 7
4.3 Result from Physical Observation
4.3.1. Availability and functionality of fire safety equipments
Table 21 – Availability and functionality of Fire Safety Equipments
Equipments Availability Functionality Remark on Functionality
portable fire extinguisher 10 7 Mostly not well labeled
fire alarm 6 4 Mostly intact and visible
fire exits 10 2 Mostly locked in chains
emergency lighting
6 3 Faulty Luminaries
system
flame detector 0 0 Not Available
smoke detector 3 3 Mostly new buildings
fire safety signs 6 2 Mostly old and defaced
fire hose reel 7 2 Very Old and Unlabeled
heat detector 0 0 Not Available
fire buckets 2 2 Bucket old and untidy
dry riser 0 0 Not Available
sprinkler system 0 0 Not Available
fire hydrant 0 0 Not Available
fusible link door 0 0 Not Available
wet riser 0 0 Not Available
halon gas system 0 0 Not Available
Table 21 shows that portable fire extinguisher and fire exits are available in all the building visited,
fire alarm emergency lighting system, fire safety sign and fire hose reel are also prominent in some of
the building visited. In term of functionality, fire extinguisher is rated functional in seven of the ten
buildings, in most cases the extinguishers are not well labelled, this may be due to the fact that they
have not been checked in the recent time, in some of the buildings. The fire alarm are intact and the
fire glass still in place, all the building are with fire exits but eight of them are locked in chains as at
the time of visit, this means the quest for security has overtaken the main use which the exit door are
meant for, so in case of fire, escaping from such building will be very difficult. The emergency
lighting systems in some of the buildings visited are have faulty luminaries which implies they may
not be able to give light in time of emergency. Smoke detector were available in three of the building
visited, this buildings were mostly new buildings, fire safety sign and hose reel in most of the
13
buildings are old and not well labelled, fire buckets are old and untidy in the places they are available,
flame detectors, dry riser, sprinkler system, fire hydrant, fusible link door, wet riser and halon gas
system are not available in all the building visited.
4.3.2 Proximity of escape route/exit
In most of the building visited, it was discovered that most of the escape route were blocked with
various obstacle ranging from old furniture to used office cabinets, this obstacle make most of the
escape route to be clumsy. In most cases, the fire exits are locked in chains and door bolt even when
the building is occupied to its full capacity.
4.3.3 Other observations
In most of the building, fire safety signs has been relegated as sometimes when available, they are old
and defaced; label on some fire extinguishers indicates they are overdue for recharging and refilling.
Most of the hose reels available are old and worn out, sometimes without the jet nozzle and no
evidence of water as some of it is without stopcock; label of instruction to user is clearly missing in
most buildings where they are available.
4.4 Result from Oral Interview
Oral interview was conducted for chief fire superintendents in Akure and Ado Ekiti fire service
secretariats, the responses from the duo is very encouraging and similar in most cases, when asked
about the frequency of their office in organisation of fire safety provision, the officers replied that it is
very rare except on special request, and sometimes immediately after a fire incident has been brought
under control, the immediate audience is sensitize on fire safety practices. The constraints highlighted
include lack of finance and uncared attitudes of building occupant and lack of stringent law in support
of activity like that. Organisations and industries also rarely invite the fire office for fire safety related
training except for promotional purpose when a company is out to market a product.
The response of the officers to availability of fire code in the country confirms the existence of a code
in respect of fire safety practices in public, residential and industrial buildings. The officers also
reiterate that the administration of this fire code has suffered a great set back in the time past, this has
led to the neglect of some of the provision of the code, one of which is the issuance of fire certificate
to building owners and occupant in respect to the provisions made for fire safety equipment in the
building, the issuance is only visible now for some industrial building and filling stations. The fire
officers confirm the fact that fire fighters are often blamed for destructions made by fire before they
are brought under control, but reacted that oftentimes, the fire may have been out of hand before they
are invited. Mostly this is due to the fact that the building occupant are never prepared to offer first
aid fire fighting, due to their ignorance in this area, sometimes they aggravate the intensity of the fire
by using wrong extinguisher for a particular fire.
4.5 Historical Data
For the purpose of this research work, a set of historical data were made available from the archive of
the fire statistics in Ekiti State, the record shows the occurrence of fire in the last five years.
Table 22 – Fire Statistics
YEAR NO OF NO OF PROPERTY PROPERTY NO OF
FIRE CASUALTIES LOSS IN SAVE IN LIFE
CALLS NAIRA NAIRA SAVED
(MILLION) (MILLION)
2004 58 23 45.9 86.8 66
2005 52 15 52.5 95.9 54
2006 82 15 51.2 133 73
2007 66 16 68.2 149.3 83
2008 39 14 36 82.4 53
Total 297 83 253.8 547.4 329
Source: Ekiti State Fire Services Secretariat, Ado-Ekiti, Ekiti State.
Table 22 shows there had been 297 fire calls within the specified period in which 83 casualties were
recorded in the various fire incidents, a total of 329 lives were also saved from the various fire
14
incidents. The fire office records a total loss of property to the tune of N253, 800,000.00 within the
specified period, and in the various effort of the fire men, property worth N547, 400,000.00 were
saved from the ravaging effect of fire in the period under consideration.
4.6 Discussion of Findings
Information collected from questionnaires, physical observation and oral interview were analyzed and
presented. It was discovered that 68.9% of the respondent have witness a fire incidents before and
know the extent of damage such on incident can cause, destruction of properly ranked highest, this is
in line with Guardian (2006) report that over 9 billion Naira loss had been recorded in Nigeria as at
2005. Structural defect ranked second, this corroborates the Daily Sun (2006)’s Report on NIDB
House which was gutted by fire and later results into partial collapse of the building.
Nevertheless, despite the incessant fire incident in the country and possible damage that may occur
thereafter, it was discovered that fire fighting equipment are either not available or where available
they are not functional or that the occupant of the building are not even sure of their availability and
functionality. Portable fire extinguisher and fire alarm took the lead in the ranking of respondents in
regard to available and functional equipments; this is in line with physical observations made by the
researcher in some of the buildings visited in the course of the research. Fire hose reel, oftentimes
when available are mostly not functional, while most of the passive fire fighting equipment like
sprinkler system, fire hydrant, risers, fusible link door and halon gas system are mostly not available
in public buildings occupied by the respondent. This was also confirmed during the physical
observation by the researcher. Apart from portable fire extinguisher and fire alarm system, all other
listed fire equipment fall below average rating of respondent in term of availability and functionality.
It was discovered that majority of the respondent have never attend any training as regard fire. Despite
the fact that there are many of the respondents with technical background, this has little or no effect
on the level of training received by the respondent. This is corroborated by personnel interview report
from the fire office, when they were asked on extent of request from employers, parastatal and
building occupiers, they responded that it only happen on rare occasion except for promotional
purposes when a manufacture want to promote a new fire equipment. This was also because of the
ineffective administration of the available fire code in the country as gathered from the fire office.
This is also in line with the Ayeni (2002)’s conclusion that building occupants in residential buildings
are ignorant of the use of common fire extinguisher, and do not even know what to do in case of fire
outbreak.
Most of the respondents accept being responsible for damages cause in time of fire incident, this was
supported by the analysis where building occupants ranked highest in the level of responsibility. Fire
fighters also has a large portion of responsibility, the building designers, regulatory body e.g. PHCN,
and the building owner has their share of the responsibly, with a mean score of not less than three
(which indicates above average). All the aforementioned are responsible for fire incident in public
building. From the composition of the design team, builders, estates managers and fire fighters
involvement in the design of building is very low, this may as well been the major cause why
provisions made for fire safety equipment is very low and sometimes never available in building
design. This was confirmed from the report of the oral interview which indicates that fire office is
mostly not involved in the design and construction of building. Considering the factors militating
against the integration of fire safety equipment and devices in the design of building, government
policy was part of the factors that ranked highest; other militating factors would have been of non
effect if the government policy on the implementation and administration of the existing fire code has
been stringent. Ignorance of the professionals involved in the deign team also ranked highest among
the militating factors and this is not encouraging, if the designers are ignorant of the active and
passive fire fighting equipment, the integration of such equipment in their design will suffer a great
deal.
15
5 CONCLUSION AND RECOMMENDATION
5.1 CONCLUSION
This study has assessed the fire safety practices in public building, from the research; the following
has been discovered;
1. Most of the public building are without adequate fire fighting installation and equipment
2. Oftentimes where thy are available, they are not functional or the occupants are not sure of
their functionality
3. Many occupants of public building have never or rarely receive training on fire safety, first
aid fire fighting and evacuation procedure, so their fire safety awareness tend toward zero,
also professionals involved in the design of building are oftentimes ignorant of the need and
use of the fire protective devices.
4. Whenever there is fire incident, damage is imminent, this ranges from destruction of property
to structural defect, injury to person, collapse of building death, permanent disability and loss
of prestige of the edifice.
5. Every stakeholder in public building is responsible in case of fire incident, the building
occupants, fire fighters, building designer, regulatory body, service organization e.g. PHCN
and building owner alike. In like manner, unavailability of a stringent government policy on
the administration of fire code in the country is a strong factor militating against fire safety
provisions.
6. Majority of the respondents are ignorant of the current emergency call numbers, this indicates
that it will be highly difficult to make contacts to fire-fighters in case of fire.
5.2 RECOMMENDATIONS
Based on the analysis of results and findings, the following recommendations are hereby made:
1. Building owners should ensure that their building is well equipped with active and passive
fire fighting equipment.
2. The available equipment should be maintained regularly and adequately so that they will be
effective anytime they are needed.
3. Fire safety training, training on first aid fire fighting and training on evacuation procedure
should be made compulsory for all building occupants and at regular interval
4. Government should revisit the fire code and resuscitate its administration and implementation,
compliance with fire code regulation should be made compulsory for building owner, users
and occupiers of public building and defaulters brought to book
5. Compliance with the fire code and issuance of fire certificate should be approached right from
the inception of the construction and appropriate follow up ensured after completion and
throughout the buildings life span.
REFERENCES
Allen, George R. (1973) The Graduate Student’s Guide to theses and Dissertations: A Practical
Manual for Writing and research. Jossey-Bass, Inc, Publishers, USA
Aqua group (1984). Fire and Building, Granada Publishing, Great Britain.
Ayeni, B. M. (2002). Method of Controlling Fire Hazard in our Environment (A Case Study of Ado-
Ekiti). Unpublished HND Thesis, Federal Polytechnics Ado-Ekiti.
Chadderton, D. V. (1995). Building Services Engineering. E & FN SPOON, London UK.
Coleman, R.J. (1982). Opportunities in fire protection service.
Daily Sun (2006). It was Like Armageddon. The Daily Sun, Thursday, March 23, 1, 4
Hassan, H. (1999). Fire and Safety Management in Buildings, The Professional Builders Journal.
June/July. 32-35
Levitt, E. R. and Samuelson N. M. (1987) Construction Safety Management, McGraw-Hill Book
Company. NY
Makanjuola S. A. (2000) Fire in Tall Buildings: Causes and Prevention. Unpublished Term Paper,
Federal Polytechnics Ado Ekiti, Nigeria
Moser, C. A. and Kalton, C. (1971) Survey Methods in Social Investigation. Heinemann Education
London
Oludare L. (2000). Season of fire, Shelter Watch, May/June, 29-30.
Powel Smith and Billington M.J (1991) The building Regulations: Explained and Illustrated, Eight
edition BSP Professional Books, London, Great Britain.
16
The Guardian (2006). Nigerians Fire Incidents and Safety at Workplace. The Guardian Newspaper,
May 2006.
APPENDICES
Appendix 1 – Questionnaire 1 on Assessment of Fire Safety Practices in Public Buildings (for
occupiers of public building)
Please thick as appropriate [ ]
Section A
1. Type of organization
(a) Contracting [ ] (b) Consulting [ ] (c) Business [ ]
(d) Government [ ] (e) Military [ ] (f) Paramilitary [ ]
(g) Educational [ ]
2. Academic qualification (a) HND [ ] (b) B.SC [ ] (c) PGD [ ] (d)
M.SC/M.TECH [ ] (e) PHD [ ]
3. Year of working experiences
(a) 1 – 5 yrs [ ] (b) 6 – 10yrs [ ] (c) 11- 15yrs [ ] (d) 16-20yrs [ ] (e) 21 – 25 yrs [ ]
(f)26 – 30 yrs [ ]
5. Type of office building
(a) Bungalow [ ] (b) 1 – 2 floor [ ] (c) 3-4 floor [ ] (d) Above 4 floors [ ]
6. Type of office accommodation
(a) Single user [ ] (b) 2 –3 users [ ] (c) General office [ ]
SECTION B
7. Have you witnessed a fire incident before?
(a) Yes [ ] (b) No [ ]
8. From your experience, rate the following extents of damage according to the degree of
destruction in the fire incident (3. High, 2.Medium, 1.Minimal)
3 2 1
1- Death
2- Destruction of Property
3- Collapse of Building
4- Structural Defect
5- Loss of Prestige
6- Injury
7- Permanent Deformity
9. Indicate the following active fire protection means & equipment in relation to the availability
in your office complex. Use the scale below, thick as appropriate. (3 – Available, 2-Not
Available 1. Not sure)
Equipments 3 2 1
1- Smoke Detector
2- Heat Detector
3- Flame Detector
4- Fire Alarm
5- Sprinkler System
6- Portable Fire Extinguishers
7- Halon Gas System
8- Fusible Link Door
9- Fire Exits
10- Emergency Lighting System
11- Fire Hose Reel
12- Dry Riser
17
13- Wet Riser
14- Fire Hydrant
15- Fire Safety Signs
16- Fire Buckets
10. Indicate the following in accordance to the level of functionality in your office complex
according to the below scale (4- Highly factional, 3 – Functional,
2 – Non functional, 1- Not sure)
4 3 2 1
1- Smoke Detector
2- Heat Detector
3- Flame Detector
4- Fire Alarm
5- Sprinkler System
6- Portable Fire Extinguishers
7- Halon Gas System
8- Fusible Link Door
9- Fire Exits
10- Emergency Lighting
System
11- Fire Hose Reel
12- Dry Riser
13- Wet Riser
14- Fire Hydrant
15- Fire Safety Signs
16- Fire Buckets
9. How often do you attend fire safety training (a) frequent [ ](b)Often [ ] (c) Rarely [ ]
(d) Never [ ]
10. Kindly indicate the frequency of your training on First Aid Fire Fighting. (a) Frequent
[ ] (b) Often [ ] (c) Rarely [ ] (d) Never [ ]
11. How often do you receive training on Evacuation procedure?
(a) Frequent [ ] (b) Often [ ] (c) Rarely [ ] (d) Never [ ]
12. Kindly indicate to the level of your perception the level of responsibility apportion to the
following in case of fire outbreak (5- High, 4 -Above average, 3- Average 2- Below average
1- None.)
5 4 3 2 1
1- Building Designers
2- Regulatory Bodies
3- Fire Fighters
4- Building Occupant
5- Service Organizations
(E.G. PHCN, Water Cooperation,
Nitel )
6- Building Owner
13. Do you know the current fire emergency Call telephone numbers?
(a) Yes [ ] (b) No [ ]
14. If yes, please list them:
1. .........................................,
2. …………………………………,
3. …....……………………………,
4. ………………………………….,
15. Will you be interested in the outcome of this research? (a) Yes [ ] (b) No [ ]
16. If yes, state the E-Mail address you want the result top be sent to
………………………………………………..
18
Appendix 2: Questionnaire 2 on Assessment of Fire Safety Practices in Public Buildings (for
professionals)
Please Tick as Appropriate [ ]
1. Academic Qualification of Respondent
(a)HND [ ] (b) B.SC [ ] (c) PGD [ ] (d) M.SC/M.TECH [ ](e) PHD [ ]
2. Professional Qualification
(a) MNIOB [ ] (b) MNIA [ ] (c) ANIQS [ ] (d) MNSE [ ]
(e) MNIESV [ ] (f) OTHERS [ ]
3. Year of Experience
(a) 1 – 5 yrs [ ] (b) 6 – 10yrs [ ] (c) 11- 15yrs [ ]
(d) 16-20yrs [ ] (e) 21 – 25 yrs [ ] (f)26 – 30 yrs [ ]
4. Do you normally provide fire safety devices at the design stage in building? (a) YES [ ]
(b) NO [ ]
5. The under listed are various type of fire safety devices, kindly indicate (using the scale
below) the frequency of your provision.
Scale: 4 – Always, 3 – Sometimes, 2 – Rarely, 1 – Never
Equipments 4 3 2 1
1. Smoke Detector
2. Heat Detector
3. Flame Detector
4. Fire Alarm
5. Sprinkler System
6. Portable Fire
Extinguishers
7. Halon Gas System
8. Fusible Link Door
9. Fire Exits
10. Emergency Lighting
System
11. Fire Hose Reel
12. Dry Riser
13. Wet Riser
14. Fire Hydrant
15. Fire Safety Signs
16. Fire Buckets
6. In the design team you have worked with, indicate the level of activity of the following
professionals in the design and construction of building.
Scale: 4 – Actively involved, 3 – Involved, 2 – Rarely involved,
1 – Not involved.
Professionals 4 3 2 1
Builders
Architects
Quantity Surveyor
Civil Engineer
Estate Manager
Firefighters
19
7. At the design stage, kindly assess the level of importance of the following factors in the
integration of fire safety devices in building.
Scale: 4 – Very important, 3 – Important, 2 – Somewhat important,
1 – Not important.
Factor 4 3 2 1
Size of Building
Complexity of Building
Clients’ Brief
Purpose of Building
Financial Capability of Client
Type of Building
Type of Occupant
8. Kindly indicate the level of influence the under listed has contributed to the hindrance of
integration of fire safety devices in buildings?
Scale: 4 – Very high, 3 – High, 2 – Low, 1 – Very low.
Factor 4 3 2 1
Initial Cost
Maintenance Cost
Government Policy
Ignorance of Professionals
Ignorance of client
Carelessness of Design Team
Attitudes of End Users
Appendix 3 – Checklist for Physical Observation
1. Name of building:…………………………………………………………
2. Location of building:………………………………………………………
3. No of floors:………………………………………………………………
4. a) From the under listed, which of the following fire fighting equipments is available in
the building:(tick as appropriate)
b) Indicate the level of functionality of the available equipment based on:
-Appearance
-Label (name, operation instruction/safety precaution)
-Servicing/maintenance chart
Equipments availability functionality
1. Smoke Detector
2. Heat Detector
4. Flame Detector
5. Fire Alarm
6. Sprinkler System
7. Portable Fire
Extinguishers
8. Halon Gas System
9. Fusible Link Door
10. Fire Exits
11. Emergency Lighting
System
12. Fire Hose Reel
13. Dry Riser
20
14. Wet Riser
15. Fire Hydrant
16. Fire Safety Signs
17. Fire Buckets
5. Identify the proximity of the escape route/fire exit:
………………………………………………………………………………………
6. Other observations:
…………………………………………………………………………………………
Appendix 4 – Questions for oral interview with Firemen
1. Location of fire office:……………………………………………..
2. Rank of Fire officer:………………………………………………
3. Year of working experience:………………………………………
4. How often do your offices organize training for occupant of public
building:…………………..
5. What are the likely constraints:
…………………………………………………………………………………………………
…………………………………………………………………………………………………
…………………………………………………………………………………………………
…………………………………………………………………
6. How often do organizations contact your office for fire related training:…………..
7. Is there a standard fire code in the country?…………………….
8. How can you comment on the implementation and administration of the fire code:
…………………………………………………………………………………………………
…………………………………………………………………………………………………
…………………………………………………………………………………………………
…………………………………………………………………
9. How often do organizations, industries, building owners contact you for issuance of fire
certificate?………………………………………..
10. Oftentimes, firemen are mostly blamed for damages in fire outbreak, what is you comment
on this assertion:
…………………………………………………………………………………………………
………………………………………………………………………………
11. Does your office keep record of fire incident (fire statistics)? ………
12. Can you make such information available for the purpose of this research? ……...
21
COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Charles Lucian, pp 904-915
Construction problems of buildings on expansive soils in
Kibaha, Tanzania
Charles Lucian1
1
School of Real Estate Studies (SRES),
Ardhi University (ARU),
Tanzania
Email: [email protected]
Abstract
Volume changes associated with expansive soils have caused considerable construction
problems to lightly loaded engineered structures in Kibaha, Tanzania. The most obvious
problem is that of cracking in masonry walls. A principal source of formation of smectite clay
minerals present in expansive soils is the geological condition triggered by climatic factors in
the area. This paper outlines the geological properties of the expansive soils from site
investigation and laboratory test results. Importantly, a method for the quantification of clay
minerals using X-ray diffraction techniques is applied to soil samples. Extensive survey of
building typology and materials, damage in the building envelope, indoor survey of damage is
provided. Finally, based on field and laboratory investigations, remedial measures for the
damages were proposed.
1. Introduction
The presence of the expansive soils, also known as shrink-swell or swelling soils in the coast
belt of Kibaha where semi-arid clayey soils are predominant caught many builders unawares.
Most foundation designs were based on bearing capacity criteria with a limited knowledge of
high shrink/swell soil problems. It is from this misjudgment that several houses in the area
have developed numerous cracks in foundations and walls. Swelling or expansive clay soils
are those that comprise swelling clay minerals such as smectite (montmorillonite), which
expand when the moisture in the soil changes (Taylor and Smith, 1986, Waltham, 2002 and
Bell, 2004). In addition, expansive soils display high degree of shrink-swell reversibility with
change in moisture content.
Although many regions in Tanzania such as Arusha, Coast (Kibaha), Kagera, Kigoma,
Morogoro, Musoma, Rukwa, Ruvuma and Tabora have often been identified with expansive
soils (Hathout, 1972 and Lucian, 2008), evidences have shown that, until today, their many
hidden geotechnical properties have not fully been studied because of technical and resource
limitations. As such, some effort needs to be done as soon as possible to examine the
influence of soil characteristics associated with expansive soils and document the results.
While very little work has been done to study the extent of expansive soils in Kibaha on one
hand, on the other hand the damages in buildings founded on expansive soils have been very
poorly documented (Lucian and Hintze, 2007). The scarce knowledge about the behaviour of
foundations in swelling soils is obvious behind the damages of structures supported on the
foundations mainly due to the uplift of the foundations (dooming or centre heave) following
wetting of the soil.
- 904 -
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Charles Lucian, pp 904-915
Despite the fact that the accusing finger is mainly pointed at the expansive soils, other
contributing factors such as poor design, poor construction, inadequate observation of the
construction processes, poor drainage, treacherous trees close to the building (human
activities) and climatic factors have exacerbated the problem.
There are many unanswered open questions raised on the origin of the problem whose
answers could be provided by practical experiments. To unravel the mystery behind the
construction problems due to expansive soils, it is imperative to establish procedures for
detecting the existence of expansive soil layers, evaluating their effects on buildings and
proposing appropriate remedies. The construction problems can be minimized when the
possible effects on buildings are recognized and measures to deal with them are taken prior to
construction activities as well as existing structures. This paper therefore presents a case study
of two typical geotechnical sites of expansive soils in Kibaha. The first contains a four-storey
building (Regional office block), 51.8 m long from east to west by 45.7 m wide from north to
south (Figure 1), on a limited flat area with a gentle slope. This building which was
constructed in 1977 consists of a reinforced concrete frame on shallow pad foundation (1.85
m deep), with a variation of underpinning carried out recently down to 3 m. It exerts a
pressure of 97 kPa on the local soil (Lucian, 2008).
The second site contains a Roman Catholic Church (Figure 2), constructed in the 1970s. It is a
single-storey high walled house with reinforced concrete frame structure and a gable-ended
roof. The frame is infilled with cement sand blocks in cement mortar. The church is founded
on pad footings at a depth of 1.2 m within the estimated active zone. The thickness of the
walls ranges between 24 and 25 cm.
Figure 1: 4-storey building (the regional office block) in the case study area.
- 905 -
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Charles Lucian, pp 904-915
Figure 2: Roman Catholic Church in Kibaha.
2. Geological Background
Kibaha is a township located in eastern Tanzania, about 40 km west of Dar es Salaam (the
commercial capital city of Tanzania), along the Dar Es Salaam-Morogoro highway. It’s
positioned at an altitude of about 155 m above sea level and located approximately by
geographic latitude and longitude of 06º46'S and 38º55'E respectively. It is within the coastal
belt where plastic clay soil is predominant. The area has gradually rising low to medium
undulating plains (ca 100-1,500 m above sea level), covered with tropical vegetation, a sparse
cover of grass and trees of sporadic distribution. It experiences a very deep groundwater table
well below the depth of active zone of expansive soils even during heavy rains (Lucian,
2008). However, the soil is often saturated during the rainy season.
The surface geology of the coastal plain comprises a complex autochthonous and
allochthonous sequence of late mesozoic and early cenozoic sediments. The indigenous and
non-indigenous sediment fillings are composed of lacustrine, fluviatile, residual, pluvial and
alluvial deposits that include micaceous materials (micaceous schists, clay shale, siltstones,
silty mudstones etc), calcareous sandstones, limestones, marine marls, shells, organic
materials and conglomerates. By the processes of chemical and physical weathering, these
conglomerates that contain plenty of silicate minerals converted to soils rich in clay minerals
such as montmorillonie, kaolinite and illite through hydration and dehydration, leaching,
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Charles Lucian, pp 904-915
oxidation and reduction, and ion exchange. Typically, the deposits are reddish brown, grey
brown and grey in colour (Lucian, 2008).
Generally, soils tend to be sandy clay, although deposits of terrace gravels, marine clays and
fossiliferous shells are common locally. The underlying basement consists of the crystalline
and metamorphic rocks of the Mozambique orogenic belt (Mpanda, 1997). Largely, the soils
reflect the geology and climatic conditions of the area.
Predominantly, the mesozoic and cenozoic sediments of coastal marine belt in Kibaha contain
significant amount of the active clay minerals (montmorillonite), the most troublesome
expansive clay mineral. Montmorillonite is remarkable for its very small fine particles which
may be considered small colloid with dimensions as small as a few tens of Angstrom units.
The small non-scale fine particles are agglomerated due to surface attraction of one particle to
another. Since montmorillonite minerals are very fine with large specific surface areas, their
presence contributes to high degree of expansiveness of soil. Usually, the degree of
expansiveness is proportional to the amount of montmorillonite or other expansive clay
minerals present in the soil.
3. Geotechnical Characteristics
The soils of Kibaha area are very complex with considerable variation at the local scale. They
vary slightly from place to place and have, for the most part, irregular drainage and no
definite water tables. The soils range from slowly permeable sandy loams; loams with
unsatisfactory drainage; to clays with imperfect drainage (impermeable). Generally, the soils
have higher clay fractions along the valleys than on the ridge tops. There is also a trend
towards decreasing clay contents at greater depths.
Most soils have grey, grey brown and reddish brown colours. The top soil layer is
characterized by dark brownish clay loam changing downward to yellowish light grey sandy
loam with clay at the depth of 6.0 m. The soils exhibit significant shrinking and swelling
during drying and wetting cycles and are characterised by significant open desiccation cracks
during the dry season. They are very hard with a stiff consistency when dry and very sticky
and plastic when wet. On desiccation, the soils experience excessive shrinkage and reduction
in volume.
4. Geotechnical Investigation
Soil samples were collected from open pits within the vicinity of the two damaged buildings.
Sample preparation followed the standard procedures available at Dar es Salaam Institute of
Technology (DIT) soil laboratory. Visual classification of soils relied primarily on sight and
feel of the soil according to ASTM D2488-00- Standard Practice for Description and
Identification of Soils (Visual-Manual Procedure). A typical soil profile is shown in Figure 3.
The profile shows existence of consistent layers of soils in the pit, an implication of quasi-
horizontal stratification. The profile indicated the presence of clay, flocculated clay fabric and
diffused lapideous fragments of small size in soil horizons. It is postulated that flocculated
clays tend to be more expansive than dispersed clays (Nelson and Miller, 1992). The profile
shows that the site is underlain by a 0.3 m thick layer of very dry dense grey sandy clay
followed by the layer of 0.1 m thick dry dense greyish black sandy clay. A 0.2 m thick layer
of very dense greyish red sandy clay with occasional pebbles and limestone fragments
underlies this layer. Below the above layer follows a layer of 0.2 m thick of very stiff fissured
pinkish clay with cracks. From a depth of 0.8 m down to 1.6 m there is the moist dense
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whitish mixture of reddish grey sandy. The dominance of greyish colour in the samples was
interpreted to reflect the presence of montmorillonite in the soils.
High quality undisturbed block samples and disturbed samples retrieved from the open pits
were carefully transported to the laboratories for testing. Soil properties were measured and
analysed in the laboratories. The laboratory data sets obtained were analysed using empirical
models, standard graphs and tables. The basic geotechnical properties of samples from the
open pits at the Roman Catholic Church (RC) and regional office block (RB) are shown in
Table 1.
Table 1: Physical properties of Kibaha clay samples at the regional office block (RB) and Roman Catholic
Church (RC).
Clay Free Activity
Grain size Atterberg’s limits content swell Eqn.
Sample Depth (%) (%) % (<2µm) (%) 2.17
No: (m) Gravels Sand Fines LL PL PI SL
0.6 11 50 39 64 21 43 12.5 34 150 1.5
1.0 14 51 35 63 24 39 13.3 30 130 1.6
RC1
2.0 16 51 33 54 23 31 14.2 29 100 1.3
3.0 5 59 36 59 22 37 14.0 33 130 1.4
1.0 9 42 49 69 23 46 11.1 29 140 2.0
RC2
2.0 12 63 24 61 30 31 16.6 22 100 1.8
3.0 1 67 32 69 23 46 13.6 27 100 2.0
1.0 2 55 44 51 21 30 16.5 39 130 0.9
RB
2.0 1 60 39 51 15 36 15.0 35 120 1.2
3.0 3 52 44 49 23 26 15.1 34 140 0.9
Mean 7.4 55.0 37.5 59.0 22.5 36.9 14.2 31.2 124.0 1.46
St. Error 1.8 2.3 2.3 2.4 1.2 2.2 0.5 1.5 5.8 0.13
STD 5.7 7.3 7.1 7.4 3.7 6.8 1.7 4.8 18.4 0.40
Kurtosis -1.8 -0.2 0.2 -1.5 3.4 -1.4 -0.1 0.4 -1.3 -1.05
Skewness 0.2 -0.0 -0.2 0.0 0.0 0.1 -0.2 -0.4 -0.3 0.02
Min. 1.0 42 24 49.0 15.0 27.0 11.1 22.0 100.0 0.88
Max. 16 67 49 69.0 30.0 47.0 16.6 39.0 150.0 2.05
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Charles Lucian, pp 904-915
Figure 3: Soil profile general information at the Roman Catholic Church.
5. X-ray mineralogy
Identification of the presence of expanding clay minerals in soils is carried out by the use of
x-ray diffraction (XRD) patterns following the method of Brown and Brindley (1984). The
whole-rock samples were run from 2° through 65° at a step of 1s and a step width of 0.020°.
The whole-rock XRD analysis of the samples indicated that the rocks are composed of
predominantly quartz, albite and montmorillonite (Figure 4). The XRD analysis indicates that
the sample has high quartz content because of quartzite on which the soil was formed. The
patterns show that the only present clay mineral is montmorillonite.
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800
700
600
500
400
300
200
100
2 10 20 30 40 50 60
Charles Lusian, Sample 3 (RC1),Powder Mount, File:20677002 - Type: 2Th/Th locked - Start: 2.000 ° - End: 65.000 ° - Step: 0.020 ° - Step time: 1.0 s - Anode: Cu - Company: SEAMIC XRD Laboratory - Creation: 08/18/06 11:15:37
Operations: Fourier 20.000 x 1 | Strip kAlpha2 0.500 | Import
46-1045 (*) - Quartz, syn - SiO2 - Y: 50.00 % - d x by: 1.000 - WL: 1.54056
41-1480 (I) - Albite, calcian, ordered - (Na,Ca)Al(Si,Al)3O8 - Y: 50.00 % - d x by: 1.000 - WL: 1.54056
02-0037 (D) - Montmorillonite - AlSi2O6(OH)2 - Y: 50.00 % - d x by: 1.000 - WL: 1.54056
Sample 3 (RC1)
Figure 4: XRD pattern for whole-rock sample S3.
For mineralogical composition, clay size fractions were prepared by sedimentation
techniques. A portion of each sample was jaw crushed and 25g from each taken. The samples
were mixed with the dispersing agent (either sodium silicate, sodium oxalate, sodium
hydroxide, sodium pyrophosphate, or sodium hexametaphosphate) in a 500 ml bottle. 100 ml
standard raw water solution was added to the mixture and well shaken. The mixture was
sieved through a 63μm sieve while pouring the mixture into a 1-litre cylinder and adding
distilled water up to the 1000 ml mark. The mixture was left to settle overnight.
A long glass tube was taken and a mark put at 20.9 cm. The tube was then immersed in the
measuring cylinder until the 20.9 cm mark touched the water level. The sample was drawn
through the tube using a teristatic pump. Thereafter, the sample was dried in an oven at
105°C. 80 mg of the dry sample was weighed and mixed with 1 ml distilled water in a test
tube. The test tube with the sample was placed in an ultrasonic bath and agitated for 1 hr so
that the clay can be well dispersed. The resulting slurry was drawn, spread on a clean glass
slide and left to dry overnight. The sample was scanned with a 1-s step time at 0.02° 2θ
increments between 2° and 32°. Clear peaks in the diffractograms provided unabashed
evidence for the presence of well-crystallised clay minerals. Usually, the presence of
montmorillonite appears at angle ranging between 4˚ and 10˚, and this was the case for all the
samples tested.
In order to differentiate the mineralogical composition, the samples were then put in the
ethylene glycol for overnight. The glycolation treatment is used to determine the expandable
clay minerals present. If clay minerals are present, there will be a shift in the d-spacing after
the glycolation, because crystal lattice expands slightly after the treatment. For all the tested
samples, the glycolated trace showed a change in the peak positions for smectitite and little or
no change in the peak positions for nonexpanding kaolinate. The x-ray scans of a sample are
shown in Figure 5.
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Charles Lucian, pp 904-915
A quantitative estimate of smectite was obtained using the peak-height ratio method by
measuring endothermic peak areas. The mineralogical composition determined was expressed
in clay fraction. The compositions ranged from smectite content (~60%), to very low kaolinite
content (<10%). The smectite clay minerals were vividly identified at the discernible basal
spacing of 14 to 15 angstroms. The smectite basal spacing of 14 to 15 angstroms swelled to
about 17 angstroms upon glycolation of the samples. In general, the Kibaha samples are very
rich in smectite. A sharp maximum in percent smectite and a minimum in percent kaolinite
indicate a high swell potential. Furthermore, the analysis showed a stepwise decrease in
percentage of smectite and increase in amount of kaolinite with depth.
270
260
250
240
230
220
Smectite
210
200
190
180
170
Kaolinite
160
Kaolinite
Lin (Counts)
150
140
130
120
Smectite
110
100
90
80
70
60
50
40
30
20
10
2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32
2-Theta - Scale
Charles Lucian, Sample 3 (RC1), Air Dried, File:2067702a - Type: 2Th/Th locked - Start: 2.000 ° - End: 32.000 ° - Step: 0.020 ° - Step time: 1.0 s - Anode: Cu - Company: SEAMIC XRD Laboratory - Creation: 08/17/06 13:38:58
Operations: Smooth 0.296 | Fourier 20.000 x 1 | Strip kAlpha2 0.500 | Import
Charles Lucian, Sample 3 (RC 1), Glycolated, File:2067702b - Type: 2Th/Th locked - Start: 2.000 ° - End: 32.000 ° - Step: 0.020 ° - Step time: 1.0 s - Anode: Cu - Company: SEAMIC XRD Laboratory - Creation: 08/17/06 16:32:48
Operations: Smooth 0.296 | Fourier 20.000 x 1 | Strip kAlpha2 0.500 | Import
Sample 3 (RC1)
Figure 5: X-ray diffraction scans of a soil sample S3 for clay content.
6. Damage Study
The foundation of the first building (Figure 1) is constructed on expansive soils consequent to
inadequate soil investigation of engineering-geological conditions. It is therefore not surprising that
cracking of the internal and external walls ranging from hairline to 20 mm wide appeared in the
building as early as the 1980s. A geotechnical engineer (Lucian, 1996) carried out an investigation
of the building damages in the late 1990s. It was revealed that the defects originated from the
moisture penetration that entered the poor site soil backfilling and the expansive sub-soils during
the rainy seasons and from poor drainage system. The investigator recommended a number of
remedial measures. Among other things, the main recommendations were to replace the flat roof
with a double pitched roof provided with gutters and downspouts and to underpin the shallow
foundation using traditional methods. Other remedial measures suggested included replacing the
natural backfill with selected good fill, providing a concrete paved walk (apron) all around the
exterior of the building and putting up open channel drainage to direct water away from the
building.
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Charles Lucian, pp 904-915
For more than six years, no corrective actions were taken and the condition of the building
continued to worsen. Remedial construction taking into account most of the recommendations took
effect in the year 2000 except for the underpinning of the exterior footing due to budget limitations.
The underpinning of the foundation followed by replacing the expansive backfill with good
compacted backfill took place in the year 2005.
Considering the extent of the original damages, the remedial measures are beginning to bear fruits.
The telltales stuck on the walls of this building since 2005 indicate that many of the cracks now
appear to be dormant. It is unfortunate that the swelling potential had not been recognized in the
design stage to guard against uncalled for damages.
The built foundation of the second structure (Figure 2) equally rests on expansive earth foundation
soil. As a result a series of cracks developed in the walls as well as floors. The cracks, mainly in the
external walls, are generally diagonal at approximately 45º occurring above and below windows
and above doorways. Movement of the walls has distorted door and window frames. To-date, no
investigations have been carried out on the building. It is from this fact that apart from sealing the
cracks with mortar, no serious precautions have been taken to guard against the damages. The
sealed cracks have been propagating in width with the passage of time indicating the possibility of
continuing ground movement. Furthermore, no rainwater collection systems were provided around
the roof, so all the rainwater collected is allowed to penetrate to the foundation. As a result, the
seasonal moisture changes have been propagating the damages by activating the expansive soil
layers. It is also clear from the typical damages that their extent is the function of the type of
construction material triggered by the presence of expansive clay minerals and diverse climatic
changes.
7. Remedial Measures
Surface Drainage
It is important to maintain uniform moisture conditions in the soil around the buildings.
Therefore, drainage of surface water should be provided away from all sides of all buildings
to assure immediate drainage and diversion of surface water away from these structures.
Without proper subsurface, undesirable standing (or ponding) of water on site would penetrate
the expansive soil and create unequal soil expansion, which may result in potential wall and
concrete cracking. A recommended slope is ≥ 2% for paved areas and ≥ 5% for vegetated
areas.
Roof water runoff
To capture, direct the roof run-off and prevent paving ad soil erosion around the building, a
gutter and downspout system should be provided to collect rainwater from the roof and direct
it away from the building foundation by means of leader extensions and underground drain
lines. This is especially important because the buildings have short roof-overhang.
Backfill
Increase in lateral soil pressures from the backfill not accounted for in the original design has
been one of the sources of damages to the existing foundation. Since the soils in Kibaha are
commonly expansive, but remain relatively dry through the majority of the year, the slightest
water infiltration into the soils results in uneven excessive soil expansion across the
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Charles Lucian, pp 904-915
foundation. The practicable solution to this problem is to replace expansive backfill with
gravel or other non-swelling material. Foundation perimeter drains should be provided in both
directions not only to carry rainwater percolating down through the backfill away from the
foundation but also to relieve excessive hydrostatic pressure from rising groundwater.
Furthermore, the drains help the backfill to dry out more quickly, thus reducing lateral soil
pressure to the foundation
Landscaping
Trees should be planted as far apart or away from any foundations as their mature height. For
existing trees, their roots should be cut and capped so that they do not trespass to the
foundation. Plant and tree roots near the foundation pose a problem to un-compacted fill,
because their root systems withdraw sufficient water from soils to cause drying and cracking
quickly.
Underground utilities
For installation of underground water utilities in poor soils such as expansive soils, the ground
differential movement associated with swell/shrink soils may be devastating to a standard
pipeline. Flexible pipelines with flexible joints are typically designed to allow the pipes to
confirm to the ground movement without structural distress.
Underpinning the existing foundations
Underpinning is the most appropriate remedial measure but an expensive undertaking for
most of the structures, particularly if the areas are accessible with difficulties or if internal
walls call for underpinning which may require lifting internal floors. The underpinning
involves extending the foundation (continuous footing) further with masonry, concrete piers,
piles or caissons to transfer the foundation loads to deeper stable stratum beyond the depth of
active zone. The underpinning should be carried out under experienced supervision of a
recognised expert.
Repair the cracked walls
Once all the above measures are put in place, especially the underpinning, cracks could be
repaired without significant risk of re-cracking. The repair involves sealing the joints with
joint sealants (e.g. sealing with epoxy-based material or by injecting a cement grout), raking
out and refilling the open joints with appropriate mortar or re-pointing brickwork or blocks,
strengthening by embedment of the reinforcement or stitching with stainless steel
reinforcement across the cracks. The choice of the method of application depends on the size
of the crack. In any case, expert advice from qualified engineer or architect should be sought
regarding the choice of the method.
Community sensitization
This case report should be used to build awareness regarding the presence of expansive soils
in the area and their impact on stability of the buildings. Although the expansive soils have
caused enormous amounts of damage to most buildings in Kibaha, they remain mysterious to
most people in the area. This is because the damage develops slowly and takes time to reach
their final peak. Therefore, there should be a mechanism where the information on the
presence of expansive soils and most aspects of their remedies is shared to all players in
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Charles Lucian, pp 904-915
construction. This can be achieved through posters, seminars, trainings, workshops,
gatherings, meetings and conferences funded by various sources.
9. Conclusion
The mechanical tests and chemical analysis were done on soils from two sites in Kibaha to
confirm the presence of expansive soils. The test results characterized the soils/rocks as
highly expansive type with smectite as the dominant clay mineral. It was further observed that
the presence of expansive soils caused typical types of damages such as cracked foundations,
floors and walls. The results of these tests were used to determine the viable remedial
measures for construction problems on expansive soils. Having available suitable remedial
measures for countering expansive soils, serious damages would be avoided. One important
thing that can be done is to inform and educate those responsible for the construction on
expansive soils and those that undertake the maintenance. That way there's a chance that the
next building on expansive won't suffer the same fate.
Generally, many houses in the area have not been designed to counteract the effect of
expansive soils. It is envisioned that the put forward proposals and site maintenance practices
will be adhered to, to guard against further risk of damage. Efforts are underway to organise
national workshops for all relevant stakeholders and end users on the use of the proposed
measures in an effort to prevent and mitigate building damages. Furthermore, the issue of
keeping strict surveillance where the measures are carried out solely to address damages due
to expansive soils is at the top of the list of priorities.
It is obvious that the effort in this research has been directed to the identification of the source
of the problem in expansive soil. While the expansive soil has been undoubtedly identified,
there are still significant lacunae that still need to be addressed. Quantification of clay mineral
contents is at the top of the agenda. With full profile fitting of measured x-ray diffractograms,
it will be possible to do mass balance calculations to quantify the clay minerals by area
measurement of the intensities of characteristics clay peaks.
10. Reference
ASTM D 2488-00 (2000). Standard practice for description and identification of soils
(Visual-manual procedure). Designation D 2488-00, American Society for Testing
Materials, West Conshohocken, PA.
Bell, F. G. (2004). Engineering Geology and Construction. Taylor & Francis. p. 304. ISBN
0415259398, 9780415259392
Brown, G. and Brindley, G. W. (1984). X-ray diffraction procedures for clay mineral
identification. In G. W. Brindley and G. Brown, Eds., Crystal structures of clay
minerals and their x-ray identification, London, Mineralogical Society,
Monograph, 5, pp. 305-360.
Hathout, A. S. (1972). Soil atlas of Tanzania. Geography Department, University of Dar es
Salaam (UDSM), Tanzania.
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RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Charles Lucian, pp 904-915
Lucian, C. (1996). Structural survey and geotechnical investigation works. A case of the
regional office block for coast region (Consultant report), Kibaha, Tanzania.
Consultancy Report.
Lucian, C. and Hintze, S. (2007). Practical experience with building on expansive soils in
Tanzania, The Proceedings of the Third Structural Engineers World Congress,
Bangalore, India, pp. 124.
Lucian, C., (2008). Geotechnical Engineering for Poverty Reduction: Practices for
Constructing on Expansive Soils in Tanzania. RICS Construction and Building
Research Conference, Dublin Institute of Technology, Ireland,
http://www.rics.org/NR/rdonlyres/2A0E5591-B66D-4AC6-BDB9-
8D7284ADA54E/0/Lucian.pdf
Mpanda, S. (1997). Geological development of the East Africa coastal basin of Tanzania.
Stockholm contributions in Geology, Stockholm University, Department of
Geology and Geochemistry, Stockholm, Sweden.
Nelson, J. D. and Miller, D. J. (1992). Expansive soils: Problem and practice in foundation
and pavement engineering. John Wiley and Sons, Inc., New York.
Taylor, R. K. and Smith, T. J. (1986). The engineering geology of clay minerals: swelling,
shrinking and mudrock breakdown. Clay Minerals, Vol. 21, 235–260
Waltham, T. (2002). Foundations of Engineering Geology. Edition: 2. Taylor & Francis, p.57.
ISBN 0415254507, 9780415254502
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Justine Cooper and Keith Jones, pp 916-928
Measuring performance in-use in UK social housing
Justine Cooper1 and Keith Jones1
1
School of Architecture and Construction,
University of Greenwich, Avery Hill, SE9 2PQ,
United Kingdom
Email: [email protected]; [email protected]
Abstract:
Presently the UK social housing stock accounts for approximately 20% of the total UK
housing with maintenance costs in the region of £1.25 billion per annum. In terms of its
impact on the environment, housing is responsible for approximately 27% of the UK’s
CO2 emissions. However as only 0.8% of housing is replaced each year and, given
increased demand, by 2050 approximately 70% of the housing stock will comprise of
that which currently exists. Thus if the housing stock is to address the social,
environmental and economic aspects of sustainability, the housing industry will have to
work largely with that which exists today. Through a major questionnaire survey of UK
social housing providers, our research, supported by in-depth interviews confirms that
the current approach to social housing maintenance does not fully address the social,
environmental and economic aspects of sustainability and suggests that a new
maintenance model is needed which is based on the performance of a house in-use
rather than on its physical condition. This will require maintenance managers moving
away from the use of a (predominantly) single, subjective criteria model to a multi-
criteria hierarchical model which incorporates a much broader understanding of
performance than just its physical condition. This paper will report on the development
of a set of Key Performance Indicators (KPIs) which will support this new model by
providing a mechanism which can quantify and measure social, environmental and
economic criteria to help organisations define progress towards their strategic
sustainability goals.
Keywords:
Key Performance Indicators, Maintenance, Social housing, Sustainability
1 Introduction
This paper presents an instalment of the findings of a wider EPSRC funded study which
sought to review current maintenance practices and attitudes towards the sustainability
agenda and develop a new theoretical approach for social landlords that integrates
social, environmental and economic criteria into the decision making process to
improve the overall sustainability of existing social housing. The research has
determined that a new maintenance model is required which is based on the
performance of a house in-use rather than on its physical condition per se (Jones and
Cooper, 2007 and Cooper and Jones, 2008a, 2008b). The new maintenance model will
need to incorporate a broader set of performance criteria organised in a hierarchical
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Justine Cooper and Keith Jones, pp 916-928
form than are considered by the current (single attribute) condition based maintenance
model.
The aim of this paper is to demonstrate (by drawing on a series of in-depth interviews)
how social housing landlords can develop a set of Key Performance Indicators (KPI)
which incorporate their interpretation of the sustainability agenda and therefore
measures local needs (to support the new maintenance model). The interviews aimed at
identifying the sustainability criteria which could be quantified and measured to help
organisations define progress towards their strategic sustainability goals.
A new sustainable maintenance model and therefore a new set of KPIs, is deemed
necessary to overcome the limitations of the current condition based maintenance
model. The condition based model has proved useful in meeting the constrained
requirements of the Decent Home Standard (DHS) and therefore improving the quality
of social housing to a degree, but it was never intended to be a sustainability standard
and as such is not expected to make much progress in terms of this agenda. The
literature review (supported by the results of a major questionnaire survey) will provide
a description of the current social housing maintenance model and identify its
limitations. The findings and discussion section will identify the range of
environmental, economic and social criteria social housing landlords wish to consider as
part of their maintenance decision making process to ensure improved housing
sustainability.
2 Literature Review
2.1 Social Housing and The Decent Homes Standard
There are approximately 22 million homes in England (Communities, 2008) of which
3.9 million (17.9%) are within the social sector, including 2.1 million (9.5%) owned by
Local Authorities (LA) and 1.8 million (8.2%) owned by Registered Social Landlords
(RSL). Of the remainder, 70.2% are owner occupied and 11.9% are rented from private
landlords. The social housing stock is relatively old with just over 50% of it constructed
prior to 1965 compared to approximately 60% of the privately owned stock.
New building works is expected to have a limited impact on the overall quality of
housing as demolition rates in the UK are currently very low, approximately 0.8% of
housing replaced each year (DCLG, 2006a) and, given increased demand, by 2050
approximately 70% of the housing stock will comprise that already built today.
Therefore if the built environment is to address the changing needs of society in a more
sustainable manner the construction (housing) industry will have to work, to a large
extent with existing stock.
However there have been concerns in the UK regarding the condition of existing social
housing since the 1980’s when a combination of low management and maintenance
allowances, an unwillingness to raise rents to match repair needs and restrictions
preventing the cross subsidisation of Housing Revenue Accounts from general funds
resulted in repair backlogs (DCLG, 2000) in the order of £19 billion in 1996 for
England alone. This prompted the UK Government’s commitment to make housing
decent by 2010 via The Decent Home Standard (DHS).
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Justine Cooper and Keith Jones, pp 916-928
The DHS was conceived as a minimum standard which triggers action if a range of
decency standards are not met. A property is considered decent if it: satisfies Housing
Health and Safety Rating System (HHSRS) as fit for purpose; is in a reasonable state of
repair; has reasonably modern and appropriately located facilities; and has a reasonable
degree of thermal comfort (SAP 2005 rating of 35 or more). In the short time since its
introduction the DHS has gone some way to addressing the quality of UK housing, (in
1996 2.1 million properties within the social housing sector were classified as non-
decent which was reduced to 1.4million by 2008, taking into account the replacement of
the fitness standard (DCLG, 2008)) however its impact on the sustainability of social
housing remains questionable.
2.2 Social Housing and Current Maintenance Practices
Traditional social housing maintenance practices have centred around the stock
condition survey (SCS) (Figure 1). The SCS provides a snapshot of the physical
condition of the housing stock at a particular point in time from which a stock condition
profile model is developed that predicts maintenance demand and the associated budget
requirements over a 25-30 year period (note: a rolling 12 month budget is also
determined). The demand for maintenance action is predicted using data relating to the
length of time remaining before a component fails/requires maintenance. Maintenance
need is determined by considering the physical condition of components and
compliance with the DHS. Budgetary constraints and specification standards (e.g.
legislation) are applied to the demand profile and maintenance options and risk are
assessed to ensure that the housing stock remains viable over the period until the next
refurbishment stage. Finally, for cash flow purposes the demand model is ‘smoothed’
using algorithms and alternative maintenance strategies (e.g. responsive; planned
maintenance etc) are assessed.
Figure 1. The Built Asset Maintenance Process Model (Wordsworth, 2001)
The limitations to the current model are well documented within industry and research
literature (O’Dell, 1996; Cooper and Jones, 2008; Sharp and Jones, 2007) these include;
the maintenance planning process being out of sync with organisation’s strategic
objectives; issues regarding the effectiveness and efficiency of reliance upon the stock
condition survey as a means of determining the maintenance budget (Chapman1999);
priority setting mechanisms are often simplistic with elements of subjectivity making
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the decision process difficult to justify (Shen et al, 1998; Alani et al, 2002);
maintenance demand exceeding resources and lack of learning within the system despite
the inference that a feedback loop is present (Arditi and Nawakorawit, 1999).
2.3 Sustainable Development Theory
The widely used and accepted international definition of sustainable development is that
provided by Brundtland (1987) ‘development which meets the needs of the present
without compromising the ability of future generations to meet their own needs’.
There are a number of existing and announced policies impacting the building fabric
and affecting domestic energy efficiency. The Climate Change Bill is the most recent
policy which calls for unilateral reductions in CO2 emissions by 80% on 1990 levels by
2050 via legally binding 5 year ‘carbon budgets’ for the UK. There are two inter-related
issues that need to be considered: physical improvements to the performance of existing
homes; and changes to lifestyle to support sustainable living.
In Securing the Future (HMSO, 2005) the Government recognised the importance that
people’s lifestyle and behaviour have on carbon emissions and commits to greater
community engagement; deliberative forums to help people live more sustainable
lifestyles; investigating ways in which stakeholders can influence decision making; new
commitments to support education and training in sustainable development and
evaluation of key environmental taxes.
Whilst procedures have been put in place to address these issues for new social housing
(the Code for Sustainable Homes), it is only recently that government has entered into
consultation to tackle the difficult issue of existing housing stock. The Heat and Energy
Saving Strategy Consultation (DECC, 2009) sets out plans to upgrade 24 million UK
homes to near-zero carbon by 2030, yet the April 2009 budget failed to reflect this
change in tactic by delivering well below the expected fiscal strategy for refurbishment
that expected by many.
2.4 KPI Theory
Key Performance Indicators (KPI) help organisations define and measure progress
towards organisational goals. KPIs are quantifiable measurements that reflect the
critical success factors of a particular organisation against which clear targets can be set,
and provide a method of benchmarking an organisations performance against others
within their sector to help drive further improvements. Successful KPIs can lead to
improved staff motivation and tenant satisfaction by providing a clear picture of what is
important and what is required to achieve improved housing performance.
In addition to developing their own unique set of KPIs, social housing landlords must
also comply with its regulators KPIs. The Audit Commission has a series of [Housing]
“Key lines of enquiry (KLOEs) which represent a set of questions and statements
around service or judgment specific issues. These provide consistent criteria for
assessing and measuring the effectiveness and efficiency of housing services.” (Audit
Commission, 2009). None relate to housing performance or the sustainability of existing
social housing.
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The Housing Corporation provides KPIs to assess the performance of a social housing
landlord and sustainable communities indicators stating “Sustainability is the product of
a complex set of interactions between a large number of social, economic and
environmental factors … demand for housing; reputation (or image) of the community;
crime and ASB; social exclusion and poverty; the accessibility of employment, facilities
and services; the quality of the community’s built and green environment; the quality,
design and layout of housing; the extent of social cohesion; the mix of the community”
(Housing Corporation, 2003), however, because maintenance policy is rarely directly
linked to an organisations strategic goals, coupled with the necessity to achieve the DHS
target, these factors do not form part of the maintenance decision making process.
2.5 Sustainable Building Assessment Methodologies
There are a number of assessment methodologies currently available throughout the
developed world that provide a method for rating the performance of buildings and
developments, at both a local (state) and national level, with the objective of
encouraging continuous improvement in sustainability. Table 1 provides a selection of
nationally recognised methodologies.
The most recently introduced assessment methodology is the Code for Sustainable
Homes which is specifically designed for assessing new housing in England only. The
Code replaced EcoHomes© (upon which it is based) and was the governments response
to tackling (amongst other criteria) the carbon footprint of new housing by measuring
performance across 7 key issues; Energy efficiency/CO2; Water efficiency; Surface
water management; Site waste management; Household waste management; Use of
materials; Lifetime homes (level 6 only). EcoHomes© is still applicable for rating
existing properties undergoing refurbishment and for new housing outside England. The
Code requires assessment of the development at both design and post construction phase
whilst the post construction phase is voluntary under the EcoHomes© scheme. The two
schemes have been purposely produced to accommodate all (standard dwelling type)
housing schemes within their designated geographical locations. (DCLG, 2009; BRE,
2006a)
There are problems with both schemes including; the generic approach to what can be
atypical developments that does not reflect local needs; the definition of ‘zero carbon’;
focuses on measuring physical parameters at design stage and does not measure in-use
performance.
EcoHome XB was developed by BRE in conjunction with the Housing Corporation for
the environmental assessment of existing social housing stock and “to provide a
monitoring tool and to capture minor refurbishments and day to day maintenance”
(BRE, 2006b). The scheme allows landlords to score their stock so that benchmarks for
improvements can be established, to track improvements made and to help identify
areas where attention is needed and therefore help prioritise maintenance and
refurbishment works. It’s a self assessment tool which covers management policies as
well as environmental issues (largely following the format of EcoHomes©). The
concerns with this scheme include the length of time and cost to implement together
with the collection of additional data which cannot be utilised elsewhere.
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Table 1. Building Assessment Methodologies
Mandatory (M) / Voluntary (V)
Domestic / Civil / Commercial
Goes Beyond Minimum
Post Construction (PCR)
Requirements by Law
Independent Assessor
Building Assessment
In-house assessment
Refurbishment (R)
County of Origin
Environmental
Existing (XB)
Methodology
Design (D)
Accredited
Economic
Social
Stage
BREEAM UK V 9 D / PCR / XB 9 8 C 9 8 9 9
Code for England M 9 D / PCR 9 8 D 9 8 9 9
Sustainable Wales M
Homes (social)
NI
(Social)
LEED USA V 9 D / XB 9 8 All 9 8 9 9
NABERS Australia V 9 XB 9 9 D/ 9 8 9
Com
SPeAR UK V 9 Planning 9 8 All 9 9 9 9
CEEQUAL UK V 9 Construction 9 9 Civil 9 8 9 9
EcoHome UK V 9 D / R / PCR 9 8 D 9 8 9 9
EcoHome UK V 8 XB 8 9 D 9 8 9 9
XB
Through its housing policy the UK government aims to deliver mixed sustainable
communities (DCLG, 2006b) and as the effective financier of social housing this policy
needs to be reflected through social housing policy. Currently social housing
maintenance need is determined upon a single attribute condition model. In this sense
physical condition has become a proxy for performance which was acceptable in the
past when the main function of a house was to be weatherproof; it could be argued that
the level of weatherproofing was a performance indicator, but with the sustainability
agenda now driving UK governments housing policy this is no longer the case. To
accommodate the broader physical and in-use performance attributes of the
sustainability agenda, a multi attribute maintenance model is needed and with it a new
set of key performance indicators.
3 Research Methodology
A multi methodological approach has been taken where qualitative and quantitative
research are considered complimentary rather than mutually exclusive, as argued by
Loosemore et al., (1996). To date a combination of literature review, major
questionnaire survey and a series of in-depth interviews have been used to understand
and start to question established social housing maintenance models and to develop new
knowledge to support the development of a new sustainable social housing maintenance
model. The questionnaire survey was used to measure what criteria landlords currently
use to determine maintenance need, whilst the interviews were used to formulate a set
of criteria landlords would wish to use to encapsulate their interpretation of the
sustainability agenda.
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The major questionnaire survey aimed at translating the broad concept of sustainability
in maintenance and addressed two key research questions ‘Has the sustainability agenda
influenced the way that social housing maintenance is perceived, planned and
implemented in England and Wales?’ and ‘Are the current practices/toolkits used by
maintenance managers conducive to improving the sustainability of the existing social
housing stock?’ Five hundred and sixty four RSL questionnaires were distributed in
October 2006 and 201 were issued to LAs and ALMOs within England and Wales in
January 2007. In total, 95 completed questionnaires were returned which represents a
response rate of 12.4% with the responding English social landlords being responsible
for the management of 19% of all social housing within England.
Full quantitative analysis of the questionnaire data was undertaken using the statistics
software SPSS. A single data file was compiled and used to generate all the statistics.
The qualitative data was analysed using a modified form of content analysis.
The questionnaire survey concluded that;
o Sustainability is an important concept that needs to be integrated into maintenance
decision making and this agenda has begun to influence the way maintenance
managers perceive the performance of their social housing stock
o There is an awareness of the impacts that environmental and economic aspects of
sustainability have on the performance of social housing but there was less
awareness of how to interpret the social agenda.
o Maintenance planning continues to reflect traditional process and practice and, the
tools used to assess the performance of social housing stock did not generally reflect
the sustainability agenda
o Few landlords actually measured the sustainability of their stock and those that did,
tended to use their own metrics and toolkits to reflect their specific interpretation of
the sustainability agenda rather than use standard toolkits (e.g. EcoHome XB)
o A new range of toolkits is needed that; reflect the local interpretation of the
sustainability agenda; comprise customised performance indicators that relate to the
local sustainability agenda; provide a set of analysis tools to interpret the
performance indicators; provide a set of modelling toolkits that can integrate the
performance indicators in a robust and defendable way; allow the impact of actions
to be measured and fed back into the maintenance process.
The full questionnaire results report (Phase 1 – Results of a Questionnaire Survey
October 2008) is available from the authors by visiting www.idcop.soton.ac.uk
The development of the above mentioned toolkits was the focus of the in-depth, semi-
structured interviews. Specifics were sought by attempting to answer two key research
questions ‘What is the range of criteria that social housing maintenance managers need to
address when assessing the sustainability of their existing social housing?’ and ‘How can
these criteria be integrated into a decision making model that is robust and defendable?’.
Twenty seven interviews were conducted with landlords, representing RSLs, LAs and
ALMOs from the North West, Midlands, Humberside, Greater London and Home
Counties between April and June 2007.
Free format type interviews using standard protocols, a topic list (housing maintenance,
quality, sustainability strategy and general) and agenda of questions was used and all
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interviews were audio recorded and transcribed at a later date into a word document.
Qualitative analysis of the transcripts was carried out using NVivo 8 software, a form of
contextual analysis which helps manage and store unstructured data, with purpose built
tools for coding, sorting and arranging data, to aid analysis. (The full interview report
(Phase 2 – Interview Results January 2009) is available from the authors by visiting
www.idcop.soton.ac.uk)
The data analysis presented by this paper relates to the development of the sustainable
maintenance decision making hierarchy where interviewees were asked to balance the
social, environmental and economic aspects of sustainability and then to identify criteria
pertinent to each.
4 Findings and Discussion
4.1 Interview Results
Answering the first interview research question ‘What is the range of criteria that social
housing maintenance managers need to address when assessing the sustainability of their
existing social housing?’ was carried out in two phases, the first sought to balance the
triple bottom line of sustainability by asking landlords to rank the social, environmental
and economic headline criteria in the context of maintaining social housing stock.
Of the 27 social landlords interviewed, 21 were asked how they would balance the triple
bottom line of sustainability and 18 answered. Economic was voted most important 13
times, Environmental 6 times and Social 11 times (on a number of occasions all three
criteria were voted as equally balanced) and by simply normalising these results
determined that economics (0.43) was considered the most important, social (0.37)
second most important and environmental (0.2) aspects of sustainability was third.
The second phase was to build the sustainable maintenance hierarchy. The hierarchy
goal is ‘to improve the sustainability of the existing social housing through routine
maintenance’, the top tier of the hierarchy represents the three aspects of sustainability
and consists of the three nodes; Economic; Social; and Environmental. The children to
those nodes were determined by asking Landlords what criteria should be included in
the maintenance process to ensure improved sustainability is delivered.
It emerged, that responses given were dependant upon two courses of action, the ‘house
going forward’ (maintenance work carried out on the property, figure 2) and
‘maintenance practice’ (the maintenance process, not shown).
Figure 2 represents the responses of all landlords interviewed and indicates that they
wish to consider a wide range of criteria that represent the social, environmental and
economic aspects of sustainability. However prior to the development of figure 2 the
raw data was initially analysed in terms of the RSL group and the ALMO/LA group to
draw comparisons and disparities between the two groups.
Common environmental criteria between the two groups were waste, energy, materials,
water and pollution, all widely accepted issues currently incorporated in government
legislation and best practice.
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Figure 2. Sustainable Maintenance Hierarchy – House Going Forward
Safety was the only common social criteria between the groups. There is better
understanding of economic and environmental issues for which there is a plethora of
supportive literature; however there is less understanding of what role housing
maintenance can play in improving the quality of life of tenants and hence the need for
investigation into this issue.
Whole life costing was the only consistent economic criteria between the groups,
otherwise suggestions varied greatly, this could be a reflection of their differing
approaches to housing management (ALMO/LA are more community minded whereas
RSLs appear to take a more business like approach).
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In order to develop a set of KPIs which better reflect the requirements of social housing
maintenance managers interviewees were asked what variables they would like to
measure to help improve the way maintenance demand is determined. The research
team categorised the responses provided as, ‘in-use costs’, health, building elements,
energy efficiency rating, components, tenant requirements, procurement and noise and
Table 2 lists these categories with examples of the responses given. The responses are
diverse and represent the social, environmental and economic aspects of sustainability.
Table 2 Measurements for Building Performance
Measurements Interview Responses
for Building
Performance
In-Use Costs “So we can then turn round to residents and say we’ve done this work and as a result
you should now be using less energy, so you’ll see … (savings).”
“Heating, we’re measuring the performance of a building as people go in but we’re
not taking any data about how people, its cost in use.”
Health “ … there needs to be some measures in place for actually measuring the health rate or
the health of an estate or neighbourhood… In terms of sustainability I think we need to
get closer to the sustainability agenda and try and identify some of the key indicators
of the estate to find out what the real need is.”
Building “ … deterioration due to orientation of a building, the impact the sun has … it does
Elements deteriorate the fabric of the building more quickly …”
“I’d certainly like to look at life-cycles of elemental building elements”
Energy “… energy rating properties. It’s not been sparked off by HIP packs and things like
Efficiency / that, it’s purely a sensible way of looking at a property… It gives us an understanding
Rating of our energy rating and SAP, its just one of the big issues at the moment, obviously
with global warming”
Components “… efficiency of the components we’re using …”
Tenant “ …. its actually measuring what people, what’s now expected.”
Requirements
Procurement “We are now looking more at performance specifications and moving into that area
much more so now. Full life time costings, that sort of thing that should also influence
our procurement … For instance, within DH we do a lot of kitchens, we are looking at
the eco panels within kitchens, and the way that they are manufactured and what sort
of life they give.”
Noise “Sound and noise”
4.2 Discussion of Interview Results
Lutzkendorf and Lorenz (2005) ask “what is sustainable development” and present
Rydin’s (2003) argument that there are two approaches, the ‘triple bottom line’
approach where economic, social, environmental aspects are equally balanced and the
‘nested model of sustainability’ where the focus is on the environment. The interview
results concur with those of Lutzkendorf and Lorenz in that to measure the performance
of a house in-use, economic, environmental and social headline criteria are needed.
However the interview results suggest that a third model is required as the triple bottom
line of sustainability is not equally balanced and nor is it nested but in fact it is a more
complex multi criteria decision model formed of a hierarchy. A hierarchy is required
because performance measurement of a house in-use based upon the headline criteria
alone is insufficient to reflect the local needs of social housing and permit landlords to
balance each aspect of sustainability in a way that best suits their own strategic needs.
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Landlords found ranking social, environmental and economic headline criteria difficult
because; of the complexity of the subject, in some cases there was a (conceded) lack of
understanding, but also because (a result of its complexity) solutions generally required
a cross department approach, and a definition of what sustainability means to the
maintenance of social housing is lacking, although a popular response was “its places
where people want to live and are happy to live in.”
Those involved with maintaining LA owned and managed housing appear to have a
more mature understanding of the issues surrounding sustainability. Their attention is
focused on the benefits of wider participation, going beyond that of a provider of social
housing, encompassing other agencies such as the NHS and the police. This group
appears to take more of a community perspective than do the RSL group, which takes a
more pragmatic, businesslike approach.
Figure 2 indicates that Housing maintenance managers would wish to consider a wider
range of criteria than is currently used to plan maintenance works via the DHS. The
issue now becomes one of creating effective KPIs from the criteria identified in figure 2
that will aid improvement of the sustainability of existing housing through maintenance
intervention. There are many well established sustainable indicators available
(Commission for Sustainable Development, Dow Jones Sustainability Indices, FTSE 4
Good, International Institute for Environment and Development, International Institute
for Sustainable Development, World Bank, Audit Commission) and assessment
methodologies (refer to table 1) but their relevance to social housing and maintenance
will be limited because they do not reflect local need, are equally weighted and current
toolkits are too simple in form to measure any criteria beyond physical condition.
Furthermore do landlords have sufficient control to make such KPIs practicable? It is
thought not. Of course not every landlord would wish to measure their housing stock
against every criterion mentioned, a selection would be chosen which best represents
their unique requirements and reflects their interpretation of the sustainability agenda.
Closer inspection of the suggested criteria determines that many cannot be developed
into KPIs because they actually represent; a government agenda (e.g. Warmzone), a
course of action (e.g. go open-book with partners), an action outcome (e.g. kerbside
appeal would result from improved external environmental), cannot be measured
directly (e.g. water conservation is important especially in the south but not all
properties have water meters by which to measure consumption), example of how a
target could be met (e.g. Recycle kitchens to power kitchen plant) or are dealt with
elsewhere (e.g. support for asylum seekers would be included in a community cohesion
strategy). However if the maximum benefit is to be realised from limited resources,
tenant lifestyle and behaviour must be taken into account during property maintenance
planning.
Currently economic, social and environmental sustainability criteria has been sought
from the social housing landlord, for they are responsible for predicting maintenance
demand and associated budget requirements. However social criteria, measurements and
KPIs cannot be developed in isolation from the tenant and this perspective will be
sought during the final phase of this research. This perspective is crucial in realising
Government policy in terms of the impact occupancy behaviour has on energy
consumption and emissions and in overcoming one of the biggest issues faced by social
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Justine Cooper and Keith Jones, pp 916-928
housing landlords which is how to manage rising tenant expectations resulting from the
DHS.
5 Conclusion and Further Research
The current approach to social housing maintenance is based on the (single attribute)
condition based model, where physical condition is used as a proxy for building
performance. Sustainability is a major UK government objective reflected in the way it
seeks to support its social housing stock, however landlords are currently unable to
implement this agenda via housing maintenance because (invariably) maintenance
planning is not directly linked to strategic goals. KPIs have began to address the
sustainability agenda in housing but from a strategic level and not an operational level
and therefore the impact of current KPIs on improving the sustainability of existing
social housing through maintenance interventions will be limited. Current sustainable
building assessment methodologies are based upon building design and not on the
building’s performance in-use despite government’s assertion that this objective should
receive greater inclusion and the generic form they take does not allow for local needs.
Thus, for existing social housing to address the sustainability agenda a new approach to
social housing maintenance is required which includes the performance of a house in-
use and a new set of KPIs. Testing this proposition was part of a multidisciplinary
research project carried out with a UK Social Housing provider.
Landlords need a methodology which is flexible enough to interpret their individual
interpretations of the sustainability agenda and reflects the local needs of their stock and
tenants. In effect a multi-criteria decision model is needed in the form of a hierarchy of
independently rated first, second and third level sustainable performance criteria and not
just physical condition, as presented by this paper. The final phase will be to develop
appropriate weightings for these second and third level criteria.
The final phase of this research is to undertake an action research project with a
Housing Association, part of which will be used to develop a set of metrics and a
mathematically robust way of measuring them by using the Analytical Hierarchy
Process (AHP) developed Thomas Saaty in the early 1970’s (Saaty 1996) in a similar
way to how Spedding et al (1994, 1995) used it for maintenance modelling.
6 Acknowledgement
This project is funded by the Engineering and Physical Sciences Research Council
through their Sustainable Built Environment programme.
7 References
Alani, A. M., Tattersall, R. P. & Okoroh, M. I. (2002) ‘Quantitative models for building
repair and maintenance: a comparative case-study’, Facilities, 20 (5/6) pp. 176-189
Arditi, D, and Nawakorawit, M. (1999) ‘Issues in Building Maintenance: Property
Manager’s Perspective’ Journal of Architectural Engineering, 5 (4) pp. 117-132
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Justine Cooper and Keith Jones, pp 916-928
Audit Commission (2009) ‘Key Lines of Enquiry’ http://www.audit-
commission.gov.uk/housing/inspection/Keylinesofenquiry/Pages/default.aspx
viewed 29/5/09
BRE (2006a) ‘EcoHome 2006 – The Environmental Rating for Homes’ BRE, Watford
BRE (2006b) ‘EcoHome XB – The Environmental Rating for Homes’ BRE, Watford
Chapman, K. (1999) ‘Dissatisfaction with Stock Condition Surveys in Social Housing’
Structural Survey, 17 (4), pp. 211-215
Cooper, J., and Jones, K.G. (2008a), ‘Routine Maintenance and Sustainability of
Existing Social Housing’, CIB W070 Conference in Facilities Management,
Emerald, Heriot Watt University, Edinburgh, 16th-18th June 2008, pp 361-368.
Cooper, J., and Jones, K.G. (2008b), ‘Routine Maintenance and Sustainability of
Existing Social Housing’, RICS Construction and Building Research Conference,
COBRA, RICS, Dublin Institute of Technology, 4th-5th September 2008
DCLG. (2000). “Housing Revenue Account” http://www.communities.gov.uk/housing/
DCLG. (2006a). “Housing Statistics” http://www.communities.gov.uk/housing/
DCLG (2006b) ‘From Decent Homes to Sustainable Communities: A Discussion
Paper’, DLCG Publications, London
DCLG (2008) ‘English House Condition Survey 2006 Revised Headline Report: Decent
Homes and Decent Places’ DCLG Publications
http://www.communities.gov.uk/documents/housing/pdf/ehcsheadline2006.pdf,
DCLG (2009) ‘Code for Sustainable Homes: Technical Guide’ DCLG Publications,
London. ISBN 978 1 85946 330 7
Department for Energy and Climate Change (DECC) (2009) ‘Heat and Energy Saving
Strategy: Consultation’, DECC, London, ISBN. 978-0-1085-0815-8
HMSO. (2005). “Securing the future: delivering UK sustainable development”, HMSO.
Jones, K.G., and Cooper, J., (2007) ‘The Role of Routine Maintenance in Improving the
Sustainability of Existing Social Housing’, ENHR Sustainable Urban Areas, ENHR,
Rotterdam, 25th-28th June 2007.
Looseman, M., Hall, C. and Dainty, A.R.J (1996) ‘Excitement, innovation and courage
in construction management research – Challenging historical values’, 12th Annual
ARCOM Conference, Sheffield Hallam, pp. 418-427
Long, D and Hutchins, M., (2003) ‘A toolkit of indicators of sustainable communities’
The Housing Corporation and the European Institute for Urban Affairs
Lutzkendorf, T., and Lorenz, D (2005) ‘Sustainable Property Investment; Valuing
Sustainable Buildings Through Property Performance Assessment’ Building
Research and Information, 33 (3), pp. 212-234
O’Dell, A (1996) ‘Taking stock: a review of stock condition survey methods in the UK,
user Orientated and Cost Effective Management, Maintenance and Modernisation of
Building Facilities’. ISBN 951 758 358 3
Saaty, T.L (1996) ‘Decision making with Dependence and Feedback: the Analytic
Network Process’. RWS Publications, Pittsburgh, USA
Sharp, M., and Jones, K. (2007) ‘A New Performance-Based Process Model for Built
Asset Maintenance’ Facilities, 25 (14/14), pp. 525-535
Shen, Q., Lo, K., and Wang, Q. (1998) ‘Priority Setting in Maintenance Management of
Public Buildings – A Modified Multi-Attribute approach using Analytical Hierarchy
Process’ Construction Management and Economics, 16 (6), pp. 693-702
Wordsworth, P. (2001). ‘Lee’s building maintenance management’, Blackwell Science,
UK.
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Emmanuel Fatoye, pp 929-943
A comparative analysis of residential satisfaction in three income
levels public housing estates in Nigeria
EMMANUEL O. FATOYE
Department of Quantity Surveying, Lagos State Polytechnic, Lagos, Nigeria
e-mail: [email protected]
Abstract
Residential satisfaction is more than considering just the technical quality of the constituent
components of the building but includes how well the housing and its environment had met the
needs and expectation of the occupiers. The satisfaction level is however closely related with the
overall quality of the housing and its environment. This paper therefore aimed at comparing users’
satisfaction on the quality performance of three income levels public residential estates. The
specific objectives were: to determine the occupiers’ satisfaction using quality performance criteria
under the elements of building performance and to rank the degree of importance of quality
performance criteria to occupier satisfaction. Data were obtained from both primary and secondary
sources. A total of 226 questionnaires, drawn from three different socio-economic housing estates
were collected and used for the study. The data were analysed using simple descriptive statistics and
analysis of variance (ANOVA). The results showed that there is significant difference in the
occupiers’ satisfaction among the three estates. The satisfaction level as revealed by the mean
difference of the three housing estates is in the upward direction starting from the low-cost to the
high-income housing estates. This implies a corresponding increase in the housing quality from the
low-income to the high-income housing estates. The absence of some infrastructural facilities and
the state of disrepair of the existing ones had further explained this level of difference in the
occupiers’ satisfaction. The study recommended the provision of missing infrastructural facilities
and maintenance of the existing ones.
Keywords: Occupiers’ satisfaction, residential estates, quality performance, building elements,
Nigeria.
1 Introduction
Despite various measures to improve housing qualities over the past decades, housing remained a
persistent and divisive social issue in developing nations like Nigeria. Virtually all residents desire
to live in a conducive residential environment, but the housing situation has been gradually
deteriorating without due consideration for residential satisfaction by the housing providers due to
‘ever increasing cost of building materials and goods’ and the desperate need of housing by house
seekers (Olatubara and Fatoye, 2006; Olatubara, 2008). In his own view, Ha (2008) stated that the
failure of many housing projects may be traceable to the lack of knowledge on the determinants of
residential satisfaction. He stressed that the success of housing programmes does not only depend
on merely provision of housing units, but also on other factors that affect the need of residents
based on the housing quality. The achievement of quality, aside time and money, in any housing
project is a key factor that contributes to the ultimate success of that project.
If the housing sector is to improve the quality of the residential buildings it produces in meeting the
needs and expectations of consumers, it then must take a proactive approach to understanding
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consumers’ views on the quality of the building being produced. This can be done effectively
through the assessment of the users’ satisfaction on the quality performance of the dwelling houses.
This research is therefore aimed at making a comparative analysis of users’ satisfaction on the
quality performance of three income levels public residential estates in Nigeria. The specific
objectives are to: (i) determine the occupiers’ satisfaction using quality performance criteria under
the elements of building performance (ii) rank the degree of importance of quality performance
criteria to occupier satisfaction.
The feedback on the satisfaction level of the occupants will be used to assess the quality of housing
estates and the result will serve as a benchmark or yardstick to quality improvement in housing
production and delivery. It will help housing developers build better residential estates for user-
occupiers and assist in providing healthy, productive and comfortable in/outdoor environment and
long-term benefits to them as well as maximise value for their money.
2 Literature review
The current and future prospects in the housing sector depend on the extent to which
owners/occupiers are satisfied with the built facilities. This emphasis is based on the fact that many
problems in the built environment are the result of neglecting the users’ point of view. Lahdenpera
and Tiuri (1999) noted that customer satisfaction is not only a matter related to the hand-out of a
freshly completed building, but is a life-cycle issue which has to be taken into account right from
the initial investment phase. There is therefore need to first of all understand and establish what the
consumers’ want (real and perceived need) and only then could such expectations be met.
The general idea of residential and neighbourhood satisfaction has become the prominent indicator
of housing quality and condition which affect individuals’ quality of life. These are used by
numerous researchers, analysts, and housing providers as (i) an evaluative measure of private and
public sectors building performance, (ii) an indicator of residential mobility, (iii) an evaluation of
occupants’ perception of their residential environment and improvements in new projects, (iv)
essential inputs in monitoring the success of housing policies, (v) a basis for taking decisions about
improvements in current housing stock through ‘feed-back’ information and about the design and
development of future housing through ‘feed-forward’ information, and (vi) a measure of
accountability of housing managers, designers and policy makers (Oliveira and Heineck, 1999;
Salleh, 2008; Amole, 2009).
2.1 Theoretical framework
Residential satisfaction is a reflection of ‘the degree to which (the inhabitants) feel (that their
housing) is helping them to achieve their goals’. It refers to individuals’ evaluation of the conditions
of their current residential environment, subject to their needs, expectations and achievements (Hui
and Yu, 2009). According to Salleh (2008), theories on residential satisfaction are based on the
notion that residential satisfaction is a measure of the difference between occupants’ actual and
desired housing and neighbourhood situations whose judgements are based on their needs and
aspirations. Satisfaction with their residential conditions indicates the absence of complaints as
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their needs meet their aspirations. Contrariwise, they are likely to feel dissatisfied if their housing
and neighbourhoods do not meet their residential needs and aspirations.
In the Expectancy-Value Model of Attitude proposed by Rosenberg (cited in Francescato,
Weidemann and Anderson, 1989), evaluations were seen as strongly dependent upon people’s
expectations or beliefs that the evaluated object furthered or hindered the attainment of their goals.
To be more specific, Morris and Winter (cited in Salleh, 2008) introduced the notion of “housing
deficit” to conceptualise residential satisfaction. Their Housing Adjustment Theory, on which this
study is based, contends that if a household current housing meets the norms, the household is likely
to express a high level of satisfaction with housing and neighbourhood. An incongruity between the
actual housing situation and housing norms results in a housing deficit which gives rise to
residential dissatisfaction. Once their dissatisfaction with the current residence surpasses a certain
level (the threshold level) they are likely to consider some form of housing adjustment (Salleh,
2008; Hui and Yu, 2009). The adjustment may be in the form of intention to relocate except for
some socio-economic reasons.
2.2 Factors affecting residential satisfaction
The literature is replete of analysis of many variables that are strongly related to residential
satisfaction and the occupiers’ evaluations of the variables. Some of these are: building features
(such as number of bedrooms, size and location of kitchens, and quality of materials, etc.) and
neighbourhood facilities (like schools, hospitals, shops, recreational facilities, etc (Amaratunga and
Baldry, 1998; Torbica and Stroh, 1999; Salleh, 2008). The study of Ukoha and Beamish (1997)
indicated that residents in public housing in Abuja, Nigeria were satisfied with neighbourhood
facilities such as closeness to schools, hospitals/clinics and shops/markets. They were however
dissatisfied with their overall housing situation (structure types, building features, housing
indications and housing management). Kowaltowski , da Silva, Pina, Labaki, Ruschel and Moreira
(2006) reported that the population of low-income housing in the region of Campinas, Brazil
preferred houses to apartments and satisfaction with their housing conditions was high despite low
feeling of security in the neighbourhood. Satisfaction rates in general terms were high but were not
directly related to physical elements of the home and its neighbourhood.
The work of Westaway (2006) in Soweto, South Africa, revealed that the group from the squatter
camp had the lowest levels of satisfaction with their personal and environmental quality of life. The
group was found to be the most disadvantaged in this regard when compared with the relocated, the
awaiting relocation and the site tenure allocated groups. Kowaltowski et al (2006) opined that
quality of life was related to feelings of security, physical safety, protection from the elements
(wind, rain, lightening) and environmental comfort (thermal, acoustic, visual, and functional space).
According to them, security and safety feelings were related not only to crime rates and the quality
of policing, but also to street lighting and visibility of movements in public areas.
In the survey carried out by Ha (2008), the residents of social housing estates in South Korea were
satisfied with neighbourhood amenities (health clinics, stores, banks, post office, etc.) but highly
dissatisfied with parking facilities and landscape architecture. A total of 51% of the residents were
satisfied with their accommodation while about 11% expressed their dissatisfaction. The balance
was between the two opinion groups.
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The findings of Salleh (2008) about private low-cost housing in Malaysia revealed that satisfaction
levels are generally higher with dwelling units and services provided by the developers than
neighbourhood facilities and environment. The contributing factors for the low level of satisfaction
with neighbourhood facilities and environment were poor public transportation and lack of children
playgrounds, community halls, car parks, security and disability facilities. The development of
housing, being in the hands of profit-motivated private sector who give less attention to the
provision of neighbourhood facilities and environment was given as reason for this level of
dissatisfaction.
3 Research methods
In operationalising occupiers’ satisfaction or developing valid measures of satisfaction, a
measurement standards or quality performance criteria will be employed. These standards will be
limited to the broad areas of physical, environmental, functional, behavioural, economic and timing
elements. Elements of building performance are factors that impact on the effectiveness of a facility
(Carpenter and Oloufa, 1995). They are those aspects of facilities that are measured, evaluated and
used to improve building (Amaratunga and Baldry, 1998). According to them, building
performance has been defined in British Standard (BS) 5240 as behaviour of a product in use. It
thus relates to a building ability to fulfilling the functions of its intended use and satisfy users’
requirement.
This study employed the use of cross-sectional procedure. Data collected from secondary sources
include those on the population size of the study areas and they were obtained from the Lagos State
Development and Property Corporation (LSDPC) office in Nigeria. Other information that was
relevant to the study was obtained from the literature. These include government documents and
publications, textbooks, journals, research works, conference/seminar papers and World Wide Web.
Primary data were collected through questionnaires administered on the occupants of the housing
estates as well as direct field observation.
The level of satisfaction was evaluated under six elements of building performance evaluation of
residential estates – physical, environmental, functional, behavioural, economical and timing
elements (Amaratunga and Baldry, 1998). These elements were examined both objectively and
subjectively and covered such areas as the design, the house, the estate layout and site location as
well as ease of access to local facilities and city wide services. Within each of these elements of
building performance were listed quality performance criteria adopted by Western (1979) and from
the HOMBSAT (HOMe-Buyer SATisfaction) instrument developed by Torbica (1997; cited in
Torbica and Stroh, 1999) [Appendix I]. The questionnaire was designed to seek the opinion of the
respondents on their level of satisfaction/dissatisfaction on the listed quality performance criteria
on a 1 – 5 Likert-type scale using 1 for very dissatisfied, 2 for dissatisfied, 3 for neither dissatisfied
nor satisfied, 4 for satisfied and 5 for very satisfied. Direct field observation was also used through
the researcher’s visits to the sampled estates to inspect the general housing condition/estate layout.
3.1 Study population
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The Lagos State Development and Property Corporation (LSDPC) was established by the LSDPC
Edict No. 1 of 1972 (LSDPC, n.d.). It was vested with the power to provide and manage residential,
commercial and industrial houses throughout the state. In almost four decades of existence, the
Corporation has demonstrated its ability to rise to the challenge of housing provision for the
teeming population of Lagos State. LSDPC has a total of 40 residential estates. These comprise 20
low cost (supposedly for low income earners), 15 medium income and five upper income housing
estates. There are 14,972 housing units under low-income estates, 3,878 units in medium income
and 1,722 units in upper income housing estates, making a total of 20,572 units in the 40 estates
(LSDPC, n. d.). The estates were categorised into three using stratified sampling technique based on
the three cost/income level housing estates.
For this study, one estate was chosen from each of the strata by purposive sampling method based
on the estate with highest number of housing units in the stratum. These were Abesan Housing
Estate (low-cost) with 4,272 housing units, Ijaiye Housing Estate (medium income) having 840
units and Dolphin Phases I and II (upper income) with a total of 892 housing units. These (6,004)
constitute good representation of the population. The design concept of Abesan was an owner-
occupier with the aim of providing affordable accommodation for the low income earners. They are
four-storey (on four floors) blocks of two -bedroom flats (66.38m2 each) and three storey blocks of
three-bedroom flats (109.09m2 each).The houses in Ijaiye medium income housing estate are two-
storey blocks of four flats containing four bedrooms. Dolphin high income housing estate contains
four bedroom duplexes of industrialised system building with precast concrete panels.
A total of 301 housing units were sampled through questionnaires from a sample frame of 6,004.
This represents five percent of the sample frame comprising 214 from Abesan, 42 from Ijaiye and
45 from Dolphin housing estates. The sample size was based on five per cent of the sample frame
selected using systematic sampling technique. Thus, one housing unit was chosen from every 20.
The data collected were analysed using both descriptive and inferential statistics. Data presentation
and analysis made use of frequency distributions and percentages of all the respondents. The
respondents were asked to indicate the level of satisfaction/dissatisfaction using some selected
quality performance criteria on a 1 - 5 Likert-type scale. A Mean Items Score (MIS) and weighted
average were computed for each of the performance criteria and were ranked in descending order of
importance. In order to achieve precision in data analysis, this study made use of the Statistical
Package for the Social Sciences (SPSS) computer programme
4 Findings and discussion
These results give, empirically, facts and figures about the satisfactory level of the residential
apartments. Out of 301 questionnaires administered, 226 were duly completed and returned,
representing 75.08%, for the analysis. Figure 1 below shows the length of stay of the occupiers in
their residence. About 41.6% of them have been living there for more than ten years. Those who
have lived there between four and ten years are 34.0%, 16.4% for between two and four years and
8.0% for those who have been living there for less than two years. In essence respondents who
have lived in their residence for many years completed most of the questionnaires. It can therefore
be inferred that the respondents have adequate knowledge of their living apartments and out-door
environment.
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Figure 2 below shows a comparative analysis of the distribution of occupiers’ satisfaction combined
into the elements of building performance as indicated by residents of the three estates. It can be
observed from the figure that in Dolphin estate, the respondents experienced highest level of
satisfaction with physical element (66.7%). However, in Ijaiye and Abesan estates the respondents
had highest level of satisfaction with functional element (75.0%) and (66.7%) respectively. This
element ranked third in Dolphin estate. This is probably due to the use of precast concrete panels
used for the construction
45
40
35
30
25
F req. (% )
20
15
10
0
0-2 2-4 4-6 6- 8 8- 10 1 0+
Years
Figure 1: Length of stay in residence
of Dolphin houses, which makes adaptability to change in design very difficult. Those who are
satisfied with environmental element have the lowest percentage in Dolphin (39.4%) and Abesan
(24.8%). Field observation confirmed that there were no street lighting, refuse disposal system,
good drainage system and pipe-borne water in those estates. The overall assessment of the three
estates, put together, showed that the occupiers who were satisfied with functional element ranked
highest with 65.0 percent. This is followed by physical element with a total percentage of 62.4
percent. Those who are satisfied with environmental elements ranked lowest with 30.1% percent.
When all the 70 quality performance criteria are considered together, irrespective of elemental
grouping, residents of Dolphin Estate experienced the highest level of satisfaction (60.3%). Next to
this are Ijaiye Estate (58.7%) and Abesan Estate (51.3%). The overall satisfaction level of all the
estates is 53.9 percent.
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80.0
70.0
60.0
50.0
Frequency (%)
40.0
30.0
20.0
10.0
0.0
Phy. Env. Funct Beh. Eco. Tim. Ovrall
All 62.4 30.1 65.0 49.1 56.2 37.2 53.9
Dolphin 66.7 39.4 45.5 39.4 54.5 48.5 60.3
Ijaiye 72.5 42.5 75.0 52.5 65.0 32.5 58.7
Abesan 58.8 24.8 66.7 50.3 54.2 35.9 51.3
Elements of Building Performance
Fig.2: Distribution of occupiers’ satisfaction using elements of building performance
Table 2 below shows the weighted average from the relative performance indices for the three
estates. The major quality performance criteria which provided the residents’ level of satisfaction,
ranked in descending order, include the number of rooms in the house (0.818), ceiling height
(0.792), and location of different rooms (0.787). Others are brightness in the house during the
daytime (0.748), nearness of house to religion/worship locations (0.748), the size of the rooms
(0.743), and layout of the rooms [i.e. the design in relation to occupiers’ daily life in the house]
(0.726), etc. They are least satisfied with the behavioural and environmental elements. These
include nearness of house to fire-fighting stations (i.e., very far from the estates) which is the lowest
in the rank (0.129)), street lighting (0.164), refuse disposal system (0.182), drainage system (0.217),
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Table 2: Relative performance indices for the three estates (in descending order of importance)
Quality Performance Criteria Abesan Rank Ijaiye Rank Dolphin. Rank Weighted Sub Group
(N=153) (N=40) (N=33) Average. group rank
(N=226) rank
Functional element
The location of different rooms 0.758 1 0.875 1 0.818 1 0.787 1
The layout of the rooms (i.e. the design in relation to your daily life in the 0.706 2 0.775 2 0.758 2 0.726 2
house)
Available parking space 0.654 3 0.675 4 0.576 3 0.646 3
Adaptability to change in design 0.608 4 0.700 3 0.455 4 0.602 4
Group average 66.7 1 75 1 45.5 4 65 1
Physical element
The number of rooms in your house 0.797 1 0.825 2 0.909 1 0.818 1
The ceiling height 0.765 2 0.825 3 0.879 3 0.792 2
The size of the rooms 0.732 3 0.750 4 0.788 4 0.743 3
The performance of foundations 0.654 6 0.850 1 0.788 5 0.708 4
The number and position of electrical outlets 0.621 9 0.750 5 0.909 2 0.686 5
The scale and proportion of the floor plan 0.680 4 0.625 17 0.758 11 0.682 6
The floor plan of your dwelling 0.647 7 0.650 13 0.788 6 0.668 7
Street design 0.660 5 0.725 7 0.636 19 0.668 8
Your toilet(s) design 0.627 8 0.725 8 0.636 20 0.646 9
The performance of roof 0.582 14 0.750 6 0.788 7 0.642 10
Your Bathroom(s) design 0.608 11 0.650 14 0.788 8 0.642 11
The number of bathroom(s) 0.575 16 0.700 10 0.727 12 0.619 12
Your plot size 0.614 10 0.700 11 0.515 24 0.615 13
The kitchen design 0.608 12 0.475 23 0.788 9 0.611 14
The number of toilet(s) 0.562 18 0.650 15 0.697 14 0.597 15
The operation of windows 0.588 13 0.425 25 0.788 10 0.588 16
The operation of doors 0.575 16 0.525 22 0.727 13 0.588 17
Quality of materials used in ceilings 0.542 19 0.650 16 0.697 15 0.584 18
The operation of electrical fittings 0.542 20 0.550 20 0.667 17 0.562 19
Quality of materials used in walls 0.510 21 0.675 0.606 22 0.553 20
The operation of plumbing fittings 0.562 18 0.475 24 0.576 23 0.549 21
Quality of materials used in floors 0.471 23 0.625 18 0.697 16 0.531 22
Quality of building materials 0.490 22 0.600 19 0.636 21 0.531 23
Quality of paints 0.451 24 0.375 26 0.667 18 0.469 24
The location of balcony 0.346 25 0.725 9 0.424 26 0.424 25
The size of your balcony 0.327 26 0.550 21 0.455 25 0.385 26
Group average 58.8 2 72.5 2 66.7 1 62.4 2
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Economic element
Nearness of your house to religion / worship locations 0.765 2 0.650 3 0.788 2 0.748 1
Nearness of your house to schools for children 0.771 1 0.700 2 0.515 6 0.721 2
Nearness of your house to market/shopping centres 0.641 3 0.750 1 0.818 1 0.686 3
Getting value for your money 0.516 4 0.500 7 0.576 5 0.522 4
The cost and effort needed to keep the house up 0.510 5 0.625 4 0.424 8 0.518 5
Easiness of maintenance of your house 0.484 6 0.600 5 0.455 7 0.500 6
Nearness of your house to recreational facilities 0.405 7 0.450 9 0.758 3 0.465 7
Nearness of your house to your workplace 0.359 9 0.500 8 0.758 4 0.442 8
Low-cost maintenance features in your house 0.379 8 0.600 6 0.364 9 0.416 9
Group average 54.23 3 65 3 54.5 2 56.2 3
Behavioural element
The level of privacy in your house 0.608 4 0.725 1 0.636 4 0.633 1
Nearness to neighbours of different religion 0.627 3 0.675 4 0.545 7 0.624 2
Open spaces, parks and reserves 0.647 1 0.625 9 0.424 13 0.611 3
Individual space for each member of your household 0.634 2 0.650 6 0.424 14 0.606 4
Building setback (distance from house to your property boundary) for outdoor 0.575 5 0.675 5 0.545 8 0.588 5
living space, entertaining and parking.
Distance of your building from the side boundary fence 0.575 6 0.650 7 0.515 10 0.580 6
Security system of your house 0.542 8 0.625 9 0.697 2 0.579 7
Security level of your neighbourhood 0.516 9 0.700 2 0.667 3 0.571 8
Distance of your building from the rear boundary fence 0.569 7 0.650 8 0.455 11 0.567 9
The width of foot paths 0.484 11 0.700 3 0.455 12 0.518 10
Adequacy of off-street parking 0.490 10 0.575 12 0.424 15 0.495 11
Colour(s) of paints used in the house 0.405 12 0.600 11 0.545 9 0.460 12
Emergency/ Escape route 0.366 14 0.575 13 0.636 5 0.442 13
Aesthetic appearance 0.379 13 0.575 14 0.394 16 0.416 14
Nearness of your house to police station 0.268 16 0.250 16 0.727 1 0.332 15
Adequacy of on-street parking (bays) 0.320 15 0.350 15 0.364 17 0.332 16
Nearness of your house to medical facilities(hospitals/ clinics) 0.261 17 0.225 17 0.636 6 0.309 17
Nearness of your house to fire fighting station 0.105 18 0.075 18 0.303 18 0.129 18
Group average 50.3 4 52.5 4 39.4 5 49.10 4
Timing element
Level of deterioration of your building based on annual increase in repairs 0.359 59 0.325 63 0.485 50 0.371 1
and maintenance cost
Group average 35.9 5 32.5 6 48.5 3 37.2 5
Environmental element
The brightness or light in your house during the day time 0.758 1 0.750 1 0.697 1 0.748 1
Indoor Air Quality ( IAQ ) 0.634 2 0.675 2 0.667 2 0.646 2
Space for landscaping 0.484 3 0.625 4 0.364 11 0.491 3
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Noise pollution 0.373 6 0.675 3 0.576 4 0.456 4
Water pollution 0.405 4 0.525 7 0.515 5 0.442 5
Landscaping of streets (i.e., trees, hedges, grass etc.) 0.399 5 0.600 5 0.303 12 0.421 6
Air pollution 0.359 7 0.575 6 0.455 7 0.411 7
Accessibility to the disabled and aged people 0.320 9 0.500 8 0.424 8 0.367 8
Source(s) of Water 0.333 8 0.175 11 0.636 3 0.349 9
Drainage System 0.183 10 0.200 10 0.394 10 0.217 10
Refuse disposal system 0.105 12 0.225 9 0.485 6 0.182 11
Street lighting 0.124 11 0.100 12 0.424 9 0.164 12
Group average 24.8 6 42.5 5 39.4 6 30.10 6
Note: P= Physical element; Env= Environmental element; F= Functional element;
B= Behavioural element; Eco =Economic element; T= Timing element
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nearness of house to medical facilities (hospitals/clinics) (0.309), and sources of portable water
(0.349).
4.1 Test of hypothesis
This study tests the hypothesis that there is no significant difference in the occupiers’ satisfaction
among the three housing estates. With a view of ascertaining the level of residential satisfaction
among the three Estates, analysis of variance (ANOVA) was carried out (Tables 3(a) and 3(b)). The
result of the analysis on Table 3(a) below indicates mean (average) difference in the occupiers’
satisfaction for the three housing estates with 35.90 for Abesan, 41.63 for Ijaiye and 42.21 for
Dolphin estates respectively.
Table 3(a): Analysis of variance of occupiers’ satisfaction among the three estates
Estate N Mean F P Remarks
(Between Groups)
Abesan 153 35.90
Ijaiye 40 41.63 3.452 0.033 Significant
Dolphin 33 42.21
Total 226 37.84
. The F-value (3.452) is greater than the critical (table) value of 3.07 and p-value (0.033) < 0.05 at
95 percent alpha level. This shows that the sample mean differences are statistically significant.
Therefore, the null hypothesis (Ho) is rejected and the alternative hypothesis (H1) is accepted that
there is significant difference in the occupiers’ satisfaction among the three housing estates.
The pattern of mean difference is shown in Table 3b below. The significant mean differences are
indicated by an asterisk (*). The mean difference of 5.72 between Abesan and Ijaiye shows that
these two housing estates differ in their population means. Similarly, the mean difference between
Abesan and Dolphin estates (6.31) indicates that the two estates also differ in their population
means. In contrast, the mean difference between Ijaiye and Dolphin, which is 0.59 shows that the
difference in the population means is not statistically significant i.e., they do not differ in their
population means.
Table 3(b): Multiple comparisons of mean difference
Dependent variable: QUALPERF
LSD
Mean Difference Std. 95% Confidence Interval
(I) A1 (J) A1 (I – J) Error Sig. Lower Upper Bound
Abesan Ijaiye -5.7230* 2.85034 0.046 B
-11.3401 d -0.1060
Dolphin -6.3102* 3.08069 0.042 -12.3811 -0.2392
Ijaiye Abesan 5.7230* 2.85034 0.045 0.1060 11.3401
Dolphin -0.5871 3.77458 0.087 -8.0255 6.8513
Dolphin Abesan 6.3102* 3.08069 0.042 0.2392 12.3811
Ijaiye 0.5871 3.77458 0.877 -6.8513 8.0255
* The mean difference is significant at 0.05 level.
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These findings are further validated from the 95 percent confidence interval for each mean
difference as shown in the table. The sample mean difference between Ijaiye and Abesan of 5.72, is
somewhere between 0.11 and 11.34. This confidence interval does not include zero, hence, there is
difference in their population means. In the same vein, the mean difference of 6.31 between
Dolphin and Abesan falls between 0.24 and 12.38 whose confidence interval does not also include
zero. Therefore, there is also a difference in their population means. On the contrary, the confidence
interval figure between Ijaiye and Dolphin is between –8.03 and 6.85. This range includes zero.
This shows that the difference could be zero, indicating that there is no difference in their
population means.
The difference in the occupiers’ satisfaction among the three housing estates may be
attributed to the difference in the housing quality between the three estates, as shown by the
comparative relative performance indices (RPI) of the three estates (Table 2). Dolphin estate had the
highest Relative Performance Index in terms of the number of rooms in the house, number and
position of electrical outlets, the ceiling height, location of different rooms, nearness of house to
market/shopping centres, the floor plan, size of rooms, etc. Ijaiye has the second highest RPI
followed by Abesan.
5 Conclusion and Further Research
This study revealed that there is significant difference in the occupiers’ satisfaction among the three
estates. The satisfaction level, as revealed by the mean difference of the three housing estates, is in
the upward direction starting from the low-cost to the high-income housing estates. The mean
difference of the three estates shows that Abesan estate has the lowest level of satisfaction
(35.90%), followed by Ijaiye estate (41.63) and Dolphin estate, with the highest level of satisfaction
(42.21%). This implies a corresponding increase in the housing quality from the low-income to the
high-income housing estates. This finding agrees with the assertion of Ha (2008) that one of the
crucial housing problems is the increasing polarisation between the housing conditions of the lower
and upper economic classes especially on issues that affect the occupants’ satisfaction.
The absence of some infrastructural facilities and the bad state of disrepair of the existing ones had
further explained this level of difference in the occupiers’ satisfaction. When the facilities are
provided and a sound maintenance culture is cultivated by the appropriate management agency,
Nigerian housing conditions will be more satisfactory. If these areas can be given due consideration,
the concept of housing (as opposed to shelter) will become a reality in the nation’s housing sector
where the needs and expectation of the users will be met.
The methodology of the study, which may and should be improved upon, might be a useful tool in
the field of housing development and production - planning, programming, design, construction,
and occupancy. It could be used for comparative studies between public and private housing
projects, cross-cultural housing studies, and residential satisfaction between urban and peri–urban,
or urban and rural or peri-urban and rural housing development/dwellers. The housing problems
that were found to be associated with public residential estates in the study area may also be true
with estates in other states of Nigeria as well as other developing countries. This implies the need
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for further research that will put each geographical, cultural, or religious setting into its true
perspective.
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Amole, D. (2009), ‘Residential satisfaction in students’ housing’, Journal of Environmental
Psychology, 29, 76-85.
Carpenter, C.L. and Oloufa, A.A. (1995), ‘Post-occupancy evaluation of buildings and development
of facility performance criteria’, Journal of Architectural Engineering, 1(2), 77-81.
Francescato, G., Weidemann, S and Anderson, J.R. (1989), ‘Evaluating the built environment from
the users’ point of view: An attitudinal model of residential satisfaction’, In: W.F.E. Preiser (Ed)
Building Evaluation, Plenum Press, New York, pp 181-198.
Ha, S-K (2008), ‘Social housing estates and sustainable community development in South Korea’
Habitat International, 32, 349-363.
Habitat (UNCHS) (1996), ‘An urbanizing world’, Global report on human settlements.
Hui, E. C. M. and Yu, K. H. (2009), ‘Residential mobility and aging population in Hong Kong’,
Habitat International, 33, 10-14.
Kowaltowski D. C. C. K., da Silva, V. G., Pina, S. A. M. G., Labaki, L. C., Ruschel, R. C. and
Moreira, D. C. (2006), ‘Quality of life and sustainability issues as seen by the population of low-
income housing in the region of Campinas, Brazil’, Habitat International, 30, 1100-1114.
Lahdenpara, P.J. and Tiuri, U. A. (1999), ‘Setting up preconditions for long-term customer
satisfaction by means of open building’, Paper delivered at CIB W55 and W65 Joint triennial
symposium on customer satisfaction: A Focus for Research and Practice, Cape Town South Africa:
5-10, September.
LSDPC (n. d.), ‘LSDPC at a glance’, Lagos.
Olatubara, C. O. and Fatoye, E. O. (2006), ‘Residential satisfaction in public housing estates in
Lagos State, Nigeria, Journal of the Nigerian Institute of Town Planners, 19 (1), 103-124.
Olatubara, C. O. (2008), ‘The dynamics of households’ residential choice in Nigeria’, The Fifteen
Faculty Lecture, Delivered at the Faculty of the Social Sciences, University of Ibadan, Nigeria.
Oliveira, M.C.G and Heineck, L.F.M (1999), ‘An investigation into the determinants of built
environmental customer satisfaction’, Paper delivered at CIB W55 and W65 Joint triennial
symposium on customer satisfaction: A Focus for Research and Practice. Cape Town South Africa:
5-10, September.
941
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Emmanuel Fatoye, pp 929-943
Salleh, A. G. (2008), ‘Neighbourhood factors in private low-cost housing in Malaysia’, Habitat
International, 32, 485-493.
Torbica, Z. M and Stroh, R. C. (1999), ‘An assessment model for quality performance control in
residential construction’, Associated School of Construction (ASC), Proceedings of the 35th Annual
Conference, California Polytechnic State University, San Luis Obispo, California, April 7-10, pp
363- 370.
Ukoha, O. M. and Beamish, J. O. (1997), ‘Assessment of residents’ satisfaction with public housing
in Abuja, Nigeria’, Habitat International, 21 (4), 445-460.
Westaway, M. S. (2006), ‘A Longitudinal investigation of satisfaction with personal and
environmental quality of life in an informal South African housing settlement, Doornkop, Soweto’,
Habitat International, 30, 175-189.
Western, J. (1979), ‘The cultural and environmental dimensions to housing, In: H.S. Murison and J.
P. Lea (Eds) Housing in the Third World: Perspectives on Policy and Practice, The Macmillan
Press, London.
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RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Emmanuel Fatoye, pp 929-943
Appendix I: Quality Performance Criteria
[Source: Western (1979); Amaratunga and Baldry (1998); Torbica and Stroh (1999)]
A Physical Element 37 Water pollution
1 Your Plot (Please indicate size) ------------- 38 Source(s) of Water
2 The floor plan of your dwelling C Functional Element
3 The Scale and proportion of the floor plan 39 The layout of the rooms (i.e. the design in relation to your
daily life in the house)
4 The number of rooms in your house 40 The location of different rooms
5 The size of the rooms 41 Adaptability to change in design
6 The kitchen design 42 Available parking space
7 Your Bathroom(s) design D Behavioural Element
8 The number of bathroom(s) 43 Building setback(distance from house to your property
boundary) for outdoor living space, entertaining and parking
9 Your toilet(s) design 44 Distance of your building from the side boundary fence
10 The number of toilet(s) 45 Distance of your building from the rear boundary fence
11 The ceiling height 46 Nearness to neighbours of different religion
12 The number and position of electrical outlets 47 Individual space for each member of your household
13 The size of your balcony 48 The level of privacy in your house
14 The location of balcony 49 Emergency/ Escape route
15 Quality of building materials 50 Colour(s) of paints used in the house
16 Quality of materials used in floors 51 Aesthetical appearance
17 Quality of materials used in walls 52 Open spaces, Parks and reserves
18 Quality of materials used in ceilings 53 The width of foot paths
19 Quality of paints 54 Security level of your neighbourhood
20 The operation of windows 55 Adequacy of on-street parking (bays)
21 The operation of doors 56 Adequacy of off-street parking
22 The operation of electrical fittings 57 Security system of your house
23 The operation of plumbing fittings 58 Nearness of your house to medical facilities
(hospitals/clinics)
24 The performance of foundations 59 Nearness of your house to police station
25 The performance of roof 60 Nearness of your house to fire fighting station
26 Street design E Economic Element
B Environmental Element 61 Low-cost maintenance features in your house
27 Space for landscaping 62 Easiness of maintenance of your house
28 The brightness or light in your house during the day time 63 The cost and effort needed to keep the house up
29 Indoor Air Quality (IAQ) 64 Getting value for your money
30 Landscaping of streets (i.e., trees, hedges, grass etc.) 65 Nearness of your house to your workplace
31 Accessibility to the disabled and aged people 66 Nearness of your house to market/shopping centres
32 Street lighting 67 Nearness of your house to recreational facilities
33 Refuse disposal system 68 Nearness of your house to religion / worship locations
34 Drainage System 69 Nearness of your house to schools for children
35 Air pollution F Timing Element
36 Noise pollution 70 Level of deterioration of your building based on annual
increase in repairs and maintenance cost
943
COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
J C N Joubert and C E Cloete, pp 944-965
Valuation of broiler units: A practical approach
JCN Joubert1 and C E Cloete1
1
Department of Construction Economics
University of Pretoria
South Africa
E-mail: [email protected]; [email protected]
Abstract:
Much uncertainty existed on the most applicable method to valuate broiler units. The
research attempted to determine which method of valuation is the most appropriate and
reliable for the valuation of broiler operations. A sample of 15 out of the 196 contract
broiler farm valuations was selected in the Mpumalanga and North West Provinces in
South Africa. The size of the broiler houses was at least 1 000 m². Broiler units with a
minimum of four houses were taken into account. Data was gathered by means of
assessments of previous valuations as well as physical valuations done in the field and
analysed statistically. Figures were tested for normality; differences between the overall
means were determined by the analysis of variance using the ANOVA test; the
correlation coefficient between the two different methods and the dependable variable
were determined; and regression analysis was fitted. The differences in the coefficient
of variance between the two sets of data used, indicates that the cost approach have a
smaller variation around the mean. The income approach, on the other hand, indicates a
more realistic approach, because the basis is the net margin and not a norm for
replacement and depreciation. Although differences do exist, a strong correlation exists
between the two methods. It is concluded that no single method of valuation of broiler
units should be used, but rather a combination of the cost approach and the income
approach.
Keywords:
Broiler units, valuation methods, valuation of broiler units.
1. Introduction
According to the National Agriculture Marketing Council (NAMC) (2007:5), South
Africa produces more than 85% of the broiler meat in the Southern African
Development Community (SADC) and occupies the 15th position globally in industry
size, with a market share of 1.38% of the 202 countries listed for broiler production SAPA
(2006:17). Ratcliff (2001:7) indicated that the world consumption is projected to rise on
average with 1.5% per annum. Rothwell (2001:2) pointed out that the industry
continued to grow at a pace that exceeded the growth of any other meat sector in the
world, with world production forecasted to increase annually during 2000-2009 by 2.4%
and poultry net export by 3.2%, with high increasing consumption rates,
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The SA poultry industry continues to dominate the agricultural sector in South Africa.
The turnover at the producer level for the year 2006, as recorded by the Department of
Agriculture (DoA), was more than R15 700 million, made up of closely R12 000
million for broilers and R3 800 million for eggs at retail level. These turnovers
increased to a total of R19 905 million (SAPA, 2007:3). At retail level the turnover
constitutes to R28 529 million (SAPA, 2007:3).
The South African Poultry Association differentiates the industry into three branches
(some of which are integrated in a major operations) namely:
● The day-old chick supply industry
● The egg industry
● The broiler industry
(SAPA, 2007:2)
Broiler operation is highly capital-intensive and technical know-how and trained
management skills are important factors for a successful operation. A thorough
knowledge and understanding of valuation methodology and the broiler operation are
necessary when it comes to the valuation of broiler units.
The purpose of this research was to assess and compare the different methods used for
the valuation of contract broiler producers.
2 Literature survey
Although extensive literature exists on valuation in general and on agricultural
valuations in particular (e.g. Behrmann, 1995; Clark and Litt, 1973; Coetzee and Steyn,
2004; Green, 1995; Griffiths, 2005; Herholdt, 2004; Murray, 1973; Suter, 1981), limited
material exists on the valuation of broiler units. Various publications, discussions with
informed individuals, broiler farmers, contractors, financial institutions, and valuers in
practice, agricultural advisors and the internet served as valuable tools of research.
Three well-known appraisal approaches are commonly used when valuing agricultural
land in South Africa (Suter, 1981:249), namely the comparable sales or market
approach, the income capitalised or indirect approach and the cost approach.
2.1. Comparable-sales or market approach
This method is based on the prices paid for other farm properties which are located in
the same area and which have recently changed ownership (Suter, 1981:249).
International Valuation Standards (IVS) as defined by Marten (2001:5) and accepted by
South African Council of Valuers, define the comparable-sales or market approach as
follows:
“The estimate amount for which an asset (since change to “property”) should
exchange on the date of valuation between a willing buyer and a willing seller,
in an arm‘s length transaction after proper marketing, wherein the parties had
each acted knowledgeable, prudently and without compulsion.”
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J C N Joubert and C E Cloete, pp 944-965
A comparable sale is defined as a farm or property which resembles the subject property
being appraised as closely as possible, in terms of the kind of farm organisation, type of
farm, date of sale, location, farm size, productive capacity, and extent of improvements
(Behrmann, 1995:12). Behrmann (1995:14) also mentions that value adjustments are
typically made for the following factors used to clarify sales:
(1) date of transaction;
(2) location;
(3) farm size;
(4) productive capacity;
(5) extent of the improvements; and
(6) other factors, like methods of sales.
Adjustments for each major factor are generally applied to each comparable sale.
Because a farm sold seldom fully reflects the maximum or difference in value in money
terms due to any major factors, the figures derived may be discounted or reduced,
depending on the extent to which that factor may have influenced the sale price.
Coetzee and Steyn (2004:13) state that investors, as well as legalists, favour the
comparable-sales method of valuation. Sales in broiler units are limited and, if detected,
broiler house differences pertaining to technology plays a major role towards the net
margin of a broiler unit.
Schimmel (in NPEC, 2004:32) stresses that
“One of the difficulties of valuation is that sufficient data generally does not
exist, and if it does and the sales are only somewhat similar, a number of
adjustments are required, for example, those for the time, location, or physical
condition of the properties. The danger lies in the fact that the more adjustments
you make, the less comparable the properties become, until one adjusts the
property right out of comparability. The second problem arises when
adjustments are made. It is easy enough to recognise a difference in location,
size or shape, however, the difficult part is to put a monetary value to all of
these items.”
The difficulty is that broiler farmers are limited and that comparable sales are very
scarce.
2.2. Income-capitalised or indirect approach
Suter, 1981:249 define the income capitalised approach as follow:
“The earnings or income capitalization approach in which value is based on
the annual income stream that the farm or subject property will almost likely
produce in the future
The National Property Education Committee (2004:32) points out that the income
capitalised method of valuation is founded on the hypothesis that a purchaser/investor
would pay no more for a property with a predetermined income stream, than he would
pay for a similar property with the same predetermined income stream, all factors
including and, most importantly, the risk factors being equal.
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J C N Joubert and C E Cloete, pp 944-965
“Agricultural land has value because investors expect that land will yield profits in
future years. The price of land is also affected by inflationary expectations and
expectations of mortgage rates. The difference between the latter is called the real
discount rate.” Nieuwoudt, 1995:1)
Coetzee and Steyn (2004:13) claim that earnings and the capitalisation rate respond to
inflation to the same ratio, i.e. if the inflation rate is 5%, the returns from the farming
operation or rent and the capitalisation rate would respond equally. The formula is as
follows:
P0
V0 = --------
it
where:
V0 is the present productive value of the farm;
P0 is the real earnings from the farm; and
it is the real capitalisation rate.
Behrmann, (1995:19) stipulated that the quickest and easiest method of capitalising
residual money returns to land into value is with a cash lease. If cash leases are to be
used in order to derive a capitalisation rate, they may be used if a sufficient number of
leases are observed in relation to the market value of the farm land. If this is possible, a
sound objective rate of capitalisation may be derived. At the same time, a valuer has to
be sure that the lease figure he/she uses is the net figure, that is, after the landlord’s
expenses are deducted from the total lease payment.
Once an annual net income of a farm has been estimated, it is relatively easy to compute
either an independent income value or sale value estimate by capitalisation. The main
problems are an understanding of the capitalisation concept and the selection of a
capitalisation rate.
Behrmann (1995:21) emphasizes definition of a capitalisation rate requires the best
judgement from even the most experienced farm appraiser.
Conceptually, the capitalisation rate is the opportunity cost of money to whoever are the
most likely buyers or owners of the subject property. The rate reflects that yield which
could be obtained on a comparable investment by the most likely buyer or owner, if
he/she were to invest, not in farm real estate or in the subject property, but in the next
best alternative opportunity in the community instead (Behrmann,1995:20).
The broiler industry is a highly specialised biological factory that needs very good
management skills. The industry provides an equal cash flow stream on an annual basis.
The value is a function of the rent it can generate. From research on the various
valuation methods, it is evident that the income-capitalised approach can be applied
with great success on a broiler farm.
2.3. Cost approach
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J C N Joubert and C E Cloete, pp 944-965
The value determined by the cost approach is based on the sum of values contributed by
the various acreages of different quality of land, as though unimproved, and each of the
buildings and improvements (Suter, 1981:249, cf. the definition of the cost approach in
NPEC, 2004:33).
The cost approach typically leads to a value somewhat higher than the earnings or sale
approach (Suter,1981:376).. It does not establish value in the market, however, it does
tend to establish an upper limit to that value and it serves as a check against the other
approaches. The cost approach, as applied to various components of a farm property, is
most useful when the subject farm, if it were to be sold, would probably be sold in
separate tracts and for separate uses.
Green (1995:28) says that the cost approach is the most popular approach to value
buildings on a farm. Certain infrastructure would always be necessary on a farm, like
roads, fences, barns, water tanks, etc. If these features are not present, normal operation
cannot continue, however, this does not necessarily enhance the value of the
infrastructure itself. Several values may therefore be ascribed to a building or a group of
buildings.
Some of the reasons for the sum of the parts to be greater than the whole are that
(Behrmann (1995:32):
• in many areas of agriculture there is a strong demand for unimproved land;
• the cost of new improvements seldom, if ever, adds an equal value to the
market value of the farm;
• new technology often add to the efficiency of the farm family without
making an equal or proportional contribution to the farm’s market value;
• a number of investments in buildings and improvements are sometimes
based on wants rather than needs, and a prospective buyer’s own wants
would influence his judgments and valuation; and
• farm families may experience years of high and low income alternatively,
and in the years of high income they may over-invest in equipment and
improvements. Hence, the appraiser may underestimate the depreciation of
such assets.
Cost is not necessarily value. If an item can be reproduced or replaced, the cost of
acquiring that particular item, or an equally desirable substitute, tends to establish an
upper limit to the value. Cost represents that upper limit only if several assumptions are
made, namely:
• The existing item is one that can actually and easily be replaced. It cannot
remain an old-fashioned or obsolete building. It has to be one which can be
replaced by a modern building, with modern material and equipment and
erected by modern techniques.
• The item can be created, or a substitute acquired, without costly delay. In
some instances, a buyer would pay more than the cost of the item, and justify
it, in order to own or obtain it immediately.
• Following the creation of the asset, no particular physical deterioration
should have occurred. In practice, some is likely to occur and this is a
function of time which cannot remain constant.
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J C N Joubert and C E Cloete, pp 944-965
(Behrmann, 1995:33).
The infrastructure on a specialised farming unit is of the utmost importance. Normally,
without the infrastructure, farming operation cannot continue. The type and state of
technology invested also play an important role – a fully environmental controlled
broiler house is more productive and efficient than a semi-environmental controlled
broiler house. The technology of the house can determine the outcome of the growing
rate of broilers and can have an influence on mortally, etc. In a specialised farming
operation, infrastructure can be divided into essential infrastructure and complimentary
infrastructure.
The final question is: Do we place a value on the infrastructure and the normal farming
operation, or do we value the farming business in total?
When the cost approach is used, we need to take depreciation into account. Behrmann
(1995:33) indicates that the cost approach can be used in the following instances:
Guidelines of the American Society of Farm Managers and Rural Appraisers Inc
indicate that the known three approaches, namely cost, income-capitalised, and sales-
comparison approaches should be used when valuing agricultural units (Cooley,
1998:43). Further assessment regarding the practical application of broiler units
revealed that all three methods were used in the valuation of broiler units.
In an international study conducted by French (2004:536), it was found that valuation
models in the UK can be grouped as follows:
the comparable method;
the investment/income method;
the accounts/profit method;
the development/residual method; and
the contractor’s/cost method,
whereas, in the USA and Germany, only three principal methods are used, namely:
the capital-comparison method;
the investment method; and
the depreciated replacement-cost method.
A way in which it is possible to estimate the market value of land and property is the
contractor’s method or the replacement-cost method. If the property being valued is so
specialised that properties of that nature are rarely sold on the open market, it would be
effectively impossible to assess its value by referring to comparable sales of similar
properties. Similarly, if there is no rental produced, the investment method would also
be inappropriate. The profit method can be applied if the property is intrinsically linked
to the business carried out on the property. However, where such business is one of
production rather than service, it is difficult to determine the contribution of the
property to the overall usage. Thus, once again, the valuer should revert to
understanding the thought process of the user of the building. Here, the nature of the
business is so specialised that there are no comparisons, thus, the owner of the building
would simply assess the market value of the building by referring to its replacement
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J C N Joubert and C E Cloete, pp 944-965
cost, that is, how much it would cost to replace the property if the business was deprived
of its use. In simple terms, market value would equate to reconstruction costs. The
valuer would assess the market value of the raw land (by referring to comparable land
values in an appropriate alternative use), add the cost of re-erecting a building which
could perform the function of the existing structure and, from this, make subjective
adjustments to allow for the obsolescence and depreciation of the existing building
relative to the new hypothetical unit. It is reasonable to assume that this mirrors the
thought process of the owner-occupier and should thus be viewed as a valid and rational
method of valuation. This describes the contractor’s or cost method (French, 2004:537).
The judge in the court case between Minister van Waterwese v Mostert 1966 4 SA 690
(A) 723F; Minister van Waterwese v Von During 1971 1 SA 858 (A) 971A; D Brown,
Land Acquisition, 199 states the following:
“It seems to be accepted that the decision as to which method should be used to
determine the market value of comparable sales, but the court is generally
prepared to rely on the judgment of the valuer as to which he uses.”
The factors influencing the value of broiler units are sophisticated, hence a valuer who
claimes to be qualified to value broiler units, should be well-informed and take all the
factors into consideration when valuing a broiler unit.
The dictum reliant on Roman and Roman Dutch Law principles made in Graham J P
Mead v Clarke 1922 ELD 49 should be considered by all valuers:
“Where a man has expressly or tacitly professed to have business capability he
ought not to have undertaken an affair for which he was not qualified and in
which he knew or ought to have known that his own lack of skill would be
amaging to the interest of his principle.” (Voet (XVII.I.9), quoted in NPEC,
2004:3),
and further:
“Nor will want of ability to perform the contract be any defence to the
contracting party, for though the law exacts no impossible things, yet it may
justly require that every man should know his own strength before he undertakes
to do an act. And if he deludes another by false pretension to skill he should be
responsible for any injury that may be occasioned by such delusion.” (NPEC,
2004:4)
Thus the valuer has the choice of a number of methods. The method used would be a
reflection of the available information in the market place, the knowledge and the
experience of the valuer. Generally, the less information in the form of comparable
sales, the more the valuer would be inclined to use a model that reflects the role of
property as an asset to the business. Such properties tend to be referred to as specialised
properties. Conversely, where there is a lot of comparable transactions (either in the
form of capital value and/or rent values or statistics/yields), the valuer may value
without reference to the original thought process of the occupier. The valuer may use
”second-hand” information from comparable properties and interpret the information
within the context of the current market to estimate the price of the subject property.
This procedure can be used for non-specialised properties (French, 2004:538). French
(2004:534) refers to a specialised property as a property where there is insufficient
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RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
J C N Joubert and C E Cloete, pp 944-965
market data to value it by some form of comparison. The assumption with all valuations
of specialised buildings is that they should be valued on the assumption that the existing
use of the building would continue perpetually. Based on this assumption, improvement
on agricultural land can result in specialised property. As such, the value is determined
on an accounts or profit method (French, 2004:540)
The market for agricultural land differs from most other markets in that the supply is
virtually fixed. Under such circumstances, it is often said that the price would be
determined by demand alone. However, this is not a very accurate way of articulating it.
The precise explanation for the situation would be that the price of the stock (the stock
being unchangeable) would have to adjust itself to such a level that those, who would
inevitably have to keep this stock, would, in fact, have to be comfortable to keep it
(Clark & Litt, 1973:1). Clark and Litt (1973:1) also state that land have value because it
can earn rent. The word rent has multiple meanings. In most cases, it represents
payment for the use of buildings, roads, hedges, fences, drainage and other fixed
improvements, as well as for the land itself. Rent is also the amount by which actually
received proceeds exceed the minimum amount that would have been necessary to
evoke the supply of the production factors required. In the case of agricultural land, the
minimum amount required to evoke its services would be the provision for
maintenance, depreciation and interest on buildings, and other fixed improvements.
3 Research Methodology
Data was gathered by means of assessments of previous valuations as well as physical
valuations done in the field. There are only a few valuers who specialise in the field of
agriculture and even less in the field of broiler farms. Information on international and
local valuers who specialise in broiler units was gathered via the internet, the South
African Institute of Valuers (SAIV) and South African financial institutions like
commercial banks. Interviews with the different valuers were held to obtain the
necessary information and valuations of broiler units.
Three major approaches were identified for the valuation of broiler farms, namely the
comparable, cost and capitalisation methods. These approaches are well known to the
South African valuation industry. In general, a quantitative approach was followed with
the accumulation, analysis and interpretation of the result.
Normally, valuers do not apply more than one valuation method if the instructor does
not request it in South Africa. Quite a number of valuations investigated only had one
method applied. To do the necessary comparison, application of more than one
valuation method was required. The researcher was responsible for the additional
valuations. Where only one valuation method was used, it was enhanced with further
valuation applications. Valuations done only on the basis of the cost approach were
enhanced by further economical data from the broiler producer to establish a value on
the basis of the income-capitalised method.
The geographical area was limited to the Mpumalanga and North West Provinces in
South Africa. The size of the broiler houses was at least 1 000 m². Broiler units with a
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J C N Joubert and C E Cloete, pp 944-965
minimum of four houses were taken into account. A sample of 15 out of the 196
contract broiler farm valuations was selected.
Other activities influencing an agricultural property, like other improvements and other
agricultural and business activities, were eliminated from the study. Only the necessary
infrastructure for the production of broiler units was taken into account.
All the data received was converted to square meter (m²). Raw data was organised and
classified; statistical analysis was performed by the application of the PH Stats package
in a Microsoft Excel Worksheet (Levine et al., 2005:46).
Figures were tested for normality; differences between the overall means were
determined by the analysis of variance, using the ANalysis Of VAriance (ANOVA) test
(Leedy & Ormrod, 2001); the correlation coefficient between the two different methods
and the dependable variable were determined; and regression analysis was fitted.
A multiple approach was necessary to achieve the research goals. Valuers registered as
professional or associated valuers with the SAIV, and the Board of Valuers and
Agricultural Advisors did assessed valuations.
All the information was obtained by means of interviews and inspections over the
period 2005-2007. Technical aspects taken into account were:
quantity of broiler houses;
size of individual broiler houses;
age of broiler houses;
heating system;
feeding system;
ventilation system;
watering system;
lighting system;
standby generator;
electricity back-up;
waste management; and
bird health.
4 Findings and Discussion
The study evaluated the comparable sales of two properties; determined a capitalisation
rate; tested the data for normality; fitted a multiple regression on the income-capitalised
method’s data; and investigated a correlation between the income-capitalised method
and the cost approach.
Very limited data on comparable sales was available. Table 1 provides information
regarding sales that meet the requirements of an open market transaction.
Table 1 Specifications on comparable sales
Property 1 Property 2
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RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
J C N Joubert and C E Cloete, pp 944-965
Farm Name Modderfontein Vaalrivierdrift
Registration Div. IP HS
Farm Number 188 2
Portion 1 (remaining) 6
Province North West Mpumalanga
Extent 338.338 ha 131.624 ha
Local Authority Ventersdorp Local Municipality Lekwa Local Municipality
Title Deed Nr T835/1995 T59388/2003
Owner 1 Slabbert JF Frikkie Lyons Familie
ID No 480219 5015 051 Trust
Owner 2 Slabbert AE
ID No 540111 8006 084
Selling Price R9 328 000 R4 800 000
Selling Date 22 Oct 2007 6 Nov 2006
Table 2 Technical aspects on a broiler unit for the calculation of value via the income-capitalised method
Property 1 Property 2
Contract party Astral Foods Supreme Poultry
Quantity of houses 4 4
Surface (m²) 1 728 1 078
Total surface (m²) 6 912 4 312
Cost of DoC (Rand) 2.50 2.50
Chicks per house 30 000 21 600
Total chicks per cycle 120 000 86 400
Cycles per year 7.3 7.2
Mortality (percentage) 7.5 6.5
Total chicks delivered per cycle 111 000 80 784
Average rounded weight (kg) 1.75 1.8
Total average weight delivered (kg) 194 250 145 411
Average selling price (Rand) 7.60 7.60
FCR 1.7 1.69
Feed consume per bird (kg) 2.975 3.042
Average feed price (Rand) 2 500 2 500
Management fees (Rand) 120 000 120 000
Value of loose equipment (Rand) 1 516 032 1 261 000
Provision for capital replacement (Rand) 151 603 126 100
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Property 1 was valued by a registered valuer from Absa Bank, using the cost-approach
method. The property valued at R7.65 million. A professional associated valuer valued
Property 2, also using the cost-approach method. The property was valued at R3.7
million.
The valuations were divided into the following components:
Table 3 Valuation results of properties as units
Property 1 Property 2
Value Percentage Value Percentage
Land R1 353 617 17.69% R294 936 7.96%
Improvements R666 258 8.71% R373 064 10.07%
Broiler unit R5 630 976 73.61% R3 038 499 81.98%
Value (rounded) R7 650 000 R3 706 499
Table 4 Valuation of broiler units (Depreciated-cost approach)
Sale 1 Sale 2
Depreciated value of loose equipment R1 516 032 R1 261 000
Depreciated value of fix improvement R4 114 944 R1 777 499
Depreciated value (cost approach) R5 630 976 R3 038 499
Depreciated value/m² R 815 R 705
Property 1 was sold for R9.33 million and Property 2 for R4.79 million. If a weighted
average principle is applied to the above valuations, the valuations can be adjusted
accordingly (Table 5).
Table 5 Adjusted valuations of the broiler units
Sale 1 Sale 2
Land value R 1 650 882 R 381 153
Value of improvements R 812 573 R 482 120
Value of broiler unit R 6 867 582 R 3 926 727
Value (rounded) R 9 330 000 R 4 790 000
A capitalisation rate is market-determined by the in-depth analysis of the sales of
similar properties (cf. Cloete 2004:33).
If a market value of R6.87 million is used on the broiler part of the valuation for
Property 1, as calculated in Table 5, with a net margin of R1.17 million per year, as
calculated from specifications illustrated in Table 2, the discount rate is calculated at
17.05% for this comparable sale.
If a market value of R3.25 million is used on the broiler part of the valuation of the
comparable sale (Property 2), as calculated in Table 1, with a net margin of R700 000
per year, as calculated from specifications illustrated in Table 2, the discount rate is
calculated at 17.9% for this comparable sale.
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4.1 Statistical Analysis
4.1.1 Descriptive statistical output
The sample represents 7,65% of the total broiler farm operations in the Mpumalanga
and North West provinces.. Data is converted to Rand/m². Two sets of data are used:
the one set of data represents the value derived from the depreciated-cost approach of
the 15 broiler units, while the other set of data represents the value derived from the
income-capitalised method of the same 15 broiler units. A test for normality was done
and the mean standard deviation and coefficient of variation was calculated. Correlation
was also tested between variables and between the values derived from the different
valuation methods. Multiple regression statistics were applied.
4.1.2 Test for normality
To test for a normal distribution, the researcher needed to construct charts and observe
their appearances. As a general rule in testing for normality, statisticians have found
that, for many population distributions with a small to moderate-sized dataset, a dot
scale and a box-and-whiskers plot should be constructed (Levine et al., 2005:241). The
researcher included a dot scale diagram.
4.1.3 Box and whiskers diagram
Table 6 below illustrates a box and whiskers plot for the value derived from the income-
capitalised method (R/m²).
As illustrated in Table 6, the data is a little bit skewed to the right, indicating a positive
distribution. There is a longer tail to the right of the distribution and a distortion that is
caused by larger or higher values – these values pull the mean upwards so that it is
greater than the median (Levine et al., 2005:120). The researcher is of the opinion that
the data is fairly normally distributed. The reason for the skewness could be good
management, irrespective of the age of a house.
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Variabl
e
66 71 76 81 86 91 96 101 106 111
0 0 0 0 0 0 0 0 0 0
Figure 1 Income-capitalised value (R/m²)
(Box and whiskers plot)
Table 7 illustrates the box and whiskers plot for the depreciated value (R/m²).
768
650 700 750 800 850 900 950 1000
Figure 2 Depreciated value (R/m²) (Box and whiskers plot)
The data is skewed to the left, indicating a negative distribution. The result shows that
the mean is smaller than the median (Levine et al., 2005:120). Negative skewness arises
when the mean is decreased by low values.
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The result could be due to older broiler houses, where moveable assets have already
depreciated in value.
4.1.4 Dot scale diagram
Table 5 Statistical calculated data (Income-capitalised and depreciated-cost approach)
Depreciated-cost
Income-capitalised values values
Mean 817.31 805.47
Median 802.17 815
1st Quartile 702.20 705
3rd Quartile 930.80 887
Standard Deviation 122.92 100.87
Coefficient of variation (CV) 15.04% 12.52%
The mean and median are the balancing points of distribution which, in this case, show
a relatively normal distribution of data.
The dot scale diagram reflects the distribution of the data with the values, mean, median
standard deviations and quartiles.
Values
Mean
0 500 1000 1500 Median
1st Quartile
3rd Quartile
+/- 1 Std. Dev.
+/- 2 Std. Dev.
+/- 3 Std. Dev.
Figure 3 Income-capitalised value (R/m²) (Dot scale plot)
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Values
Mean
0 200 400 600 800 1,000 1,200 Median
1st Quartile
3rd Quartile
+/- 1 Std. Dev.
+/- 2 Std. Dev.
+/- 3 Std. Dev.
Figure 4 Depreciated value – cost approach (R/m²) (Dot scale plot)
The standard deviation is a squared percentage of the values derived at per square
meter. It indicates that the observation of 15 broiler units, from the majority of 196
contract broiler farms in this sample, are clustered within R122.92/m² around the mean
of R817.31/m², using the income-capitalised method (i.e., clustering between X – 1S =
694.39 and X + 1S = 940). In fact, 60% of the data for the income-capitalised method
lies within the interval. For the calculated depreciated values, there is a mean of
R805.47 and a standard deviation of R100.87/m², indicating again that 60% (9 of 15)
observations lies within the interval.
The coefficient of variation (CV) is a relative measure of variation. It is always
expressed as a percentage rather than in terms of units of the particular data. The CV
measures the scatter in the data relative to the mean. In the analysed data, the
observation is made that the values derived from the income-capitalised method
scattered more around the mean (15.04%), than the values derived from the depreciated-
cost approach (12.52%). The reason for the above is that the basis of the calculation for
the cost approach relies on depreciation and a norm for replacement cost, while the
basis of calculation for the values derived from the income-capitalised method arises
from the net margin.
4.2 Multiple Regression Fit on the Income-Capitalised Value
When a valuer determines a value, he/she should consider the most suitable points of
contriving. The value is supposed to be the most probable point of value, therefore
statistics and statistical application play a major role in valuation techniques (Steyn,
2003:57).
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Lizieri and Venmore-Rowland (1991:121) are also of the opinion that a valuation does
not have a definite point, but rather a lot of points contriving to the value. There is no
guarantee that the determined points would form the balance of an interval or that the
distribution is normal.
Many people question the integrity of valuation (Lizieri & Venmore-Rowland,
1991:115). Waller (in Steyn, 2003:59) experiences traditional methods as subjective and
time-consuming. Due to the criticism on valuation, it is necessary to use statistics to
give valuations more credibility (cf. Detwiler & Radigan, quoted in Steyn, 2003:60).
4.2.1 Variables taken into account
The following variables were taken into account for the determination of value/m²:
Yi : Income-capitalised value/m²
X1 : Average slaughter weight (kg)
X2 : Net margin/year/m²
X3 : FCR
X4 : Broilers/m²
X5 : Cycles per year
X6 : Mortality
X7 : Total size of house in m²
X8 : Cycle in days
X9 : Discount rate
4.2.2 ANOVA table and adjustment
Table 6 illustrates an ANOVA table of multiple regression.
Table 6 Results of multiple regression on income-capitalised value (R/m²)
Regression Statistics
Multiple R 0.97373
R Square 0.94815
Adjusted R Square 0.71235
Standard Error 59.58254
Observations 15
ANOVA
Df SS MS F Signif F
Regression 9 389496.03 43277.34 13.7143 0.005
Residual 6 21300.48 3550.079
Total 15 410796.51
Standard Upper
Coefficients Error t Stat p-value Lower 95% 95%
Intercept -264.2227 1141.6852 -0.2314 0.8247 -3057.83 2529.38
Average slaughter 1236.3129 475.8197 2.5983 0.0408 72.02 2400.6
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weight (kg)
Net margin/year/m² 7.2711 0.9968 7.2945 0.0003 4.83 9.71
FCR -664.8548 368.9411 -1.8021 0.1216 -1567.62 237.91
Broilers/m² -7.4621 9.5039 -0.7852 0.4622 -30.72 15.79
Cycles per year 10.8874 41.2544 0.2639 0.8007 -90.06 111.83
Mortality 3706.5383 2111.0173 1.7558 0.1296 -1458.94 8872.01
Total size 0.0057 0.0026 2.1648 0.0736 0 0.01
Cycle in days -34.6437 15.2678 -2.2691 0.0637 -72.00 2.72
The model can be fitted as follows:
Yi = β 0 + β1X1i + β2X2i + β3X3i+ β4X4i + β5X5i + β6X6i + β7X7i + β8X8i + εi
Income-capitalised value/m² = -264.2227 + 1236.3129 X1i+ 7.2711X2i -
664.8548X3i - 7.4621X4i + 10.8874X5i +
3706.5383X6i + 0.0057X7i +-34.6437X8i + εi
4.2.3 Coefficient of multiple determination
The R Square measures the portion in variation in Y that is described by the set of
explanatory variables selected.
The coefficient captured is 0.9481. This means that 94.81% of the variation in value per
square meter, determined via the income-capitalised method, can be explained by the
variation of the variable.
Some statisticians suggest that the adjusted R Square should compute to reflect both the
number of explanatory variables in the model and the sample size. This is especially
necessary when comparing two or more regression models that predict the same
dependant variable but have a different number of explanatory variables. The results
define the R Square as 0.7123. Hence, 71.23% of the variation in value per square can
be explained by the multiple regression.
4.2.4 Residual analysis for the multiple regression model
Residual plot 1
The first residual plot examines the pattern of residuals versus the predicted value of Y.
It is clearly evident that the residuals are scattered, except for the residual plot of the
capitalisation rate. This could be due to the discount rate being held consistently at
17.5%.
This plot also provides evidence of a possible quadratic effect in at least one
explanatory variable, a possible violation of the assumption of equal variance and/or a
need to transform the Y variable (see Appendix 4).
Residual plot 2 & 3
These plots involve explanatory variables. Patterns of the plot of the residuals versus
explanatory variables may indicate the existence of a quadratic effect and, therefore,
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indicate the need to add a quadratic explanatory variable to the multiple regression
model. No violation and evidence of homoscedasticity was established.
Residual plot 4
This plot is used to investigate patterns in the residuals in order to validate the
independence assumption when data is collected in time order. Associated with this, are
the Durban Watson statistics and a positive autocorrelation indication among the
residuals. Time series data was not used; therefore, no autocorrelation between the
residuals could be experienced.
4.2.5 Testing for significance of the regression model
The test is required if there is a significant relationship between the dependant variable
and the set of explanatory variables. Because there is more than one explanatory
variable, the null and alternative hypotheses are explained as follows:
H0: β1 = β2 = β3 = βk = 0 (no linear relationship between the dependant variable and
the explanatory variable)
H1: At least one βj ≠ 0 (linear relationship between the dependant variable and
the explanatory variable)
The null hypothesis is tested with the F test. If a 0.05 level of significance is used, the
critical value of the F distribution is 8, and 6 degrees of freedom obtained from any
statistical table (critical value of F) is approximately 4.1. From Table 7 the F statistics
given in the ANOVA table is 13.71. Because 13.71 > 4.1, or because the p-value = 0 <
0.005, the researcher rejected H0 and concluded that at least one of the explanatory
variables is related to the income-capitalised value per square meter.
It would be necessary to test the contribution of each interaction separately in order to
determine which interaction terms should be included in the model.
4.2.6 Inferences concerning the population regression coefficient
If a level of significance of 0.05 is selected, the critical value for t, for 6 degrees of
freedom, should be between -2.4469 and +2.4469. From Table 7 the t-value for the
average slaughter weight (kg) is 2.5983 and the net margin/year/m² is greater than
2.4469, therefore, we can reject the null hypothesis and conclude that there is a
significant relationship between average slaughtered weight and the income-capitalised
value. There is also a significant relationship between margins per square meter and the
income-capitalised value per square meter.
If we focus on the p-value of both the variables above, the conclusion is confirmed.
4.3 Correlation Between Income-Capitalised Values And Depreciated-Cost
Approach
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Table 7 illustrates the correlation between the income-capitalised value and the value
derived from the depreciated-cost approach. The correlation for the 15 observations is
97.33%.
Table 7 Correlation between the income-capitalised value (R/m²) and the depreciated value–cost
approach (R/m²)
Income capitalisation Depreciated value
(R/m²) (R/m²)
Income-capitalised value per square
metre 1
Depreciated value per square meter 0.973285062 1
Good correlation existed between the cost and income-capitalised method. On the other
hand, differences were detected between the two methods applied in some houses as
illustrated in Figure 5.
Value per m²
1,200
1,000
800
600
400
200
0
Val 1 Val 2 Val 3 Val 4 Val 5 Val 6 Val 7 Val 8 Val 9 Val 10 Val 11 Val 12 Val 13 Val 14 Val 15
Depreciated Cost Value Income Capitilsed Value
Figure 5 Comparison between the values of the broiler houses under research
Figure 5 illustrates the differences in some of the valuations and the importance for a
multiple approach when valuing a broiler unit.
5. Conclusion and Recommendations
Differences were detected between the two methods applied in some cases. On the other
hand, a strong correlation existed between the cost and income-capitalised method in
most cases.
Different emphases were detected between the different financial institutions and
valuers in the application of valuation methodologies.
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When the income-capitalised method is used, knowledge about the technical aspects
like mortality, PEF, FCR, price of DoC, price of feed, price of the live mass received
and other cost and income components are crucial details in the valuation of a broiler
unit.
When valuers decide to use the cost approach, he/she should be fully aware of the cost
concluded in such a valuation and should see every house as part of the total valuation.
To determine the cost of erecting a broiler farm, the valuer needs knowledge on the
before-and-after method, the land/surface preparation, the steel structure, bricks and
mortar, heating, the waste system, watering and feeding systems, electricity and control
systems, support systems when shortage of water is experienced, backup systems with
power failures, etc.
Alternative methods, like multiple regression analysis, can be used and seen as add-ons
if the valuer has enough data.
The differences in the coefficient of variance between the two sets of data used,
indicates that the cost approach have a smaller variation around the mean. The income
indicates a more realistic approach, because the basis is the net margin and not a norm
for replacement and depreciation.
Given the importance of the broiler industry, it is important for South Africa to do the
necessary research on the first and secondary effect of factors influencing the value of
the industry. Possible topics for further research include:
What is the influence of government policies on the South African poultry
industry?
How competitive is the South African poultry with other countries?
Why is there a difference between the income-capitalised approach and the
depreciated-cost approach?
How applicable is the above methodology towards other specialised agricultural
units like laying houses, DoC production, piggeries, wineries, etc.?
6. Acknowledgements
Dr Jan Herholdt for the time, his expert guidance, patience, constructive ideas and
encouragement.
The Commercial Valuation Department of Absa, especially Jaco Goosen, Marius
Nel, Piet Smith and Gert Botha.
The Agricultural Division of Standard Bank and their Agricultural Team, especially
Gerrit Maritz and Bertie Smith.
Christo Claasens from Landbank Lichtenburg for providing information regarding
the financing of broiler units by Landbank.
Johann Reyneke from Tetragon Valuers (Pty) Ltd for providing valuable
information.
Mark A Lewis, appraiser from Dickerson-Seely & Associates Inc, Lufkin, Texas,
for supplying valuations used in America.
Broiler farmers in South Africa who participated in the research.
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Mr Z de Beer, editor of the South African Poultry Bulletin, for information
provided.
References
Behrmann, H.I. (ed.) 1995. Farm Land Valuation. Department of Agricultural
Economics, University of Natal, Pietermaritzburg.
Clark, C. and Litt, D. 1973. The value of agricultural land. Canada: Pergamon Press.
Cloete, C.E. (ed.) 2004. Property valuation for expropriation and special purposes. SA
Property Education Trust, Sandton, South Africa.
Coetzee, L. & Steyn, M. 2004. An approach to calculate the productive value of
farmland. The South African Valuer. No 80, December 2004.
Cooley, M.A.L 1998. Complete Appraisal – Self contained report: Wigley Broiler farm
F.M. Highway 698 Central Height Community Nacogdoches County, Texas 75669.
French, N. 2004. Practice Briefing: The valuation of specialised property: A review of
valuation methods. Journal of Property Investment and Finance, 22(6):533.
Green, J.E.P. 1995. Chapter 4, Valuation of farm buildings (pp32 -34). in Farm Land
Valuation. Edited by Behrmann. Published by the Department of Agricultural
Economics, University of Natal, Pietermaritzburg.
Griffiths, D. 2005. Workschool session on farm valuation. Paper. Practical workschool:
The South African Institute of Valuers. 2-6 May 2005.
Herholdt, J.A. 2004. Assessment of small-scale sugar farms in Mpumalanga.
Unpublished treatise in Master of Science (Real estate), University of Pretoria.
Leedy, P.D. & Ormrod, J.E. 2001 Practical research: planning and design. (7th ed.)
Upper Saddle River, N.J., Merrill Prentice Hall.
Levine, D.M., Stephan, D., Krehbiel, T.C. & Berenson, M.L. 2005. Statistics for
Managers. (4th ed.) Upper Saddle River, New Jersey: Pearson Education, Inc.
Lizieri, C. & Venmore-Rowland, P. 1991. Valuation accuracy: a contribute debate.
Journal of Property Research, 8:115-122.
Murray, W.G. 1973. Farm appraisal and valuation. (5th ed.) lowa State publishers.
National Agricultural Marketing Council (NAMC) and Commark Trust. 2007.
Subsector Study: Chicken Meat. Report No 2007-03.
NPEC. 2004. Valutaion for Expropriation and Special Purposes. Sandton: National
Property Education Committee.
Ratcliff, J. 2001. Current issues and likely challenges beyond 2005. Proceedings of the
Second International Broiler Nutritionist’s Conference, pp7-16. Rotoru, New
Zealand.
Rothwell, G. 2001. World broiler industry overview. Proceedings of the Second
International Broiler Nutritionist’s Conference, pp1-6. Rotoru, New Zealand.
SAPA, 2006. Poultry industry profile. South African Poultry Association Unpublished
report, March 2006.
SAPA, 2007. Poultry industry profile. South African Poultry Association Unpublished
report, June 2007.
Steyn, M.M. 2003. Mass valuation of agricultural land for the introduction of Land
Tax. Treatise submitted in partial fulfilment of the requirements for the degree MSc
(Real Estate), Department of Construction Economics, University of Pretoria.
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Suter, R.C. 1981. The appraisal of farm real estate. Department of Agricultural
Economics Purdue University. Illinois, Danville, The Interstate Printers &
Publishers, Inc.
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
R J Coertze, pp 966-984
The condition of the vertical transportation infrastructure in
Gauteng, South Africa
Coertze, R. J.1
1
Department of Construction Economics
University of Pretoria,
South Africa
Abstract:
Vertical transport systems, lifts, escalators and hoists are used by thousands every day
to transport passengers and goods. Without this infrastructure the efficiency of the
economy will seriously detrimentally be affected. Great mention is made in the media of
expected shortages of water, electricity, infrastructure etc., and rightfully so. However a
vital important link in the economic chain, that is the vertical transportation
infrastructure, is being ignored or seriously being underestimated.
Most of the city centres in South Africa were developed in the sixties, followed by a
second wave in the early nineties. The buildings of the sixties were virtually all medium
and high rise buildings, that is, six floors and higher. These vertical transportation
systems are all thus, thirty years and beyond. Serious consideration should be given to
modernise or to replace these systems if this has not been done to date. Equipment from
the second wave is also moving into the fifteen years and beyond category and should
also be considered for improvements.
The study evaluates the compilation of the vertical transportation infrastructure in
Gauteng based on a sample of lifts, escalators and hoists in use and the expected
condition of this equipment. A model will be used to determine the “customer
satisfaction” as depicted by the users of the systems. A series of one-to-one interviews
will be conducted with the main players in the industry, namely, Government, Building
Owners/ Building Management, Consultants and Service Providers. Installations will be
visited to obtain the views and perceptions of the general public.
Key words
Sustainable service; Safety; Technologically sound equipment; Skills and Knowledge
1. Introduction
Vertical transport systems are defined as lifts, escalators, passenger conveyors, hoists,
paraplegic lifts and other passenger and goods lifting equipment being applied to
convey passengers and/or goods in a vertical, inclined or, for horizontal passenger
conveyor, in a horizontal direction. These systems are used daily to convey millions of
passengers and many tons of goods. Without this infrastructure the efficiency of the
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economy will seriously be affected. Great mention is made in the media of expected
shortages of water, electricity, infrastructure etc., and rightfully so. However, a vital
important link in the economic chain, the vertical transportation infrastructure, is often
ignored or seriously underestimated.
The productivity of building users and the general satisfaction of such users, is it a
specific building’s tenants or the general public using such lifting equipment, is also
seriously affected by the level of service provided by the lifting equipment. It is
impossible to expect tenants of a multi storey building to use only stairways for
everyday use. It is really only because of lifts that multi storey buildings are feasible.
Two of the four building owners/managers interviewed stated that the lift service in any
given medium and high rise building is one of the most important factors influencing
customer satisfaction. People will still accept poor service from other infra structure
items but when the vertical transportation system is poor, one will experience serious
dissatisfaction of tenants. Modern media has also created a well misleading myth
regarding the danger of using vertical transportation thus creating a very serious
sensitivity to the safety standards expected from this equipment. It is may be one of the
worst experiences one can have to get stuck in a high rise building’s lifts for several
hours without really knowing what will happen next, yet it is also impossible for a lift
car to fall down a lift shaft. Even the smallest lift will use at least three ropes where
every rope is capable to handle the full load of the system. Safety systems are in place to
prevent over speeding conditions. Taken everything into consideration, vertical
transportation is one of the safest transporting means available.
Most of the city centres in South Africa were developed in the sixties, followed by a
second development of alternative city hubs in the early nineties. The buildings of the
sixties were virtually all medium and high rise buildings, that is, six floors and higher.
These vertical transportation systems are all thirty years and beyond. Serious
consideration should be given to modernise or to replace these systems if this has not
been done as yet. Equipment from the second development boom is also moving into
the fifteen years and beyond category and should also be considered for improvements.
All the installations have to be maintained. To do this at an acceptable level, there
should be enough trained people to do the work, but, there should also be the necessary
skills and knowledge to service and maintain the equipment from the different
generations. Some equipment in use today goes back as far as sixty years, with the
appropriate technology of those years. To maintain these installations not only ask for
special skills but also for the necessary spare parts to be available. This may be difficult
to obtain even under normal circumstances. Any emergency may either be a very costly
exercise or a very frustrating experience when spare parts cannot be sourced in an
acceptable time period. Special castings may take anything up to a year to procure. The
process to obtain specific casting moulds, to plan the casting and subsequent
manufacturing of the sheaves, etc. cause very long delays. Without it, the equipment
cannot operate. Waiting for such special parts will see the equipment out of use for
unacceptable long times.
Research Sample size: This research evaluated the opinions and perceptions of the
main role players. A series of one-on-one interviews were conducted with one senior
manager from the department of labour, four managers from building
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owners/management agencies, four consultants and two senior managers from the
service providers. Ten installations were visited at random to obtain the general views
of users of the services.
The Government is responsible to regulate the safe transportation using any vertical
and/or inclined and/or horizontal transportation systems via lifts, escalators, passenger
conveyors and hoists. Passengers and goods are affected. These regulations encompass
the manufacturing, the installation, the maintenance and the upgrading of such
equipment. The regulation is done through the OSH Act and the relevant regulations.
These regulations incorporate the necessary standards, either national standards through
the SABS or applicable international standards, like the ISO standards, EN 81
standards, etc.
Building owners or in most cases, Building Management Agents provide the facilities to
be used. This includes all the transportation equipment as mentioned above. According
to the OHS Act, the owner is the main responsible person to ensure safe transportation
to all. There are approximately twenty eight thousands installations in South Africa of
which ca. 10000 is in Gauteng.
Otis is the largest provider in South Africa as well as in Gauteng, followed by
Schindler, KONE, Mitsubishi Electric, ThyssenKrupp Elevator and Sigma. Several
small independent service providers, mainly in the after-sales market makes up the rest
of industry. As many as ninety four independent service providers have been registered
lately.
Consultants play an extremely important role between the owners and the service
providers. For ease of communication the Lifts/escalators/passenger conveyors/hoists
industry henceforth will be called the Lift Industry. There are two types of consultants
in the Lift Industry. The first category is the traditional Electrical and Mechanical
Engineering Consultants, Quantity Surveyors, Architects etc. These are the usual
professional teams consisting of suitably qualified staff. They are responsible, inter alia
to specify the required equipment, to adjudicate on as objective as possible criteria, the
contract awards, to oversee the projects, to accept the final product and to see that their
clients in the end receive what was paid for. These consultants are becoming more and
more involved in the after sales market of equipment maintenance.
The second category is the Lift Consultants. They are in most instances well qualified
lift technicians and engineers with vast experiences in the specific lift engineering
fields. They have also become involved in specifying the new/replacement/upgrading
equipment albeit often on behalf of the professional teams, and are playing an extremely
important role in the after sales market through professional inspections and audits. The
OHS Act under section 43 Act 85 of 1993: Lifts Escalators and Passenger Conveyor
Regulation 2.2 states that no person, that is, the building owner, shall put into use or
require or permit the use of a lift, escalator or passenger conveyor unless he is in
possession of a comprehensive report issued in terms of regulation 5(1): Provided that
such report is completed by a registered person and is not older than 36 months. In the
Lift Industry theses are known as Annex B inspections and are mainly done by the Lift
Consultants.
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The third category is the Service Providers: New Installation and Modernisation
(upgrades) equipment installations and, Maintenance and Repair services are provided
by the Lift Service Providers. Products support and technical services are offered.
As explained above representatives of each role player participated in this research. A
set of topics was discussed with individuals during one-on-one interviews.
1.1. Government:
• Define the role of the Government
• Definition of a competent person
• View of the status of the industry at present
• How is regulation ensured
• What should be done to ensure sustainability?
1.2. Owner/Users
• Spectrum of port folio
• Present status of equipment
• Main sustainability threats identified
• Strategic plans to ensure sustainability.
• Application of GIAMA and PPP principles. (Government Immovable Asset
Management Act of 2006 and Public Private Programs)
• Perception of service providers.
1.3. Consultants
• Present status
• Reasons for compliance/non-compliance
• GIAMA and PPP principles (
• Adequacy of existing standards
• Market expectations: Technical and skills and knowledge
• Actions required to overcome Industry problems
• Abilities of consultants to render required services
• Risk assessments
• Compliance to OSH Act and related regulations
• Obtain value for money for customers.
• Assistance with strategic planning
• Maintenance, repair and modernisation plans
• Capital expenditure planning
• Replacement/disposal plans
• Economic viabilities
1.4. Suppliers/Service Providers
• Current status of equipment/port folio
Spectrum of units in use.
Strategic support
• Strategies
• Products
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• Technologies
• Safety
• Environment
• Quality
• Service
• Knowledge and skills
• Training
• Covering of spectrum
• Market trends
• Maintenance/Construction/Replacements
• New equipment to enter markets
• Strategic planning support to Owners/Building Managers
• Maintenance, repair upgrading plans
• Costs to action plans
• Replacement plans/Disposal plans
1.5 The General Public
• How often uses the specific installations
• Satisfied with the service/ Any worrying issues
• What infra structure item contributes most to satisfaction/dissatisfaction.
2. Findings and Discussions
2.1. Sustainable Service
Every day millions of people use the lifts industry equipment in numerous installations
for transportation into and out of buildings as well as to move goods around. Since
mankind has occupied buildings with more than one floor, movement to the upper levels
has been under consideration. Without these transportation facilities, it will not be
possible to use multi-storey buildings or the movement in and out of the buildings will
seriously affect productivity. Moving in a multi floor building using only stairways are
just not feasible. But we have become so complacent regarding the lift industry that we
do take lifts, escalators, and other people and goods movers, as a given that should just
be available every time we request such a service.
The transportation service in a building will largely depend on the tenant profile.
Buildings might be similar in areas and the number of floors, the use of the building, the
occupation of the building and placing of the building affect the vertical transportation
performance. Residential buildings are very busy in the morning when most of the
residents leave for work. The services again become quite busy in the afternoon when
people return from work. The morning traffic is usually heavier than the afternoon
traffic as more people starts at approximately the same time but do not always follows
the same routine coming back home.
Similarly, commercial buildings will be very busy in the mornings. This traffic
increases as official starting time is approached. This gives rise to the so-called, “five
minute up-peak period” where traffic studies have shown that up to 90% of building
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tenants arrive during the last 5 minutes before stating time. Again traffic can be
expected to be heavier during lunch time and again at closing time. Further to this, the
traffic is influenced by the requested inter-floor traffic necessary for sound business
operations. A building occupied by only one company will apply different patterns than
a multi-company building. Buildings servicing the general public again will have quite
different patterns than private companies. The probable stops expected in a given
building depend thus largely, as stated above, on the tenant profile. This also has a
significant impact on the service rendered.
Criteria have been developed to evaluate the performance of these systems. The mean
time between uncontrolled stops, the average waiting time at a specific landing, the
number of users queuing in a lobby, etc. are some of the performance criteria in use.
However, due to the diversity of applications no hard-and-fast rule can be applied that
will be applicable to every building. Each vertical system should be evaluated according
to its own generated demand. The acceptable criteria to measure performance are 4
stops per year. This can also be expressed as maintaining a mean time between call-
backs MTBC of approximately 90 day. At present some of the main companies
maintain a MTBC of approximately 70 days but the deviation from this is quite wide.
Every lift consultant quoted a large number of installations with twenty to thirty stops
per month is found fairly often. What is more worrying is that service providers take
weeks and even months to sort out this very unacceptable situation. It also often
escalates to the point where problems are not eliminated but just temporarily solved
only to re-occur again over and over. Due to small companies not keeping this type of
data, it is difficult and even impossible to evaluate the status of independent companies’
level of service. Consultants are building up data bases and are striving to have
necessary information available in the near future to adequately manage installations.
Penalty contracts based on the performance of an installation are being used more and
more. Service providers agree to ensure certain performance standards. Should the
standards not be met, a penalty is applied. Consultants reported installations where the
penalties exceed the contract price, which resulted in the service providers paying back
money to the owners. However, what is worrying is that every consultant stated that the
performance driven contract seems not to be an incentive to the service providers to
perform well but that service providers rather accept the penalties and do not correct bad
situations with the urgency one would expect. Millions of Rand are being paid by the
service providers due to poor performance. This is an important measurement
consultants are doing on behalf of their clients.
Service complaints are generated by a number of events. Complaints can either be based
on hard facts, obtained from a well run Management Information System (MIS), or can
be generated by the perceptions of users. A typical complaint like:” I had to wait twenty
minutes for the lift”, usually stems from. a unmeasured gut feel, and will also in most
instances be quite wrong. It takes a good athlete approximately two minutes to run 800
meters. When watching such an athlete, quite a lot of thoughts, emotions and excitement
can take place. When waiting for a lift, one tends to do nothing else but build up stress
and frustration. In most instances, well run installations are managed through a well run
MIS. A typical example is O R Tambo airport’s system where any lift, escalator and/or
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passenger conveyor is monitored 24 hours a day, 7 days a week and 52 weeks a year.
This is then the reason why these installations maintain a 90% plus availability.
Many passengers have a definite fear of lifts. This fear can be due to claustrophobia or
can be due to misinformation. There is this popular myth that lifts fall down shafts.
Technically a lift will rather fall upwards than downwards, as the counterweight is
heavier than the lift car. The counterweight is usually balanced to the car weight plus
50% of the installation’s capacity. The anxieties can however turn into complete panic
when a one is caught in an occupied stop.
Lift service providers can do a lot towards eliminating or just reducing this anxiety. A
well maintained lift, quite operations and a smooth ride goes a long way to alleviate
these fears. Indication in the lift car also plays a major role to increase these fears. Some
car position indicators immediately on departure, advances to the number of the floor
where the first exit will be done. Should someone request a long run it can be quite
possible that such a passenger may think that the lift fell down the shaft as the indicator
gave the impression that a long distance was travelled in a very short time. Rattles,
bangs and squeaks do not contribute to a comfortable ride. Unfortunately these types of
problems are experienced on many installations. A “fix it first time” attitude is
necessary to reduce and to eliminate these conditions. A senior manager of a service
provider acknowledged that this attitude is very seriously lacking in the lift industry at
present resulting in more people needed to maintain the installations.
Modern equipment are no longer manufactured from heavy pieces of steel, so over
designed that, jokingly, it has been said that the lift and escalator steel structures “kept
the buildings upright.” The rigidity of an escalator depends to a large degree on the
dynamic functioning of such an installation. When the escalator works the moving stairs
provides this rigidity. When the escalator is off, and is used as a very uncomfortable
stairway, a swaying motion may be experienced, especially on a standalone installation.
This is not dangerous just uncomfortable. Long elevators with rises over 6 meters and
measuring 20 meters and longer are found on many installations in Gauteng.
What elements will then determine whether the service will be sustainable or not?
Taking into account what needs to be in place and what should be kept in place it is
concluded that the sustainability of the lift service is determined by three elements,
namely
• Ensuring safe operations at all time
• Providing sound technical systems , and
• Adequate skills and knowledge are available to install, maintain, repair and
upgraded systems as well as to manage the processes necessary to provide the service.
2.2. Elements affecting the sustainability
The criteria that will ensure the continued sustainability of the service are the following:
2.2.1 The safety of the installations will be guaranteed at all times.
All the equipment in use is a mixture of mechanical and electrical parts. As such it will
never be able to eliminate all risks. Risks should be reduced to acceptable levels and
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adequate measuring, testing and auditing should ensure that the laid down standards are
met at all times. No deviation can be allowed. Factors to be considered:
• Severity of harm
• Levels of probability
• Frequency and exposure, and
Possible elimination, affecting, avoiding and/or limiting, will form the basis of the risk
assessment. Such risk assessments will also be carried out at such time periods as to be
able to capture any possibility and to set plans in motion to take care of the risk in an
acceptable way. Risk assessments are conducted by various consultants. It is of utmost
importance that risk assessments be carried out by competent people. A good basis to
use comes from GIAMA. (Government Immovable Asset Management Act of 2006.)
At present there is a very wide spectrum of equipment in use in Gauteng. OTIS is
maintaining equipment dating back nearly sixty years but also the very latest and newest
technology. Other service providers also have equipment ranging from very old to very
modern. All aspects of variations are found in machines, controllers, drives and in fact,
in every part of the installation, whatever the installation may be. This causes a difficult
problem to the service provider. Because the technologies can differ so much, it is
virtually impossible for one person to have expert knowledge and skill pertaining to the
complete spectrum. With every qualified person leaving the industry, with black
empowerment causing qualified staff to accept retrenchment packages, skills and
knowledge on older equipment diminishes. Consultants unanimously agree that the lack
of skills and knowledge are seriously threatening the sustainability of vertical
transportation. Due to work pressure, installations and services are done without
workmanship pride. It is a given fact in industry that when an installation is well
installed, after sales problems are few, but a poorly installed installation tends to never
come right and numerous problems will be experienced throughout the life cycle of
such an installation. A good example of excellently installed installations can again be
found at O R Tambo airport. The high performances of these installations after hand
over support this view.
It was mentioned before that a culture of “fix it first time” is necessary. Consultants and
Service providers acknowledged that due to time constrains or even, lack of knowledge
and skills, installations will often be reset to bring it back in operation again. This does
not solve any problem, rather deteriorates it. Lift technicians will time after time reset
the installation to the point where clients get so frustrated that they seek assistance from
management. Only then will the real problem be addressed. Route cause analysis is
virtually never applied and very little knowledge and skill on how to apply such a
technique exists. This is an area begging to be applied. With problems being solved first
time technical competent people will be available to do proper maintenance. Although
the lift industry claims that preventative maintenance programs are being followed, very
little evidence of such programs could be found.
The financial pressure on any multi-national company will always exist. The South
African market, and this includes the Africa south of the Sahara market, is substantially
smaller than the Americas, Europe or the Far-East markets and as such do not play as
important role to the holding companies. This contributes to enhance the pressure to
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perform financially outstandingly well, something South African companies have
always been able to do. The pressure can be seen in considering the number of
installations a service person is expected to service these days. Twenty years ago, a
technician would have covered forty to sixty units; today a technician services between
eighty and a hundred units, depending on the type and the location of such units.
Twenty years ago the technician had a so-called assistant who did all the cleaning,
lubricating and general housekeeping tasks. Today assistants will only be made
available for special tasks like cleaning in a very dirty environment. The assistance is
now the exception and not the rule. Service providers do argue that modern installations
require far less attention hence the increase in duties being possible, but all the lift
consultants interviewed, unanimously (again) expressed the issue of overloading the
technician as one of the most important contributors to the deterioration of services
provided. Lift technicians just do not have sufficient time, and in many instances the
necessary knowledge and skills to carry out the required maintenance duties. Given that
these technicians are also responsible for call outs on their routes, that is when a service
provider is requested to intervene on a non-planned basis, quality work tends to be
neglected for quantity work. But, “fix it first time” will go a long way to provide
sufficient people and time availability. This will not be able overnight. Only with sound
training and coaching can such a culture be established.
Safety regulations requirements are well managed. Skilled people nominated from
industry guards the regulations necessary to ensure safe conditions at all times. The
South African Safety standards, SANS standards are based on the EN81 standards and
are continuously scrutinised, evaluated and were necessary updated by the LIASA
committee under the guidance of the Department of Labour. To enforce these
regulations, a self regulatory systems was put in pace. Inspectors from the department of
Labour are trained to inspect conformance to the OSH Act.
There are approximately ten thousand installations running in Gauteng. Forty to fifty
percent of these installations have been installed twenty or even more years ago. These
installations do not comply with modern safety standards. But with the correct
maintenance practises, the necessary repair work and timely replacement/
modernisations acceptable safety levels will be maintained. It will however be
necessary to maintain the necessary skills and knowledge as well to sustain the required
safety levels.
The OSH Act expects inspections/audits be carried out at prescribed time periods. These
inspections may only be done by registered inspectors. To date 160 inspectors have
been registered with ECSA. However quite a substantial number are not actively
involved with audits and inspections. Internal auditing should take care of expected
short comings. Owners are relying mostly on the formal inspections, the so called
Annex B inspections required by law, to ensure conformance to requirements. Service
providers should through internal auditing prepare installations to pass every inspection
first time. This is not happening due to the lack of formal internal auditing programs
from the service providers. Consultants are reporting long item lists resulting from
external inspections; another source enhancing the frustration of clients.
Design philosophies have also changed over time. During the fifties and early sixties,
the “three bearing approach” was substantially used for drive systems in the Lift
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Industry. Intensive tests by some service providers been proven these systems to be
dangerous and in need of urgent replacements. Unfortunately, and in these days of very
tight financial management to a degree understandable, owners are reluctant to spend
the necessary funds to conform to the requirements of the OHS Act. Whether a case can
be made of latent defects, improved engineering philosophies or just far superior
equipment being available now, the fact remains that this equipment is unsafe and as
such should be replaced. However, several older installations using the three bearing
designs are still in operation in Gauteng and very little is being done by owners to
eliminate this risk.
The same argument can be made regarding stopping accuracy. Most accidents recorded
come from people tripping going into or coming out of lifts. Quoting from SANS
50081-80:2005,
Regulation 5.2.2 Leveling and stopping accuracy
Of particular importance the stopping and leveling accuracy shall comply with EN 81-
70:2003, 5.3.3 which means:
the stopping accuracy of the lift shall be 10 mm;
the leveling accuracy of 20 mm shall be maintained.
Modern controlling equipment can with ease maintain stopping accuracies of 3 – 5 mm.
10mm can already presents a tripping hazard. Poor maintenance contributes in an even
larger stopping inaccuracy. It is noticeable how many lifts stops out of level. Passengers
spoken to mention this as the biggest problem they experience. This is and remains a
hazard that can be removed by proper upgrading. Standards and expectations changes
over time and installations need to be kept up to date to ensure the sustainability of
required services at the level of safety acceptable to users.
There are several examples where the original application of buildings changed over
years. The city center of Johannesburg is a good example where previous office
buildings were converted to residential buildings. With this the demography of the
building often changes requesting different services. With elderly people and disabled
people moving into residential buildings, the level of accuracy mentioned above needs
to be improved. Equipment like hand rails to assist these people is essential. Braille
buttons and sound indications are needed for the blind. The list continues. Suffice to say
that the lift and escalators services are often neglected when changes are made with
detrimental effect to the users afterwards. Old installations and changed installations in
Gauteng offer a massive modernization/replacement market.
The client has a contract with the service provider to maintain the equipment to the
Original Product Provider’s (OPP) specification. Legal requirements have prescribed
that services will be carried out as per a specified program, either monthly or as per the
OPP’s specification. Down time is becoming an even more serious happening of lately.
Even when installations are modified, often at a considerable cost, it is not a guarantee
that down time will be reduced.
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2.2.2 The installations will be available and reliable
For the installations to be performing at an acceptable level, it is necessary to ensure a
high technical integrity standard. It is an acceptable industry norm that an installation
can be expected to have one non-planned stop per three months or then four stop per
year. The importance to measure MTBC has been discussed already. What is important
is to take action to rectify unacceptable situations. A consultant reported that based on
information obtained before and after substantial modernizations were carried out, the
performance of the equipment deteriorated by as much as 50% after the modernizations.
The matter was discussed even at the highest level with the service providers but very
little if any improvements were achieved. Improvements were obtained only after an
unacceptable long period. On certain installations data still indicates that the necessary
improvements have not been met. This culminated in total frustration with the
consultant and the owners. And damage beyond repair results.
The main service providers all are multi-national companies. They all have international
back up. Research and development are done by the holding companies. New
equipment is build and tested at world renowned institutions. The safe workings of
every component are tested under the stringiest conditions. Each such Research and
Develop concern has a well documented and applied “Product Development Program”
and these programs are adhered to according to strict laid down company policies and
procedures. When a product is released for public use, one can rest assured that all
aspects like safety, reliability, conforming to laid down standards and regulations and
economical viabilities have been tested and improved to an exceptional high level of
competence. The main RSA service providers do not do their own research and/or
development locally but all make use of the international products. As such South
Africa today boasts some of the most sophisticated installations in the world.
Destination control is but one very modern concept that has been in use here locally for
several years. VVVF machines and drives are commonly used by local providers. The
so-called “Motor-room-less installation” introduced by KONE into South Africa, is
today used in more than 80% of new installations.
Modernizations or then, Refurbishments, and Replacements, as some users prefer to
refer to installations been updated, are also done using well designed and developed
products. The different suppliers also offer products capable of handling foreign
equipment, but then complete replacements or comprehensive upgrades need to be
done. It is not a good practice to mix and match. This practice unfortunately often took
place during the eighties due to the constrains to obtain equipment then. Several
installations still today suffer due to ill planned modernizations during that period.
There are also a new trend developing in South Africa today namely to allow unknown
entities to enter the market. Strange and totally unknown equipment appears especially
on small installations. However, even some large installations, like the Charlotte
Maxene Johannesburg Academic Hospital are now upgraded using some of this less
known equipment. This can turn out to be an extremely myopic strategy. Not only can
the design and development programs of the original equipment be questioned, but the
sustainable support is also in jeopardy. Long term sustainability is forfeited for short
term financial success. This is a serious concern to all the consultants and the main
service providers. It is so that only a few companies world wide have specialized on
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providing equipment for the lift industry. Off lately, several less known names have
started to enter this specialized market. These companies are unknown and the
sustainability of their continuous support is seriously questioned.
Due to the newest equipment being brought to the local markets, the service providers
mainly concentrate on training their staff to handle such. However, the older equipment
is still with us and still needs to be maintained.
When evaluating best practices in Gauteng, it is blatantly clear that a good
“Management Information System” and well prioritized defined, budgeted and executed
upgrading/replacement programs are of utmost importance to ensure sustainability. The
O R Thambo airport is an outstanding example. Telcom Towers is another example.
Larger corporations, government agencies, mainly through GIAMA, to a large degree
have these programs in place. There are a vast number of building owners, body
corporate, smaller agencies and the like, who have not even considered such a program.
This poses serious threat to the sustainability of the lift services. It is becoming more
and more important to have proper information to take informed decisions. A MIS
addressing the performance of installations is becoming a MUST and not a nice-to-have
any longer. Institutions will have to include this as part of their management costs. The
equipment has a limited life span. Knowledge and skill to maintain older equipment are
diminishing and safety standards and regulations are increased; the view that equipment
will just continue to run for ever is something of the past and needs to be addressed.
Service providers and Consultants are offering such a service to clients. To ensure
sustainability of the service, management information cannot be ignored any more.
The availability and performances of installations are more and more managed through
performance based contracts. Data is collected on the performance of the installations.
Modern tracking devices are installed to provide the earliest possible warning of
anything that may cause or has caused a stoppage. This data is available to service
providers to enhance their service performance. Consultants are unanimously in
expressing their total disbelieves as to how service providers negate this system.
Penalties of 10% and more of total contract value are not uncommon. It seems that
service providers do not care that they are penalized for non-performance. Penalties are
not only charged for non-performing on new contract projects but even more so on
after-sales maintenance. The problem starts with poorly installed installations and
continues with the after-sales service. Problems are not sorted out. Service providers
seem to run from one problem to another without finally solving anything. Consultants
are expressing their concern that management does not know how to solve these
problems. Although there are world class erectors and field engineering technicians in
industry, they are too few to address the magnitude of the problems. Should these
experts not be available, the remaining people are just not capable to sort out the
numerous day-to-day problems. This is escalating and poses another serious threat to
the sustainability of future services.
Service providers acknowledge this situation. Support from their multi-national holding
companies are being applied but seems not to be sufficient. More will have to be done.
At present an ever rising animosity amongst service providers and consultants are not
contributing to the improvement of the industry service, not for the project side of the
work neither for after sales
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2.2.3. There shall be sufficient knowledge and skills available to support industry
It was mentioned several times already that the most serious threat to the sustainability
of the lift service comes from inadequately trained staff as well as insufficient number
of people available to do the work. At present only two companies, Otis and Schindler
are conducting formal learner/apprentices training programs. Whilst Otis has chosen to
do the Learner/apprentice training Schindler has opted to follow the apprentice only
route. In 1996 Otis had 145 apprentices in the system and Schindler 85. At present Otis
is training 65 people and Schindler 28. The other companies are either employing non-
lift technicians who they then train in-house to become competent or are employing
people trained by the mentioned companies. Again the argument of to “costly” is used
to explain the serious lack of training of new people. If one look at what other industries
are doing, the lift industry falls short very badly. VWSA has just recently invested R30
million in three manufacturing training centers. Given that the motor industry is much
larger than the lift industry this still does not justify the lack of commitment found
amongst players in this industry. Otis and Schindler are part of the SITA system.
However this is under scrutiny and will most properly be changed in the nearby future.
It is envisaged to change the manner in which training is being conducted. Schindler
management is quite clear in their view that apprentices training should start with
learning the basics through installation activities and only then continue to the more
sophisticated servicing of equipment. They do believe that spending proper time being
trained will bring back skills and knowledge and then especially including fault
recognition and route cause corrections. This is at present a short coming causing work
to be redone several times. Schindler management sees this as a major contributor to the
so-called shortage of technical staff.
The existing definition of a competent person allows the opening to use unqualified
people but with appropriate experience to be applied as so-called “competent persons”.
Consultants pointed out that this unfortunately leads to staff being graded as “competent
persons” by non-accredited evaluators. This poses a serious threat to the safe working
conditions of the installation. Although these people can do the normal lubrication and
cleaning they are not trained to do the required adjustments to, especially, the safety
systems. The OSH Act prescribes that the safety system will be inspected monthly, or as
prescribed by the original equipment supplier. It is here where the shortcoming of
adequate knowledge and skill can cause serious accidents to occur. Service Providers
using this loophole to cut costs are damaging the integrity of the industry beyond the
point of no return. It will take years to overcome the animosity that does exist in
industry.
This industry offers a unique opportunity for artisans’ trainees. The training equals that
of a millwright. Training in the electrical, electronic as well as the mechanical
engineering disciplines forms the basis of the knowledge necessary to become a
competent person. The artisanship is highly sought after in other industries as well.
Several highly skilled lift technicians have left South Africa during the recent past as
part of the brain drain. This is surely a wonderful opportunity for young people who do
not want to be office bound every day. Lift technology boasts some of the most
sophisticated electronics, another challenge for the modern technocrats. Link to this is
also the opportunity to gain world class experience overseas as part of the multi-
nationals. It is difficult to understand that the industry has such a serious problem to sell
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R J Coertze, pp 966-984
the profession to the outside world. The Lift Engineering Association should make this
one of its main tasks if it is serious about the sustainability of the lift industry in South
Africa.
Building owners as well as consultants expressed their concern regarding the shortage
of competent technical staff. It has also been mentioned several times that work is not
completed and problems are not solved. Problems are solved by using a hypothetical
problem statement process. Route cause analysis seldom takes place. Technicians will
guess a solution, set hypotheses, based on what may have worked in the past. This so-
called solution is tried out which may or may not solve the problem. If not, another
hypothesis is selected and the process repeated. This causes tremendous waste of time
and real customer dissatisfaction at the end. It is also much cost inefficiently.
The second area of shortcoming exists on supervisory level. New installations and
modernizations can be define as conventional “Project Management” with knowledge
and skills how to maintain project plans, work to a laid down budget and present the
product to the laid down specification. Service work is conventionally after sales
servicing consisting of client communication and customer satisfaction hence asking for
different disciplines. Consultants stated that supervision in industry is expected to act as
small enterprise managers rather than supporting the services offered to clients. Project
type work requires knowledge and skills of project management but, it also requires the
technical skills to ensure a well installed installation. It serves very little purpose to
employ people without the necessary knowledge and skills to ensure the quality of
required installation to well defined standards. Most companies are now using sub-
contractors to install their equipment. Although the majority of these sub-contractors are
former employees, the recent construction boom saw people being used to install lifts
who never ever before even came close to a lift installation site. Consultants reported
that this let to horrendous mistakes made during installations. Where knowledgeable
people were still managing installations, well installed installations resulted. But
incidences occurred where complete installations had to be taken out and redo. This is
not only due to poor workmanship but also to poor management/supervision. This
problem will only be eliminated through adequate training, coaching and retraining.
There are no shortcuts. Not doing the necessary training will see this situation seriously
escalating in future. The present economic climate does give some breathing space but
the problem will not disappear.
A serious problem also exists for the after sales service. Consultants do record that
service supervision seldom visits sites to carry out internal audits. Supervision is so
overloaded that they cannot give the necessary attention to technical matters. Service
providers acknowledged that on the job training very seldom takes place. Supervision
finds it extremely difficult to ensure that their quality standards are entrenched. This
leads to a culture of “non-care”. More than one consultant and owner expressed the
view point that there is just no pride in how work is being done. Several examples were
quoted where installations were reset when technicians were called out just for the
problems to recur again at a later stage. Calling upon supervisors to assist came to no
result. Supervision needs to call on field engineering technicians, but they are so
extremely overloaded with sorting out problems that installations get switched off
awaiting attention.
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R J Coertze, pp 966-984
3. Conclusions Recommendations and Further Research
3.1. Views of different participants regarding the sustainability of the lift services can be
summarized as follows:
3.1.1. Government
• Present:
Government believes that the present updating and control of the required
regulations are sufficient. Government Inspectors are being trained but do
lack experience.
• Future
The updating of the legal and regulatory requirements should continue as
is and will create sufficient control to ensure sustainability. The role of
Government should not be increased from the present
3.1.2. Building Owners/Managers
• Present
The service varies from excellent to very poor depending on the
involvement from users through management information control systems.
The service provided by the Lift Companies needs serious improvements.
At present Service Providers are interested in financial results only and
very little regard is given to service, quality and workmanship.
The vertical transportation is still functioning well but is fast deteriorating
due to this lack of customer care. There are very little if any pride in the
workmanship delivered. The relationship between supplier and customer
needs to be addressed with haste.
• Future.
Serious problems can be expected if the present poor service continuous. It
needs a paradigm change in the approach from the Service Providers to
train and develop technicians and management.
3.1.3. Consultants
• Present.
There are still a few technicians left in the system that is capable of
handling the various types of installations but they are fast disappearing.
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R J Coertze, pp 966-984
There are just not enough technical competent people to do the work
required. The present staff runs from problem to problem without fixing
such. The installations are still delivering because of disciplined
applications in the past.
The supply of lift inspectors also need to be addressed. At present there are
ca. 160 registered inspectors to handle approximately 28000 installations
country wide. This asks the question how legal inspections are being done.
Clients are starting to realize that they need to invest in the future. Several
initiatives are under way to replace older installations. This has how ever
not permeated to all owners which poses a major threat to the
sustainability of the service.
More and more penalty contracts are implemented which proofs the
dissatisfaction with the services rendered. Quick response and “fix it first
time” attitude are something very rare.
• Future
If the present situation continues a major deterioration of the service is
expected. By using unknown equipment another risk factor is added.
Should something drastically not be done regarding training and attitude
the service is in jeopardy
3.1.4. Service Providers
• Present
The extremely high growth rate in new installations has left the industry
with new problems never experienced before. Training of staff has been
neglected due to shorter time strategies. The “eyes have temporarily been
taken off the ball” but industry is working very hard to rectify the
situation.
• Future
A new approach is surely being put in place to deal with the problems of
shortages of skills and knowledge. This will ensure a continuation of the
sustainability of the industry.
Companies are expected to increase internal audits to comply with the
legal requirements. This being actively pursued will reduce further risks of
not being able to sustain the required service.
It can thus be concluded that the majority of the vertical travelling installations in
Gauteng is still acceptable but that this situation is seriously being affected by poor
installation practices and poor service workmanship.
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R J Coertze, pp 966-984
3.1 Safe working installations
Due to the OSH Act and the related regulations conforming to world expected standards
and the work being done to ensure that local standards conforms to such world
standards, lifts, escalators, passenger conveyors and hoists are operating safely at the
present moment. This is however in jeopardy due to the lack of audits and inspections
necessary to ensure continuation. This shortcoming can be contributed to the shortfall to
ensure that the necessary skills and knowledge to be available in the industry. The
present three tier approach is sufficient if applied correctly. As such it will be necessary
to do the following:
Audits at government level to continue but to be increased. Audits to ensure that
the fundamentals of the Act is conform to and the necessary action should this not
be done, is of essence to re-establish the “care culture”.
Owners through Consultants to continue with the existing audits and inspections
as required by law. Sufficient Lift Inspectors to be trained to enforce legal
inspections.
Service Providers will have to play a more important role to assure compliance.
Two companies, Otis and Schindler are ISO 9000 accredited companies and their
quality systems do call for internal and managerial audits. Present results indicate
that this very important managerial activity is neglected or even ignored. Otis does
have an internal auditing department which should entrench their quality
standards. Several consultants did question this. The other service providers all
have some system of self governing of safety standards, but again, consultants do
question conformance to these internal policies and standards. The neglecting of
internal auditing will have to be addressed urgently.
3.2 Technical excellence.
When using renowned products one is assured that the necessary excellence does exist.
A different evaluation system should be applied when less known equipment is being
considered. In instances like this consideration should be given to use consultants with
the necessary engineering credibility. Lift consultants often do not have the necessary
in-depth technical background to evaluate design criteria and design philosophies. It is
of utmost importance to select the correct engineering capabilities when requesting the
evaluation of less known equipment.
3.3. Technical and managerial knowledge and skills.
This is the one area that poses a real threat to the sustainability of the service rendered
by the lift industry. Should serious action not be taken in the very near future, both the
safety and technical acceptability will be in jeopardy. It is necessary to determine what
strategy the lift industry wants to follow. The present methodology to procure
knowledgeable and skillful people is not successful. Just feeding the industry with more
and more people will not solve the poor workmanship, the lack of problem solving
ability and the absence of a “pride in one’s work” culture. Fix it the first time is maybe
the surest way of ensuring adequate people to do the work but will take time to
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R J Coertze, pp 966-984
entrench. Knowledgeable people who understand the principles involved in project
management and service provision is required at appropriate levels.
First line supervision is totally overloaded with all kinds of additional tasks and do not
concentrate on quality, service and customer satisfaction. Top management should be
involved in the sustaining of companies. Unfortunately due to the numerous problems
managers are lost in detail.
The industry does have an employers’ organization, the Lift Engineering Association.
Due to the anti-trust pressures, the effectiveness of this organization has seriously
diminished over the years. However, this organization should take the lead in
determining the way the artisan needs of the industry should be addressed. The
curriculum of the apprenticeship is to be thrashed out amongst the role players in
industry and then be rigorously applied. Should this not be done the mediocre service
provided at present will continue and the sustainability of such service will surely be in
jeopardy.
4. Acknowledgements
There is a tremendous amount of goodwill in the lift industry. Ever participant
expressed the view that the problems in industry can be solved. It will take time to do so
but there is no alternative. People needs to be trained, safety needs to be ensured and
world class technology needs to be applied
The following people are acknowledged for their very informative and useful
contribution. They were at all times prepared to participate, to give their honest opinion
and perspectives and to share their knowledge and skills and information. Please accept
my sincere thank you.
Mr Jake Malatse. Executive Manager Electrical and Mechanical Engineering.
Department of Labour
Mr James Balyntine: TFMC
Mr Andre Vermeulen ACSA
Mr Ronnie Branders. WAC Projects
Dr Theo Kleinhans. Dr Theo Kleinhans Consultancy
Mr Willem Du Toit. W T DU Toit Lift Consultant
Mr Filipe Vinagre: Otis
Mr Matt Biskaduros: Schindler
5. References
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RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
R J Coertze, pp 966-984
George R Strakosch, 1998, The Vertical Transportation Handbook, Third Edition John
Willey & Sons, Inc. New York and Canada simultaneously
Occupational Health and Safety Act and Regulations. Act 85 of 1993 (Full Version),
2005, Revised Fourth Edition Compiled by LexisNexis Butterworths, p13, p142 - p146
SABS 0400-1990 First Revision South African Standard, Code of Practice for The
application of the National Building Regulations, First Revision, August 1990,
Published by The Council of the South African Bureau of Standards, p194 – p195
SANS 50081-1:2004 Edition 1 and EN corr.., and EN amdts A2,A1, EN 81-1:1998
Edition 2 and corr., and amdts A2,A1, South African National Standard Safety Rules for
the construction and installation of lifts Part 1: Electric lifts, November 2005, Published
by Standards South African (a division of SABS).
SANS 50081-80:2005 Edition 1; EN 81-80:2003 Edition 1 SOUTH AFRICAN
NATIONAL STANDARD, Safety rules for the construction and installation of lifts,
Existing lifts, Published by Standards South African (a division of SABS)
SANS 14798:2006 Edition 1 ISO/TS 14798:2000 Edition 1 South African National
Standards, Lifts (elevators), escalators and passenger conveyors, Risk analysis
methodology, Published by Standards South African (a division of SABS)
SABS 0360 Edition 1, South African Standard, Code of Practice, The maintenance and
repair of electric and hydraulic powered lifts, escalators and passenger conveyors,
Published by Standards South African (a division of SABS)
SANS 21:2003 Edition 1 and EN amdt A1 EN 115:1995 Edition 1 and amdt A1, Safety
Rules for the construction and installation of escalators and passenger conveyors,
Published by Standards South African (a division of SABS)
SABS 1545-10 Edition 2 2000, South African Standard, Specification: Safety rules for
the construction and installation of lifts, Part 10: Testing and inspection documents for
lifts, Published by Standards South African (a division of SABS)
‐ 984 ‐
COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
E O Fatoye and K T Odusami, pp 985-997
Occupants’ satisfaction approach to housing performance evaluation:
the case of Nigeria
E. O. FATOYE1 and K. T. ODUSAMI2
1
Department of Quantity Surveying, Lagos State Polytechnic, Ikorodu, Lagos, Nigeria
e-mail: [email protected]
2
Department of Building, University of Lagos, Akoka, Yaba, Lagos, Nigeria
e-mail: [email protected]
Abstract
Housing is an array of economic, sociological and psychological phenomena. Its performance
should not only meet the technical expectation but also the overall satisfaction of the end users. The
aim of this study is to evaluate housing performance based on occupiers’ satisfaction approach. The
objectives were to: determine occupants’ satisfaction level based on indicators of HOMBSAT
instruments of building performance, and to assess the relative importance of the performance
indicators as perceived by the occupants. Data were collected from both secondary and primary
sources. In all 226 questionnaires were collected from three different housing estates and analysed
for the study. The results showed that the occupiers were most satisfied with criteria under design
such as the number of rooms in their houses, the ceiling height , the location of different rooms, and
nearness to religion (worship) location. They were least satisfied with the criteria under the
subsystems of estate layout and site location, and access to local facilities and city-wide services
such as nearness of house to fire-fighting stations. This study recommended an improvement in the
provision and maintenance of housing essential facilities.
Keywords: Housing, occupants’ satisfaction, performance evaluation.
1 Introduction
One of the basic needs of man is shelter; the second most essential human need after food (Federal
Republic of Nigeria, 1985, 1991 and 2002). In an earlier but slightly different opinion, Mabogunje,
Hardoy and Misra (1978) asserted that among the basic needs such as food, clothing and shelter
which man obtains from nature, shelter leaves the most visible impact on the built environment;
while at the same time its characteristics are influenced by natural environment. More essentially,
according to Smith (1973) and Agbola (1998), housing has been universally understood to be more
than shelter (physical structure of bricks and mortar). It is a collection of characteristics to provide a
unique home within any neighbourhood and it is thus an array of economic, sociological, and
physiological phenomena. In the words of a study in the Chelsea Sea area of New York, Smith
(1973, p.21) said:
Housing…has represented much more than physical structures; housing is/has become a
subject of highly charged emotional content: a matter of strong feeling. It is the symbol of
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status, of achievement, of social acceptance. It seems to control, in large measures, the way
in which the individual, the family, perceives him/itself and is perceived by others
.
The World Health Organisation [WHO] (1987) and Habitat (1996) held the view that the quality
and size of housing and the quality of the neighbourhood in which it is located is obviously
important for privacy, security and an enjoyable domestic life. Its location is important in terms of
the access it provides its residents to employment locations, to required city services, and to
amenities that promote good health. From the foregoing, housing, no doubt, is very important in
meeting human needs and expectations.
Performance evaluation of built facilities (housing inclusive) has often been based on how well the
physical structure conforms to design specifications. Different authors (Mohsini, 1989; Torbica and
Stroh, 1999) had identified that this approach, however meaningful, is not without limitation. This
is because occupants’ main concern is how the constructed facility will best meet their needs and
expectations regardless of how the construction has conformed to specification. The current and
future prospects in the housing sector depend on the extent to which owners/occupiers are satisfied
with the built facilities. This emphasis is based on the fact that many problems in the built
environment are the result of neglecting the post occupancy evaluation from the occupiers’
satisfaction approach.
If the housing sector is to improve the quality of the residential buildings it produces in meeting
those needs and expectations, it then must take a proactive approach to understanding users’ views
on the quality of housing being produced. This can be done effectively through the evaluation of the
users’ satisfaction on the quality performance of the dwelling houses. In order to investigate the
level of quality achieved, feedback is required through the performance evaluation techniques in
respect of the buildings being studied. This will serve as a benchmark to quality improvement in the
production of better housing for user-occupants and assist in providing healthy, productive and
comfortable in/outdoor environment and long-term benefits to them.
The aim of this study is to evaluate housing performance using occupants’ satisfaction approach.
The specific objectives of the study were to determine the occupiers’ satisfaction adopting the
quality performance criteria of building performance, and to assess the relative importance of the
performance indicators as perceived by the occupants.
2 Literature review
Housing is an economic resource providing space for production and access to income-earning
opportunities (Agbola, 2005). The performance of this sector is often the barometer by which the
health or ill-health of a nation is measured or determined. Therefore, for any nation, housing is a set
of durable assets, which account for a higher proportion of a country’s wealth and on which
households spend a substantial part of their income (Agbola, 1998). Averagely, according to
Bruning, Langenhop and Green (2004), housing is the single largest expenditure in American
household budgets. Its satisfaction has hence been justifiably described as one of the variables that
affect life satisfaction.
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Quality performance evaluation should therefore be a matter of particular interest to the public and
private housing providers in seeking to increase the occupants’ satisfaction and maximise value for
their money. The achievement of quality is one of the key factors that contribute to the ultimate
success of any housing project, beside cost and time (Ha, 2008). There is a higher degree of
correlation between quality and cost. This is why total building performance is taking a higher
profile nowadays involving a whole life cycle cost (LCC) appraisal to be generally implemented
either at the design stage or occupancy stage of a project. According to Davis Langdon
Management Consulting (2006), life cycle costing is a tool or technique that enables comparative
cost assessments to be made over a specific period of time, taking into account all relevant
economic factors both in terms of initial capital costs, and future operational and asset replacement
cost. Kishk, Al-Hajj, Pollock, Aouad, Bakis, and Sun (2003) outlined the components of LCC as
initial capital costs, operation costs, maintenance costs, occupancy costs and residual values
(including demolition and site clearance costs). Therefore, life cycle analysis (or life cycle
assessment) is an integrated “cradle to grave” approach to assess the environmental performance of
products and services (Bamfort, 2005). Since design is to be done to meet specific functional
requirements, the designers must endeavour to balance the requirements not only of his client but
also of the facilities’ end-users. The challenge, therefore, for the house building industry is to lower
the initial and life cycle costs of housing but at the same time improve its quality and functionality
(Barlow and Gann, 1999) towards occupiers’ satisfaction.
Occupants’ residential performance is a measure of the degree to which a housing (quality)
performance is meeting the occupants’ expectation in terms of benefits and needs. At the conception
of housing occupation, a consumer builds some expectations on the performance of the desired
housing, the benefits it will provide and the needs it should fulfil. The judgement of these begins
immediately after occupation, which in turn determines his level of satisfaction/ dissatisfaction. It is
on this background that the work of Bruning, Langenhop and Green (2004) considered housing
satisfaction as the gap that exists between residential needs and aspirations and the current
residential context. These may include residents’ assessment of neighbourhood safety, ease of
access to areas of interest, the quality of other homes in the immediate area, the desirability of the
community, and friendliness/pleasantness of the people in the immediate neighbourhood.
The design and management of dwelling facilities that help to improve the satisfaction of the users
is a task that requires the explicit statements of performance requirements and effective
management. For instance, the housing minimum standard set by the Korean Government is based
on three factors (Ha, 2008):
Minimum floor area for adequate space and privacy e.g. the dwelling floor space for a
household of four persons must exceed 37.0m2.
Facilities i.e., provision of basic services: Any housing lacking basic services and facilities
such as running water, electricity or a sewage system is judged to be below standard.
Structure and environment: Housing with poorly built structures such as tents, commercial
huts, and barracks using inadequate building materials are also considered to be sub-standard.
Housing performance evaluation through residential satisfaction approach is based on some
performance measurement criteria as available in the literature. These criteria are all based on
significant elements of housing and its environment, though they may vary in their arrangement and
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E O Fatoye and K T Odusami, pp 985-997
presentation. The work of Kowaltowski, da Silva, Pina, Labaki, Ruschel, and Moreira (2006) in
Brazil showed that the population of low-income housing in the Campinas region expressed high
level of satisfaction with their housing conditions despite low feeling of security in the
neighbourhood. Satisfaction rates were generally high but not directly related to physical elements
of the home and its neighbourhood. According to Ukoha and Beamish (1997), the residents in
public housing in Abuja Nigeria were satisfied with neighbourhood facilities such as closeness to
schools, hospitals/clinics and shops/markets. They were however dissatisfied with their overall
housing situation (structure types, building features, housing indications and housing management).
In Soweto, South Africa, the group from the squatter camp had the lowest levels of satisfaction with
their personal and environmental quality of life. The group was found to be the most disadvantaged
in this regard when compared with the relocated, the awaiting relocation and the site tenure
allocated groups (Westaway, 2006). The findings of research carried out by Salleh (2008) in
Malaysia about private low-cost housing indicated that satisfaction levels are generally higher with
dwelling units and services provided by the developers than neighbourhood facilities and
environment. The contributing factors for the low level of satisfaction with neighbourhood
facilities and environment were poor public transportation and lack of children playgrounds,
community halls, car parks, security and disability facilities. The development of housing, being in
the hands of profit-motivated private sector who give less attention to the provision of
neighbourhood facilities and environment was given as reason for this level of dissatisfaction.
Ha (2008) observed that the residents of social housing estates in South Korea were satisfied with
neighbourhood amenities (health clinics, stores, banks, post office, etc.) but highly dissatisfied with
parking facilities and landscape architecture. A total of 51% of the residents were satisfied with
their accommodation while about 11% expressed their dissatisfaction. The other residents fall
between these two classifications.
In another dimension, the result from the investigation of Bruning, Langenhop and Green (2004)
showed that relationship attitudes play a prominent role in respondent evaluations of living in a city.
The study concluded that when compared with other more traditional evaluations of respondents’
housing experience, the city-resident relationship is an important predictor of overall satisfaction.
3 Research Methods
This study employed the use of cross-sectional approach. Data collected from secondary sources
include those relevant Government documents and publications, textbooks, journals, research
works, conference/seminar papers and World Wide Web. Primary data were collected through
questionnaires administered on the occupants of the housing estates.
From the existing literature (Western, 1979; Torbica (cited in Torbica and Stroh, 1999) and field
survey, 70 quality performance criteria relevant to housing satisfaction were selected, evaluated and
examined both objectively and subjectively. These were broadly categorised into four sub-systems
of the design, the house, the estate layout and site location as well as ease of access to local facilities
and city wide services. The questionnaire was designed to seek the opinion of the respondents on
their level of satisfaction/dissatisfaction on the listed quality performance criteria on a Likert-type
scale ranging from 1 (very dissatisfied) to 7 (very satisfied). Direct field observation was also used
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through the researcher’s visits to the sampled estates to inspect the general housing condition/estate
layout.
3.1 Study population
Lagos State Development and Property Corporation (LSDPC) has 40 residential estates comprising
a total of 20,572 housing units (LSDPC, n. d.). The estates were categorised into three using
stratified sampling technique based on the three cost/income level housing estates. One estate was
chosen from each of the strata by purposive sampling method based on the estate with highest
number of housing units in the stratum. These were Abesan (low-cost) Housing Estate, Ijaiye
(medium income) Housing Estate and Dolphin Phases I and II (upper income) Housing Estate.
These three estates have 6,004 housing units which constitute good representation of the population.
In all, 301 out of the 6,004 housing units were sampled through questionnaires representing 5
percent of the sample frame. This comprises 214 from Abesan, 42 from Ijaiye and 45 from Dolphin
housing estates. The questionnaires were distributed using systematic sampling technique of one
housing unit chosen from every 20. The data collected were analysed using both descriptive and
inferential statistics. Data presentation and analysis made use of frequency distributions and
percentages of all the respondents. The respondents were asked to indicate the level of
satisfaction/dissatisfaction using the 70 selected quality performance criteria on a seven-point
Likert-type scale. A Mean Items Score (MIS) was determined for each of the performance criterion
and was ranked in descending order of importance. In order to achieve precision in data analysis,
this study made use of the Statistical Package for the Social Sciences (SPSS) computer statistical
programme.
3.2 Occupants’ Relative Satisfaction Indices
The computation of relative satisfaction indices (RSI) with each of the elements or instruments of
performance and the whole of building performance was based on the principle that an occupier’s
scores on all the selected criteria, considered together, are the empirically determined indices of
relative satisfaction. The index of relative satisfaction (RSI) of an occupier is the sum of the
occupier’s actual scores (on a seven-point scale) expressed as a percentage of the sum of the
occupier’s potential scores (or the maximum scores possible) on all the criteria (Onibokun, 1974).
Put into mathematical formula:
N
∑yv
RSI(p) = v=1 x 100
N
∑Yv
v=1
where,
RSI = Index of relative satisfaction of an occupier
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p = refers to either of the elements or instruments
yv = Actual score by an occupier on the “v”th variable (criterion)
Yv = Maximum score that variable ‘v’ could have on the scale
used i.e. for a seven-point scale, Yv = 7
N = Total number of variables
The relative satisfaction of an occupier under the whole estate is the sum of the occupier’s potential
scores (or the maximum scores possible) on all the instruments of quality performance criteria. The
result will indicate the distribution of RSI scores giving a clear insight into the performance of the
housing estate through the proportions of occupiers under the levels of satisfaction. The analysis of
this study is carried out by dichotomising the 1-7 scale into two-point of 0 and 1 degree of
satisfaction. An occupier who scores any variable between 1 and 4 is coded as 0 meaning “not
satisfied” while between 5, 6 and 7 is coded as 1 and classified as “satisfied”. The result will
indicate the proportion of occupants under “satisfied” and “not satisfied” regions.
3.3 Index of Relative Performance (Relative Importance)
This is to ascertain specific performance criteria (either under each of the elements, instruments or
as a whole) which provided occupiers' satisfaction or which were sources of dissatisfaction. The
degree of satisfaction/dissatisfaction is the measure of relative weight attached to a criterion by all
the occupiers taken together. It is the sum of all the actual scores (on a seven-point scale) given by
all the occupiers as a proportion of the sum of all the maximum possible scores on the seven-point
scale that all the occupiers could give to that criterion.
This is expressed mathematically as:
N
∑ aij
RPIj = i=1
N
∑Aij
i=1
Where,
RPFj = Relative Performance Index for criterion “j”
N = Number of respondents
aij = Actual score on the seven-point quality performance by the
“i”th respondent on the “j”th criterion
Aij = The potential score (or the maximum score that respondent
“i” could give to criterion “j” on the quality performance scale.
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When the frequency is calculated to know the number of respondents on each score the
mean item score (MIS) for each criterion is calculated to obtain the RPI as follows:
RPI (on a seven-point scale)
= 1n1 + 2n2 + 3n3 + 4n4 + 5n5 + 6n6 + 7n7
7N
Where,
n1 = number of respondents for very dissatisfied;………..:
n7 = number of respondents for very dissatisfied
N = Total number of respondents
The questionnaire for the analysis was recoded on a two-point scale of 0 and 1 where 1 through 4 on
the seven-point scale was coded as 0 for “not satisfied” and 5 through 7 was coded as 1 for
“satisfied”. The formula item becomes
RPI = n 5 + n6 + n 7
N
The criteria are then ranked in descending order of their relative performance index (from the
highest to the lowest). The maximum index that a criterion could have is 1.000 but the lowest
depends on the study area. However, the closer to 1.000 a RPI is, the more the contribution of the
criterion to the satisfaction (and vice versa) for the occupiers.
4 Findings and Discussion
These results present 70 selected quality performance criteria with which to measure the residential
satisfaction/dissatisfaction of housing occupiers. The criteria are arranged under the instruments of
building performance of the design, the house, the estate layout and site location, and the ease of
access to local facilities and city-wide services. Table 1 below shows the distribution of the
occupiers’ relative satisfaction indices of the housing estates under the instruments of building
performance. The numbers of respondents who are satisfied with each of the performance criteria
under the instruments are indicated starting with the highest. This implies then that the criterion
having the least frequency of relative satisfaction index will have the highest frequency of relative
dissatisfaction index and vice-versa. Considering the whole performance criteria irrespective of the
instrument classification, respondents who are satisfied with the number of rooms in their houses
has the highest frequency (81.9%). This is followed by the ceiling height (79.2%), the location of
different rooms (78.8%), the brightness or light in the house during the day time (74.8%), nearness
to religious (worship) location (74.8%) and so on.
Table 1: Occupants’ Relative Satisfaction (HOMBSAT Instruments)
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S/N Quality Performance Criteria Satisfied Not Total
Satisfied
A. Design
1. The number of rooms in your house 185 (81.9) 41(18.1) 226(100.0)
2. The ceiling height 179(79.2) 47(20.8) 226(100.0)
3. The location of different rooms 178(78.8) 48(121.2) 226(100.0)
4. The brightness or light in your house during the day time 169(74.8) 57(25.2) 226(100.0)
5. The size of the rooms 168(74.3) 58(25.7) 226(100.0)
6. The layout of the rooms (i.e. the design in relation to your daily 164(72.6) 62(27.4) 226(100.0)
life in the house)
7. The number and position of electrical outlets 155(68.6) 71(31.4) 226(100.0)
8. The scale and proportion of the floor plan 154(68.1) 72(31.9) 226(100.0)
9. The floor plan of your dwelling 151(66.8) 75(33.2) 226(100.0)
10. Street design 151(66.8) 75(33.2) 226(100.0)
11. Your toilet(s) design 146(64.6) 80(35.4) 226(100.0)
12. Indoor Air Quality (IAQ) 146(64.6) 80(35.4) 226(100.0)
13. Your Bathroom(s) design 145(64.2) 81(35.8) 226(100.0)
14. The level of privacy in your house 143(63.3) 83(36.7) 226(100.0)
15. Nearness to neighbours of different religion 141(62.4) 85(37.6) 226(100.0)
16. The number of bathroom(s) 140(61.9) 86(38.1) 226(100.0)
17. Your plot size 139(61.5) 87(38.5) 226(100.0)
18. The kitchen design 138(61.1) 88(38.9) 226(100.0)
19. Individual space for each member of your household 137(60.6) 89(39.4) 226(100.0)
20. Adaptability to change in design 136(60.2) 90(39.8 ) 226(100.0)
21. The number of toilet(s) 135(59.7) 91(40.3) 226(100.0)
22. Building setback (distance from house to your property boundary) 133(58.8) 93(41.2) 226(100.0)
for outdoor living space, entertaining and parking
23. Distance of your building from the side boundary fence 131(58.0) 95(42.0) 226(100.0)
24. Distance of your building from the rear boundary fence 128(56.6) 98(43.4) 226(100.0)
25. Space for landscaping 111(49.1) 115(50.9) 226(100.0)
26. Emergency/ Escape route 100(44.2) 126(55.8) 226(100.0)
27 The location of balcony 96(42.5) 130(57.5) 226(100.0)
28 The size of your balcony 87(38.5) 139(61.5) 226(100.0)
29 Accessibility to the disabled and aged people 83(36.7) 143(63.3) 226(100.0)
Average 140(62.1) 86(37.9) 226(100.0)
B. The House
30 The performance of foundations 160(70.8) 66(29.2) 226(100.0)
31 The performance of roof 145(64.2) 81(35.8) 226(100.0)
32 The operation of windows 133(58.8) 93(41.2) 226(100.0)
33 The operation of doors 133(58.8) 93(41.2) 226(100.0)
34 Quality of materials used in ceilings 132(58.4) 94(41.6) 226(100.0)
35 The operation of electrical fittings 127(56.2) 99(43.8) 226(100.0)
36 Quality of paints 126(55.8) 100(44.2) 226(100.0)
37 Quality of materials used in walls 125(55.3) 101(44.7) 226(100.0)
38 The operation of plumbing fittings 124(54.9) 102(45.1) 226(100.0)
39 Quality of building materials 120(53.1) 106(46.9) 226(100.0)
40 Quality of materials used in floors 120(53.1) 106(46.9) 226(100.0)
41 Getting value for your money 118(52.2) 108(47.8) 226(100.0)
42 The cost and effort needed to keep the house up 117(51.8) 109(48.2) 226(100.0)
43 Easiness of maintenance of your house 113(50.5) 113(50.0) 226(100.0)
44 Aesthetic appearance 94(41.6) 132(58.4) 226(100.0)
45 Low-cost maintenance features in your house 94(41.6) 132(58.4) 226(100.0)
46 Level of deterioration of your building based on annual increase 84(37.2) 142(62.8) 226(100.0)
in repairs and maintenance cost
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Average 121(53.7) 105(46.3) 226(100.0)
C. Estate Layout and Site Location
47 Available parking space 146(64.6) 80(35.4) 226(100.0)
48 Open spaces, Parks and reserves 138(61.1) 88(38.9) 226(100.0)
49 Security system of your house 131(58.0) 95(42.0) 226(100.0)
50 Security level of your neighbourhood 129(57.1) 97(42.9) 226(100.0)
51 The width of foot paths 117(51.8) 109(48.2) 226(100.0)
52 Adequacy of off-street parking 112(49.6) 114(50.4) 226(100.0)
53 Colour(s) of paints used in the house 104(46.0) 122(54.0) 226(100.0)
54 Noise pollution 103(45.6) 123(54.4) 226(100.0)
55 Water pollution 100(44.2) 126(55.8) 226(100.0)
56 Landscaping of streets (i.e., trees, hedges, grass etc.) 95(42.0) 131(58.0) 226(100.0)
57 Air pollution 93(41.2) 133(58.8) 226(100.0)
58 Source(s) of Water 79(35.0) 147(65.0) 226(100.0)
59 Adequacy of on-street parking (bays) 75(33.2) 151(66.8) 226(100.0)
60 Drainage System 49(21.7) 177(78.3) 226(100.0)
61 Refuse disposal system 41(18.1) 185(81.9) 226(100.0)
62 Street lighting 37(16.4) 189(83.6) 226(100.0)
Average 97(42.8) 129(57.2) 226(100.0)
D. Ease of Access to Local Facilities and City-wide Services
63 Nearness of your house to religion / worship locations 169(74.8) 57(25.2) 226(100.0)
64 Nearness of your house to schools for children 163(72.1) 63(27.9) 226(100.0)
65 Nearness of your house to market/shopping centres 155(68.6) 71(31.4) 226(100.0)
66 Nearness of your house to recreational facilities 105(46.5) 121(53.5) 226(100.0)
67 Nearness of your house to your workplace 100(44.2) 126(55.8) 226(100.0)
68 Nearness of your house to police station 75(33.2) 151(66.8) 226(100.0)
69 Nearness of your house to medical facilities (hospitals/clinics) 70(31.0) 156(69.0) 226(100.0)
70 Nearness of your house to fire fighting station 29(12.8) 197(87.2) 226(100.0)
Average 108(47.9) 118(52.1) 226(100.0)
Overall Average 122(54.0) 104(46.0) 226(100.0)
Note: Figures in parentheses are row percentages
According to Table 1, the average relative satisfaction under each of the subsystems of HOMBSAT
instruments of building performance shows that design of building has the highest frequency of
satisfaction, which is 62.1 percent. This is followed by quality of the house (53.7%), ease of access
to local facilities and city-wide services (47.9%) and estate layout and location (42.8%). The
overall satisfaction/ dissatisfaction ratio is equally 54:46 percent.
Tables 2 below shows the ten most important (1-10) criteria under the RPI for the three estates put
together. It reveals that the degree of satisfaction in the three estates is on the high side with house
design especially with number of rooms in the house, the ceiling height, location of different rooms
and nearness of house to religious/ worship locations.
Table 2: Relative performance indices and weighted average of the ten most important
criteria for the three estates (in descending order of importance)
Quality Performance Criteria Abesan R Ijaiye R Dolphin R W.Av. R Instr.
(N=153) (N=40) (N=33) (N=226)
The number of rooms in your house 0.797 1 0.825 3 0.909 1 0.818 1 D
The ceiling height 0.765 3 0.825 4 0.879 3 0.792 2 D
The location of different rooms 0.758 6 0.875 1 0.818 4 0.787 3 D
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Nearness of your house to religion / worship 0.765 4 0.650 34 0.788 13 0.748 4 D
locations
The brightness or light in your house during the 0.758 5 0.750 9 0.697 24 0.748 5 A
day time
The size of the rooms 0.732 7 0.750 6 0.788 7 0.743 6 D
The layout of the rooms (i.e. the design in 0.706 8 0.775 5 0.758 15 0.726 7 D
relation to your daily life in the house)
Nearness of your house to schools for children 0.771 2 0.700 20 0.515 48 0.721 8 A
The performance of foundations 0.654 11 0.850 2 0.788 11 0.708 9 H
Nearness of your house to market/shopping 0.641 15 0.750 10 0.818 5 0.686 10 D
centres
*Note: D= Design; H= The House; Es = Estate layout and site location; A= Ease of access to Local
Facilities and City-wide Services
On the other hand, Tables 3 below shows the ten least important criteria from 61-70 in their ranking
under the RPI for the three estates put together. There is low degree of satisfaction (i.e,
Table 3: Relative performance indices and weighted average of the ten least important criteria
for the three estates (in descending order of importance)
Quality Performance Criteria Abesan R Ijaiye R Dolphin R W.Av. R Instr.
(N=153) (N=40) (N=33) (N=226
)
Level of deterioration of your building based on 0.359 59 0.325 63 0.485 50 0.371 61 H
annual increase in repairs and maintenance cost
Accessibility to the disabled and aged people 0.320 63 0.500 54 0.424 58 0.367 62 D
Source(s) of Water 0.333 61 0.175 68 0.636 33 0.349 63 Es
Nearness of your house to police station 0.268 65 0.250 64 0.727 20 0.332 64 Es
Adequacy of on-street parking (bays) 0.320 64 0.350 62 0.364 67 0.332 65 A
Nearness of your house to medical 0.261 66 0.225 66 0.636 36 0.309 66 A
facilities(hospitals/ clinics)
Drainage System 0.183 67 0.200 67 0.394 64 0.217 67 Es
Refuse disposal system 0.105 68 0.225 65 0.485 49 0.182 68 Es
Street lighting 0.124 69 0.100 69 0.424 59 0.164 69 Es
Nearness of your house to fire fighting station 0.105 70 0.075 70 0.303 70 0.129 70 A
*Note: D= Design; H= The House; Es = Estate layout and site location; A= Ease of access to Local
Facilities and City-wide Services
high degree of dissatisfaction) with ease of access to local facilities and city-wide services, estate
layout and site location with particular emphasis on nearness of house to fire-fighting station, street
lighting, refuse disposal system, drainage system, and nearness of house to government medical
facilities.
The combination of the RPIs for the three estates to find the weighted average (Kumaraswamy and
Chan, 1998) for each of the 70 criteria was computed by adding the products of the RPI for each
estate and the proportion of respondents from the corresponding estate (as a proportion of the total
respondents). For example the weighted average for ‘number of rooms in your house’ was
computed as 0.797 x (153/226) + 0.825 x (40/226) + 0.909 x (33/226) =0.818. The ten criteria with
the highest and ten with the lowest weighted averages irrespective of the subsystems are presented
in Table 2 above. The table reveals that the number of rooms in the house has the highest weighted
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average with 0.818. This is followed by ceiling height (0.792), location of different rooms (0.787),
nearness of house to religion/worship locations (0.748) and the brightness in house during the day
time (0.748). Considering it from the dissatisfaction side, nearness to fire-fighting station has the
lowest weighted average (0.129), this is followed by street lighting (0.164), refuse disposal system
(0.182), drainage system (0.217) and nearness of house to medical facilities (0.309).
5 Conclusion and Further Research
The occupiers’ relative satisfaction analysis revealed that satisfaction with the number of rooms has
the highest frequency of 81.9% while nearness of house to fire–fighting stations has the lowest
frequency of satisfaction and, by inference, the highest frequency of dissatisfaction. This is the trend
with the ranking of the weighted average of the relative performance indices (RPI) for the three
estates. On the basis of classification into subsystems of instruments of building performance,
design instrument (62.1%) ranked highest while estate layout and site location ranked lowest with
42.8 percent.
Infrastructural facilities have psychological, social and economic implications on housing
occupiers. Therefore, the government should provide these within the estates as part of its priorities
in housing design, provision, and delivery. Fire outbreak is a big threat to life and most especially to
property. While violent crime may involve carting away handy and movable properties (if loss of
life is not involved), fire will spare none – movable and immovable properties. This is the reason
why provision of well–equipped and functional fire-fighting stations cannot be over–flogged. It is
the heartbeat of the estate residents and the most important recommendation of this study. There is
also need for the rehabilitation of central sewage system in Abesan, repair of bad roads and drains
as well as provision of portable water in Abesan and Ijaiye housing estates. Drainage system in
Dolphin estate must be improved to stop the area being flooded especially during the rainy season.
Generally, the estates lack medical facilities (hospitals/medical centres), portable water, good
drainage system, refuse disposal system, street lighting, well–equipped recreational centres,
shopping complexes, public schools for children (except Abesan), landscaping of streets with trees,
hedges and grasses. These facilities should not only be provided but also well maintained as the
need arises. The absence of some the infrastructural facilities and the bad state of disrepair of the
existing ones had explained the 46 percent dissatisfaction level of the occupant. The liveability
conditions of those estates will continue to be adversely affected until there is improvement in the
provision and regular repair/maintenance of the facilities. When the facilities are provided and a
sound maintenance culture is cultivated by the government, Nigerian housing conditions will be
more satisfactory.
The selected variables (quality performance criteria) under the various subsystems of elements or
instruments of housing performance, with which occupiers’ satisfaction is measured, should not be
regarded as very exhaustive. There are other criteria, which, though may not be relevant in these
study areas, may be relevant or important in others. For instance, similar researches on residential
estates might well include variables related to the location and topography of land, the quality of
other homes in the immediate area, and the city-resident relationship
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Kevin Chuks Okolie and Winston Shakantu, pp 998-1010
Design and user/occupier needs in building performance
Okolie, Kevin Chuks1 and W M. Shakantu1
1
Department of construction management, P.O. Box 77000. Faculty of Engineering
Built Environment and Information Technology. Nelson Mandela Metropolitan
University, Port Elizabeth 6031. South Africa.
E- mail: [email protected]. Telephone. 0027415044169.
Abstract
In this paper, the pre-eminence of end-user requirements as a primary focus of building
design is identified. The dynamic interaction between the building and the end-user is
also examined. It is shown that traditionally, there has been very little communication
between the end-user, the designer and the clients in the design process. Hitherto,
designers and clients have made decisions for end-users without proper consultations;
often resulting into costly change orders because the new buildings do not meet the
users’ needs. It is shown that performance of a building is determined by the extent to
which the design and completed building meets the needs of its intended user/occupier.
The paper therefore posits that performance evaluation is an effective tool for meeting
user needs and improved design briefs. It further emphasises the need to adopt a team
approach to the design process. The design process could benefit from input by facilities
managers who in some cases, act as the surrogate client and in-fact funnels the clients’
inputs and user requirements into the design. Anecdotal evidence shows that end-
users/occupiers are happier with buildings that meet their needs.
Key words: Building performance, Design, Evaluation, Facilities manager, User-
needs.
Introduction:
Modern buildings are relatively complex artefacts; their design, construction and
commissioning are an arrangement of systems and subsystems that work together for
the common good. The building is a basic resource which is not just an asset for
investment purposes but also the interface between people and workplace. Buildings are
not generally procured for their own sake but required as an enabling resource
supporting the creation of products and services in an organization. In social terms, they
provide the necessary internal environment for living in comfort and safety. As
Douglas(1996:23-32) puts it, buildings are facilitators to peoples’ physical well-being;
both for habitation and leisure purposes.
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Building performance evaluation is a facilities management function and so the
evaluation of buildings in terms of user-needs provides a platform for facility managers
to make their contributions to the achievement of organizational goals. Clearly, the
efficiency and effectiveness of an organization is influenced by the physical
environment in which it operates and since buildings constitute the main physical assets
of an organization, a thorough understanding of the physical workplace and its impact
upon the user behaviour is vital (Barrett and Baldry, 2005:93). It is important to
understand that buildings are primarily objects of use and this should make users
experts in what buildings can do. As a matter of fact, most employees spend more time
in their workplaces than their homes and for this reason; they probably know more
about how offices should look like or be, than the average architect or consultant. This
view is supported by Best, Langston and De Valence (2003: 282); in their submission,
architects, planners and consultants may come and go, but users spend their lives in the
creations of the designers. Corroborating this view, Barrett and Baldry (2003:94)
observe that very few organizations ask their staff whether a building meets their
requirements, even-though the people that understand a building best are the people that
use it everyday. However, in most cases, the people concerned and affected by the
design are never involved or considered in the design process. Design and decision-
making is rather concentrated, fragmented and involves only a small group of experts.
This fragmentation has led to common scenarios such as that outlined by Lovins and
Browning (1992:44), where the architect draws the building, then throws it over the
wall to the civil or mechanical engineer with the injunction, “Here, cool this.” The
process sees many consultants working in isolation, resulting in inadequate briefs, with
many variables that have considerable/significant effects on their designs. The
implication of this is that it is the end-user who lives and suffers the consequences of
these decisions.
In the following sections, this paper identifies and analyzes the dynamic interaction
between the building and the end-user or occupier and how this interaction can be
optimized during the design process. It discussed the concept of building performance
evaluation and shows how it can assist designers to create buildings that perform to the
optimal satisfaction of the user and overall organizational efficiency.
Aim and Objectives:
The broad aim of this paper is to evaluate the importance of user needs in building
performance evaluation and design. To this end, the specific objectives of the study
include:
• Examine the link between building design and user needs;
• Identify the role of the facility manager in the design process; and
• Establish performance evaluation can improve design briefs.
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Methodology:
The study relies on the review of recent studies on building performance evaluation to
provide a framework for gaining insight into the end user needs. It attempts to highlight
the relative importance of various other issues raised in the review; the most significant
being the implication of building performance evaluation in the procurement of
buildings. Mouton (2001:19) states that a study that uses literature as methodology
provides an outline of the research in a certain discipline through an investigation of
trends and debates. Mouton (2001) further defines a non-empirical study as analysis of
the meaning of words or concepts through clarification and elaboration of different
dimensions and meanings. Neumann (2000:301) opines that a researcher can search
through collections of information bearing a research question and variables in mind,
and then reassemble the information in new ways to address the research question.
In this study, collection of information means existing literature on the concept of
building performance evaluation and user-needs in facilities management. The study is
designed and carried out by describing the role of the facilities manager in the design
and procurement of buildings, and presentation of current developments and debates.
The literature sources include the most relevant and current within the discipline from
books, articles and websites. The key issue in this paper is the importance of user-needs
and building performance evaluation on design briefs.
Performance Evaluation in Building facilities Management:
Generally, a facility is something designed or created to provide service or fulfil a
function. It is often used as plural. In this context, they refer to buildings designed for
various purposes. Accordingly, building performance is a measure of the extent to
which the building satisfies its designed technical, functional and behavioural purposes
(Mbamali, 2005). Facilities management refers to an umbrella term under which a wide
range of property and user related functions may be brought together for the benefit of
the organization and its employees as a whole (Spedding, 1994:8). However, for the
purpose of this paper, performance evaluation refers to a systematic evaluation of
services provided by buildings which occur sometime after their occupation, usually 12
to 24 months. This is sometimes referred to as post occupancy evaluation (POE).
Building facilities include residential accommodations, classroom blocks, laboratory
blocks, offices, health clinics, factories, Commercial, recreational and sports buildings.
Buildings are important to all businesses and organizations. The cost of this asset alone
should make it a resource that is high on the agenda of business managers. In times of
high operating costs, increasing competition and rising user-expectations, organisations
must seek to maximize their return on building investments. An effective tool for the
realization of this objective is building performance evaluation (Amaratunga and
Baldry, 2000:294). Although interest in building performance evaluation has
significantly increased in recent years, studies show that the concept is a far more
mainstream activity in the United States of America, Australia and some European
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Kevin Chuks Okolie and Winston Shakantu, pp 998-1010
countries than it is in Africa (Preiser, 1996; Barrett and Baldry, 2003). The fact that a lot
of money goes into the procurement of Buildings, shows that an evaluation process is
needed to ensure that it works as intended. Buildings are designed and built to meet
specific or group of needs already determined to a large extent before implementation.
The ability of the building to successfully accomplish the purpose for which it is
designed measures its success (Mayaki, 2005:4). The primary purpose of Building
Performance Evaluation is to improve design practice. The methodology includes
reviews of design documentation, interviews with operators and occupants, site
inspection, analysis of utility data and occupant satisfaction surveys. Finally feedback is
provided to the design team for future designs or improvement of existing buildings.
Generally, Barrett and Baldry (2003:97-99) reports that building performance
evaluation can serve two broad purposes, namely;
• Improves current situations; and
• Aid in the design of future buildings (briefing).
Baird (1996) maintains that the benefits of evaluation include:
• Better matching of demand and supply;
• Improved productivity within the workplace;
• Minimization of occupancy costs;
• Increased user satisfaction;
• Certainty of management and design decision making; and
• Higher returns on investment in buildings and people.
It is obvious from the above, that building performance evaluation should be considered
a potential success factor by both the designer and the facilities manager. In his work
titled “post occupancy evaluation; how to make our buildings work better” Preiser
(1995) maintains that performance evaluation can be used for fine-tuning, after a
building has been occupied and the occupants begin to adapt to the facility to suit their
needs. In large facilities housing hundreds or thousands of occupants such as hostels and
lecture theatres, this is necessary to get feedback from the occupants efficiently and
rapidly in order to carry out the fine-tuning process. This shows that the aim of
performance evaluation is not just to optimize occupancy costs but also to raise
efficiency of space management and related assets for people and processes. The
modern end-user or building occupier is participative, creative, self organising and
community oriented. Performance evaluation provides an enhanced methodology that
accommodates not only the end-user-needs but also produces better buildings. In the
absence of evaluation, the quality of facilities and worker morale may be difficult to be
achieved in an organization.
Evaluation of User/Occupier Needs in Building Design:
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Kevin Chuks Okolie and Winston Shakantu, pp 998-1010
When a decision to procure a building is being considered, there are usually three
factions of people involved; the designers, the clients and the end-users. Traditionally,
there has been very little communication between the end-user and the other two
groups. The designers and clients have made decisions without consulting the end-users
who there-after found that the new buildings do not meet their needs and this leads to
costly alterations of such buildings (Atkin and Brooks, 2005:123). Evaluation of user-
needs provides both objective and subjective means of gaining insight into end-user
needs or requirements in a building. However, the evaluation of user needs in a building
is usually seen as a complex and difficult issue to reconcile. This is because buildings
are designed, built and operated for various uses and purposes. Dewulf and Van Meel
(2003:281-291) state that the purpose and use to which a building will be put is
determined by the need of the user/occupier; if the building is for residential,
manufacturing, agricultural, health or educational purposes, it will invariably be
expected to satisfy the needs of their various end-users/occupiers. It follows therefore
that the performance and success of a building is determined by the extent to which it
meets the functional requirements of the end-user/occupier. Commenting on this,
Lomash (1997:167-171) outlines five fundamental questions that must be answered
when designing and specifying the performance of a building, namely;
• Who is the user?
• What is the need of the user?
• Where does the need exist?
• When is the need to be fulfilled? and
• How long will the need exist?
Lomash (1997) adds that answers to the above questions are quantified, based on which
the performance, as expected is also quantified through the development of performance
objectives. Lomash (1997) maintains that the attributes of designs, materials,
components, systems procedures and assemblies must be executed to meet the
requirements of the end-user. In his view, Elsevier (2008:248) states that an important
driving force for building performance evaluation is the opportunity for end–users to
develop and articulate real needs concerning different functionalities of a building and
its parts. Elsevier (2008) submits that actual user-needs require support in formulation
and capturing of the requirements in the building design.
Designers have always argued that there is no such thing as one user or one best way to
involve or evaluate the needs of the user in the design process. In reality, the user or
occupier is not necessarily a person; it may be an individual or an organization
comprising different factions of people with different interests and needs (Dewulf and
Van Meel, 2003). In the office design, for example, the term ‘user’ refers to a diversity
of people, ranging from the rank-and-file employees to top management staff of the
organization. All these people have different ideas, opinions, needs and interests and in
such situations as this, it may be difficult to arrive at common needs that will be
incorporated into a single design. Logical, as this argument might sound, the fact still
remains that there is no single best method; user- needs and the extent to which they are
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incorporated in the design depends on the specific context. As Dewulf and Van Meel,
(2003) argues, the consultant designer, facility or real estate manager must be aware that
the interests and needs of the user or stakeholder in the design depends on the political,
legal, cultural, economic and social context in which they operate. Never-the-less, due
to economic pressures, cost seems to be a universal driver in the design of office
buildings. Whatever the case, in organizations that have a large tradition of employee
participation and decentralized responsibilities, many users/stakeholders need to be
involved and their needs accommodated in the design. In any case, many authors argue
that meeting user-needs determines the degree to which the building facility contributes
to the success of an organization (Barrett and Baldry, 2003:95; NAO, 2003; Kathrine
and Svein, 2004; Zimring, 2008; Joe, 2009). This is where the facilities manager can
play an important role.
Role of the facilities manager in design and evaluation of user needs:
Facility managers are relatively new in the design process. Given this fact and their
current number in practice, designers are usually uncomfortable and reluctant to take
advice or directions from them. Perhaps, the architect may ask; how many facility
managers understand how an architectural/engineering firm designs a major project? Or
from a builder’s perspective, how many facility managers understand how a
manufacturing/industrial facility is constructed? It should be realized that facility
management is a multidisciplinary discipline and most practitioners come from a
design/Engineering background. Never-the-less, unless facility managers have a
working knowledge of the dynamics of design process, clients will continue to get
designs whose completed buildings perform sub-optimally even from the most reputable
firms. As the construction industry becomes increasingly specialized, the facility
manager must take a more proactive part in the design process than any other facility
management function (Cotts and Lee, 1992:143). The reason for this is not far-fetched;
certain business restrictions and contracts define the envelope within which the facility
manager and the architect operate in the user-designer equation; while the design project
manager manages all design elements on his/her side, the facility manager manages all
user requirements and owner inputs in the design, especially where the facility manager
acts as the surrogate client.
Issues covered by the facility management function have been a subject of discussion by
many authors. In the 1990s, there was an explosive growth of the functions to cover the
total integration of people, processes and places in the service of a core business.
Thompson (1990:12) argues that facility management is a profession devoted to facility
planning and where building design meets business objectives. He sees strategic
facilities management as a foundation around which to build daily traditions. An
absence of this strategic foundation could result in a break of operational interface
between the facility provider and the facility user. Thompson (1990) referred to what he
called ‘the facility management spectrum’ which follows the development of the facility
function within the organization. This begins with the planning phase, followed by
tactical planning and results in a reactive facilities management zone such as operations
and emergency repairs. He suggests that the development of a facilities management
function within an organization has to start from the proactive strategic planning stage.
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The range of tasks, according to Thompson (1990) covers construction management and
real estate activities. Although Thompson’s submission did not include how facility
management can add value to the business, his focus was on buildings and processes.
The facility managers’ function at the proactive strategic planning stage would include
inputs at the early design stage of the building. Similarly, Swensson (1998) identifies
the responsibilities of a facilities manager to include the control of operating budgets
and occupancy costs. He seeks to get effective use of accommodation and tries to
understand not only how an individual building performs but also builds an
understanding of ‘user demand’.
More proactive facilities organizations demonstrate the capability to go beyond the
traditional means of identifying user needs and seek to achieve a clearer understanding
of the expectations held by the users. To achieve this, Atkins and Brooks (2005:125)
recommend that facility managers should have a proper understanding of user
satisfaction and building performance. This requires the examination of the complex set
of interacting subsystems including physical environmental factors, job characteristics,
organizational factors, socio-cultural characteristics and past experience of users; more
detailed operational definitions of the variables being investigated (such as noise, space,
health, privacy, satisfaction and productivity) should be developed. Generally, an
improved fit between the physical setting and user functions; both at the individual and
organizational level should improve performance. Cotts and Lee (1996) in their
contribution affirm that it is essential that a facilities manager understands the rules of
design; those rules include identification of systems and subsystems, development of
standards and regulations and constraints; they state that every building project that is
interior related must address one or more systems such as walls, floors, ceiling,
fenestration and furniture. These systems dictate to the designer in varying degrees what
should be designed in a particular space. Contributing to the above argument, Barrett
and Baldry (2003:96) opine that facilities managers should understand how building
evaluations can contribute to organizational effectiveness and communicate this to the
design team and other people within the organization.
Facilities managers represent a new and untapped frontier for improving organizational
goals and performance. But how do organizations know if their facilities are supporting
organizational goals and user requirements? The answer to this question is by the
introduction of building performance evaluation. Unfortunately, this is not well
developed in most organizations and the construction industry as a whole. Organizations
seem to have more information on items such as computers, photocopiers, refrigerators,
etc, than their buildings and those that have a relatively good management of their
assets, have little information concerning their building performance (Cotts and Lee,
1992). The fact that building facilities may affect an organizations’ effectiveness and
employee performance makes it imperative to evaluate them on a regular basis. Despite
the benefits of evaluation, it still remains the missing link in the building delivery
process (Leaman, 2003). It is generally known that organizations simply identify their
need to build and go through the process of planning, briefing, design, construction and
final occupancy. This process is linear and usually repeated for every new building
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RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Kevin Chuks Okolie and Winston Shakantu, pp 998-1010
project that the organization may undertake. (Barrett and Baldry, 2003:93-104).
Although this is the typical process, it is not necessarily the best. Absence of evaluation
does not allow organizations to make use of their staff (users) which is a valuable
resource at their disposal; this gap limits not only the opportunity to learn from the staff
whether the building is performing in terms of user needs but also the loss of valuable
information that could help the architect for effective briefing process
Importance of Building Performance Evaluation and feedback to Design Briefs:
The building performance evaluation process helps to construct a practical tool for
better design briefs. It provides data and information which can be used as a feed-
back/feed-forward into designs for new buildings or improvement of existing ones. This
shows that there is a nexus between design brief and evaluation. Evaluation does not
only provide the necessary information for a good brief, it also contributes to high
building performance and overall organizational effectiveness. In a pilot survey of an
academic facility, Preiser (1995:19-28), states that evaluation and feed back can be used
to improve building performance or quality in terms of health, safety, security,
functionality/efficiency and social/psychological/cultural satisfaction. Preiser (1995)
maintains that the long, medium and short term benefits of performance evaluation
include;
• User feedback on problems in buildings and identification of appropriate design
solutions;
• Feed forward of positive and negative lessons learned into the next building
cycle;
• Creation of data bases, clearing houses and generation of planning and design
criteria for specific building types such as health care, offices, residential, and
recreational facilities.
For those involved in design and built asset management, the benefits or importance of
building performance evaluation are undeniable. The feedback it provides show clearly
whether the design and operation of the building are actively supporting the occupier’s
needs or business. It helps to determine whether the anticipated benefits of the building
improvement were achieved, thereby providing guidance for future design briefs and
projects (Kauntze, 2008). For the occupier, the objective of establishing the building’s
contribution to business or satisfaction of needs is made beyond doubts. For the owner,
the return on investment is demonstrated and to the management and design team,
lessons are learnt and continuous improvement made. Performance evaluation should
not be done only once. A regular programme or on-going evaluation system should be
put in place to help fine tune a building or flag up potential problems at an early stage.
This will limit expenditure in the long run or can be used to influence the brief and
design process. A regular programme also requires both the facilities manager and the
design team to implement an iterative staged briefing program where both parties assess
how well the projects work after occupancy. The evaluation should address the items to
be corrected or improved and when undertaking any such evaluation program, two
issues must be borne in mind;
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RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Kevin Chuks Okolie and Winston Shakantu, pp 998-1010
• Evaluation results must feed back into the building cycle; and
• Seek to raise awareness among those who can influence funding and improve
design (OECD, 2007).
If performance evaluation is undertaken at regular intervals throughout the building’s
occupational life, it can offer a lot of information including measurement of a projects
success, feedback from occupiers, benchmark data, input into design process and input
into change management and communication process. Through the application of
performance evaluation techniques such as interviews, occupant satisfaction surveys,
focus group discussions, observations and questionnaires regarding workplace design,
indoor air quality, comfort, aesthetics and accessibility, useful information and
knowledge can be gathered; especially to improve the performance of the building from
which it is collected and how future ones can be procured. This is what feedback entails.
Feedback is very critical to the evaluation process. This is because the final stage in the
building delivery process is both reflective and informative. It is important to learn from
past decisions and actions so that future performance can be improved. When a loop is
formed, it enables the benefit of hindsight to feedback into early stages of decision-
making on other building projects and activities in the succeeding years. There must be
a formalized loop and methods for accessing and incorporating such critical
information. Feed forward and feedback is a process of assessing and reviewing a
building after occupation and using the information obtained to incorporate or fine-tune
the design of new buildings (Leaman, 2003:24). Simply put, it is the review of a
complete project and its performance in use and incorporating the information into new
briefs or improvement of existing ones. Leaman (2003) argues, that feedback is not
better used because designers and builders go on to the next job without learning from
the one they have just done. Feedback is useful for a whole range of purposes such as
generating ideas for strategic planning, market analysis, feasibility studies, and cost-
benefit analysis. For the built environment, feed forward and feedback mechanism is an
effective tool for the evaluation of building performance. Information is either fed
forward into the design of new buildings or fed back to improve existing buildings
(Barrett and Baldry, 2003). Since the evaluation exercise is a facility management
function, an effective feedback mechanism can be achieved if the facilities manager is
part of the design team.
Integrated approach to the design process and end-user needs:
The design process is an important stage in the building delivery process; it has the
potential to affect how well an organization performs its functions. Generally, a building
provides the basic elements and comfort which allows the users to do their jobs. These
elements, according to Barrett and Baldry (2003) are shelter, light, heat, rain and
sanitation. Again, facilities design provides spatial arrangements that can aid or hinder
specific activities. Ease of communication, movement and privacy are all dependent on
building design. When the design and use of a facility serves the people who use them
and the program it houses, the project is functionally successful; when designs fall short
of this goal, the failures are significantly more glaring.
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Kevin Chuks Okolie and Winston Shakantu, pp 998-1010
In the early part of this decade, three concomitant but independent moves were made in
the construction industry of United Kingdom. These moves were made to re-energize
the building delivery system and this culminated in the publication of three best practice
standards, namely; Better public buildings report (2000), Charter hand-book (2000) and
modernizing construction report (2001). The primary thrusts of these reports emphasize
the need to ensure the functional performance of the constructed building facility; such
that the morale and efficiency of those working in and using the facility is enhanced.
The better public buildings report (2001) particularly targets the functional performance
of the completed building and stipulates firmly that well designed buildings must
enhance the quality of life for the end-users. In his foreword at the launching of the
report, the prime minister states;
“The best designed schools encourage children to learn; the best designed
hospitals help patients recover their spirits and their health.”
This demands a radical structural and cultural change in the procurement process, with
the most fundamental being an arrangement that must ensure that other specialists
contribute to design development right from the on-set (Cain, 2003:16). The Egan
Report of 1998; ‘Rethinking Construction’ sees the total integration of design and
construction and the use of supply chain management as key to better value for the end-
user client. It is important that professionals understand that end-user needs is central to
any design decision. One of the seven United States of America national construction
goals demands that the design of buildings be improved sufficiently to deliver a 50
percent enhancement to the performance .of building occupants. It is obvious that the
functional performance and morale of the occupant/end-user can only be enhanced if the
design is a collaborative and integrated effort. Put differently, an integrated design or
team approach based on a thorough and detailed understanding of the precise functional
requirements and interrelated values of the end-user, should be adopted (Cain,
2003:113-118).
The whole thrust of the team approach or integrated design is targeted at embracing
everyone on both the supply and demand sides whose expertise and experience could be
beneficial to the development of the design; this must obviously include the facilities
manager. It is no longer sufficient for this understanding of the end-users’ functional
requirements to be constrained to the architects and engineers. These experts have
traditionally, designed and constructed buildings with insufficient knowledge of the
detailed needs of the end-user whom the completed building must satisfy (Barrett and
Baldry, 2003). Hakkinen and Nuutinen (2007:437) in their contribution, observe that if
a building is designed without the basic end-users’ requirements, it is unlikely to
provide a suitable working environment. The authors agree that the process of
understanding the precise functional requirements of the end-user must begin by
embracing every member of the design and construction supply chain including the
facilities manager. They maintain that the bricklayer, the carpenter and the electrician
must have a clear and detailed understanding of the end-users’ functional requirement
which must be satisfied if the completed building is to be deemed a success. The
satisfaction of the end-users/occupiers comes from the ability of the building to enhance
job/performance and environmental comfort and ultimately boost staff morale.
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RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Kevin Chuks Okolie and Winston Shakantu, pp 998-1010
Although a successful building design may be decided by a complex mix of judgments
by different interested parties (ranging from functionality, visual consideration,
occupants/user comfort, and return on investment), an integrated team approach to the
design process will resolve these complexities and produce superior buildings that
represent better value for the owners, more efficient operation, better indoor
environment for the occupier and more economical to run (Obiegbu, 2005:15).
Summary and conclusion
This paper has endeavoured to present user/occupier needs evaluation as an analytical
and structured approach to the achievement of high performance in buildings. This
understanding provides facilities managers the platform to make their contributions
towards the achievement of organizational goals. It is crucial to see the design brief as a
process and not an event or a document. A good understanding of the benefits of
assessing and incorporating user requirements in the design of buildings should be the
starting point in the briefing process. This can be realised through a collaborative
approach to the design and performance evaluation exercise. Performance evaluation
provides data and information regarding user-needs which feedback/feed forward into
design briefs. It is evident from the discussion that evaluation is a missing link in the
building delivery process and for this reason; most buildings do not satisfy the needs of
the end-user. If these needs are to be satisfied, a detailed evaluation and feedback
mechanism must be frequently implemented.
This paper has extensively discussed the role of the facilities manager in design and the
importance of performance evaluation as a facilities management function. Clearly, the
facility managers’ role is important especially at the briefing and design stage; as the
surrogate client in a design process, the owners’ inputs and user requirements in the
design can be funnelled through him or her. The need to adopt an integrated team
approached in the design process has also been emphasised; it does not only allow
design to evolve within an agreed framework of project objectives but also seeks to
achieve the best balance between time, cost and quality. More importantly, the
involvement of the facilities manager provides a platform for shared understanding of
user-needs. The reason for this is clear; the facilities manager is responsible for the
management of the organizations’ physical assets. The paper strongly advocates the
need for facilities managers to understand the rules of design so that they can address
design challenges in operational asset management.
References:
Atkins, B and Brooks, A. (2005), Total facilities management. Oxford, Blackwell
publishing, 2nd edition.
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Kevin Chuks Okolie and Winston Shakantu, pp 998-1010
Barrett, P. and Baldry, D. (2003), Facilities management. Towards best practice.
Oxford. Blackwell publishing.
Commission for Architecture and Built Environment (2000), Better Public Buildings
Report. Internet: www.cabe.org.uk. Viewed: April 10th, 2009.
Charter of the confederation of construction clients (2000), Charter Hand-book.
Internet. www.servicecharter.gov.mt/. Viewed: April 10th, 2009.
Cotts, D. and Lee, M. (1992), The facilities management hand book. New York.
Amaloen; A division of American Management Association.
Cain, T. (2003), Building down barriers; A guide to construction best practices. London.
Spon press.
Douglas, J. (1996), Building performance and its relevance to facilities management.
Facilities, 4(3/4); 3-32.
Dewulf, G. and Van Meel, J. (2003), Democracy in Design; in; Best, Craig and De
Valence (Eds), Workplace strategies and Facilities management; Building in value.
Oxford. Butterworth.
Egan,J.(1998),RethinkingConstruction;Internet:www.ciob.org.cn/Resources/download/
Rethinking.%20construction%20the%20egan%20reportpd. Viewed: April 14th,2009.
Elsevier, R. (2008), User Driven Innovation in Building Process. Tsinghua Science
and Technology. 13(1); 248-254.
Hakkinen, T. and Nuutinen, M. (2007), Setting Sustainable Solutions for Office
Buildings. Facilities, 25(11/12)437-451.
Kauntze, R. (2008), The new ways in which Post Occupancy Evaluations are being used
as a business management tool. Internet: www.fm-world.co.uk/. Viewed; June30th,
2009.
Leaman, A. (2003), Post-Occupancy Evaluation; Building Use Studies. Internet;
www.usablebuildings.co.uk. Viewed: April 5th, 2009.
Lomash, S. (1997), Value management. New Delhi. Sterling publishers. Pp 167-173.
Lovins, A. and Browning, A. (1992), Green architecture; vaulting the barriers.
Architecture records, December.
Mouton, J. (2001), How to succeed in your Masters and Doctoral Studies. Pretoria: Van
Shaik
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Kevin Chuks Okolie and Winston Shakantu, pp 998-1010
Neumann, W. (2000), Social Research Methods: Qualitative and Quantitative
approaches, 4th edition, Need bam Heights: Allyn & Bacon.
National Audit Office (2001), Modernizing Construction Report. Internet:
www.nao.org.uk/publications/0001/modernizingconstruction.aspx. Viewed; 14/4/ 2009.
National Audit Office (2003), Construction Performance. Internet;
www.nao.org.uk/publications/0203/pfi_construction_performance.aspxViewed;
14/4/2009.
.Joe, N. (2009), Historic Chance to Make Buildings More Efficient and
Effective.Internet::http://hometownsource.com/index.php?option=com_content&task=v
iew&id=8031&Itemid=1. Viewed; 14/4/ 2009.
Kathrine, L. and Svein, B. (2004), User Needs/Demands (Functionality) Adaptability of
Buildings- A Model and a tool for the evaluation of buildings. Trondheim and
Multiconsult AS, Oslo.
Obiegbu, M. E. (2004), Overview of total Performance concept of buildings; focusing
on Quality, Safety, Durability, etc. Paper presented at the 34th Annual Conference of the
Nigerian Institute of Building. Abeokuta. 2004.
OECD, (2007), PEB Organizing Framework for Evaluating Quality in Educational
Facilities. Second Adhoc Experts Group Meeting; Mexico. Internet:
www.oecd.org/,du/facilities/evaluatingquality. Viewed: 10/4/ 2009.
Preiser, W. F. (1995), Post-Occupancy Evaluation; How to make buildings work better.
Facilities. 13(11); 19-28.
Thompson, T. (1990), The Essence of Facilities Management. Facilities. 8(8); 8-12.
Swensson, K. (1998), Integrated Facilities Management Information.; A process and
project model Approach. Kungliga, Tekniska.
Zimring, C. (2005), Facility Performance Evaluation. Internet:
www.wbdg.org/Resources/Fpe.php. Viewed: 10/4/ 2009.
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
R M Potgieter and C E Cloete, pp 1011-1028
The impact of a view on the value of vacant residential erven
R M Potgieter1 and C E Cloete1
1
Department of Construction Economics
University of Pretoria
South Africa
E-mail: [email protected]; [email protected]
Abstract:
The purpose of the study was to investigate the impact of a view on residential property
values. Only vacant properties (erven) were included in the study. The study included the
vacant erven of six townships known as Amandasig Extensions 37, 40 and 41 as well as
Ninapark Extensions 25, 31 and 32 situated in Tshwane, South Africa. The townships were
split into an upper and lower part respectively representing the erven in the township,
which have a view and those who do not. The average purchase price and average price per
square metre were calculated for each of the townships. From the study it was clear that
higher lying properties, that are properties having a view, were more expensive than lower
lying properties even though some of the lower lying properties also possessed a view.
Furthermore, it was calculated that higher lying properties were, on average, 24% more
expensive in terms of purchase price and 14% more expensive in terms of price per square
metre.
Keywords: Value of a view, value of vacant erven
1. Introduction
During 2004, the case of Paolo vs Jeeva NO and Others 2004 (1) SA 396 (SCA), put before
the South African Supreme Court of Appeal, highlighted the vigour with which and great
lengths property owners will go to, to safeguard and protect the views enjoyed from their
properties (Grobler 2004). Subsequent to the latter another case was put before the court for
judgement in the matter of Clark vs Faraday and Another 2004 (4) SA 564 (C) which
reiterated the fact that property owners regard a view as being part and parcel of their
properties (Smal1992:283). The respondents in both cases argued that the construction of
new houses in front of their existing dwelling houses would deprive the view enjoyed from
their properties and substantially derogate from the value of their properties. In both court
cases it was evident that property owners regard their views as “holy” and would utilize any
means possible to protect such a view. It is however the second point made which required
further investigation and which formed the crux of the study namely; the value of a view.
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RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
R M Potgieter and C E Cloete, pp 1011-1028
Since the 1960’s South African cities have experienced considerable growth, not only in
terms of population size but more so the physical growth of the cities and the pattern in
which it took place. Residential expansion specifically followed a development pattern
away from the Central Business Districts (C B D’s) of cities (last-mentioned does not
include or refer to historical segregation townships). The latter was inevitably the result of
an increase in the private ownership of motor vehicles and subsequent freedom that this
mode of transport provided. No longer was it necessary for the average person to reside in
close proximity of bus and train stations in order to commute to work or purchase month-
end groceries in the C B D. The convenience of private transport altered the face of the
South African city forever. The change in human settlement patterns, away from the
“historic” CBD of cities, ultimately brought about a chain reaction in property development
where businesses, offices, shopping malls etc. followed suit and established themselves in
close proximity of the new residential townships. Not only did the private owned vehicle
increase the freedom of their owners but indirectly facilitated the exploration and
subsequent development of areas for residential purposes previously regarded as non-
developable land purely because of geographical features and naturally the constraints
associated therewith.
Public transport such as busses is limited to a specific gradient; motorcars are not. The
result of the latter is that residential dwelling houses were increasingly built on ridges and
mountainous areas. These areas were widely and commonly recognised and marketed as
being prestige areas and were characterised by higher than the normal house prices. These
higher prices were not only the result of expensive building costs due to the mountainous
terrain but surely also because of the well known phrase uttered by so many, especially
estate agents: “…and the house has such a beautiful view!”. The aim of the study was to
investigate the validity of the last-mentioned remark with specific reference to the
contribution made by a view to the value of residential properties.
It is generally accepted that the type of view that can be seen from a residential house or
unit can have a positive impact on the price or value of the property. Studies have found
that buyers are willing to pay more for a scenic view and that houses with a good view can
attract a premium.
2. Literature survey
Most of the studies done in the past were related to water based views, whether it be an
ocean view or a view overlooking a lake. A study by Benson et al. (1998:55) found that
price premiums for superior, good and poor partial ocean views were 30.8%, 29.4% and
8.2% respectively. In terms of lake views, Seiler et al (2001:294) found that properties that
have a water view of Lake Erie attracted a premium of 56% or a premium paid of $115
000.00. As was the case with this study, numerous studies were done which were not based
on water views. Correll et al. (1978:207) examined the quasi-public good effect of
greenbelts on residential property values in Boulder, Colorado. A reviewer of the study
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suggested that a variable be included to capture the differences of existing views over the
valley because of varying degrees in elevation. Interestingly enough the authors of the
study found the view variable was statistically insignificant. Another study that found the
view variable to be statistically insignificant was that of Janmaat (2005:16). The study
examined the effect of noise pollution, generated by a provincial highway situated on the
southern boundary of a university town called Wolfville, Nova Scotia, on house prices. Of
the two externalities measured- sound levels and the presence of a view - only peak sound
levels were found to be significant. In another study not based on water views, Gillard
(1981:219) found that although a view lot added $3,887 to the price of residential
properties said view lot premium was not trivial as the mean selling price of the housing
units in the sample was $42,128.
From the studies consulted only two studies, that of Correl et al (1978:210) and Janmaat
(2005: 16), found that a view does not significantly contribute to the value of residential
properties.
3. Data and Methodology
As mentioned earlier the study focussed on vacant residential erven only (“erven” refers to
the South African term for a residential stand - the singular form of “erven” is an “erf”).
The reason for the latter was that the inclusion of residential properties, characterised by
existing dwelling houses, complicates relevant information to be obtained regarding such
properties. In terms of transaction based information it would also be necessary to obtain all
the relevant information pertaining to such a property, which naturally include the physical
information of the property such as the number of rooms, living areas, extent of the house
and any features such as a swimming pool etc. Furthermore, it would be necessary to
physically inspect and classify the view from each of the houses, especially from the rooms
and entertainment areas.
To critically look at the aforementioned features and further to incorporate such features
and physical information into the study it would be necessary to obtain the building plans
of any given property to be included in the study. The building plans of properties can be
obtained from either the registered owner of a property or the local authority. This study
concentrated on properties situated only in the City of Tshwane Metropolitan Municipality
(local authority). It is self explanatory that not many registered owners have copies of their
building plans. The only real reliable source to obtain building plans from properties to be
included in the study is therefore the local authority. The local authority however, required
an array of documents, such as a power of attorney from the registered owner, before such
building plans would be made available to the researcher. Naturally the difficulty to obtain
documents such as powers of attorney from registered owners would have been extreme to
near impossible and did the researcher therefore decide to include only vacant stands into
the study.
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In terms of the specific study area/s, the ideal was to look at erven, which were grouped
together thereby, increasing the possibility to compare different erven, belonging to a
specific group, with one another. To achieve the latter the researcher looked at different
residential townships, each made up of a number of erven.
Furthermore, keeping in mind the objective of the study, it would have been senseless to
include any residential township that is not situated on a prominent natural feature, thereby
providing for certain erven in the township to be characterised by a view. The ideal was
therefore to include townships associated with a linear natural feature of which the
Magaliesberg mountain range is the best and a near perfect example in Pretoria. The
Magaliesberg is one of Pretoria’s most well-known and recognisable natural features and
stretches from east to west through the city (cf. figure 1).
The Magaliesberg is characterised by existing developments over almost its entire length.
Unfortunately, in terms of the study, most of the developments along the Magaliesberg
consist of well-established townships, some of which date back as far as the 1950’s and
1960’s. Naturally all of the erven contained in these townships are characterised by
dwelling houses and other improvements, which rendered them obsolete for purposes of the
study.
In view of the above and in an attempt to obtain data relevant to the study, attention shifted
to the far west of the Magaliesberg, with specific reference to the area under jurisdiction of
the City of Tshwane formerly known as the Akasia City Council. This area experienced
considerable growth over the past decade and is characterised by townships which not only
offer views, but are also fairly new.
The preliminary study area included nine townships. Initial information to be obtained
regarding the townships included the following:
- The promulgation date of each of the townships ie the date on which each township
was promulgated; therefore the date after which the individual erven could be
transferred from the developer into the names of the purchasers.
- Purchase date of erven contained in each of the townships in the Deeds Office.
- Extent of the individual erven in each of the townships.
- Purchase price of the individual erven in each of the townships.
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Figure 1 Locality plan of study areas
Relevant information was obtained from the South African Deeds Office (Pretoria branch)
and more specifically, the database made available by the Deeds Office called WinDeed.
Mentioned program can be purchased from the Deeds Office and is usually used by
property related professions such as property valuers, town planners, estate agents and
conveyancers (attorneys). With WinDeed itself, it is possible to obtain data regarding any
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given property such as the registered owner, extent of the property, whether any bond has
been registered over the property etc. However, to obtain the original purchase date and
purchase price of any property the researcher had to make use of a subdirectory within
WinDeed called WinXfer. Last mentioned enabled the researcher to obtain all relevant
information regarding the initial townships to be included in the study. WinXfer has
however, one restriction affecting the number of townships to be included in the study.
With WinXfer it is only possible to retrieve data regarding any township, specifically
registration dates of erven, registered in the (Pretoria) Deeds Office, dating back to January
2002.
After the relevant information regarding the townships was obtained from the Deeds Office
by means of WinXfer, the following townships were found to be suitable to be included in
the study:
Township Name Proclamation Date No. of Residential Erven
Amandasig X 37 July 2006 90
Amandasig X 40 July 2006 33
Amandasig X 41 July 2006 20
Ninapark X 25 August 2002 21
Ninapark X 31 May 2003 33
Ninapark X 32 October 2002 33
As mentioned before, the aim was to look, as far as possible, at erven that were grouped
together, thereby increasing the possibility to compare different erven, belonging to a
specific group, with one another.
The only real option to achieve the latter was to look at different residential townships each
made up of a number of erven. The attempt to keep the characteristics of the townships
included in the study the same was further increased by looking at townships belonging to
the same “residential estate”.
In terms of the above it should be mentioned that the Amandasig townships form part of a
residential security estate known as “Magaliesberg Country Estate”. Mentioned estate
consists of a total of 10 individual townships of which Amandasig Extensions 37, 40 and
41 are included in the study. Mentioned townships were included mainly because relevant
information regarding these townships was available and naturally also because they were
characterised by a slope thus providing some of the erven in the specific township with a
view. The remaining townships comprising the aforementioned estate were at the time of
compiling the study not yet proclaimed and was sufficient information regarding these
townships not yet available.
The aforementioned estate is characterised by both northerly and southerly slopes (views).
The townships included in the study being Amandasig Extensions 37, 40 and 41 are
situated in a part of the estate characterised by a valley shape so to speak, with Extensions
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37 and 40 having a view in a southerly direction while Extension 41 has a view in a
northerly direction.
The three Ninapark townships on the other hand comprise a residential security estate
known as “Shawu Security Estate”. Again the aim was to, as far as possible; establish a
certain extent of homogeny regarding not only the individual townships but also their
relation to one another with specific reference to locality, geographical features etcetera.
Mentioned estate is characterised by a view in a northerly direction.
The township of Amandasig Extension 37 consists of 90 erven ranging in size from 600m
to 1328m . The average erf size in the township is 696.43m. The township has a
predominant slope in an easterly direction. The whole of the township is subject to said
slope and because of the position of the eastern township boundary; even the lowest lying
properties have a view of the remainder of the “valley” in an easterly direction.
Figure 2 Township layout Amandasig X37
Furthermore, the contours applicable to the township are more or less evenly spaced except
for the north western part of the township which is subject to contours spaced closer
together albeit for a small distance taking into account the total distance of the township in
an easterly direction. For this reason it was decided to split the township in two halves
(upper and lower part) with specific reference to the entire slope applicable to the township.
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The difference in height from the highest lying property to the lowest lying property is 25
metres. The highest lying erf in the township is 1385 metres above sea level while the
lowest lying erf in the township is 1360 metres above sea level. The 1372 metre contour
was accepted as being the base contour line. Each erf primarily affected by the base contour
line was included in the lower part of the township (60 erven). The remainder of the erven
(30 erven) in the township were included in the upper part of the township. The upper part
of the township has a gradient of 1:11.23 therefore 1:11. The lower part of the township is
subject to a slope of 1:13.67 therefore 1:14. By calculating the spot height for each erf it
was determined that the upper and lower part of the township had an average height of
respectively 1376.1m and 1368m. The standard deviation, variance and coefficient variance
for the upper and lower part of the township was calculated using MS Excel and is depicted
below:
UPPER PART LOWER PART
Standard Deviation R 116 799.48 R 63 969.26
(Purchase Price)
Standard Deviation R 80.53 R 71.95
(Price/m )
Standard Deviation 2.8 2.7
(Spot Heights)
Variance (Purchase Price) R 13 642 119 540.23 R4 092 066 666.67
Variance (Price/m ) R 6 485.55 R5 176.17
Variance (Spot Heights) 8.0 7.2
Coefficient Variance 34.50% 25.83%
(Purchase Price)
Coefficient Variance 18.87% 19.05%
(Price/m )
Coefficient Variance 0.21% 0.20%
(Spot Height)
Amandasig Extension 40 consists of 33 residential erven ranging in size from 577m to
1309m . The average erf size in the township is 837.16m . It should be noted however that
two of the erven in the township being Erven 1388 and 1408 were at the time of writing not
yet sold to new owners and were still registered in the name of the township owner
(developer). These two erven were therefore not included for purposes of the study.
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Figure 3 Township layout Amandasig X40
The township possesses the same inherent characteristics as Amandasig Extension 37 being
that the contours are more or less evenly spaced over the length of the township except for
the northwestern most part of the township where the contours are spaced considerably
closer. The township has a slope in a predominantly southeasterly direction. Again it was
decided to split the township in half. The difference in height from the highest lying
property to the lowest lying property is 22 metres. The 1385 metre contour was accepted as
being the base contour line. Each erf affected by the base contour line was included in the
upper part of the township (9 erven). The remainder of the erven (22 erven) in the township
were included in the lower part of the township. The upper part of the township has a
gradient of 1:10.37 therefore 1:10. The lower part of the township is subject to a slope of
1:18.37 therefore 1:18. The upper and lower part of the township had an average spot
height of respectively 1388.9m and 1378.3m. The standard deviation, variance and
coefficient variance for the upper and lower part of the township is depicted below:
UPPER PART LOWER PART
Standard Deviation R 182 599.59 R 90 611.93
(Purchase Price)
Standard Deviation R 102.25 R 86.14
(Price/m )
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Standard Deviation 4.3 2.9
(Spot Heights)
Variance (Purchase Price) R 33 342 611 111.11 R 8 210 521 645.02
Variance (Price/m ) R 10 455.36 R 7 419.56
Variance (Spot Heights) 18.4 8.2
Coefficient Variance 30.95% 24.83%
(Purchase Price)
Coefficient Variance 17.00% 18.58%
(Price/m )
Coefficient Variance 0.31% 0.21%
(Spot Height)
Amandasig Extension 41 consists of 20 residential erven ranging in size from 600m to
940m . The average erf size in the township is 711.95m . The township is situated on the
southern side of the estate and has a slope in a northeasterly direction overlooking the
previous townships being Amandasig Extensions 37 and 40. The contours applicable to the
township are for the largest part evenly spaced. As was the case with the previous
townships it was decided to split the township in half. The difference in height from the
highest lying property to the lowest lying property is 9 metres. The 1378 metre contour was
accepted as being the base contour line. Each erf affected by the base contour line was
included in the upper part of the township (8 erven). The remainder of the erven (12 erven)
in the township were included in the lower part of the township. The upper part of the
township has a gradient of 1:15. The lower part of the township is subject to a slope of
1:20. It is worth noting that the slopes inherent to the upper and lower part of the township
are not as steep if compared to those of the previous townships. The upper and lower part of
the township had an average spot height of respectively 1378.75m and 1375.5m. The
standard deviation, variance and coefficient variance for the upper and lower part of the
township is depicted below:
UPPER PART LOWER PART
Standard Deviation R 101 140.28 R 88 102.73
(Purchase Price)
Standard Deviation R 126.71 R 155.43
(Price/m )
Standard Deviation 1.5 1.2
(Spot Heights)
Variance (Purchase Price) R 10 229 357 142.86 R 7 762 090 909.09
Variance (Price/m ) R 16 054.92 R 24 158.06
Variance (Spot Heights) 2.1 1.3
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Coefficient Variance 27.28% 25.35%
(Purchase Price)
Coefficient Variance 24.19% 31.26%
(Price/m )
Coefficient Variance 0.11% 0.08%
(Spot Height)
Figure 4 Township layout Amandasig X41
Ninapark Extension 25 consists of 21 residential erven ranging in size from 1001m to
1154m . The information of four of the erven in the township could not be obtained due to
the fact that these erven were still registered in the name of the township owner
(developer). Furthermore, two of the erven in the township were only recently registered
into the names of new owners. These erven were respectively registered into the names of
the new owners on 03 May 2007 and 18 August 2006. Because mentioned erven were
registered at a much later stage as the rest of the erven in the townships it was decided not
to include the erven in the township. Mentioned erven also recorded purchase prices which
were much higher compared to the rest of the erven in the township. It was assumed that
the “abnormal” purchase prices of the aforementioned erven related directly to their
purchase dates. The average erf size (of the erven included in the study) in the township is
1027.70m . The township has a slope in a northerly direction and is the contours applicable
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to the township for the largest part quite evenly spaced. When visiting the township (site) it
was clear that the township gradually flattens out when moving in a northerly direction.
Figure 5 Township layout Ninapark X25
The difference in height from the highest lying property to the lowest lying property is 8
metres. Because of the change in gradient applicable to the township, the 1305 metre
contour was accepted as being the base contour line. Each erf affected by the base contour
line was included in the upper part of the township (6 erven).
The remainder of the erven (11 erven) in the township were included in the lower part of
the township. The upper part of the township has a gradient of 1:17.6 therefore 1: 18. The
lower part of the township is subject to a slope of 1:57.
The upper and lower part of the township had an average spot height of respectively
1307.8m and 1302.9m. The standard deviation, variance and coefficient variance for the
upper and lower part of the township is depicted below:
UPPER PART LOWER PART
Standard Deviation R 13 662.60 R 20 987.01
(Purchase Price)
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Standard Deviation R 15.87 R 22.0
(Price/m )
Standard Deviation 1.8 1.1
(Spot Heights)
Variance (Purchase Price) R 186 666 666.67 R 440 454 545.45
Variance (Price/m ) R 251.87 R 484.08
Variance (Spot Heights) 3.3 1.1
Coefficient Variance 7.32% 12.83%
(Purchase Price)
Coefficient Variance 8.83% 13.70%
(Price/m )
Coefficient Variance 0.14% 0.08%
(Spot Height)
Ninapark Extension 31 consists of 33 residential erven ranging in size from 846m to
2088m . The average erf size in the township is 1052.90m . The slope inherent to the
township bears the same characteristics as that of Ninapark Extension 25 although
considerably more extreme (steeper). The slope applicable to the township noticeably
changes at a specific street in the township, called Swartpiek Crescent, when moving down
in a south-north direction. The difference in height from the highest lying property to the
lowest lying property is 46 metres. Because of the change in gradient applicable to the
township, the previously mentioned street was accepted as the separation line so to speak.
Each erf situated above, i e south of swartpiek Crescent was included in the upper part of
the township (19 erven). The remainder of the erven (14 erven) in the township, situated
below or north of Swartpiek Crescent were included in the lower part of the township. The
upper part of the township has a gradient of 1:6. The lower part of the township is subject
to a slope of 1:22.
The upper and lower part of the township had an average spot height of respectively
1318.2m and 1304.9m. The standard deviation, variance and coefficient variance for the
upper and lower part of the township is depicted below:
UPPER PART LOWER PART
Standard Deviation R 127 473.86 R 19 824.09
(Purchase Price)
Standard Deviation R 45.04 R 25.29
(Price/m )
Standard Deviation 8.8 1.7
(Spot Heights)
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Variance (Purchase Price) R 16 249 584 795.32 R 392 994 505.49
Variance (Price/m ) R 2 029.01 R 639.82
Variance (Spot Heights) 77.0 2.9
Coefficient Variance 47.07% 11.59%
(Purchase Price)
Coefficient Variance 19.84% 13.24%
(Price/m )
Coefficient Variance 0.67% 0.13%
(Spot Height)
Figure 6 Township layout Ninapark X31
Ninapark Extension 32 consists of 33 residential erven ranging in size from 887m to
1200m . The average erf size in the township is 967.54m . The slope inherent to the
township closely resembles that of Ninapark Extension 31. As was the case with Ninapark
Extension 31 the slope applicable to the township noticeably changes at Swartpiek Crescent
when moving down in a north-south direction. The difference in height from the highest
lying property to the lowest lying property is 27 metres. Swartpiek Crescent was again
accepted as the base line. Each erf situated above, i e south of swartpiek Crescent was
included in the upper part of the township (18 erven). The remainder of the erven (15
erven) in the township, situated below or north of Swartpiek Crescent were included in the
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lower part of the township. The upper part of the township has a gradient of 1:9.28
therefore 1:9. The lower part of the township is subject to a slope of 1:31.6 therefore 1:32.
The upper and lower part of the township had an average spot height of respectively
1313.6m and 1303.5m. The standard deviation, variance and coefficient variance for the
upper and lower part of the township is depicted below:
UPPER PART LOWER PART
Standard Deviation R 55 955.75 R 19 036.31
(Purchase Price)
Standard Deviation R 50.57 R 15.14
(Price/m )
Standard Deviation 5.3 1.4
(Spot Heights)
Variance (Purchase Price) R 131 045 751.63 R 362 380 952.38
Variance (Price/m ) R 2 557.13 R 229.23
Variance (Spot Heights) 28.1 2.1
Coefficient Variance 23.92% 11.18%
(Purchase Price)
Coefficient Variance 21.75% 8.21%
(Price/m )
Coefficient Variance 0.40% 0.11%
(Spot Height)
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Figure 7 Township layout Ninapark X32
In summary the average purchase prices, prices per square metre as well as the difference
between mentioned parameters pertaining to each of the townships are tabled below.
Table 1: Difference in Purchase Price and Price per Square Metre
(Calculated for all the Townships)
Gradient Average Purchase Average Price/
Price m²
Amandasig X 37 Upper Part 1:11 R 338 533.33 R 426.73
Lower Part 1:14 R 247 633.33 R 377.57
Difference (%) 21% 36% 13%
Upper Part 1:10 R 589 888.89 R 601.38
Amandasig X 40 Lower Part 1:18 R 364 954.55 R 463.70
Difference (%) 44% 62% 30%
Upper Part 1:15 R 370 750.00 R 523.89
Amandasig X 41 Lower Part 1:20 R 347 500.00 R 497.15
Difference (%) 25% 7% 5%
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Upper Part 1:18 R 186 666.67 R 179.72
Ninapark X 25 Lower Part 1:57 R 163 636.36 R 160.56
Difference (%) 68% 14% 12%
Upper Part 1:6 R 270 842.11 R 227.06
Ninapark X 31 Lower Part 1:22 R 171 071.43 R 191.11
Difference (%) 73% 58% 19%
Upper Part 1:9 R 233 888.89 R 232.48
Ninapark X 32 Lower Part 1:32 R 170 333.33 R 184.53
Difference (%) 72% 37% 26%
Overall Average 35.66% (36%) 17.50% (18%)
4 Findings and Discussion
As one could have expected, it is clear from the above that higher lying properties, that is
properties having a view, are more expensive than lower lying properties even though some
of the lower lying properties also possess a view.
From the study it is evident that higher lying properties are, on average, 36% more
expensive in terms of purchase price and 18% more expensive in terms of price per square
metre. Other than the fact that it was established that higher lying properties are more
expensive than their lower lying counterparts, two aspects came to the fore. Firstly that the
difference in the average purchase price is considerably more than the difference in the
average price per square metre. Secondly that the average differences in both purchase
price and price per square metre are significantly more for properties situated on a steep
slope compared to properties situated on a moderate and/ or gradually decreasing slope.
Two of the townships included in the study, being Amandasig Extension 41 and Ninapark
Extension 25, are subject to a relatively moderate and even slope. As indicated in Table 1,
the differences in the average purchase price and price per square metre of said townships
are below the average mentioned above. Also noteworthy is the fact that the purchase price
average is more than the price per square metre average. Again, it should be noticed that the
difference between purchase price and price per square metre are only marginal for the
townships possessing a moderate slope being Amandasig Extension 41 and Ninapark
Extension 25.
Unlike some of the studies in the literature, which focussed on water-based views, this
study was conducted in inland Pretoria. It is well known that properties having an ocean
view or view over a lake are orientated to maximally exploit such a view with less
emphasis placed on the orientation of the sun, its heat and/ or light. In terms of the study
conducted, a further question arose which deals with the orientation of the views. In the
southern hemisphere and specifically South Africa the preference is to construct houses to
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face in a northerly direction in order to maximally utilize the light and heat of the sun. The
latter is, almost without exception, applicable to inland properties only.
Three of the six townships, being Ninapark Extensions 25, 31 and 32 have a northerly
view. Amandasig Extensions 37 and 40 is subject to a slope in a predominantly south-
easterly direction. Amandasig Extension 41 on the other hand has a view in a north-easterly
direction. From the discussion above it is evident that the impact of a view on all of the
townships was positive although to a different degree. Interestingly enough and as
mentioned earlier, Amandasig Extension 40 with an inherent view facing southeast
recorded the highest difference in average pertaining to both purchase price and price per
square metre.
Equally so, Ninapark Extension 25 (northerly view) and Amandasig Extension 41 (north-
easterly view) recorded the second most and lowest differences in average pertaining to
purchase price and price per square metre. In terms of the study conducted the conclusion
could therefore be made that a view has a positive impact on residential property values
irrespective of the specific direction of such a view. The study clearly indicated that people
are willing to pay more for properties with a view regardless the direction of such a view.
References
Benson, E. D. et al. (1998). Pricing Residential Amenities: The Value of a View. Journal of
Real Estate Finance and Economics, 16(1), pp 55-73.
Correll, M. R. (1978).The affects of Greenbelts on Residential Property Values: Some
Findings on the Political Economy of Open Space. Land Economics, 54(2), pp 207-
217.
Gillard, Q. (1981). The Effect of Environmental Amenities on House Values: The Example
of a View Lot. Professional Geographer, 33(2), pp 216-220.
Grobler, S. J. (2004). The Right to a View. The South African Valuer, June 2004, no.78, p.8-11.
Janmaat, J. (2005). Factors Affecting Residential Property Values in a Small Historic
Canadian University Town. Acadia University. Department of Economics.
Seiler, M. J. et al. (2001). The Impact of World Class Great Lakes Water Views on
Residential Property Values. The Appraisal Journal, July 2001, p.287-295.
Smal, C (ed.) (1992). The Valuers’ Manual, Part 3. 2nd ed. Durban: Butterworth.
- 1028 -
COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Simon Robson, pp 1029-1043
The use of judgement by commercial property developers
Simon Robson
School of the Built Environment,
Northumbria University, Newcastle upon Tyne, NE1 8ST,
United Kingdom
Email: [email protected]
Abstract:
In the UK, as in other developed market economies, commercial property is a multi-
million pound industry that makes an important contribution to GDP and employment.
Commercial development is a classic example of a high risk / high return business; a
fact that is particularly apposite in times of economic uncertainty. Developers clearly
take significant risks at various stages of the development process; and they do this in
anticipation of the considerable financial rewards on offer. Equally, when their
assessment indicates it, the decision will be taken not to proceed. On what basis do they
make these decisions? Previous research by the author found that, while formal risk
assessment is undertaken by developers, the process is heavily influenced by their risk
attitude and ‘judgement’. The research seeks to explore these issues by generating
empirical data on developers’ ‘judgement’ and setting them against existing theoretical
work. The overall aim of the study is to examine the issue of ‘judgement’ in risk-related
decisions in the property development process, and to determine whether this concept
can be theoretically explained using existing work on risk, risk attitude and heuristics.
The method of enquiry is predominantly in-depth, semi-structured, face-to-face
interviews with experienced property developers. At this stage the data has been
analysed by a sorting and sifting process to try and find similarities, differences and
patterns in the responses. The research has found that property developers essentially
believe that they adopt a fairly objective approach to risk related decision making
however the use of judgement, intuition and experience was frequently referred to. A
preliminary analysis of the data suggests that heuristics play a role in the decision
making process. In particular the availability heuristic, confirmation trap and cautious
shift heuristic are evident. The work reports on the interim findings of a continuing
study, and conclusions are, as yet, provisional, but in terms of its aims, objectives and
method the paper gives an insight into an important and little researched issue in the
property development industry.
Keywords:
Commercial property, developers, heuristics, judgment, risk
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Simon Robson, pp 1029-1043
1 Introduction
In the UK, as in other developed market economies, commercial property is a multi-
million pound industry that makes an important contribution to GDP and employment.
Commercial development is a classic example of a high risk / high return business; a
fact that is particularly apposite in times of economic uncertainty. Developers clearly
take significant risks at various stages of the development process; and they do this in
anticipation of the considerable financial rewards on offer. Equally, when their
assessment indicates it, the decision will be taken not to proceed. On what basis do they
make these decisions? Previous research by the author found that, while formal risk
assessment is undertaken by developers, the process is heavily influenced by their risk
attitude and ‘judgement’.
The research seeks to explore these issues by generating empirical data on developers’
‘judgement’ and setting them against existing theoretical work. The overall aim of the
study is to examine the issue of ‘judgement’ in risk-related decisions in the property
development process, and to determine whether this concept can be theoretically
explained using existing work on risk, risk attitude and heuristics.
The method of enquiry is predominantly in-depth, semi-structured, face-to-face
interviews with experienced property developers. At this stage the data has been
analysed by a sorting and sifting process to try and find similarities, differences and
patterns in the responses. It is the researcher’s intention to conduct a significant number
of additional interviews which will generate a substantial amount of data requiring a
more structured approach to analysis. It is the researcher’s intention to use the
qualitative research software package NVivo to undertake template analysis of the data.
This is a technique for thematically organising and analysing textual data.
The research has found that property developers essentially believe that they adopt a
fairly objective approach to risk related decision making however the use of judgement,
intuition and experience was frequently referred to. A preliminary analysis of the data
suggests that heuristics play a role in the decision making process. In particular the
availability heuristic, confirmation trap and cautious shift heuristic are evident. The
intention is to expand this research project and interview a wider range of property
development executives. It is hoped that this may result in the construction of some
theory that may ultimately help to improve the quality of the property development
decision making process. (Wilkinson & Read, 2008)
2 Literature Review
Commercial property development encompasses aspects of real estate, construction and
project management but is in itself a complex process involving a variety of sub
processes. Property development has been defined as ‘a process that involves changing
or intensifying the use of land to produce buildings for occupation’.
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Simon Robson, pp 1029-1043
‘Uncertainty lies at the root of property development, which produces a product in
anticipation of unknown future demand. Development is a complex stochastic process
whose features vary with time and place’. (Fisher & Robson, 2006)
Various approaches have been devised to model the property development process and
these can be used to help identify and analyse property development risk. These include
the traditional event sequence approach (Birrell & Bin, 1997), structure and agency
theory (Healey & Barratt, 1990), institutional analysis (Ball, 1998), and institutional
economics (Keogh & D'Arcy, 1999).
Although the Birrell and Bin model can be criticised for its linear nature it is a useful
model for the purpose of this research. The model shows the trader developer’s property
development process as a four stage process involving fourteen phases. The model can
be represented as follows:
1. Evaluation
a. Opportunity / site identification
b. Market analysis
c. Site investigation
d. Feasibility study
2. Acquisition
a. Professional appointments
b. Financing
c. Planning application
d. Site assembly / purchase
3. Procurement
a. Design
b. Tender / contracting
c. Construction
4. Disposal
a. Promotion
b. Letting
c. Sale
All the events in the process involve a huge amount of decision making. Risk is attached
to the taking or not taking of decisions not the events themselves. Risk can be defined as
‘the probability of an event and its consequences’. (British Standards Institution, 2002)
Risk management traditionally focused on threats however in recent years the potential
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Simon Robson, pp 1029-1043
for events to have positive consequences has been recognised as part of the process.
(Hillson & Murray-Webster, 2007)
The relationship between risk and profitability in property development has long been
recognised. ‘For development to proceed, an acceptable profit must be believed to exist
commensurate with the risks involved. (Millington, 2000)
When making individual decisions relating to the various phases of the development
process developers should apply the normal principles of risk management as set out
below.
(British Standards Institution, 2002)
Fisher and Robson (2006) explored how developers perceive risks and the techniques
they use to manage them. Risk analysis and evaluation can involve techniques such as
brainstorming, SWOT analysis, probability-impact matrices and sensitivity analysis. A
decision is then required as to how to treat or respond to the risk. Risk responses can be
categorised as avoidance, reduction, transfer and retention.
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Simon Robson, pp 1029-1043
Fisher and Robson (2006) identified the key risks facing a developer as rent, letting,
investment, building, finance, site condition, site assembly and planning. Developers
were asked how important they considered the following risk response methods were to
the success of their projects: fixed price contract, pre-letting, advance purchase, option
to purchase the site, joint venture, phasing, mixed or flexi use, and finance cap. A
‘league table’ of these methods was assembled. This showed the fixed price contact as
the most widely used form of risk management with the finance cap as the least used.
The Use of Risk Management Tactics (Percentages)
(Fisher & Robson, 2006)
As can be seen from the above table there was considerable variance in the use of risk
response methods by developers. The most used technique not being used by 19% of
respondents and the least used technique being used considered important or crucial by
24%.
This suggests a less than objective approach to risk management by property
developers. Fisher and Robson (2006) concluded that ‘While developers do manage
risk, decisions are made on the basis of professional and business experience’.
‘Surely if risk management is well understood, with clear principles, user-friendly tools,
efficient techniques, trained and skilled people, and so on, then its implementation
should not be variable. Applying the same standard approach to managing risk should
deliver results every time.’ (Hillson & Murray-Webster, 2007)
Risk management literature presents two main explanations why risk management is
generally not so straightforward: risk attitude and human judgement.
Risk attitude has been defined as a ‘chosen response to uncertainty that matters, driven
by perception.’ (Hillson & Murray-Webster, 2007) Four basic attitudes to risk have
been identified: risk averse, risk tolerant, risk neutral and risk seeking. Risk attitudes
exist on a spectrum and although individuals or groups may have a default attitude this
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Simon Robson, pp 1029-1043
may be modified by situational or environmental factors. The risk attitude of the
individual or group will have implications for the risk management approach chosen.
Risk averse individuals or groups are characterised as over-reacting to threats and
under-reacting to opportunities. Risk tolerant individuals or groups are comfortable with
risk. Although this may seem to be an acceptable position it may result in problems
impacting from unmanaged threats and opportunities being missed. Risk neutrality is a
more mature attitude focused on the longer term and seeks strategies to secure tangible
benefits. Risk seekers are attracted by challenges and are likely to underestimate threats
and over estimate opportunities. (Hillson & Murray-Webster, 2007)
A significant amount of work has been undertaken into the role of intuitive judgement
in decision making. Much of this has centred on the notion of heuristics. A heuristic has
been defined as ‘A short cut or rule of thumb that yields a rough and ready answer,
which may be correct, but which is often biased. Heuristics underlie many of our
intuitive inferences.’ (Johnson-Laird, 2006)
This theme is further developed by Hillson and Murray-Webster (2007) ‘Heuristics can
subconsciously and systematically introduce sources of bias when considering a
situation where the answer is unknown or unfamiliar, and when the person is required to
make a judgement with insufficient information.’
Tversky and Kahneman (1974) were leading pioneers in the field of heuristics. They
frequently stated that heuristics sometimes succeed and sometimes fail, and contended
that irrationality and bias were the main contributors to errors in human reasoning.
However Daniel Kahneman, in his 2002 Nobel Prize Lecture, seemed to suggest that he
was more inclined to their positive role referring to Klein’s assertion that ‘Most
behaviour is intuitive, skilled, unproblematic and successful’. (Klein, 1998) Kahneman
continued ‘In some fraction of cases, a need to correct the intuitive judgements and
preferences will be acknowledged, but the intuitive impression will be the anchor for the
judgement.’ (Kahneman, 2002a)
Numerous authors have described the characteristics of various heuristics. Four of the
most commonly referred to are availability, representativeness, anchoring, and the
confirmation trap. (Hillson & Murray-Webster, 2007) (Kahneman, Tversky & Slovic,
1982a) (Gigerenzer & Engels, 2007)
The availability heuristic is a subconscious search for data to compare to the current
situation. It depends on the extent to which an item is available to the memory
inevitably meaning that recent events are given disproportionate significance. It can be
simplified as ‘it happened before so it can happen again’.
The representativeness heuristic tries to pigeonhole situations into a range of
stereotypes. Although this can be a useful starting point it over emphasises aspects of
the current situation that are similar to the stereotype. This may lead to a less thorough
assessment of a situation than that required.
The anchoring and adjustment heuristic starts with an irrational choice of an initial
value. This then acts as an anchor around which adjustments are made. The starting
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Simon Robson, pp 1029-1043
point may come from a suggestion or from experience. Problems with this heuristic are
an over attachment to the number first thought of and a reluctance to adjust sufficiently
around it.
The confirmation trap is in effect an approach that involves assuming an answer and
then looking for supporting or refuting evidence. Subconsciously the decision maker
will overly rely on their preformed position and fail to consider all the available data.
In addition to individual heuristics a number of group heuristics have been identified.
These include the risky shift where the group becomes more risk seeking than its
members, and the cautious shift where the group becomes more risk averse than its
members.
Paul Slovic stated that ‘there are two fundamental ways in which human beings
comprehend risk: the analytical system using formal logic and normative rules, and the
experiential system which is intuitive and not always accessible to conscious
awareness.’ (Slovic et al., 2004)
This view was supported by Gigerenzer et al (1999) who believe that we are all
equipped with an innate toolbox of ‘fast and frugal heuristics’ that can be used in a
variety of situations to produce adaptive solutions, however this does not preclude the
use of more objective approaches. ‘Models of reasoning need not forsake rationality for
psychological plausibility, nor accuracy for simplicity. The mind can have it both way.’
Behavioural research is extensively used in a variety of business disciplines including
management, marketing and accounting. Although there have been a number of
applications of this approach within real estate, it is still an underused in this discipline
area. One of the first studies of heuristics in Real Estate research looked at whether
anchoring and adjustment caused bias in residential valuations. (Northcraft & Neale,
1987) Subsequent research by Diaz, Hansz and Gallimore has primarily focused on the
application of heuristic theory in property valuation and appraisal. (Diaz III, 1990;
Gallimore, 1994; Diaz III & Hansz, 1997). There appears to be a lack of research on the
application of behavioural theory to decision making in property development. The key
decisions in the development process are made by experienced professionals and much
of the existing research has concentrated on novice surveyors. ‘if one wants to
determine if experts use, and or, are biased by heuristics, one will have to move to real
world, empirical research. This is difficult as it is time consuming and extremely
unappreciated, but necessary to advance knowledge.’ (Hardin III, 1999) In the ten years
since Hardin wrote this there appears to have been significant strides in the application
of behavioural theory in the finance discipline but little progress in real estate. This
research represents an early stage in trying to fill this gap.
3 Research Methodology
Developers must decide how much of which risks to retain to enable them to proceed
with what they hope will be a profitable scheme. Numerous decisions within the
process, including the ultimate decision on whether to proceed with a scheme come
down to judgement.
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Simon Robson, pp 1029-1043
Property development literature appears to simply accept this and there does not appear
to be any attempt to explore the concept of judgement. This is where there seems to be a
gap in the literature. In the more generic literature on risk, behavioural decision making
and heuristics are explored.
This paper reports on the pilot stage of a research project that will ultimately seek to
answer the following questions:
o In decision making, what factors determine the balance between formal analysis
and the developer’s judgement?
o Does judgement consist of more than intuition and gut feel?
o Is ‘judgement’ determined by attitude?
o Are individuals born with a particular risk attitude or does it develop in response
to experience (nature or nurture)?
o Can theories be developed for decision making in property development which
draw on research into behavioural decision making and heuristics?
The epistemological stance for this research is constructionist. This stance assumes that
there is no objective truth waiting to be discovered. Meaning is constructed, and
‘different people may construct meaning in different ways, even in relation to the same
phenomenon’ (Crotty, 1998)
The extremes of objectivism and subjectivism are rejected as the researcher does not
believe there is a ‘right’ answer to the research question which is out there to be found
or that the object makes no contribution to the generation of meaning. The approach to
the relationship between theory and the research will therefore be inductive in that it is
hoped eventually to produce some theory from the research.
The theoretical perspective for this research is interpretivism. The stream of
interpretivism with most relevance to this research is phenomenology. This approach
involves studying experience from the subject’s perspective. The phenomenological
method involves the collection and analysis of data in a way that does not prejudice
their subjective character. An important requirement of this approach is to prevent or
minimise the imposition of the researcher’s presuppositions on the data. This is
achieved by what is known as ‘bracketing’. Crotty (1998) says that the rubric of
phenomenology is a ‘quite single minded effort to identify, understand, describe and
maintain the subjective experiences of the respondents’. The approach is expressly
subjectivist and uncritical. Crotty (1998) refers to what is described as the great
phenomenological principle of putting oneself in the place of the other. This represents
a significant challenge to the researcher in trying to suppress their professional
knowledge of the subject area.
The research seeks to explore how attitude and judgement (perhaps sub-conscious)
affect decision making about risk. The most appropriate method of eliciting this
information was by interview.
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‘The goal of any qualitative research interview is …. to see the research topic from the
perspective of the interviewee, and to understand how and why they have come to this
particular perspective.’ (King, 2004)
An important issue that must be considered when carrying out qualitative interviews is
the relationship between the interviewer and the interviewee. Rather that seeing the
interviewee as a research ‘subject’ as one would in a structured quantitative interview, a
qualitative interviewer must recognise that there is no such thing as a ‘relationship free’
interview. In this approach the interviewee is considered to be a ‘participant’ in the
research who will help ‘shape’ the course of the interview and not just passively
respond to the questions. (King, 2004)
It is therefore important that the researcher develops a habit of awareness and critical
thinking regarding their engagement with the research and its participants. (King, 2004)
The researcher carried out four in depth interviews with the decision making directors
of property development companies. This is a pilot stage of what will subsequently be a
more substantial study.
The four interviews conducted have produced a reasonable amount of data. At this stage
the data has been analysed by a sorting and sifting process to try and find similarities,
differences and patterns in the responses. ‘The aim of this process is to assemble or
reconstruct the data in a meaningful or comprehensible fashion.’ (Jorgenson, 1989)
It is the researcher’s intention to conduct a significant number of additional interviews
which will generate a substantial amount of data requiring a more structured approach
to analysis.
Template analysis will be employed to undertake this task. Template analysis is a
technique for thematically organising and analysing textual data. The technique requires
the researcher to produce list of codes (a template) to represent the themes identified in
the textual data. It is the researcher’s initial intention to use qualitative research software
package NVivo to undertake the template analysis. It is important that the researcher
uses NVivo as a tool to aid the analysis but does not replace the need for interpretation.
The researcher is also cognisant of the fundamental tension that exists with template
analysis which is particularly relevant to this particular research project. That is wanting
to be as open as possible with the data and avoid imposing ones preconceptions on it
against the need to give some shape and structure to the analysis.
4 Findings and Discussion
4.1 Findings
The initial focus of the interviews was to ascertain the respondents understanding of risk
and explore their perceived attitudes towards it. None of the respondents had thought
about how they would define risk. But all agreed that it was central to their roles
commenting that “ it is top of our agenda” and” everything we do is risk management”.
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Simon Robson, pp 1029-1043
Although the term risk could not readily be defined, there was more clarity about what
constitutes risk management. One developer commented that the purpose of risk
management is to make certain that a standardised approach is adopted, ensuring the
differences in individual risk attitudes are ironed out, whereas another said that risk
management is an attempt to get some science behind the gut feel you inevitably build
up.
Differences of opinion were expressed about the level of risks taken by property
developers. It is often said that profit is essentially a return for risk-taking and one
developer commented that “risk-taking is a necessity…...if there is no risk there is no
intrinsic value” meaning it is not worth going for. A contrary view expressed was that
the profit earned by property developers is for “grief and hassle” not risk-taking. There
was a significant diversion of opinion between one developer commenting that “real
entrepreneurs don't tie everything down to the nth degree”, to approaching property
development from the perspective of identifying all the risks, and then de-risking them.
All the respondents profess to be naturally risk averse, one saying “personally, I am risk
averse, but you have to take risks in this job or nothing would get done”. Most felt that
their attitude to risk was consistent with their company's attitude, with one commenting
that “there is a structure in place to ensure nothing off the wall is done”.
The general view was that although their attitude to risk had not changed over time their
ability to manage it had. One said “I can judge things quicker than I used to be able to”.
Another stated that “your assessment of risk is largely related to your knowledge and
your knowledge is based on your experience”.
The developers were asked whether any specific incidents had influenced their attitude
to risk. Most commented that their approaches had built up over time. One respondent
however said that the systems they use now, had resulted from an unsuccessful
development 15 and 16 years ago before the system was in place. “Gut feel enables you
to sweep things away, whereas risk management ensures all factors are taken into
account, and then weighted, however, one person's 10 might be another person's four.”
The developers were then asked whether Birrell and Bin's model was representative of
what they did. The general response was that it was, although not necessarily in that
order.
Although they recognized that all the phases of the model are important in ensuring the
success of a development the general view was that the first stage is the most important.
“the early stages are the most critical, if you don't get things right at the start there will
always be problems, and that is when you have the least information.”
Having identified that the early stages are the most critical the use of judgement at this
point was explored. One developer said that “experienced developers have the ability to
make split-second decisions -- this is where experience comes in”. Another commented
that “gut feel, must come before risk analysis, if it was the other way round you would
miss things.”
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Simon Robson, pp 1029-1043
The term judgement was used on a number of occasions. “I am making judgement calls
throughout the process”. The idea that decisions are a combination of scientific analysis
and judgement was a common theme.
The respondents had difficulty in defining the term judgement. One commented that
“we all make judgements because we have filters in place”. They expanded this by
saying that we constantly reference back to what happened in the past “without ever
realising that we are filtering information”. This same respondent considered that an
individual's filters relate to their background and experience. Experience was also
considered to be linked to intuition “if you have no experience you don't know what
risks you are taking”.
Sometimes risks did not seem to be explicitly recognized “there is a basket of risks -- I
know what they are and sometimes I will balance one against another.”
The general view was that collective decision-making would normally lead to more
conservative, risk adverse responses. The feeling was expressed that it was far easier to
take risks individually, with the group more likely to identify additional negatives than
positives.
One of the respondents considered the scientific approach to risk management being at
the opposite end of the pendulum to an intuitive approach and felt that if the pendulum
swung too much towards the scientific approach opportunities would be missed and if it
swung too much in the opposite direction too much risk would be taken.
4.2 Discussion
Risk management is clearly central to the role of the property developer although the
senior decision makers in the process have not explicitly considered what constitutes a
risk. There is more certainty about how risk is managed. The view initially expressed
was that objective process is followed to manage and mitigate risk although when
probed most acknowledged the frequent use of ‘gut feel’.
Surprisingly, perhaps, all of the interviewees professed to be naturally risk averse which
contrasts with the stereotype of the brash, braces clad individual. The profit/risk
relationship referred to by Millington (2000) was generally recognised although one
interviewee dismissed this proposition, effectively saying that they make a profit by ‘de-
risking’ projects.
There was a general acceptance by the developers that they could judge things quicker
as they became more experienced. This seems to relate to the availability heuristic
which suggests that judgement and decision making will be based on individual’s
successful negotiations of similar tasks in the past.
The Birrell and Bin model was recognised by the developers who in addition to
generally feeling that the early stages of the process are the most important in ensuring a
successful project also considered that this was the stage at which they are more likely
to use judgement. A repeated theme seemed to be that they would start their analysis
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Simon Robson, pp 1029-1043
from a gut feel, intuitive position and then apply the ‘science’. This seems to be a case
of the ‘confirmation trap’ at work where decision makers assume an answer and then
look for supporting evidence to substantiate it.
All the interviewees expressed the view that collective decision making is more risk
averse than individual decision making. This assertion is explained by the ‘cautious
shift’ heuristic where the group position moves to the risk averse end of the risk
spectrum. The underlying view being that risk avoidance is a virtuous position to adopt.
A final finding worthy of discussion is that judgement based decision making and
‘science’ based decisions are at the opposite ends of a pendulum that effectively mirrors
the risk attitude spectrum.
This view is at odds with the proposition expressed by Gigerenzer et al (1999) that the
two approaches can effectively be adopted simultaneously.
5 Conclusion and Further Research
Commercial property development is a complex process that involves risk in all of its
stages. Developers are required to take numerous decisions in respect of risk to ensure
the profitability of their projects. Generic risk management approaches are used to
identify and analyse risk. Many of the decisions relate to whether to avoid, reduce,
transfer or retain risk. Previous research by Fisher and Robson (2006) looked at the use
of a variety of risk response tactics such as pre-letting, options and fixed price contracts.
The research revealed that although commercial property developers all use some of
these techniques there is an inconsistency of practice in the sector which is partially
explained by developers making decisions based on their experience.
Generic risk management literature suggests that this inconsistency can largely be
explained by differences in risk attitude and the use of judgment. Risk attitude is often
presented as existing on a continuum from risk averse to risk seeking with the chosen
risk response partially dependent on where the decision makers sit on this scale.
A large amount of research has been carried out into behavioural decision making. Pre-
eminent researchers in this field were Kahneman and Tversky (Tversky & Kahneman,
1973; 1974; Kahneman, Tversky & Slovic, 1982b; Kahneman, 2002b) who have
extensively investigated the use of heuristics in decision making.
A variery of heuristics have been identified including availability, representativeness,
anchoring and adjustment, and the confirmation trap. Various views exist regarding the
quality of decision made using heuristics, a major concern being the introduction of
bias.
A limited amount of research has been undertaken applying behavioural theory to the
real estate discipline. This has primarily investigated the influence of heuristics in
property valuation.
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Simon Robson, pp 1029-1043
This work represents a preliminary investigation into the use of heuristics in commercial
property development decision making. A phenomenological stance has been adopted
with data being collected using long semi-structured interviews with experienced
property development directors.
The research has found that property developers essentially believe that they adopt a
fairly objective approach to risk related decision making however the use of judgement,
intuition and experience was frequently referred to. A preliminary analysis of the data
suggests that heuristics play a role in the decision making process. In particular the
availability heuristic, confirmation trap and cautious shift heuristic are evident.
At this stage the research has not sought to determine whether the apparent use of
heuristics affects the quality of decision making either way or causes the introduction of
any bias.
The intention is to expand this research project and interview a wider range of property
development executives. It is hoped that this may result in the construction of some
theory that may ultimately help to improve the quality of the property development
decision making process.
6 Acknowledgement
This research represents the early findings of a larger research project being undertaken
as part of a DBA at the Newcastle Business School being funded by the School of the
Built Environment at Northumbria University.
7 References
Ball, M. (1998) 'Institutions in British property research: a review', Urban studies, 35
(9), pp. 1501-1517.
Birrell, G. & Bin, G. S. (1997) 'The UK property development process: its phases and
their degree of importance to profitability', Cutting Edge.
British Standards Institution (2002). PD ISO/IEC Guide 73 Risk Management -
Vocabulary - Guidelines for use in standards.
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Property Valuation and Investment, 15 (3), pp. 256-260.
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Simon Robson, pp 1029-1043
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Simon Robson, pp 1029-1043
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perspective on property pricing decisions', Organisational Behaviour and
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biases', Science, 185, pp. 1124-1131.
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- 1043 -
COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Reamogetje Ngoepe, Mbongeni Simelane and Ian Kennedy, pp 1044-1053
How has South African construction been insulated from the
global financial crisis?
Reamogetje Ngoepe, Mbongeni Simelane and Ian Kennedy 1
1
School of Construction, Economics and Management, University of the Witwatersrand,
Johannesburg, South Africa
Email: [email protected]; [email protected];
[email protected]
Abstract:
To answer the question in the title, the method followed was to consult and report on
experts in the field to establish the basic factors. A subsequent literature review was
performed to see if a combination of these factors had been documented elsewhere.
The paper argues that although the National Credit Act (NCA) provides an extremely
useful tool for financial management in controlling mortgages given out on residential
property, it was only one of five factors that together insulated South Africa from the
cold chill of the Global Financial Crisis. The paper argues that strict financial controls
were already implemented in the Liquid Asset Requirement. Together with the
provision of free Reconstruction and Development (RDP) housing, most mortgage loans
made out by local financial institutions turned out to be low-risk loans. Next, the paper
argues that the application of Foreign Exchange Control reduced the offshore exposure
of South Africa to toxic assets. Finally, the Fédération Internationale de Football
Association (FIFA) events and similar projects come to the rescue with infrastructure
projects financed for 2010.
The finding that the combination of these five favourable factors contributed to the
insulation does not appear to have been documented elsewhere. The five individual
factors considered are represented by the acronyms NCA, LAR, RDP, FEC and FIFA.
The first factor was the National Credit Act (NCA) within South Africa. The second
factor was the strict banking regulations as operationalised in the Liquid Assets
Requirement (LAR) that the South African Reserve Bank demands of banks. The third
factor was the supplying of free Reconstruction and Development (RDP) housing,
which effectively removed a sizable segment of potential mortgage defaulters from the
pool of applicants. The fourth factor was the effect of Foreign Exchange Control, which
deterred South Africans from investing overseas, possibly in toxic assets. The final
factor was that prior, contracted investment for maintenance and events such as the
2010 FIFA World Cup meant that construction could continue to proceed. The effects of
the NCA, LAR, RDP housing, Foreign Exchange Control and FIFA 2010 have all been
beneficial for the South African Construction sector.
Keywords:
Global Financial Crisis, South African credit, construction, housing, NCA, LAR, RDP,
FEC, FIFA.
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RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Reamogetje Ngoepe, Mbongeni Simelane and Ian Kennedy, pp 1044-1053
1 The Global Financial Crisis
The subprime mortgage crisis is an ongoing financial crisis triggered by a dramatic rise
in mortgage delinquencies and foreclosures in the United States, with major adverse
consequences for banks and financial markets around the globe. The crisis, which had
its roots in the closing years of the 20th century, became apparent in 2007, and exposed
pervasive weaknesses in financial industry regulation and the global financial system.
Too many incentives in the subprime market existed to make loans, which put
borrowers at great risk of failure. For example (Dodd, 2007):
• Over half of subprime mortgages are stated-income loans, loans that the industry
often refers to as “liar’s loans”. Shockingly, 43% of brokers who make these
loans do so even though they know that their borrowers do not have the income
to qualify for the loan. The brokers make these loans, because they are paid
more in doing so.
• Brokers “upsell” borrowers. That is, they put borrowers in loans with higher
interest rates than they could otherwise qualify for, because the brokers make
greater commissions.
• Minority borrowers are being targeted for higher cost subprime mortgages,
regardless of their financial health.
• About 70% of subprime loans have costly prepayment penalties that trap
borrowers in high cost mortgages. These mortgages strip wealth rather than
build it, and these penalties keep borrowers from shopping for a better deal.
Unfortunately, living in a minority neighbourhood also puts a homeowner at
significantly higher risk of having a prepayment penalty.
• Approximately 8 in 10 subprime loans are adjustable rate mortgages, mortgages
whose monthly payments will spike up by as much as 30% to 50% or more.
Many borrowers who take these loans are unaware of the payment shocks that
await them and have no prospects of being able to make the higher payments.
Thus, they are forced to refinance the loan, if they have sufficient equity to do
so. Each re-finance generates new fees for the lenders and brokers, and strips
more equity from the homeowner. One lender called sub-prime loans
“foreclosure loans”.
When U.S. house prices began to decline in 2006-07, mortgage delinquencies soared,
and securities backed with subprime mortgages, widely held by financial firms, lost
most of their value. The result was a large decline in the capital of many banks and US
government sponsored enterprises, tightening credit around the world.
The effects of the recession affected all aspects of the United Kingdom national
economy. According to The Times 100 (2009), in December 2008, the UK Construction
sector shrank at its fastest pace since records began. How is the South African
Construction sector different?
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Reamogetje Ngoepe, Mbongeni Simelane and Ian Kennedy, pp 1044-1053
2 South Africa and the Global Financial Crisis
South Africa, Africa's economic powerhouse, is “reasonably well insulated” from the
global financial crisis despite expecting low export revenue this year, Finance Minister
Trevor Manuel said. What does Manuel mean by “reasonably well insulated”? He
continues: “In relative terms, South Africa has not been badly affected by the current
global economic turmoil.” To illustrate this, Group Five's order book was back at R13bn
after Middle East cancellations (Engineering News, 2009).
This paper seeks to analyse Manuel's statement.
The South African construction industry is divided into different parts, Small and large
companies; overseas and construction projects elsewhere in Africa; local residential,
commercial and industrial markets, Government and civil works. This paper does not
differentiate between these parts, which have been affected individually in different
ways. For example, factors such as high interest rates would affect the demand for the
residential part far more than the Global Financial Crisis would. In fact, the residential
plans passed nationally were down 25.5% (ABSA 2009), a fact that this paper will
explain in the next paragraph, without recourse to the Global Financial Crisis.
There is a simple explanation for residential plans being down: The interest rate is the
major driver as Figure 1 illustrates.
Figure 1. Total mortgage advances (year on year %) in dark line and mortgage rate (%) in light line
(Source: SARB, 2009)
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RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Reamogetje Ngoepe, Mbongeni Simelane and Ian Kennedy, pp 1044-1053
Figure 1 reveals that mortgage advances in the elastic residential sector really are highly
sensitive to (in fact is now negatively controlled by) the mortgage rate applied by the
South African Reserve Bank, after as short delay. It is not necessary to invoke the
introduction of the NCA in 2006 as an explanatory variable causing any jump, except
that it does force residential advances to mirror the interest rate more closely after 2006.
PPC (2008), which derives more than 90% of revenue from cement operations, said that
regional cement volumes declined marginally by 1.6% after seven consecutive years of
strong growth. This was mainly due to the continued drop in demand from the formal
residential sub-sector. However, in spite of the delays in commencement of many
infrastructure projects, demand from the infrastructure sub-sector virtually offset the
residential subsector decline.
Furthermore, civil works are just starting to recover as Figure 2 shows.
Figure 2. FNB Civil Construction Growth in SA Construction activity, compiled by the BER
(Source: Realestateweb 2009)
Leslie (2008) was able only to identify three factors “South Africa had been far less
affected than most by the collapse of world markets for three reasons: we were
protected by our exchange controls … the National Credit Act, … and the funds now
available for infrastructural development will prop up the economy for another two to
three years.” This paper will add two other factors (Liquid Asset Requirements and the
Reconstruction and Development Programme).
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RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Reamogetje Ngoepe, Mbongeni Simelane and Ian Kennedy, pp 1044-1053
3 Liquid Asset Requirement (SARB 1999)
The South African Reserve Bank requires that each bank in South Africa must hold an
average daily amount of liquid assets that shall not be less than an amount equal to 5%
of its adjusted total liabilities to the public. This Liquid Asset Requirement is “is a
prudential requirement aimed at ensuring the liquidity and safety of the banking
system.” In addition, the minimum amount of liquid assets held on any day during the
prescribed period must at least equal 75% of the average daily amount of liquid assets
required to be held by the bank. With circular 10/99, the Reserve Bank tightened up a
loophole. Banks must now outright own a minimum of 95% of all the instruments that
they claim to qualify as liquid assets. The LAR ensured that runs on the bank would not
result in lack of cash and subsequent panic.
4 The National Credit Act
South Africa is in a much stronger position than the UK and the US to withstand the
global financial crisis because it has a much more rigorous regulatory environment to
govern the extension of credit than these countries.
According to Steward (2009), one has to give credit to the initiators of the NCA for
ensuring that SA has not been as seriously affected by the global problems, as are many
of the world's leading economies.
The National Credit Act (NCA) became law in 2006 to ensure that consumers can
afford credit before getting into any transactions with the credit provider. It makes
provisions for credit transactions that include mortgages, credit cards, overdrafts, micro-
loans and pawnbroking transactions. (NCR 2009)
The NCA has a regulatory body called the National Credit Regulator. The Chief
Executive of the National Credit Regulator was quoted by Pressly (2008):
“In the case of Fanny Mae and Freddie Mac, people were provided with loans at a
lower interest rate for two years. That rate then rose to the commercial rate -
unaffordable to scores of so-called subprime mortgage holders. This 'teaser interest
rate' market had never existed in South Africa, so the lending institutions were not
directly exposed to this problem.”
5 The Reconstruction and Development Programme
Most people who were allocated Reconstruction and Development Programme (RDP)
houses did not obtain them through a loan. They were given the houses, and although
they have ownership of the house, there is no mortgage bond involved. This action
sweepingly succeeded in removing what would have been questionable borrowers from
even applying for a mortgage loan.
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RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Reamogetje Ngoepe, Mbongeni Simelane and Ian Kennedy, pp 1044-1053
6 Foreign Exchange Control
Foreign exchange controls (FECs) are controls imposed by the government on the
purchase / sale of foreign currencies by residents or on the purchase / sale of local
currency by nonresidents. The purpose of exchange control (Polity, 2002) is:
• to ensure the repatriation into the South African banking system of all foreign
currency acquired by residents of South Africa;
• to prevent the loss of such foreign currency resources through the transfer
abroad of real or financial capital assets held in South Africa;
• to effectively control the movement into and out of South Africa of financial and
real assets while at the same time not interfering with the efficient operation of
the commercial, industrial and financial systems of the country.
Foreign Exchange Controls include bans on:
• people from using foreign currency in South Africa and
• South Africans from possessing foreign currency.
Foreign Exchange Controls include restrictions on:
• currency exchange to Government-approved exchangers only,
• fixed Rand-to-foreign exchange rates and
• the amount of foreign currency that may be imported to / exported from S.A.
The restrictive exchange controls have protected South African banks from the current
financial crisis by limiting the amount that they may hold in foreign assets writes
Diakanyo (2008).
Similar thoughts are expressed by First National Bank spokesperson Vapi (2008): “The
South African banking system has effectively been insulated from the global financial
crisis mainly as a result of the prevailing exchange control regulations.”
7 The 2010 World Cup effect
Pre-event expenditure attributed to the hosting of the 2010 FIFA World Cup is mainly
geared towards the construction and improvement of infrastructure required to
successfully host the event (Bohlmann and van Heerden, 2005). In addition there has
been continued Government financing for the maintenance and upgrading of
infrastructure. This includes Demand side management projects, where Government
buildings have to comply with the Government’s own Greening regulations, leading to
aggressive energy efficiency in Government and State-Owned Enterprises’ Buildings.
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RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Reamogetje Ngoepe, Mbongeni Simelane and Ian Kennedy, pp 1044-1053
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RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Reamogetje Ngoepe, Mbongeni Simelane and Ian Kennedy, pp 1044-1053
8 The combined effect of the above factors
This work consulted experts in the field to establish the five basic factors. A subsequent
literature review showed that not all these factors had been documented.
Although no one of the above factors could be cited as the cause of the South African
construction industry being insulated from the global financial crisis, when considered
collectively, they have all contributed. Contrary to the car, citrus, chemical and other
industries, the advantage of the construction industry is that their product is not exported
to the US, the EU and Japan.
The future of Africa is not so simple. “IMF experts said the (African) continent will be
spared the worst shocks largely because of limited integration in global financial and
capital markets. Aid agencies have, however, cautioned that any cut in donor assistance
to poor countries will have a devastating impact in the provision of social services and
overall efforts to eradicate poverty.” The New Politickler (2008).
The Obama Administration is now putting measures into place in the US. Making
Home Affordable (2009) is a comprehensive plan to stabilize the U.S. housing market,
first announced by the Administration on February 18. The three-part program includes
aggressive measures to support low mortgage rates by strengthening confidence in
Fannie Mae and Freddie Mac; a Home Affordable Refinance Program to provide new
access to refinancing for up to 5 million homeowners; and a Home Affordable
Modification Program to reduce monthly mortgage payments for up to 4 million at-risk
homeowners. In addition, Obama (2009) is introducing a bank regulation plan that was
“a sweeping overhaul of the financial regulatory system, a transformation on a scale not
seen since the reforms that followed the Great Depression.”
9 Discussion
However, the extent to which an imported Global Financial Crisis will have a delayed
effect on the South African construction industry is still to be seen. The Construction
industry is made up of many parts. This paper has served as a reminder that the
construction industry has parts that are not protected from business cycles and global
forces. Diversification inside the Construction industry helps it to weather the financial
storms.
10 Conclusions
This paper has shown that there more factors insulating the South African general
Construction industry from the Global Financial Crisis than was previously thought.
The five factors that contributed in their own unique ways to the insulation were the
NCA, LAR, RDP, FEC and FIFA.
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RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Reamogetje Ngoepe, Mbongeni Simelane and Ian Kennedy, pp 1044-1053
1. The NCA is a stringent law governing the buying of property on credit.
2. The LAR ensured that people could always withdraw their funds from banks and
gave strengthened confidence of the banking system.
3. RDP housing was intended for the needy and succeeded in removing
questionable borrowers from applying.
4. FEC prevented South African money from being invested in dubious foreign
assets, and finally,
5. FIFA and other maintenance projects ensured that construction projects
continued during the global economic crisis.
The value of this work is that it has shown for the first time that these five factors were
serendipitous in reducing the effect of the global financial crisis on the Construction
industry in South Africa.
South Africans have been protected from over-indebtedness and defaulting on housing
loans or investing in foreign toxic assets. The NCA stringently governs the buying of
property on credit with the RDP housing being intended for the needy but which also
succeeded in removing questionable borrowers from applying. Foreign Exchange
Control prevented South African money from being invested in dubious foreign assets.,
while FIFA and other maintenance projects ensured that construction projects continued
during the global economic crisis.
With the wisdom of retrospection, these old and just-in-time factors effectively isolated
the South African construction industry from the global financial crisis.
References
All Web references last viewed 2009-6-29
ABSA (2009), “Residential Building Statistics” quoting StatsSA.
http://www.absa.co.za/absacoza/generated/files/6aa1f013deb1f110VgnVCM100000
3511060aRCRD/BuildingStats.pdf?F_C_ID=03b8ac45985bc010VgnVCM1000003
511060aRCRD
Bohlmann H. R. and van Heerden J.H., (2005), “The Impact of Hosting a Major Sport
Event on the South African Economy” University of Pretoria, Department of
Economics Working Paper Series. Working Paper: 2005-09
Diakanyo, S., (2008), “On absurd predictions of a recession of the SA economy”
http://www.thoughtleader.co.za/sentletsediakanyo/2008/10/06/on-absurd-
predictions-of-a-recession-for-sa-economy/email/
Dodd, C., (2007), “Senator Dodd: Create, Sustain, Preserve, and Protect the American
Dream of Home Ownership” http://dodd.senate.gov/?q=node/3731
- 1052 -
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Reamogetje Ngoepe, Mbongeni Simelane and Ian Kennedy, pp 1044-1053
Engineering News (2009), “Group Five’s order book back at R13bn after Middle East
cancellations” 16th February 2009 http://www.engineeringnews.co.za/article/group-
fives-order-book-back-at-r13bn-after-middle-east-cancellations-2009-02-16
Leslie, G., (2008), “Turning point has been reached in cape residential sector, says
Greeff MD. http://blog.cyberprop.com/ShowEntry.blog?id=87
Making Home Affordable (2009), “Obama Administration to Launch National Outreach
Campaign in Support of Making Home Affordable Program” June 26, 2009
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Manuel, T., (2008), “SA 'reasonably insulated' from financial storm'”, Mail and
Guardian Online. Oct 10 2008. http://www.mg.co.za/article/2008-10-10-manuel-sa-
reasonably-insulated-from-financial-storm
NCR (2009), “The National Credit Act No. 34 of 2005”
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Obama, B., (2009), “Political Hotsheet”
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shtml?tag=contentMain;contentBody
The New Politickler (2008), “Africa safe from world economic crisis”
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Polity (2002), “Commission of Inquiry into the rapid depreciation of the exchange rate
of the rand and related matters: Final Report dated 30 June 2002” p 3.
http://www.polity.org.za/polity/govdocs/commissions/2002/rand/part_i.pdf
PPC (2008), “PPC sees no let-up in demand”
http://www.fin24.com/articles/default/display_article.aspx?ArticleId=2424302
Pressly, D., (2008), “SA's tougher credit rules are buffer to crisis – NCR”
http://www.fastmoving.co.za/news-archive/sa-economy/sas-tougher-credit-rules-
are-buffer-to-crisis-ncr
Realestateweb (2009), “Civil construction sector: worried about what's next”
http://www.realestateweb.co.za/realestateweb/view/realestateweb/en/page197?oid=3
8111&sn=Detail
SARB (1999), “Liquid assets held in compliance with section 72 of the Banks Act,
1990, and section 50 of the Mutual Banks Act, 1993” Banks Act Circular 10/99.
http://www.reservebank.co.za/internet/Publication.nsf/WPSCNPV/85ECDC1D3445
3FA742256B51004EFCE1?opendocument
SARB (2009), “Mortgage advances growth on a sharp downward trend” 30 January
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3511060aRCRD/MortgageAdvances_no12_Jan2009_.pdf?F_C_ID=03b8ac45985bc
010VgnVCM1000003511060aRCRD
Seria, N., quoting the Chief economist of the South African Reserve Bank. “Southern
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=africa
Steward, L., (2009), cited in “NCA not having desired effect”
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Vapi., X., (2008), “SA Credit Act a worldwide hit” 18 Nov. 2008
http://www.sagoodnews.co.za/economy/sa_credit_act_a_worldwide_hit.html
- 1053 -
COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Quentin Rowland and Danie Hoffman, pp 1054-1068
Evaluation of credit risk assessment criteria for commercial
property finance applications by black economic
empowerment borrowers
Quentin Rowland1 and Danie Hoffman2
1
Department of Construction Economics, University of Pretoria
2
Department of Construction Economics, University of Pretoria
Email: [email protected]; [email protected],
Abstract:
Notwithstanding the good intentions of various policies and legislation introduced to
fast track the transfer of property to a broader base of South Africans, significant
barriers exist which are preventing the redistribution of wealth to a blacks. Chief
amongst these are a lack of capital in black hands and a lack of appropriate skills and
experience which combine to prevent blacks from gaining access to bank finance. This
article provides a summary of the key credit assessment criteria used by banks in
granting loans and explores possible mitigants to these factors. The results of a survey
questionnaire, sent to a representative sample of private property developers and
investors operating in the South African commercial property industry to gauge their
opinions on what they perceived to be the key challenges faced in raising financing, is
also briefly discussed to provide primary research in support of the literature surveys
conducted. The primary and literature research indicated that lack of capital and lack of
collateral are key challenges facing BEE companies in raising finance from commercial
banks in South Africa. The research also found that these problems could be overcome
by BEE companies forming partnerships or joint ventures with white/experienced
property developers and investors in order to mitigate the risks associated with lack of
capital, skills and collateral in order to satisfy the banks lending criteria.
Keywords:
BBBEE, property finance, credit risk, mitigants, skills transfer
1 INTRODUCTION
Broad based black economic empowerment (“BBBEE”) is a government initiative to
speed up the process of economic transformation with a view to ensuring greater
equality amongst South Africa’s various race groups and at the same time to create a
more equitable distribution of wealth and therefore a stronger economy. Significant
progress has been made over the last few years towards achieving greater equity in
property ownership and whilst no one can argue with the BBBEE principles involved,
the devil lies in the detail and the manner in which empowerment is pursued (Business
Report, 2007).
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RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Quentin Rowland and Danie Hoffman, pp 1054-1068
The property industry in South Africa, largely by virtue of previous apartheid
legislation, is characterised by a highly disparate distribution of property ownership
between the country’s various race groups. Since 1994, certain legislative changes such
as the abolition of the Group Areas Act and the introduction of, inter alia, the Broad
Based Black Economic Empowerment Act, the Preferential Procurement Policy
Framework Act, the Employment Equity Act and the Skills Development Act, have
facilitated a structural shift in the economic base of the economy whereby 600,000
black adults have been added to the middle income group which has increased this
segment’s share of total spending to 30% (Bissker, 2007). The boom in the residential
property market experienced over the last 8 years has widely been attributed to this
growing pool of economically active people (Sigonyela, 2006 & South Africa’s house
price boom grinds to a halt, 2008).
However, as property and particularly commercial property, is by its nature highly
capital intensive, ownership has remained largely fragmented in favour of the white
population who historically have had preferential access to capital, finance and the
necessary skills required to engage in this market successfully. Accordingly, the
commercial property development industry is dominated by a number of privately
owned and managed organisations that have gained prominence over the last two
decades. Black involvement in these organisations by way of management and
ownership is fairly low for a variety of reasons, most importantly due to lack of
requisite knowledge and experience and lack of financial resources.
The challenge therefore lies in finding ways in which the transfer of a significant
portion of commercial property assets to BEE entities can be facilitated in as shorter
period as possible. A crucial part of this puzzle is provision of finance which is
traditionally provided by commercial banks. However, commercial banks base their
lending decisions on a number of criteria which potential borrowers, including BEE
borrowers, must fulfil and herein lies the problem; that BEE borrowers are generally not
able to fulfil these criteria or offer significant mitigants to identified risks.
The aim of the research was therefore to identify the key challenges facing aspirant BEE
property investors and developers in raising funding for their projects. The research
methodology followed was firstly to mine existing research literature on the subject,
both academic and non-academic, the former which proved to be limited due to the
infancy of the topic. Daily, weekly and monthly press and business publications proved
to be the most useful and up to date source of information on the topic.
Secondly, a questionnaire was distributed to a purposeful sample of 32 private property
developers and investors operating in the South African commercial property industry
to gauge their opinions on what the main challenges were that aspirant BEE property
developers and investors faced. The sample was selected to include both BEE and non-
BEE companies in order to get a balanced view of responses on the topic. A
questionnaire was used in order to obtain as much information as possible from the
respondents without requiring them to apply too much time to the exercise with the
intention of maximising the response rate.
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The response rate to the questionnaire was disappointing however, given the purposeful
sample of potential respondents, but the responses received supported the view that a
lack of ability to meet the bank’s lending criteria was the main challenge facing BEE
property developers and investors in the South African commercial property industry.
More specifically, lack of equity and lack of collateral were the main challenges faced
which was in line with the findings of the literature survey.
The results of this research should therefore assist BEE property developers and
investors in identifying the main obstacles which they will face in raising finance so that
they, and the providers of finance, can focus on overcoming these challenges.
2 LITERATURE REVIEW
2.1 Credit Evaluation and Provision of Credit Facilities
2.1.1 Background
Access to finance is a crucial element in the success of any business, particularly that of
start up businesses. Given that small business development and empowerment of
entrepreneurs are national strategies set up to contribute to economic growth and job
creation, provision of finance to these parties should likewise be a national priority.
The fundamental objective of lending is to approve profitable advances with an
acceptable risk profile (Meyer, 2005). The challenge therefore lies in the reconciliation
of the objectives of borrowers/entrepreneurs with the risk appetite of financiers.
According to Lucas-Bull (2007), the debate around empowerment is often associated
with the terms “risk”, “cost” and “opportunity” which are all fundamental to any
sustainable lending. As such, any empowerment financing must meet these tests of
lending best practice in order to succeed.
Accordingly, the following discussion aims to explore the various factors which banks
consider whilst assessing applications for commercial property finance to assist
borrowers in understanding these factors and to enable them to provide banks with
appropriate mitigants against these risks.
2.1.2 The 7 C’s of credit assessment
In considering the long term risks associated with financing commercial property
transactions, property financiers use a number of assessment tools. The seven C’s of
credit analysis is one of the more widely used risk assessment tools used by banks in
deciding who to lend to, independent of the underlying transaction, the seven C’s being
character, capacity, capital, conditions, collateral, credit history, and common sense.
This methodology, (sometimes referred to as the 5 C’s where only the first five factors
are considered) is widely described in various academic texts including that of Wight
and Ghyoot (2005) and Cloete (2005) which, together with the writers own experience
in property finance over 12 years, formed the basis of the discussion below.
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This methodology is particularly relevant to the financing of BBBEE property
transactions as it goes to the root of the problem – that BBBEE entities generally can’t
meet these criteria by virtue of their status as “un-empowered” persons.
This sentiment was shared by The South African Institute of Black Property
Practitioners (SAIBPP) president Nyameka Madikizela who believes that the funding
hurdle bedevils emerging black property entrepreneurs (eprop, 2008). Madikizela states
that “with no track record to speak of, no collateral let alone cash, the aspirations of
many emerging black entrepreneurs remain just that, aspirations”.
2.1.2.1 Character
Here issues of morality, responsibility, stability, integrity, trustworthiness and honesty
in business and personal dealings are considered. This element is regarded as the most
important but at the same time the most difficult to assess due its subjective nature.
These character traits are generally established and proven over time. BEE entities at the
present time have not had the ability to establish or prove these due to, amongst other
things, education, job reservation and the previous Group Area Act. As such, BEE
entities will have to painstakingly build up a track record through prudent investment
decisions and high levels of management integrity. Partnering with well established and
reputable developers and investors will very quickly establish a strong reputation in the
market place whilst at the same time will lead to skills transfer for future stand alone
investments.
2.1.2.2 Capacity
Capacity addresses the ability of a borrower to meet the obligations which it has
accepted in the course of borrowing money. Banks look at income generating capacity,
qualifications and experience amongst other things. In the commercial property market,
the analysis of the income generating capacity is extended to include additional factors
such as:
a. Sub-sector of the property industry
These sub-sectors are residential, commercial, industrial, retail or leisure each of
which are subject to unique cyclical fluctuations. Typically, banks prefer to lend
against non-specialised properties where the market for tenants is widest and
deepest such as offices, retail and non-specialised industrial properties such as
mini-factories and warehouses. They will shy away from manufacturing plants,
hotels, guest houses, golf courses, churches, schools and free standing restaurants
as alternative uses/tenants prove difficult to find in a failure situation.
Banks will also look at the borrowers and their own exposure to the particular sub-
sector to ensure that they are not overexposed to a sector which may be in a
declining cycle.
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b. State of the market in which the borrower operates
Is the market in a growth or declining phase? What is the extent of demand, supply
and competition? This is important to determine due to the long lead time
associated with property development. For example, if a residential developer is
planning a large scheme for sell-out at the end of a growth phase, the developer
may be unable to sell-out the project and therefore would not be able to repay the
funding. Accordingly, this is closely aligned to “Conditions”.
c. Property location
Due to the fixed nature of property, specific location is vital for the long term
sustainability of the income generating capacity of a property. For example,
changes in demographic profiles and deterioration of or changes to road and other
infrastructure around a location can negatively affect the demand for property, from
a lettability or saleability perspective, and therefore its ability to generate sufficient
cash flow to service borrowings.
d. Quality of management and succession planning
Banks place large reliance on experience of the borrower’s management team. This
is vital to ensure that the borrower is able to meet it’s commitments through good
times and bad by constantly adapting to changing market conditions and properly
maintaining the property to avoid value destruction.
Risk management techniques such as diversification and specialisation can be used to
maximise returns through changing property cycles and sector specific demands.
Diversification would generally be practiced by large portfolio investors with extensive
resources. Therefore this method may be difficult for BEE entities to practice initially
until they have built up the necessary resources.
Notwithstanding the benefits of formal education, only experience will tell borrowers
what to do when conditions change. As blacks have only recently entered the property
development arena, this experience is generally lacking.
In addition, capacity also refers to the additional sources of income which the borrower
can turn to in need which, for most BEE entities, will be lacking. As such, BEE entities
need to match their resources to the appropriate investments and gradually build up cash
flows, capital and experience.
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2.1.2.3 Capital
This considers the person’s personal financial position in terms of access to
unencumbered assets which could be liquidated to meet commitments in need. In the
case of a company/corporate entity, the level of investment of the shareholders in the
business is carefully considered. In the case of commercial property, a bank would
generally expect a borrower to provide between 20% and 30% of the cost of a property
from their own resources before the bank would provide funding. In the case of
specialised, high risk or low income producing properties, this level of contribution
could increase to 50% or more.
BEE entities by and large do not have any capital assets built up and therefore, need to
either start small and build up resources or pool their resources with either other BEE
entities or established investors to gain access and exposure to larger investment or
development opportunities. Frequently, BEE entities can add “sweat equity” to a project
by using their BEE credentials to gain a stronger negotiating position in respect of
government business where such factors play a greater roll in procurement spending
decisions. Alternatively, they could provide other services to the joint venture, such as
leasing, property and projection management, and forgo their fees or income in return
for equity in the project.
Notwithstanding the above, rapid accumulation of capital by black South Africans will
not take place over a short time and as stated by Wendy Lucas-Bull (2007), time is an
unavoidable factor for genuine and sustainable capital accumulation.
2.1.2.4 Conditions
“Conditions” refers to the current and anticipated state of the market in which the
borrower operates. Generally, these are things over which the borrower will have little
control such as taxes, interest rates, inflation, legislative changes, environmental factors
and political instability. This element is closely linked with “Capacity” as a bank would
carefully consider the ability of the borrower to still meet his obligations in a
deteriorating or changing economic or political environment.
This is possibly the one area where the playing field is level and BEE and non-BEE
entities are equally affected by market forces over which they have no control. It is the
extent to which they can respond to changes in market conditions that may set them
apart and this is where education and more importantly experience will play a large role.
The property market in South Africa as a whole experienced a period of consolidation in
2008 following successive interest rate hikes totalling 5% in response to rampant
inflation, this following a positive growth cycle which existed for the preceding six to
seven years. In 2009, the situation has worsened due to the global credit crisis and
resultant liquidity squeeze which has seen the South African banks significantly
curtailing their lending in the residential and commercial property markets in response
to growing concern over slowing economic growth.
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Limitations on and costs of capital required to provide such funding have also had a
negative impact on provision of property finance. Not even rapid monetary policy
easing by the South African Reserve Bank between the end of 2008 and June 2009,
which has resulted in the South African commercial banks reducing their prime lending
rates from 15,5% to 11%, has had any significant impact on the appetite of lenders to
provide more credit.
Allied to the fluctuations in the global and local lending markets is the effect of interest
rates on the property market. Interest rate risks are carefully considered in the lending
decision due to the high use of gearing by private investors and developers, typically in
the region of 70% to 80% of the open market value of a property. As the borrower’s
income stream is relatively inflexible, small movements in the interest costs can have
significant impacts on the borrower’s ability to meet their commitments to the financier.
Banks typically stress test the ability of the property and the borrower to absorb
increases in interest rates through a cycle when considering applications for funding.
Use of a range of interest rate hedging products at the disposal of borrowers can
significantly reduce this risk.
On the political risk front, issues of corruption and inefficiencies in local government
departments and parastatals continue to be a hindrance to economic progress and
development. The most recent and particularly relevant example of this is lack of
infrastructural planning by and resultant poor state of electricity supply from the state
run and owned electricity utility, Eskom. This has resulted in many property
developments being put on hold and at the same time has resulted in large increases in
the cost of electricity which has increased the operating costs of property owners and/or
tenants.
BEE could also be regarded as a political risk to businesses that in the past have earned
their livelihood from government contracts but have not taken steps towards
empowerment. Certain legislative changes such as those relevant to the subject matter at
hand i.e. the BBBEE Act, have both positive and negative ramifications for borrowers.
Companies and individuals who have embraced the BBBEE philosophies should be
well placed to benefit from these changes. However, BEE companies cannot always
expect to receive protection from BEE legislation and at some point, this artificial
environment will end. Sango Ntsaluba, CEO of the Amabubesi Group states that black
businesses must start to contemplate life after BEE and wean themselves off artificial
stimulants ministered by the state (Ryan, 2008).
Many players that entered the market over the positive growth period up to 2008 will
not have experienced a negative cycle and will therefore not know how to respond to
the change in cycle. The ability of borrowers/investors to adapt and respond to these
challenges will determine which of them will still be around when the market turns as it
will inevitably do.
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2.1.2.5 Collateral
Collateral refers to what assets the borrower can offer the bank as additional security to
strengthen their proposal. According to Pretorious and Shaw (2004), South African
commercial banks base their credit decisions on the applicant’s creditworthiness and
amount of security offered rather than on the quality of the applicants’ business plan or
potential of the business venture.
However, provision of collateral security should not be seen as a substitute for a serious
deficiency in one of the other elements and should not be viewed as the source of
repayment. Repayment should always come from the cash flow generating ability of the
business.
Linked to lack of capital, BEE entities are often not able to provide any meaningful
forms of collateral security in support of weak credit applications or aggressive gearing
requirements. This is where BEE entities are at a significant disadvantage to other
established developers and investors who can seek aggressive financing deals as they
are able to back these up with collateral security over other assets. Banks may mitigate
this risk by pricing the transaction at a higher level to improve their returns in response
to accepting a higher level of risk. This is possible where the transaction is particularly
lucrative for the borrower and the project is able to absorb a higher level of pricing.
2.1.2.6 Credit history
This considers how well the borrower conducted previous loan facilities with the bank
or other providers of credit such as suppliers. In the case of corporate entities, this is
extended to include not only the managers and shareholders of the borrowing entity but
often includes the reputation of the parent group.
Banks find great levels of comfort in seeing previous credit lines repaid in time and
without any problems. BEE entities generally have no credit histories to provide this
comfort and therefore have to establish a track record over time by taking on smaller
projects or their own or entering into joint venture with more experienced players.
2.1.2.7 Common sense
Common sense is essentially a summation of the information gained from considering
the six factors above to formulate a logical and objective decision. If the borrower falls
short on any of these factors, the financier would have to provide a very good reason for
still providing the facilities sought.
The lack of ability of BEE entities to meet these criteria makes it extremely difficult for
lending officials in the banks to justify providing finance where they routinely turn
away applications that would satisfy many of these criteria but fail on others.
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Depending on which of the criteria have been met and which fall short, the bank would
need to look at how to mitigate these risks as described above. In addition, banks could
look at playing a more active role in the borrower’s business by having more regular
reviews and “health checks”, introducing equity partners, joint ventures and skill
transfer arrangements.
3 RESEARCH METHODOLOGY
3.1 Introduction
Due to the lack of previous academic research or published information on the specific
topic researched, exploratory research using a variety of sources of information was
undertaken. As the topic is evolving rapidly, the most useful sources of information
tended to be daily, weekly and monthly financial publications which provided up to date
information and reports on BBBEE in general, and as it relates to the commercial
property industry. Previous academic research, academic texts and other non-academic
publications dealing with the subject topic were consulted to provide additional
theoretical grounding as presented in the literature review.
3.2 Sample selection
The total population of commercial property developers and investors operating in
South Africa is indeterminable. Therefore, in order to narrow the research sample to
bring potential respondents in line with the focus of the research on entrepreneurial
developers and owners, the following qualifying criteria were set:
• Subjects are to have completed at least one property investment or
development transaction in the last two years with a value of at least
R10,000,000, this being a level above which would include property
developers and investors who were serious about becoming long term
players in the market and not once-off speculators.
• Subjects are to have raised funding through either of Standard Bank, Absa,
Nedbank, Firstrand/RMB Group or Investec for the aforementioned
transaction(s).
In addition, the potential sample of respondents was further narrowed, taking into
account the following factors:
• limited scope of primary research required of the purpose of the research.
• politically and commercially sensitive nature of the topic to potential
respondents
• indeterminable total potential population which would meet the target
sample criteria for respondents
Based on the above factors, a minimum target of ten non-BEE and ten BEE respondents
was set.
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In selecting the sample, the author and Borkum (2009) drew on their combined and
respective industry contacts to derive a sample of respondents who, given their
professional association, would be willing to provide answers to the questions being
posed with the intention of maximising the response rate. More importantly, the
respondents were selected to be broadly representative of the total potential population
of entrepreneurial property developers and owners based on knowledge of these
respondents’ BEE status, size and nature of their property portfolios and nature of
operations.
The writer and Borkum’s respective industry contacts, from which potential respondents
were selected, were built up over a number of year’s involvement in financing and
administration of commercial property developments and acquisitions with a range of
employers. These contacts range from small niche businesses to large and diversified
and multidisciplinary organisations. These contacts were generally located in the greater
Johannesburg region but in view of the wide scope of operations of certain respondents,
they have exposure to commercial property around South Africa. Accordingly, the
potential respondents forming the purposive sample were regarded as being broadly
representative of the total potential population of entrepreneurial property developers
and owners.
Due to the geographic dispersion of respondents, the questionnaire was distributed via
email to the respondents with a follow up email and telephone calls, in preference to
personal interviews which, whilst potentially improving the response rate, would not
have been practical and would have met with resistance from potential respondents due
to their personal time constraints.
3.3 Survey objectives
The objective of the questionnaire was to identify common problems, trends and
possibly solutions in the provision and raising of finance for commercial property
transactions as perceived by the respondents. Questions covered a wide range of topics
related to the research effort including demographic information to assist in qualifying
respondents, views on and compliance with BEE objectives and guidelines, views on
future trends affecting the commercial property industry, views on the role that banks
play in the facilitating BEE and the obstacles which they and borrowers face in this
regard.
However, given the limited population and sample size and that responses were likely to
be highly subjective in certain instances in view of respondents individual and personal
experiences in raising funding, the responses were not expected to provide any
conclusive statistical results or any comprehensive body of information but would
provide valuable insights into the challenges faced by individual respondents. As such,
this primary research, is regarded as being a secondary source of information in support
of that obtained from the literature research in view of the latter’s wider and more
objective scope.
Notwithstanding the limitations discussed above, this primary research information is
not likely to be available from publicly available material and as such will be of
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immense value in the context of this research study. In addition, this research should
provide a foundation on which further, more comprehensive research can be based
using a larger and more representative target population and once more BEE
entrepreneurs gain experience in the industry on which such research can undertaken.
4 PRIMARY RESEARCH FINDINGS
4.1 Analysis of respondents
Of the 32 questionnaires distributed, 16 responses were received which represents a
response rate of 50%. However, three of the respondents fell outside of the target
population resulting in only 13 qualified responses being available for analysis.
Of the 32 potential respondents selected, 11 were regarded as being BBBEE
respondents. Of these 11 BBBEE potential respondents, only two chose to respond.
All the respondents who had completed commercial property developments or
investments of R10 million or more during the previous two years had utilised either of
Standard Bank, Absa, Nedbank, Firstrand/RMB Group or Investec to raise their
required finance although three of them had also used an alternative financier. As such,
these respondents had first hand experience in dealing with commercial banks and were
therefore qualified to comment on the challenges faced.
4.2 Analysis of results
Respondents were asked to rank various obstacles faced by banks in the provision of
finance to BEE companies in the order of magnitude in which they perceived the
challenges to lie with 1 being the biggest obstacle and 6 being the smallest. The charts
below indicate the number of times each obstacle was ranked in each ranking level to
gauge a level of consensus between respondents.
Chart 1 below indicates that most of the respondents indicated that lack of equity was
the major obstacle faced by banks followed by lack of collateral and then the lending
criteria of banks. Misunderstanding of property finance by borrowers was not regarded
as being a major obstacle.
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Chart 1
Obstacles faced by banks in lending to BEE entities
1 1 1 1 (Mis)understanding of property finance
1 by borrowers
2 2 2 4
5
No of ranking points scored
Unfavourable economic conditions
3 1 1
0 4
1 3 3 Lack of experience or skills of
4 borrowers
3
Lending criteria of banks
2
4 4 2
7 1
4 Lack of Collateral
1
0
1 3
2 2 Lack of Equity
1 1
0
1 2 3 4 5 6
Ranking
In a similar vein, respondents were also asked to rank the same obstacles but from the
point of view of the borrower instead of the bank. The same question was asked from
both points of view to gauge the respondent’s perception of whether or not there were
different challenges facing borrowers and the banks respectively.
Chart 2 below again shows that the respondents thought that lack of equity and
collateral were the main obstacles faced by borrowers indicating that the perception
exits that the challenges faced by both parties are the same. This is an important factor
in overcoming the financing challenges as both parties can focus their attention on
achieving the same objectives.
Chart 2
Obstables faced by BEE borrowers in raising funding
0
1 1
2 2 (Mis)understanding of property finance
1 by borrowers
2 4 4
1
2 Unfavourable economic conditions
1
2 0 4
1
2 Lack of experience or skills of
borrowers
4
5
2 2 Lending criteria of banks
5
8 2 Lack of Collateral
4 2
5
2
3 1 Lack of Equity
1 1 1
0 0
1 2 3 4 5 6
Rankings
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4.3 Summary of other findings
The main objective of the questionnaire was to gauge opinions from the respondents as
to what they thought were the main challenges facing BEE property developers and
investors.
In addition to providing support for the discussion of the 7 C’s in the literature survey,
the questionnaire also sought solutions from respondents as to how banks could be of
more assistance to BEE borrowers. There were fairly divergent views expressed as
expected. However, there were also some common themes such as banks relaxing or
lowering their lending criteria and for banks to play a more active role in bringing
experienced parties together with BEE companies to facilitate skills transfer.
As the subject matter evolves and BEE borrowers and the banks undertake more
transactions together, further research into this subject will no doubt start to provide
more valuable insight and solutions to the problem at hand. A wider and more
representative survey of respondent’s opinions along the lines piloted here, would, in
time, be necessary to build on the existing body of knowledge.
5 SUMMARY AND CONCLUSIONS
The aim of this research was to identify the main challenges facing BEE commercial
property developers and investors with regards to raising finance and those challenges
facing lenders, with a view to finding ways to overcome these challenges.
The primary research indicated that the major obstacle identified by respondents was
lack of equity and lack of collateral of BEE entities. As identified under the discussion
of the “7 C’s”, these are also major parts of any banks lending criteria. A lack of equity
and collateral would generally result in the borrower being unable to meet the
traditional lending criteria of the banks. This is also a view shared by Davids and Hale
(2004) who state that “it seems that no amount of financial or legal engineering can
overcome the lack of access to capital by black investors”
In a separate study undertaken by Khula Enterprise Finance Ltd (Angela Motsa &
Associates, 2004), it was found that collateral, refusal to use own collateral and lack of
cash equity where identified as obstacles faced by entrepreneurs in accessing finance,
particularly from banks. This further supports the findings of the authors own primary
research.
The challenge therefore lies in the way in which the lending criteria can be complied
with, taking into account the inherent lack of equity and collateral of BEE property
developers and investors. Again this statement is supported by the report prepared for
Finmark Trust mentioned above where it is stated in the research that banks were not
unreasonable in turning down applications for finance as they were turned down due to
a lack of generally accepted requirements for accessing finance such a lack of collateral,
blacklisting and lack of financial records.
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According to Madikizela (eprop, 2008), for BEE to succeed in the SA commercial
property industry, new kinds of entrepreneurs are needed, those who are prepared to
take risks as apposed to expecting windfalls and playing a passive role which has
characterised BEE deals in the past. Such deals tended to go to BEE high flyers and
resulted in little economic value being transferred, let alone exposure and experience of
how these assets are managed. The culture of entitlement must be ended, says
Madikizela, in order for the transformation agenda to be moved forward.
Aggressive lending by banks will be required to enable BEE entities to overcome the
capital and collateral constraints but this can only be achieved if the borrowers are able
to provide strong mitigants to the identified risks. Therefore, BEE entities need to assist
the banks in finding acceptable mitigants to the identified risks and not expect the banks
to merely provide preferential lending policies to this market segment in isolation.
Whilst banks should be cognisant of the social history underpinning the inability of
BEE entities to meet traditional lending criteria, Lucas-Bull (2007) argues that it is
unreasonable for them to do this when considering empowerment finance applications
as this would prejudice their primary responsibility to protect the savings of customers
and investments of shareholders. As such, sustainable lending requires adherence to
traditional lending practices.
Financial resources may dwindle over time but skills learnt and retained are sustainable
and transferable and this is where the objectives of broad based empowerment may be
most beneficial. Risk sharing and skills transfer should therefore be the primary focus of
aspirant BEE developers in the short term to enable them to gain financial independence
in the long term.
6 ACKNOWLEDGMENT
This research effort was undertaken in conjunction with a parallel research effort by
Mr Anton Borkum who has explored the entrepreneurial challenges facing aspirant BEE
property developers and investors operating in the South African commercial property
industry. The entrepreneurial and financing challenges were identified as being the key
challenges faced by these parties.
The intention of the parallel research efforts is that the findings together form a holistic
overview of the challenges faced by these parties with a view to assisting these parties
in overcoming these challenges.
7 REFERENCES
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Bisseker, C. 2007. Black Magic, Financial Mail. 6 July. p35-36
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Borkum, A. 2009. Entrepreneurial Ability: A key ingredient for achievement of Broad Based
Black Economic Empowerment within the South African Property Sector. Unpublished
MSc treatise. Faculty of Engineering, Built Environment and Information Technology.
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Cloete CE. 2005. Property Finance in South Africa. 2nd ed. Sandton: SAPET
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Firms must toe the line to win government deals. 2007. Business Report. 15 March. p11
Luca-Bull, W. 2007. Visions of Black Economic Empowerment. 1st ed. Auckland Park:
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Meyer. 2005. The determinants of credit risk mitigants in lending to Black Economic
Empowerment companies, from a banker's perspective. Unpublished MBL treatise.
UNISA
New developments on Property Sector Charter front. 2008. Sapoa. www.eprop.co.za (Access
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Pretorius M & Shaw G. 2004. Business plans in bank decision making when financing new
ventures in South Africa, South African Journal of Management Sciences. 7(2). p221-241
Property BEE crunch time: role for advocacy and entrepreneurialism recognised. 2008.
SAIBPP. www.eprop.co.za (Access 4 August 2008)
Ryan, C. 2008. a business vision beyond bee, Directorship. vol 2. p6-7
Sigonyela, M. 2006. Soweto swept up in SA property boom, Independent Online.
www.iol.co.za. (Access 14 July 2009)
South Africa’s house price boom grinds to a halt. 2008. Global Property Guide.
www.globalpropertyguide.com (Access 14 July 2009)
Wight A & Ghyoot V. 2005. The Property Finance Business. 1st ed. Pretoria: UNISA
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Ahmad Alhady, Osama Hosny and Ahmed ElHakeem, pp 1069-1080
Integrated optimum mark-up
Ahmed M. Alhady1, Osama Hosny2, and Ahmed ElHakeem3,
School of Sciences and Engineering,
The American University in Cairo, Egypt.
Email: [email protected]; [email protected]; [email protected]
Abstract:
In practical life, it’s a big dilemma for contractors involved in the construction industry
to decide on an optimum mark-up during the bidding stage. Before proceeding in any
project, interested bidders should prepare the tender documents that include the bid
price. Determining this price, however, is a complicated and an open issue among
construction practitioners. This complexity is due to bidders' objective in deciding upon
a mark-up that achieves the balance between the probability of winning a bid and the
maximization of the profit as much as possible. This decision should be taken in the
short bidding preparation period and under enormous pressure to speed up a bid
preparation. The objective of this research is to develop a generic approach to assist
contractors decide upon an optimum mark-up for their projects under consideration.
Moreover, it facilitates what-if-scenarios for the relationship among the probability of
winning a bid, the confidence level to compensate for possible risks, and the mark-up
value. The proposed approach analytically combines risk and bidding analyses to
achieve the research goal. By getting the different mark-ups of competitors in their past
bids, statistical analyses can be conducted to obtain the various probabilities of winning
them simultaneously, at different mark-up levels. Risk analysis is then performed for the
project using Monte Carlo Simulation to determine the confidence level of securing
potential risks, at different mark-up levels. The results generated from both analyses can
then be presented on one graph that enables decision-makers in estimating the optimum
mark-up for their projects. Based on the proposed approach, a friendly-user program has
been developed using spread sheet to facilitate the analysis processes. To test the model
performance, hypothetical data had been used, where the results showed to be close to
those generated from existing models. Moreover, when the model was applied to real
projects to ascertain its capabilities, it proved a high level of performance compared to
actual results.
Keywords:
Bidding Analysis, Competitive Bidding, Optimum Mark-up, Risk Management.
1
Graduate Student, Department of Construction and Architectural Engineering, The American University in Cairo,
Egypt.
2
Professor, Department of Construction and Architectural Engineering, The American University in Cairo, Egypt.
3
Assistant Professor, Faculty of Engineering-Mataria, Helwan University, Cairo, Egypt.
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Ahmad Alhady, Osama Hosny and Ahmed ElHakeem, pp 1069-1080
1 Introduction
The final price of any bid consists of direct cost, indirect cost and/or (overhead), and
mark-up. As for direct and indirect costs, they can be estimated by studying the
available resources and their prices in the surrounding market. Mark-up, however,
consists of profit and contingency, and can be calculated as a percentage of the
summation of total cost. In practice, the mark-up of a construction project is often
estimated based on the sixth sense and experience, and involves emotional reactions to
concurrent situation. However, this influenced bid price decision indirectly considers
various factors associated with project conditions. These factors such as risks should be
properly evaluated when deciding on the mark-up or the bid price of any project.
Current models specialized with estimating bid mark-ups can be classified into three
types: statistical models; artificial intelligence based models; and multi-criteria utility
models (Wang et al., 2007). Models that used these techniques did not explicitly
account for risk analysis in their calculations, but they accounted for studying their
competitors’ historical records only which might implicitly consider potential risks but
for old projects not for the project under consideration. That is one of the main reasons
that indicates why the employment of these models practically in real situations is
limited (Moselhi, et al., 1993). The main objectives of this study are to: 1) initiate a
novel approach by which the contractors can easily decide upon the optimum markup
for any construction project and accordingly the final bid price taking into consideration
risks associated with the projects; 2) provide contractors with the probability of winning
a certain bid as well as the confidence level to avoid potential risks that might affect a
certain project at different markup levels. This is done through developing a flexible
model based on the proposed approach to help decision makers in contracting
companies in estimating the optimum mark-ups for their projects.
The proposed approach incorporates bidding analysis together with risk analysis
techniques in order to obtain the optimum mark-up and consequently the final bid price.
In this study, bidding strategy expresses the technique that is used to determine the
probability of winning a certain contract at different mark-ups. While Risk analysis
describes the technique used to estimate the probability (confidence level) of covering
projects’ risks at that mark. This study adopts a statistical approach in the bidding
analysis and a simulation technique in the risk analysis to develop the proposed
approach. A flexible spread sheet model that can predict the optimum mark-up
considering potential risks was designed based on the proposed approach. The
developed approach has the privilege of benefiting from historical data related to
competitors’ behaviour and market competition as well as considering the contemporary
conditions related to potential risks facing a desired project. Accordingly, the ability to
provide more reliable and accurate forecasts is possible. Moreover, this model is
explicitly performing risk analysis for any considered project when estimating the
optimum mark-up as an independent process. So each process, either the bidding or the
risk analysis, is considered as a reference for the other one, which guarantees that each
process has appropriately performed and all the surrounded conditions of a project are
properly considered.
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Ahmad Alhady, Osama Hosny and Ahmed ElHakeem, pp 1069-1080
2 Review of Pertinent Research
Mark-up and bid price estimation are among the important topics in construction. Mark-
up is the summation of contingency and profit. So risk analysis should be well
performed for the project under consideration to recognize the confidence level of
securing potential risks at different contingencies. Risk analysis is a process that
accounts for all risks that might affect the project as well as all the opportunities that
might be beneficial for the project. It means that there are positive risks that should be
increased and negative ones that should be decreased, which is the main objective of
risk analysis. The outputs of this process are different contingencies dependent on the
level of probability, which help in determining mark-ups. To reach those outputs, some
processes should be implemented. These processes are risk management planning, risk
identification, qualitative risk analysis, quantitative risk analysis, risk response
planning, and risk monitoring and control. All these processes occur at least once during
the project duration, and they could overlap with each other (Anon, 2004). Despite the
importance of the risk analysis and its complex processes in determining the required
contingency for any considered project, the studies conducted for estimating mark-ups
and bid prices did not explicitly cover it in their analyses. Existing models for
determining bid mark-ups can be classified into three groups (1) statistical models, (2)
artificial intelligence based models, and (3) multi-criteria utility models (Wang et al.,
2007).
2.1. Statistical Models
Bidding strategies from the statistical perspective should have some form of probability
distribution. To guarantee that these distributions are well modeled, each competitor
should be analyzed individually according to her/his own distribution type (King and
Mercer, 1991). To beat all competitors simultaneously, Friedman (1956) introduced his
approach to obtain the probability and the optimum mark-up of winning all competitors
at once using Expected profit principal. About 10 years later, specifically in 1967, Gates
(1967) introduced another approach. Although both approaches have the same basics
and the same assumptions of considering cost among all competitors, the main
difference is that while Friedman considered these distributions mutually independent,
Gates didn’t (Hegazy, 2002). After publishing Gate’s model in 1967, it was the
beginning of the Friedman versus Gates controversy, and a lot of research was
conducted either to critique or to support one of the two models. During all that long
debate over the past years, Carr (1982) crafted a new model to be a reference when
judging the performance of Friedman's and Gate's models, finding closer agreement
between Gate's model and his own. Carr determined Gate's model to be the more
accurate of the two models. The debate between Friedman and Gates continued and
much research were introduced again comparing between the pros and cons of each
model. In year 2000, Crowly published a study that summarized all that debate and
concluded that using Carr’s model is more accurate compared to Friedman’s and Gates’
models Crowly (2000). Actually, even if there are some researchers against Crowley’s
conclusion, at least his research made life much easier for bidders to perceive all
models; consequently, they can select the model more appropriate to their philosophy
with more confidence.
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RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Ahmad Alhady, Osama Hosny and Ahmed ElHakeem, pp 1069-1080
2.2. Artificial Intelligence-Based Models
Since the end of 1980s, several models were published depending on deriving analogy-
based solutions, using artificial intelligence as a tool for overcoming the bidding
problem. Moselhi, et al. (1993) introduced a Decision-Support System (DSS) using an
Artificial Neural Network (ANN) for estimating the optimum mark up based on the
analogy of past projects. One year later, Hegazy and Moselhi (1994) introduced a
modified system using ANN and GAs. In this system, the genetic algorithms (GA)
technique was utilized as an automated network optimization procedure to improve the
generalization capabilities of the selected model. Several models such as (Liu and Ling,
2003; Christodoulou, 2004; Liu and Ling, 2005) were introduced using a fuzzy neural
networks (FNN) approach to enhance the performance of the ANN. The main limitation
of (FNN) is that each model is designed for a specific contractor and to be applicable for
other contractors, the rules and definitions of the membership functions should be
changed according to their environment (Liu and Ling, 2003). Despite the importance of
the models that used Artificial Intelligence tools in determining the optimum mark-up
and its beneficial usage, they might be not efficient in some countries where contractors
suffer from limitations of getting information about their competitors.
2. 3. Multi-Criteria Utility Models
Most of the models that were introduced to calculate the probability of winning for a
certain contractor in competitive bidding were developed based only on prices offered.
In order to include other effective factors such as owner's evaluation criteria with the
relative importance of each criterion and the profile of competitor's bids, Cagno et al.
(2001) presented a new approach. Practically, this model is considered one of the
important models that addressed the problem of competitive bidding since it could
achieve the interactions of different managers’ opinions in a certain company through
one model to predict a bid price. However, the main problem of this model is that it
cannot explicitly include risk analysis to assess the confidence level at which the project
will not exceed the estimated price.
2.4. Factors Affecting Mark-Up Estimation
There are many different factors that can affect the mark-up and final bid price
estimation. Many studies were published over the past years to evaluate some of these
factors. From these factors that were addressed are: cost uncertainties (Chapman et al.,
2000; Wang et al., 2007), Competition dynamic changes (Kim and Reinschmidt, 2006),
Number of bidders by (Carr, 2005), and Opportunistic Bidding Behavior (Lo et al.,
2007).
3 The Integrated Optimum Mark-Up Approach
In this research an approach is proposed to estimate optimum mark-up. The proposed
approach functions through three modules as shown in Figure 1: 1) the bidding analyzer
module, 2) the risk analyzer module, and 3) the mark-up integrator module.
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RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Ahmad Alhady, Osama Hosny and Ahmed ElHakeem, pp 1069-1080
1) BIDDING ANALYSER 2) RISK ANALYSER
Competitors Competitors Short List of
Markups. past bid major risks
prices.
Quantitative
Analysis.
Markups
Distributions.
Statistical Simulation
Analysis. process
Required
Profit.
OUTPUTS OUTPUTS
Mark-ups
Mark-ups
Probability of winning bid Probability of securing risks
3) OPTIMUM MARK-UP
INTEGRATOR
Mark-ups
Probability of winning bid/securing risks
Integrated Optimum Mark-up Model
(Figure 1) Integrated Optimum Mark-up model.
3.1. Bidding Analyzer Module
The bidding analyzer module functions through four steps as shown in Figure 2: 1)
Identifying competitors’ mark-ups in past bids through a dynamic database, 2) applying
a retrieval system to filter the data related to the competitors interested in the new
project, 3) Performing statistical analysis for competitors individually to estimate the
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Ahmad Alhady, Osama Hosny and Ahmed ElHakeem, pp 1069-1080
probability of winning each one at different mark-ups, and 4) Selecting the probability
of winning all competitors simultaneously at different mark-ups.
(Figure 2) Bidding analyzer main functions
Bid price (Bi) assigned by competitor (i) in a past bid can be known since it is
announced after each bidding stage of any project. (Bi) = C x (1+ mark-up), where “C”
is the total cost of an analyst based on the assumption that total cost is quite the same
between competitors from the same category. This assumption is accepted according to
the literature conducted in this study. So the mark-up used by competitor (i) in a past
bid = (Bi / C) -1. Accordingly, a dynamic database that keeps records of the mark-ups
assigned by competitors in past bids is developed. This database is frequently updated to
make best use of recent data that fit the concurrent conditions.
Figure 3 is used to facilitate the perception of the whole process of bidding analysis
module and is divided into four parts and each part is divided into two sub parts. It
shows the mark-up records used by two competitors A and B in their past projects,
showing the bidding year of each project. The figure demonstrates how the database is
dynamic and changes from year to year to be updated with the latest information. For
example, Parts 1 and 3 of the figure show the competitor A records in years 2008 and
2009, respectively, for a certain data window (e.g., five years window). When moving
to the analysis year of 2009 (Part 3), it can be noticed that the system automatically
eliminates all projects done in the past (i.e., the 2004 records shown in Part 1) and
added the new projects (i.e., the 2009 records), considering only the last five years
records. So if the analysis is performed in year 2008, Parts 1 and 2 of the figure are
utilized, whereas Parts 3 and 4 are used if the analysis is conducted in year 2009.
Figure 3 shows also the statistical analysis process at any mark-up for any competitor.
This can be shown in any of the four parts of Figure 3, at a 14% mark up. Considering
Part 4, the 14% mark up line divided Part 4 into two sub parts 4.1 and 4.2. It illustrates
that, competitor B during the last five years bid in five projects below the 14% and in 13
projects more than the 14% mark up. Accordingly, the probabilities to lose and win
competitor B can be calculated when dividing the number of projects below and above
the 14% mark up on the total number of projects (i.e., 18 projects), giving 28% and
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Ahmad Alhady, Osama Hosny and Ahmed ElHakeem, pp 1069-1080
72%, respectively. The previous analysis is based on the assumption that each
competitor is going to bid according to his past behaviour, which is an accepted
assumption in the absence of additional information. The statistical analysis is
performed for each competitor independently to calculate the probability of winning
her/him at different mark-ups in the new project. Finally, the figure illustrates in Parts
3.2 and 4.2, the probabilities to win competitors A and B at the 14% mark up which are
55% and 72%, respectively. As a precaution for the worst case, the minimum
probability of winning, which is 55% in the illustrated figure is selected to be the
probability of winning all competitors simultaneously (i.e., A and B) at that mark up
(i.e., 14%). This process is repeated to obtain the probability of winning all competitors
at once at different mark-ups.
Dynamic Database-
based- Bidding Analyzer
1.1 1.2 2.1 2.2
Probability of Probability to
A to win = win A = 6/15= 5/15= 33 % 10/15= 67 %
9/15= 60 % 40 %
Competitor Records
2004 2004
2006 2007
2007 2008 2006 2008 2005
2005 2006 2007 2005 2007 2006
2005 2005 2004 2008 2005 2004 2008
2004 2005 2005 2008 2004 2005 2005 2008
8% 12 % 15 % 18 % 8% 12 % 15 % 18 %
Competitor A
Competitor B
14 % 14 %
Mark-ups
1 2
3.1 3.2
3 4 4.1 4.2
5/18= 28 % 13/18= 72 %
9/20= 45 % 11/20= 55 %
2009
2009 2009 2009 2009
2006 2009 2009 2007 2009
2007 2008 2009 2008 2005
2009 2006 2007 2009 2006 2007 2006
2005 2005 2009 2008 2005 2009 2009 2008
2005 2005 2005 2008 2005 2005 2005 2008
8% 12 % 15 % 18 % 8% 12 % 15 % 18 %
14 % 14 %
(Figure 3) Bidding Analyzer Module.
3.2 Risk Analyzer Module
Based on surveying the literature, the process of risk analysis is performed through six
modules as shown in Figure 4. The proposed approach in this study does not go through
all these processes and its analyses. However, it utilizes the final short list of the major
risks that might affect a project in terms of their probabilities and impacts. This short list
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RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Ahmad Alhady, Osama Hosny and Ahmed ElHakeem, pp 1069-1080
can be obtained from the risk management team of a company after conducting the
whole process of the risk analysis.
Risk Analysis
Process
Risk Risk Risk
Risk Qualitative Quantitative
management response monitoring
Identification analysis analysis
planning planning & control
(Figure 4): The processes of the risk analysis module.
The short list contains the number of experts that decided on each level of the
probability of occurrence and the impact of each risk factor at each activity of the
project. Besides, it includes a severity matrix that is utilized to assign the additional cost
required if a certain risk occurred for each activity. Afterwards, Crystal ball is used as
an add-on software to the excel sheet model for performing the simulation process. In
order to estimate the expected probability of occurrence and the impact of a certain risk
factor on a certain activity, the discrete value method in Crystal ball is used. In this
method each group number of experts and their expected weights are inserted to crystal
ball to let the program fit the distribution curve itself. By this, crystal ball can
automatically estimate the different distributions of the investigated probabilities and
impacts and accordingly the expected values as shown in Figure 5 under P and I cells.
(Figure 5): The Simulation process using Crystal ball software.
The severity is, then, calculated through multiplying the expected probabilities and the
impacts of each risk factor. Accordingly, the additional cost of each activity affected by
a certain risk is calculated based on the obtained severity matrix. After completing the
whole data and calculations, the total additional cost for the whole project is calculated.
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RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Ahmad Alhady, Osama Hosny and Ahmed ElHakeem, pp 1069-1080
Afterwards, the simulation process is performed using crystal ball that randomly
generates values for uncertain variables over and over to simulate a model. During the
simulation process all the expected probabilities, impacts, and additional costs are
iteratively changed till achieving the number of iterations estimated. The outputs of risk
analysis process are different contingencies against the probabilities, percentiles, that
the project total cost will not exceed the estimated one at each contingency as shown in
Figure 5. By estimating the appropriately required profit from each analyst perspective,
the different mark-ups against different probabilities can be determined by adding the
required profit to each contingency.
3.3 Integration of Bidding and Risk Analyses Results Module
The results of bidding and risk analysis processes can together be plotted on one
graphical chart as shown in Figure 6. On this chart, the vertical axis represents different
mark-ups starting from 0% to 100% with steps equal to 5%. The horizontal axis
however, represents the probability which can be either the probability of winning the
bid or the probability (confidence level) of covering projects’ risks at that mark up.
Analysts can select the required mark-up value and then check the probability of
winning the bid and the probability the that project total final price will not exceed the
estimated one at the same mark-up. The point of intersection can be considered the
point at which the mark-up value is the optimum one to be added to the total cost. The
reason of selecting this point is that it makes a balance between the probability of
winning the bid and the probability of avoiding all risks that might affect a project.
However, analysts can select any other point that fit their desires through conducting
what-if-scenarios. For example, some contractors prefer increase the probability of
winning the bid regardless the profit, but this will be at the expense of covering
projects’ risks.
(Figure 6): Mark-ups versus the probabilities of winning the bid and avoiding potential risks.
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Ahmad Alhady, Osama Hosny and Ahmed ElHakeem, pp 1069-1080
4 Findings and Discussion
In order to validate the proposed approach and facilitate its application for getting the
optimum mark-up, a spread sheet model was developed to facilitate comparing the
model results with the most legendary models of Friedman and Gates. Hypothetical data
related to bidding and risk analyses for a virtual project were used and the performance
of the proposed model was then evaluated. The results showed that, for the same
hypothetical data, the proposed model recommends an 11.27% as an optimum mark-up
(Fig. 6), while Friedman and Gates recommend 10.25% and 11.82% for their optimum
mark-ups, respectively (Fig. 7). Hence, the proposed model provides results between the
two common models of Friedman and Gates but closer to Gates who has a more
realistic approach according to the literature. On the other hand, the proposed model
was presented to five experts in different construction companies for judgment.
According to their responses the model proved to be consistent with high level of
performance.
(Figure 7): Optimum markup generated from Friedman’s and Gate’s models.
5 Conclusions
Estimating the optimum mark-up and bid price of any project is considered one of the
complex issues that contractors face in practical life. Since the total cost can easily be
estimated by studying the surrounded market and its updated prices, then deciding on
the optimum mark-up remains the main challenge that faces many contractors.
Therefore, the existence of a reliable model that could assist in determining the
optimum mark-up is always the goal of most contractors. The proposed approach in this
study incorporates both bidding and risk analyses processes to enhance the capability
for estimating the optimum mark-up and accordingly the final bid price for a certain
project. A software-based model was developed to facilitate the application of the
proposed approach. After providing the developed model with the required data related
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RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Ahmad Alhady, Osama Hosny and Ahmed ElHakeem, pp 1069-1080
to competitors and all projected risks, it results in a chart by which analysts can realize
the proposed optimum mark-up which makes a balance between the probability of
winning the bid and the confidence level of avoiding all potential risks that might affect
the project considered. Moreover, this graphical chart provides analysts by the ability of
performing what-if-scenarios to select the mark-up that fits their conditions. When the
performance of the developed model was tested utilizing hypothetical data, it gave
results very close to the results generate from existing models related to mark-up
estimation. Moreover, the reactions obtained from construction practitioners revealed
high level of the proposed model capabilities. Finally, the probability of individual
bidder winning a certain contract considering probable risks can be a useful piece of
information for not only the bidders themselves, but for other people. Potential bidders
can utilize this information to decide on which bid to participate, whether to enter a bid
and, if so, the money value of the bid. Similarly, owners and consultants can also utilize
the information in deciding when and how to hold the bid, how many and which bidders
to invite, and the characteristics for determining the winner.
6 References
Anon. (2004), A Guide to the Project Management Body of Knowledge (PMBOK
Guide), Project Management Institute, Boulevard, USA.
Cagno, E., Caron, F. and Perego, A. (2001), ‘Multi-Criteria Assessment of the
Probability of Winnning in the Competitive Bidding Process’, International Journal
of Project Management,19, pp 313-324.
Carr, R.I. (1982), ‘General bidding model’, Journal of Construction Division, 108 (4),
pp 639-650.
Carr, P.G. (2005), ‘Investigation of Bid Price Competition Measured Through Prebid
Project Estimates, Actual Bid Prices, and Number of Bidders’, Journal of
Construction Engineering and Management, 131(11), pp 1165-1172.
Chapman, C.B., Ward, S.C. and Bennell, J.A. (2000), ‘Incorporating Uncertainity in
Competitive Bidding’, International Journal of Project Management,18, pp 337-
347.
Christodoulou, S. (2004), ‘Optimum Bid Mark-up Calculation Using Neurofuzzy
Systems And Multidimensional Risk Analysis Algorithm’, Journal of Computing in
Civil Engineering, 18 (4), pp 322-330.
Crowley, L.G. (2000), ‘Friedman and GatesـــAnother Look’, Journal of Construction
Engineering and Management, 126 (4). pp 306-312.
Friedman, L. (1956), ‘A competitive – bidding strategy’, Operations research group, 4,
pp 104-112.
Gates, M. (1967), ‘Bidding strategies and probabilities’, Journal of Construction
Division, 93 (1), pp 75-107.
Hegazy, T. and Moselhi, O. (1994), ‘Analogy-Based Solution to Mark-up Estimation
Problem’, Journal of Computing in Civil Engineering, 8 (1), pp. 72-87.
Hegazy, T. (2002), Computer-Based Construction Project Management, Prentice Hall,
New Jersy.
Kim, H.J. and Reinschmidt, K.F. (2006), ‘A Dynamic Competition model for
Construction Contractors’, Construction Management and Economics, 24, pp 955-
965.
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RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Ahmad Alhady, Osama Hosny and Ahmed ElHakeem, pp 1069-1080
King, M. and Mercer, A. (1991), ‘Distributions in Competitive Bidding’, The Journal of
the Operational Research Society, 42 (2), pp 151-155.
Liu, M. and Ling, Y.Y. (2003), ‘Using Fuzzy Neural Network Approach to Estimate
Contractors’ Mark-up’, Building and Environment, 38 (11), pp 1303-1308.
Liu, M. and Ling, Y. Y. (2005), ‘Modeling a Contractor's Mark-up Estimation’, Journal
of Construction Engineering and Management’, 131 (4), pp 391-399.
Lo, W., Lin, C.L. and Yan, M.R. (2007), ‘Contractor’s Opportunistic Bidding Behavior
and Equilibrium Price Level in the Construction Market’, Journal of Construction
Engineering and Management, 133(6), pp 409-416.
Moselhi, O., Hegazy, T. and Fazio, P. (1993), ‘DBID: Analogy-Based DSS For Bidding
In Construction’, Journal of Construction Engineering and Management, 119 (3),
pp 466-479.
Wang, W.C., Dzeng, R.J. and Lu, Y.H. (2007), ‘Integration of Simulation-Based Cost
Model and Multi-Criteria Evaluation Model for Bid Price Decisions’, Computer-
Aided Civil and Infrastructure Engineering/Blackwell publication,
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TRY=0, Viewed: 20/4/2009.
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Irina Unkovski and Elisabeth Pienaar, pp 1081-1093
Public Private Partnerships in South Africa:
analysis and management of risks
Irina Unkovski1 and Prof. Elisabeth Pienaar1
1
School of the Economics and Construction Management,
University of Witwatersrand, Johannesburg, 2001,
South Africa
Email: [email protected];[email protected]
Abstract:
This paper provides an in-depth look at the Public Private Partnership procurement
method, specifically related to the risks associated with this method and their impact on
the various parties involved. It deals, in particular, with infrastructure projects assigned
by Government Departments of the Republic of South Africa. The definition and key
features of PPP have been researched and presented in the literature review, as well as
the key risks that are associated with this method in infrastructure projects. Descriptive
risk data from the first infrastructure PPP project in South Africa was collected
throughout the life cycle of the project via workshops with relevant parties and revisited
through questionnaires in order to compare the theoretical approach to risks in the PPP
project with its actual realisation. The data was then analysed and the results
compared.The results showed that there is considerable risk involved in Public Private
Partnership Projects but although they are significant, they are less costly and more
manageable than using traditional methods of implementing Government projects. The
implications of these findings are discussed and recommendations are made as how to
minimise and improve the management of risks in a PPP infrastructure project and
make it a successful business indenture.
Keywords:
Cost, Government, Public Private Partnership, Risk
1 Introduction
The South African Government describes two procurement methods available to the
public sector, namely, the Traditional Procurement Method and the Public-Private
Partnering Method. PPPs or public private partnerships are long-term contracts between
the public and private sectors. The main objective of PPPs is to ensure the delivery of
well maintained, cost-effective public infrastructure or services, by leveraging private
sector expertise and transferring risk to the private sector.
In traditional procurement of public services or infrastructure, government pays for
capital and operating costs and carries the risks associated with cost overruns and late
delivery. While the expertise and experience of a private company may be procured for
the design and construction of infrastructure, once the asset has been delivered, the
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private company is paid and then withdraws. The public sector is then responsible for
staffing, maintenance, and operation.
In PPP procurement on the other hand, the public sector buys a full set of services,
including infrastructure from the private sector. It pays for these over the term of the
PPP agreement, based on successful delivery. The private sector typically puts its own
capital at risk, funding its investment in the project with debt and shareholder equity.
Because of the financial risk the private sector takes, it is motivated to provide a high
level of service, as good returns on equity will depend on the quality of services it
delivers. Some PPPs, where fees are generated on a user-pay basis, derive income from
which government can share in the benefits. PPPs are also good vehicles for other social
objectives, such as economic empowerment, through aligning the incentives of the
private party with these objectives.
In order to decide whether the PPP method is more viable than the traditional method of
procurement three internationally applied standard tests are used:
Can substantial risk be transferred to the private sector?
Is the project affordable to government?
Does a PPP procurement option show value for money?
The whole concept of Public Private Partnerships relies heavily on risk assessment and
its transfer from one party to the other. Uncertainties in a project also depend on the life
cycle of the project in question. The need for identification of the risks in Public Private
Partnerships and their impact is extremely significant for the proper execution of the
project.
Asenova and Beck (2003), Chinio and Furgeson (2003) call for prudent risk
management and a scientific approach to assessing the risks involved. Better risk
communication and post-involvement of professionals in risk matrix structures to
establish the extent to which the perceptions of risks have been accurate, are essential
for a successful project
Relevant literature indicates that only a small amount of research has been done with
respect to risk identification and assessment in order to produce more positive and firm
answers to the importance of risks on projects.
The problem addressed in this paper is: What are the risks associated with Public
Private Partnerships in South Africa? Are these risks related to operational, technical,
legal, financial, cultural and social aspects of the project? In what areas of the project
are these risks most apparent? The sub-problems addressed are: What impact will these
risks have on project performance? Do these risks have environmental, socio-
economic, political or any other impact that can influence everyday dealings in South
Africa? How can these risks be minimized and managed in Public Private
Partnerships?
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The aim of this research is to clearly define and identify the risks associated with Public
Private Partnerships, to identify the impact of these risks on Public Private Partnership
projects, and to assess and administer these risks in order to provide a benchmarking
tool for executing successful Public Private Partnerships in South Africa.
This paper is based on a primary source of information namely “Public Private
Partnerships: Managing Risks and Opportunities” by Akintoye et al., 2003, and avails
itself of both a qualitative and quantitative analysis of gathered data. Data is collected
through workshops and structured interviews with relevant parties. The structured
interviews and workshops provide qualitative data analysis where the “mass of words”
generated will be described and summarised (Lacey and Luff, 2001),as well as the
quantitative side of analysing data which will generate a “mass of numbers” that will be
summarised, described and analysed.
There are a couple of limitations to this research. First, the number of professionals
involved in Public Private Projects. Government requirements for professionals working
on these long term commitments are that every professional is experienced in this
particular method of procurement and that the quota for black economic empowerment
is met. Because this procurement is a fairly new process and only a couple of firms have
had an opportunity to be involved in them, the number of professionals working on
these projects is significantly limited. The second limitation is the lengthy process of
Public Private Projects. They usually last around 25 years and most of them are only at
the initial stage of procurement in South Africa.
The significance of this research is extremely important to the South African
Government and Private Sector who deal with Public Private Partnerships on an
ongoing basis. It will provide a benchmark for the risks present in these projects and
guidelines for assessing and evaluating them for private sector advisors. This research
will provide a risk assessment which may be used as a tool in every Public Private
Project. It will be of great benefit to both public and private sectors since the time
involved and spent on them would be minimised. It will also provide all the necessary
factors such as cost and probable occurrence of risk so that the necessary approval by
government will be timely and effective.
2 Literature Review
PPP refers to long-term partnering relationships between the public and private sectors
in the delivery of services. It is a new approach that government is adopting to increase
private sector involvement in public service delivery. In traditional procurement of
public services or infrastructure, government pays for capital and operating costs and
carries the risks associated with cost overruns and late delivery. While the expertise and
experience of a private company may be procured for the design and construction of
infrastructure, once the asset has been delivered, the private company is paid and then
leaves. The public sector is then responsible for staffing, maintenance, and operation.
Conventionally, public agencies have only engaged the private sector in the construction
of facilities or supply of equipment. Public agencies will then own and operate the
facilities or equipment in delivering services. The main objective of PPPs all over the
world is to ensure the delivery of well maintained, cost-effective public infrastructure or
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services, by leveraging private sector expertise and transferring risk to the private
sector.
In PPP projects, risks arise from the decision making of project stakeholders engaged in
pursuing project objectives at procurement, functional and strategic levels. Perceptions
of these risks will vary among the different stakeholders, thereby creating the need for
effective risk communication, of paramount importance in ensuring mutual
understanding of particular project risks. Risk management is not practicable at a single-
system, project-based level, but should rather be implemented as a plural systems
approach through which the organisational risk management systems of each participant
are openly brought to bear upon project risks. The greater burden of risk identification
in PPP lies with the client. Where the public sector client organisation will give an
indication of those risks which it is prepared to take and the public sector will also
identify those risks it feels the private sector should bear and those to be shared between
the two sectors.
An appropriate risk transfer strategy needs to be developed as part of the planning
process of the Public Private Partnerships project, in which risks best managed by the
private sector are transferred to it, and the risks best managed by the public sector
partners are retained by it (NS 2000). Ideally, the task of the private sector is either to
accept the client’s proposition or negotiate on the re-allocation of some risks. However,
a spirit of co-operation should prevail in PPP, and so some private sector consortia find
themselves also identifying risks, especially those that have been omitted in the client’s
risk matrix. PPP procurement also encourages innovative inputs from the private sector.
As this sector thus envisages the design solution in a particular PPP scheme, it
endeavours to identify and assess the risks associated with it. Such assessment enables a
consortium to price its bid more competitively. Therefore, private sector participants are
heavily involved in risk identification in PPP.
Appraise
Risk Seek for risk new or Evaluate Risk
Identification/ mitigating residual or price Monitoring
Comprehension solutions risks risks and control
Fig. 1 Illustration of the risk management process
(Source: Akintoye at al., 2003)
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2.1 Risk allocation in PPP schemes
In the past, each project was negotiated on an ad hoc basis, but now there is a much
more realistic view of what risks can be carried by the private sector. Different projects
are undertaken in different circumstances, and so the impact of risks varies with
different projects. The risk allocation cannot be standardised on a permanent basis as
individual circumstances determine what is best.
2.2 Construction risks in PPP projects
Construction is a risky endeavour. Chinyio and Furgeson 2003, say that it is better for
individuals involved in the projects to assume that all that can go wrong might go wrong
but than they should not be pessimistic but rather accountable because potential
downsides and events might catch up with any unawareness and expose circumstances
to negative consequences. Construction risks impact on time and require money to be
redressed. If potential risks can be foreseen upfront and addressed beforehand, then the
potential delays and economic implication of such risks can be minimised or eliminated.
Risk mitigation is an important stage in risk management. (McKim, 1992).
2.3 Construction project delivery and the PPP form of procurement
The procurement procedure primarily distinguishes between a PPP construction product
and a non-PPP product. However, the risks in a particular PPP project are higher than if
that same project were not done via PPP, the reason being that the scope of
responsibilities of the participants in a PPP project is higher than in non-PPP projects.
(Akintoye et al. 2003)
2.3.1 Construction-related risks in PPP
Risk pertains to ‘uncertainty of an outcome’ (Boothroyd & Emmett, 1996). It is a
chance that some event may or may not occur. In a PPP project, there would be a whole
range of risks (Akintoye et al., 2003), such as: land acquisition risk, planning risk,
design risk, construction risk, operational and demand risk, residual value risks,
financial risks and performance risks. Effectively one can consider risks in PPP projects
during any of its phases, i.e. pre-construction, construction, operation and post-
operation.
2.4 Value assessment and risk matrix
This is the pivotal stage of the feasibility study because it enables the institution to
determine whether a PPP is the best procurement choice for the project. Treasury
Regulation 16 prescribes three tests in this regard:
• Is it affordable?
• Does it appropriately transfer risk from the institution to the private party?
• Does it provide value for money?
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2.4.1 Comparable models
To determine which procurement choice is best for a project, a comparative assessment
has to be made between delivering the same service (to the identical output
specifications) as a conventional public sector procurement or as a PPP. A risk-adjusted
public sector comparator (PSC) model and PPP reference model must therefore be
constructed for the chosen solution option. These provide costing for each procurement
option in the form of a discounted cash-flow model adjusted for risk.
2.4.2 Affordability and value for money
Affordability is whether the cost of the project over the whole project term can be
accommodated within the institution’s budget, given its existing commitments. Value
for money means that the provision of an institutional function by a private party results
in a net benefit for the institution, defined in terms of cost, price, quality, quantity, or
risk transfer, or a combination of these.
2.4.3 Demonstrating affordability
As a preliminary analysis of affordability, the risk-adjusted PSC model is compared
with the institution’s budget. Then the risk-adjusted PPP reference model is compared
with the institution’s budget. If the project is not affordable, the institution may modify
the output specifications or may have to abandon the project.
2.4.4 Value assessment
There are several parts to value assessment:
• The base PSC model
The base PSC model represents the full costs to the institution of delivering the required
service according to the specified outputs via the preferred solution option using
conventional public sector procurement. The base PSC costing includes all capital and
operating costs associated with the project. The risk-adjusted PSC model includes a
costing for all the risks associated with the project.
• The risk-adjusted PSC model
The risk-adjusted PSC model is the base PSC model plus a costing for all the risks
associated with undertaking the project. Government does not usually cost these risks,
but it is necessary to do so in order to understand what the full cost to government will
be if it undertakes the project.
• The PPP reference model
The PPP reference model is a hypothetical private party bid to deliver the specified
outputs, the costing of the output specifications from a private party’s perspective.
Comparing the risk-adjusted PSC model with the risk-adjusted PPP reference model
enables the institution to assess whether service delivery by government or by a private
party yields the best value for money for the institution. The PPP reference model must
be developed using the identical output specifications as those used in the PSC model,
but technically and financially it is very different. As the institution will not know what
a private party will charge for the outputs specifications, costs will have to be estimated.
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The transaction advisor must have the necessary expertise, market knowledge and
experience to construct a market-related PPP reference model.
• The risk-adjusted PPP reference model
The PPP reference model must be presented as a discounted cash-flow model, as with
the PSC model. As far as possible the PPP reference model must rely on the same
assumptions as the PSC model, including the inflation and discount rates, which are
particularly important for allowing for a proper comparison between the two
procurement choices. The treatment of tax, VAT, depreciation, residual value and any
other assumptions must be explained in detail. A detailed narrative commentary on the
model is required. It must explain the construction of the model and its key indicators,
including the net present cost. Key indicators may be the debt/equity ratio, debt service
cover ratio, liquidity, key sensitivities to inflation, project term, and tax.
• Performing sensitivity analysis
A sensitivity analysis determines the resilience of the base PSC model and the base PPP
reference model to changes in the assumptions on which the model has been based on.
• Demonstrating affordability
The budget for the project has been identified at various stages prior to this. At this
stage, it must be scrutinised in detail and confirmed in order to demonstrate project
affordability. The National Audit Office (NAO) has powers to 'carry out examinations
into the economy, efficiency and effectiveness with which any Department, authority or
other body ... has used its resources in discharging its functions' (Section 6(1) National
Audit Act 1983). If affordability cannot be demonstrated, the institution will be obliged
both to re-examine and modify the output specifications within the affordability
constraint, or to abandon the project.
3 Research Methodology
In researching the PPP methodology with particular reference to the risks associated
with PPP projects, the focus was first on key features such as definition, benefits,
delivery models, structures, payment mechanisms, procurement processes, and
procedures as well as relationships within PPP projects as implemented globally.
Second, since the identification of risk and its assessment emerged as a critical element
in the success of a PPP project, detailed attention was given to risk perception, risk
management, risk assessment, evaluation and mitigation in terms of construction,
financial and legal issues in PPP as well as value assessment and risk matrix.
From the theory to the practical: the third step was an analysis of risks identified and
managed in the Department of Education office accommodation PPP project. A
workshop attended by all relevant stakeholders including financial, technical and legal
advisors, after which data was collected and analysed with reference to the risk matrix,
risk impact on project performance as well as ways of minimising and managing these
identified risks. Thereafter a risk table was developed into a Public Sector Comparator
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(PSC) and Public Private Partnership (PPP) in order to compare these methods and see
which one would promote value for money.
Other sample of data was collected through structured interviews with parties involved
in the project providing both qualitative as well as quantitative data analysis which was
then summarised, described and analysed.
4 Findings and Discussion
4.1 Technical Risks
The technical category is split into three sections, namely: site risks, design,
construction and commissioning risks, and operational/facilities management risks.
Under the first category the risks such as cultural heritage, availability of the site,
existing structures, environmental issues and land claims area risks were identified.
Under the second category risks such as design needs of DoE, change in requirements
by DoE, financing unavailability, change in requirements by contractor, continuing
development of design, compliance with statutory operating requirements (licences,
approvals etc), building life expectancy, (design) approvals, completion delay,
replacement of people, security on site were identified.
Operational risks relate purely to facilities management and service provider execution.
They are a major decision maker when it comes to Value for Money and hence need to
be carefully assessed. Such risks were identified to be maintenance of building, space
planning risk, changes in output specifications, operator failure, failure to meet
performance or availability standards and compliance with security regulations.
4.2 Financial Risks
Under the financial category the risks such as interest rate (post financial close),
financing unavailability, further finance, variation in inflation rates, reporting
requirements, security for performance, payment of monthly instalment, additional costs
operations, foreign exchange rate risk, insolvency and incorrect cost estimates were
identified
4.3 Legal Risks
Under the legal category, risks such as anticipated actual completion date, approvals,
change in law, duration of the contract, conditions precedent, "unaffordable" risk
insurance, contractor's proposed change due to general change in law, provision and
interpretation of information, relocation and contractual opening date, extension of time,
delay in practical completion, monitoring and inspection by DoE, variation,
benchmarking, monthly availability deductions and monthly performance deductions
were identified.
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4.4 Impact of the risks on project performance
After employing the method of calculating risks as previously mentioned, the following
results were obtained and summarised:
Table 1 Monetary impact of the risks on the project
(Source: Workshop research risk matrix, 5-8 March KPMG)
Risks PSC PPP (Rand) DoE (Rand) Contractor
(Rand) (Rand)
Technical Site 1 990 549 1 953 730 1 151 841 801 889
Design 6 227 527 2 896 123 1 802 265 1 093 858
Operational 2 642 268 1 602 077 500 486 1 101 591
Financial 3 096 308 323 251 (221 948) 545 199
Legal 8 217 271 4 496 193 2 665 657 1 830 536
Total 22 173 941 11 271 374 5 898 301 5 373 073
From this calculation it can be concluded that under the traditional method the risks
costed are double in value to those under the PPP method and furthermore, under the
PPP the risks are shared with the contractor bringing the total costs of the risks facing
the DoE under the traditional method to 70%.
4.5 Minimising and managing risks in PPP
In the course of our investigation, interviewees with involvement in PPP project
delivery were asked to relay any difficulties they had had with risk analysis and
management. The intention of the research was to ensure that impediments to efficient
risk management in PPP were ameliorated. The problems divulged are highlighted
below, with frequent reference to the interviews conducted:
• The absence of a risk management culture: It was explained that getting people to
imbibe a formal working culture of risk assessment was difficult.
• Lack of historical data to support risk assessment: There is a lack of relevant
historical data to support risk evaluation in some aspects of PPP. For instance, how
many times will the private sector fail to keep a hospital ward in an acceptably clean
condition, is a question they cannot answer. With PPP being relatively new, there is
often no experience or track record revolving around the participants. In such cases,
there is nothing to measure against. Risk assessment in such scenarios was described
as a speculative guessing game.
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• Differing perceptions on the magnitude of risks: Risk assessment in PPP is a
collective judgement on what might or might not happen. Different parties
sometimes have different views concerning the severity of risks, i.e. the likelihood
of risks materialising and the amount of money needed to cover for them.
• Laid-back clients: Clients are sometimes not forthcoming with their precise
requirements until a preferred bidder has been appointed. It often takes several
months before a preferred bidder is selected, and waiting that long to obtain some
information is frustrating to private sector participants. The lack of a clear strategy
and unwillingness to make committed decisions are other perturbing issues
attributable to clients’ passiveness. This high source of uncertainty counts as client-
induced risk. Clients are laid-back, partly because they do not thoroughly understand
the PPP process.
• Occasional lack of requisite expertise: In complex projects, particularly information
technology (IT) schemes, some PPP participants have found it difficult to identify
the technical experts who are qualified to provide the kind of risk assessment
required.
• Long duration of PPP scheme: PPP schemes entail long-term contracts, sometimes
in excess of 25 years. The length of such contracts gives rise to its own risks. For
example, facilities managers may not remain in the contract for 25 years, the
technology on which a particular IT scheme was based will almost surely change,
etc. and it may not be exactly clear (i.e. uncertainty), what will happen when such
changes occur.
• The dynamic nature of PPP risks: Risks pertaining to changes in law, traffic
volumes, and the like, are very difficult to assess, as risk analysts may often not
know how much these will change. Environmental laws and the social acceptability
of some schemes are also dynamic, and difficult to assess.
• The unstructured nature of risk assessment: In the private sector the understanding
of some risks is sometimes based on the experiences and gut feelings of the
assessors. The risk assessment process is not completely structured or documented.
• Transient expertise: Most of the organisations that form a PPP consortium are big
international organisations with diverse professionals. However, their employees
sometimes move on, leaving a vacuum which needs to be filled. When that happens
in the course of risk assessment, a company could be caught off-guard without
sufficient or requisite personnel to analyse their project risks. Although it is always
possible to employ new hands, it is sometimes very difficult to get the right risk
assessors at the right time, as there are not many around.
4.5.1 Alleviating the difficulties
In view of their enormity, the foregoing problems could not be set aside by an
investigation into the development of a framework for the best PPP risk management
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practice, and how these issues could be redressed. The notable solutions proffered from
the ensuing discussions are given below:
• The consolidation of databases for PPP risk assessment purposes: Relevant
information is really the antidote for inaccurate risk assessment.
• The training of risk analysts: Training programmes would enable those organisations
or personnel who are not conversant with detailed or current risk analysis to update
their skills.
• Adequate time to be devoted to risk analysis: In view of the fact that PPP
procurement takes so long, an interviewee commented that ‘the time allocation for
considering risks should be planned into the PPP programme so that analysts have
sufficient time for a thorough risk assessment. It should not be a rushed process’.
• Facilitating a better understanding of risks: Some organisations, especially from the
public sector, felt that a thorough identification of the risks they were going to bear
in PPP projects was their biggest problem. Avenues that could facilitate a better
understanding of risks were thought to include brainstorming, workshops and
simplification of the issues.
• Motivating clients: Given that public sector clients are sometimes laid back, the need
for motivating them to be more forthcoming was expressed. In this regard, the
payment mechanism could be structured to reward clients that are readily
forthcoming with information or decisions.
• Seeking advice from experts: There are many types of risks in PPP, and one person
may not be versatile enough to understand all of them thoroughly. Therefore risk
analysts in PPP should not hesitate to seek external advice where necessary.
• Detailed planning: Some companies do not conduct rigorous risk reviews before
proceeding to sign deals. This laxity has even been extended to PPP undertakings,
which obviously is a different domain. More detailed planning would help such
organisations identify a myriad of risks that could easily go unnoticed.
• Adopting a more structured approach: Some organisations conceded that their risk
assessment procedures were not as sophisticated as they wish them to be. A more
structured approach was described by one organisation as ‘a formal framework, a
process that says that it will be done this particular way’.
• Acquiring and retaining experience: The requisite number of personnel in risk
assessment in PPPs is yet to saturate the market. One way of speeding up this
development is to train potential and existing professionals to be able to cope with
PPPs in general and risk assessment in particular.
• Standardisation of risks: One way of alleviating risk assessment difficulties is to
have a greater standardisation of these risks through standard contracts. Such
standardisation would circumvent the risk identification phase and enable
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participants to devote more time to finding risk management solutions. However,
standardisation will not get rid of some project-specific risks that will have to be
identified in each scheme.
5 Conclusion and Further Research
The public sector initiated Public Private Partnerships do indeed deliver better quality
projects under the PPP method than under traditional methods. However, it has been
proven that many risks do occur under the PPP method and hence they need to be
addressed and managed appropriately. In South Africa, however, there are many
modifications and the understanding of risk management culture is still to be learned
and processed in order to achieve the real meaning of the PPP method. According to the
research there are many risks associated with PPP projects. Most apparent are within
technical, i.e. construction, design and operational phases, financial and legal areas. The
most apparent and costly risks are the ones that are related to the legal side of the
project. Through investigated risks it can be concluded that PPP projects are extremely
important for the economic and social development of a country, especially South
Africa. From environmental issues to political dealings, PPPs are there to be delivered.
2009 and 20101 will be particularly important for delivering PPP projects as a result of
national and local elections and delivery to the public. A better understanding of the
risks will yield better PPP projects. This can be achieved through adequate training and
dedicating time to risk analysis, motivating clients, seeking advice from the experts,
adopting a more structured approach and standardising risks.
This research can be very beneficial to those who wish to investigate further whether the
risks on this project have materialised as predicted or if they have had any other impact
on the project. The results can be compared with the ones given in this paper for further
reference. It will provide a benchmark for the risks present in PPP projects and
guidelines for assessing and evaluating them for private sector advisors. It will also
provide a risk matrix assessment which may be used as a tool in every PPP project. It
will therefore be of great benefit to both public and private sectors since time involved
and spent on risk analysis would be minimised. It will also provide all the necessary
factors and likely occurrence of risk so that where applicable the necessary approval by
government will be timely and favourable.
6 Acknowledgement
My sincere thanks go to my co-author, Prof. Elisabeth Pienaar, who helped and guided
me in the right direction from start to completion of this research as well as my work
organisation KPMG, specifically Project Advisory Services division who sponsored me
and provided me with a significant amount of information. I would also like to thank
University of Witwatersrand, who sponsored this paper and presentation in city of Cape
Town. I am particularly grateful to my family who gave me support, strength and
understanding throughout my studies.
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7 References
Akintoye A.,.Beck M and Hardcastle C. (2003), Public Private Partnerships:
Managing Risks and Opportunities. Blackwell Science Ltd., UK
Asenova D. and Beck M. (2003), A financial perspective on risk management in
public-private partnerships, in Akintoye A, et al (ed.), Public Private
Partnerships: Managing Risks and Opportunities. Blackwell Science Ltd., UK
Boothroyd, C. and Emmett, J. (1996) Risk management: a practical guide for
construction professionals. London : Witherby &Co.
Chinio E. and Furgeson A. (2003), A construction perspective on risk management in
public-private partnerships, in Akintoye A, et al (ed.), Public Private
Partnerships: Managing Risks and Opportunities. Blackwell Science Ltd., UK
Lacey A. and Luff D. (2001), Qualitative Data Analysis. Trent Focus, London
McKim R A (1992) Risk Management – back to basics. Cost Engineering, 34(12), 7-12
National Audit Office (1999) Examining Value for Money of Deals in the Private
Finance Initiative August. HMSO, London.
National Treasury (2004), PPP Manual Module 4: PPP Feasibility Study, National
Treasury PPP Practice Note No 05 of 2004
Nova Scotia NS (2000), Review of Public Private Partnership Process.
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
K A L Trusler and C E Cloete, pp 1094-1112
Are the incentives offered by the Social Housing Programme
attractive enough to ensure the participation of the private
sector?
Trusler, K.A.L. 1 and Cloete, C.E. 1
1
Department of Construction Economics,
University of Pretoria,
South Africa
Email: [email protected]; [email protected]
Abstract:
The private sector can provide valuable experience and expertise in terms of project
initiation, development and management, and mobilisation of valuable resources to
ensure that social housing projects are delivered at scale. The research investigates the
nature and extent of incentives offered to the private sector to play a more active role in
the provision of social housing. An extensive review of related literature was
undertaken, interviews were conducted, a questionnaire was completed and a financial
model was used to determine the scope of the social housing programme and the
possible role of the private sector. It is concluded that the private sector is attracted to
the incentives offered by the social housing programme, but with some reservations.
When given the opportunity to recommend changes to some of the incentives, the
private sector chose to increase the internal rate of return (IRR) and reduce the term of
the project. The only way of achieving these recommended changes when using the
financial model was to reduce the contract period, the cost of the land and buildings, the
operating costs, and the cost of long-term debt. All of these adjustments require
innovation and careful decision making. Failure to achieve the results could threaten the
participation of the private sector. The private sector believes that it should be involved
in social housing and is willing to engage in consultation with government to develop
mutually suitable grounds for participation. It is recommended that government should
take the initiative to invite the private sector to collaborate in a process that would result
in the formulation of a mutually acceptable model that would meet the social needs of
the public sector, and the objective of the private sector to achieve acceptable profits.
Keywords: Incentives, participation, private sector, social housing, viability.
1 Introduction
Since the introduction of social housing in South Africa, there is no record of a private
sector for-profit company having engaged in the initiation, development and
management of a social housing project. This stark fact prompts two suggestions, either
the private sector is not well informed about the social housing programme or, the
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private sector is informed, but does not consider the incentives being offered attractive
enough to want to participate.
Therefore, the aim of this research is to investigate the envisaged role of the private
sector in social housing including the rules for their engagement in the programme, and
more specifically the nature and extent of the incentives offered, and whether the private
sector finds them attractive or not. Other surrounding factors such as market related
incentives and risks that could influence the participation of the private sector in social
housing, are also considered.
The research design makes use of four different methods of data collection which
includes an extensive literature review that gathers information from a number of
reliable documents, publications and articles, semi-structured interviews conducted with
specific individuals from relevant public and private sector organizations, a structured
questionnaire completed by selected private sector organizations such as property
owners, property developers, property managers, and property marketing agents, and
finally the use of a financial model provided by the Social housing Foundation (SHF) to
test the financial viability of a typical project given a number of different scenarios.
The research findings show that while social housing is one of a number of programmes
initiated by the National Department of Housing (NDOH) to provide housing for all
South Africans by 2014, one of the delivery agents able to initiate, develop and manage
social housing projects is the private sector for-profit company. Since the value of their
contribution is recognized, the social housing programme stipulates very specific
incentives applicable to the private sector to encourage their participation in social
housing such as access to the restructuring capital grant, the freedom to distribute
retained profits during the term of the project, and the Build Operate Transfer (BOT)
model that enables the private sector to exit the project after 15 years and trade with the
housing stock in the market place. In addition, market related incentives such as positive
reports on the rental housing sector with regard to current supply and demand
conditions, vacancy rates and trends, including perceived risks associated with social
housing such as the management of evictions, inefficient and expensive municipal
services, etc., would influence the involvement of the private sector.
The response of the private sector to a questionnaire which introduced them to the
concept of social housing and the incentives available to them indicated that the private
sector is initially attracted to the incentives offered by the programme, but with some
reservations. When given the opportunity to recommend changes, they chose to increase
the internal rate of return (IRR) and reduce the term of the project.
When these recommended changes were applied to a typical project and tested in the
financial model, the only way financial viability could be achieved was by reducing the
contract period, the cost of the land and the buildings, the operating costs, and the cost
of long-term debt. Innovation and careful decision making would be required to
effectively implement these adjustments made to the cost side of the project, as rental
income which is controlled for the duration of the project, cannot be adjusted at will to
cover unforeseen costs.
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It is hoped that the results of this research would provide useful information as to how
well informed the private sector is about the incentives offered in the social housing
programme, and whether they find them attractive or not. This information could then
be used to make the adjustments considered necessary to ensure the participation of the
private sector in the future of social housing.
On the positive side the private sector believes that they should be involved in social
housing and as such are willing to engage in consultation with government to develop
mutually suitable grounds for participation. It is recommended that government should
take the initiative to invite the private sector to collaborate in a process that would result
in the formulation of a mutually beneficial model that would address the social
responsibility of the public sector to provide rental accommodation for low income
persons, and the objective of the private sector to achieve acceptable profits.
2 Literature Review
A number of literary sources were reviewed such as the Social housing Policy, the
Social Housing Bill, Social Housing Trends, Social Housing Finance Reviews,
Inclusionary Housing: Implementation Guidelines, the Social Housing Programme
Guidelines, and the Supply and Demand of Rental Accommodation in South Africa.
Other sources of information that were consulted include the Social Housing
Foundation website at http://www.shf.org.za, the National Department of Housing
website at http://www.housing.gov.za, and the Gauteng Department of Housing
website at http://www.housing.gpg.gov.za, all of which have provided various up-to-
date documents, publications and articles offering a wide range of useful data related to
the research topic.
The combined effect of the literary sources consulted provides a broad overview of the
national vision for housing in South Africa narrowed down to the social housing sector,
the role of the private sector for-profit company, and the incentives made available to
them as indicated below.
To start with, the national goal is to provide housing opportunities for all South
Africans, and to eradicate informal settlements by the year 2014. While millions of
houses have already been provided, approximately 2.4 million still need to be delivered
at a rate of about 500,000 per annum in order to achieve the stated goal. (Department of
Housing, 2008) As a result, the NDOH has initiated a number of housing programs,
some of which offer temporary accommodation, while others offer various forms of
fully or partially subsidized ownership. Social housing on the other hand, offers the
rental tenure option which excludes immediate individual ownership by the residents.
Social housing is defined as, a rental or co-operative housing option for low income
persons at a level of scale and built form which requires institutionalised management
and which is provided by accredited social housing institutions (SHI’s) or in accredited
social housing projects in designated restructuring zones. (Social Housing Policy
2005:8) Accredited SHI’s apply to not-for-profit private entities, whereas accredited
social housing projects apply to for-profit private companies.
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An accredited project is a project in which government makes a subsidy contribution in
order to make rental units which are provided by a private sector actor affordable to
those eligible for social housing. The project receives accreditation through the Social
Housing Regulatory Authority (SHRA). The notion of accredited projects allows for the
participation of private sector developers and rental management agencies in social
housing provision in order to bolster capacity to achieve scale delivery. (Social Housing
Policy, 2005:9)
Delivery agents are those entities which deliver social housing and may include housing
co-operatives, non-profit private sector companies such as SHI’s, municipal entities
(ME’s), public private partnerships (PPP’s), and for-profit private sector companies.
The private sector for-profit company is perceived as having the potential to make a
major contribution towards the social housing programme, therefore the Social Housing
Policy guiding principles states that, “social housing must encourage the involvement of
the private sector where possible” (Social Housing Policy, 2005:11)
In order to engage as an effective role player in the programme, the private sector would
need to know the following about social housing:
• It is a rental tenure option only.
• It takes the form of medium density multi-unit complexes which include
townhouses, row housing, multi-storey units, low rise walk-ups, etc., excluding
detached units.
• It should be developed within designated restructuring zones, which are
geographical areas identified by the local authorities to fulfil the objectives of
urban restructuring and renewal, and are focal points for targeted investment
through government funding. (Social Housing Trends, 2005:5)
• The unit mix is to include, bachelor, 1 bedroom, 2 bedroom and 3 bedroom
units.
• Units are required to be self-contained and have a minimum floor area of 30m .
• Units are to be built according to a prescribed minimum specification.
• The income mix of a targeted area as determined by a market survey should
influence the rental mix, which in turn should affect the type, quantity and
quality of the units. In principle lower rentals should be associated with lower
quality.
• The rental mix is aimed at reaching the target market with a minimum of 30%
and a maximum of 70% of the units reaching the primary target market, or deep
down-market reach. Letting a percentage of the units at market related rentals is
encouraged as this income can help to cross subsidize the lower income rentals.
• The target market is aimed at the provision of rental accommodation for low-
income persons who earn between R 1,500 and R 7,500 per month. Rentals are
based on one-third of monthly income, i.e., R 500 to R 2,500 per month.
• The primary target market is aimed at low income persons earning between R
1,500 and R 3,500 per month. Likewise, rentals are based on one-third of
monthly income, i.e. R 500 to R 1,167 per month, and the average rental in this
range may not exceed R 750 per month (2007).
• Rentals are escalated on an annual basis using CPIX.
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• Projects need to be accredited by the SHRA who will thereafter monitor the
project for compliance with accountability arrangements and other accreditation
requirements. If a private firm does not perform, it will be put on terms.
• Accredited projects for rental only, within designated restructuring zones,
qualify for government funding in the form of a restructuring capital grant.
• To qualify for the restructuring capital grant on every unit, a project must ensure
that at least 30% of its units are reaching the primary target market and that the
maximum rentals charged do not exceed R 2,500 per month (Social Housing
Policy, 2005:36). Any units that charge market related rentals in excess of R
2,500 per month will not qualify for the capital grant.
• The number of units reaching the primary target market is not limited to 30%
and may be increased up to a maximum of 70%. This percentage increase is
accompanied by a linear increase in the overall value of the capital grant (Social
Housing Programme Guidelines, 2006:19). Projects that exceed the 70% limit
do not attract any additional capital grant.
• The restructuring capital grant is made up of a combination of two components
namely, the standard component and the variable (top-up) component. The
minimum standard component is R 125,615 per unit (2007) when 30% of the
units fall into the primary target market. An increment of R 749 per unit (2007)
for every percent increase raises the standard component to a maximum of R
155,575 per unit when 70% of the units fall into the primary target market. The
variable (top-up) component is R 36,505 per unit (2007) and is added to the
standard component.
• To be eligible for the restructuring capital grant, the private sector must pledge
an equity contribution up-front equal to 10% of the total project value. This
pledge must be supported by a letter from a financial institution indicating that
the funds are available. The equity contribution must be the first funds deployed
in the project. (Social Housing Programme Guidelines, 2006:20) Generally,
project funding comprises of the capital grant, a commercial loan, and equity.
• A project must be financially viable to be accredited. Viable projects are defined
as projects that are able to generate a prescribed yield over the projects lifetime
from rental income streams after taking into account all development, operating
and financing costs as well as long term provisions for maintenance, vacancy
and default risk. (Social Housing Policy, 2005:35)
Incentives that would encourage the private sector to participate in social housing can
be drawn from three main sources namely, government incentives applicable to the
social housing programme only, government incentives generally applicable to, but not
limited to the social housing programme, and market related incentives.
Firstly, government incentives applicable to the social housing programme only,
include:
• Access to the restructuring capital grant for projects which are located within
designated restructuring zones and are accredited by the SHRA.
• The introduction of the (BOT) model which is exclusive to the private sector.
This model requires private sector companies to build and operate social housing
projects for a concession period of not less than 15 years. Thereafter, rent
control measures cease and the SHRA second bond is removed (The first bond is
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held by the debt financier). The private firm will then be free to make market
related decisions and trade with the housing stock now at their disposal. They
would be in a favourable position to realize a substantial return. (Social Housing
Programme Guidelines, 2006:20)
• To sell the property before expiry of the 15 year period, the private sector
company would require the approval of the SHRA, and would be liable for:
o Repaying one fifteenth of the initial grant amount in respect of every
uncompleted year of the 15-year term.
o Paying interest at prime + 2% on the reducing amount of the grant in
respect of the number of completed years of the 15-year term.
(Social Housing Programme Guidelines, 2006:21)
• During the term of a project, project finances must be separated from general
company finances (Ring-fenced). Project cash-flows may not be used for other
company purposes. Retained profits may be distributed. (Social Housing
Programme Guidelines, 2006:25)
• Private sector companies are not required to;
o Build up operational reserves for long term maintenance and
upgrading of housing stock.
o Reinvest any operational surpluses in further social housing projects.
o Establish and comply with annual performance agreements with local
authorities on social housing projects in the area of jurisdiction.
o Consult with residents in social housing projects through meaningful
participation.
Secondly, government incentives generally applicable to, but not limited to social
housing include the Urban Development Zone (UDZ) tax incentive in the form of an
accelerated depreciation allowance relating to investments in refurbishing existing
buildings or creating new buildings in inner city areas.
Thirdly, market related incentives would include positive reports on the significance of
the rental housing sector, especially with regard to current supply and demand
conditions, vacancy rates, trends, etc.
Recent reports indicate that the rental sector is significant accounting for roughly 20%
of households in South Africa. The majority of households that pay rent are poor or
low-income earners. Roughly 55% have an income of less than R 3,500 per month
while a further 22% earn between R 3,500 and R 7,500 per month. There is significant
unmet demand for affordable accommodation in key urban centres. Both private
landlords and social housing institutions report exceptionally low vacancy rates of
between 1% and 2%. New social housing projects released onto the market are typically
over-subscribed often by a factor of ten or more. Private landlords offering more
affordable accommodation do not have to look for tenants. To quote one landlord;
“tenants find you”. Rentals have also increased significantly over the past few years.
(Supply and Demand of Rental Accommodation in South Africa, 2008:2)
Perceived risks that could discourage private sector participation in social housing
include;
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• The management of evictions in the context of legislation that criminalises the
eviction of non-paying tenants without an eviction order.
• The inefficient and expensive services delivered by municipalities.
• Access to and the cost of debt finance and the prescribed 10% equity required
up-front.
• The limited government funding available for social housing.
• The bureaucratic process of applying for government funding and receiving
payment of same.
• Project regulation and compliance monitoring by the SHRA.
• The 15 year long-term commitment to a project given the uncertainty of the
political and economical future.
• The scale of delivery required to “break-even” as a going concern in social
housing. (approximately 2000 units)
• The lack of suitably located, serviced and affordable land.
• Delays in unlocking older buildings suitable for refurbishment or conversion.
• The inelasticity of the supply of rental stock.
• A lack of awareness of developments in the social housing program by the
private sector.
3 Research Methodology
The research design makes use of four different methods of data collection which are
each discussed below under a separate heading.
3.1 Literature Review
The content of the literature review as noted in section 2 above, was able to provide a
broad overview of social housing in South Africa, which could then be narrowed down
to the specific detail required to address the research topic with reasonable confidence.
3.2 Interviews
Interviews were arranged in advance and involved a personal visit with a selected
individual from a specific organization in the Gauteng region. Interviews were generally
semi-structured around predetermined themes enabling interactive conversation
between the interviewer and interviewee in a relaxed and conducive environment.
Interviews were conducted with selected individuals from the Social Housing
Foundation (SHF), the NDOH, established SHI’s including those categorised as Faith
Based Organizations (FBO’s), ME’s, and private sector for-profit entities such as
property owners, property developers and property managers.
Notes were taken during the interviews and formally typed up and recorded on file
afterwards. Queries were followed up as soon as possible after the interview by
telephone or by e-mail. Any queries of a substantial nature were followed up by a
second interview.
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These interviews helped to orientate the research design and bring focussed attention to
the critical issues. They influenced the content of the subsequent questionnaire in terms
of data collection and the application of the financial model in terms of data analysis.
3.3 Questionnaire
A structured questionnaire was designed in order to solicit specific data and was then
sent to prominent private sector for-profit entities operating in the Gauteng region such
as property owners, property developers, property managers and property marketing
agents who are leaders in their field. Of the 9 questionnaires handed out, 5 were
completed and returned unspoilt.
The questionnaire briefly introduces the concept of social housing and then presents an
invitation to the private sector to engage in a hypothetical business opportunity to
develop and manage a social housing project of 300 units in the inner city. The
questionnaire provides sufficient detail to orientate the respondent to the incentives
offered to the private sector and the conditions attached to their participation in a social
housing project. The questionnaire sets about determining how interested the private
sector is in a social housing project in terms of the incentives offered, whether they
would want to change any of the conditions of engagement given the opportunity to do
so, the extent of such change, their tolerance of present government services, legislation
related to rental accommodation, and the political and economic climate. Also queried
was their knowledge of social housing, whether the private sector should be involved
and whether they were willing to engage in meaningful consultation with government
on the issue of private sector participation in social housing.
3.4 Financial Model
To test the viability of a typical project given a number of different scenarios, a
financial model provided by the SHF (Financial Standardised Model Version 5.3 – 02
November 2007) was made use of.
A case study was prepared using reliable information from a current project to represent
a typical “greenfields” social housing project which is relevant, and consistent with
prevailing conditions. Different scenarios were then considered for input into the
financial model. After each scenario had been tested in the financial model, the results
were tabled for comparison and to identify trends.
Viability is determined by the ability of the project to meet key benchmarks as defined
in the financial model, taken over a 20 year life-cycle and assuming that the housing
stock has no residual value at the end of the life of the project.
The financial model defines two primary hurdles that the project must achieve to be
considered a viable project, namely;
• The IRR of the project must be equal to or higher than the prime
overdraft rate plus a margin of 4.5%. This hurdle is currently capped at
18% (2007).
• The minimum debt service cover ratio may not be less than 1:3.
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While these benchmarks were tested for each scenario to determine project viability,
additional factors specific to the interests of the private sector for-profit entity, were also
taken into consideration. These factors included the IRR at exit from the project after 15
years and the amounts to be settled such as equity share capital, outstanding balances on
shareholders loans, and outstanding debt at the end of 15 years.
These scenarios tested in the first instance, whether the project was viable in terms of
the benchmarks set by the financial model and therefore whether the project was able to
access the capital grant. Secondly, the attractiveness of the project to the private sector
for-profit entity was tested in real terms at the point of exit from the project after 15
years and less.
4 Findings and Discussion
The overall findings of the literature review, interviews, questionnaire, and financial
model are discussed below.
Social housing, which is a rental only option for low income persons, is one of a
number of programmes introduced by the NDOH to meet the national goal to provide
housing for all South Africans and eradicate informal settlements by 2014.
The private sector for-profit entity is one of the delivery agents able to initiate, develop
and manage social housing. Since the value of their contribution is recognized,
incentives have been made available in the programme to encourage their participation
as follows;
• Access to the restructuring capital grant.
• A BOT model which enables the private sector company to exit the project after
15 years and then trade in the market place with the housing stock at their
disposal, for profit.
• To sell the property before the expiry of the 15 year period, the private sector
company would require the approval of the SHRA, and would be liable for:
o Repaying one fifteenth of the initial grant amount in respect of every
uncompleted year.
o Paying interest at prime + 2% on the reducing amount of the grant in
respect of the number of completed years.
(Social Housing Programme Guidelines, 2006:20)
• Retained profits may be distributed during the term of a project. (Social Housing
Programme Guidelines, 2006:25)
• Private sector companies are not required to build up, or reinvest operational
reserves.
Other incentives that may influence the private sector to engage in social housing
include the Urban Development Zone (UDZ) income tax incentive and recent market
reports indicating that the rental sector is significant, that there is significant unmet
demand for affordable accommodation, and that vacancy rates are exceptionally low.
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Conversely, the perceived risks associated with social housing such as, the management
of evictions, the inefficient and expensive services delivered by municipalities, access to
government funding and debt finance, the lack of suitably located, serviced and
affordable land, etc., could discourage participation in social housing by the private
sector.
The structured questionnaire, designed to elicit the response of the private sector to the
above information, was presented as an invitation to participate in a social housing
project. An example of the questionnaire, incorporating a summary of the responses
received is illustrated below. Individual responses have been printed in italics
immediately below each question. The block most closely representing the general
opinion of the respondents to a particular question, has been highlighted.
Illustration 1: Research questionnaire incorporating a summary of the responses
received.
Social Housing and the Private Sector – A Research Questionnaire
What is Social Housing?
Social Housing is a rental tenure option for low income persons requiring long-term institutionalized
management, and excludes individual ownership.
An invitation to the Private Sector!
Consider being offered the following hypothetical business opportunity; to initiate, develop and manage a
Social Housing Project of 300 rental units in the inner city. The details are as follows;
Total Project Cost 100%
Made up of: Government grant 60%
Commercial loan 30%
(@ Prime for project term)
Equity 10%
(Paid up-front before any
draw-down on grant and loan)
Project Details:
• The project term is 15 years. Thereafter you may sell or let the units at market related prices and
keep the proceeds.
• You may distribute all retained profits earned during the term of the project.
• The IRR over the 15 year life of the project, no residual value assumed, is 18%.
• The project design must meet prescribed standards and specifications. Units must be self-
contained and must have a minimum floor area of 30m . There are 100, 1-bed and 200, 2-bed
units.
• 30% of the units must be let at an average rental of R 750 p.m., ranging from R 500 p.m. to R
1166 p.m. The balance of the units must be let at between R 1166 p.m. and R 2500 p.m. Rentals
may be escalated annually at CPIX. These rentals exclude any utility cost recovery, which is
done separately.
• The project will be regulated by government over the 15 year period to monitor compliance with
accountability agreements and to protect the government investment.
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Questionnaire:
0 = Not at all 1 = Unsatisfactory 2 = Satisfactory 3 = Good 4 = Very good
1. How attractive do you find the above business opportunity? 0 1 2 3 4
Responses: 1 1 3
2. Would you be satisfied with an internal rate of return (IRR) of 18%? Yes No
Responses: 1 4
3. What is the lowest IRR that you would be prepared to accept? Above 20%
Responses: 18% 20%x2 21% 25%
4. Do you consider the project term of 15 years, reasonable? Yes No
Responses: 2 3
5. Which project term would you prefer? Less 10-15 More than
than Years 15 years
10
years
Responses: 3 2
6. Which of the following equity arrangements would you prefer? Less 10% More than
(10% Up-front is the prescribed requirement) than 10%
10%
Responses: 4 1
7. What minimum floor area would you consider reasonable for 30m²
a self- contained bachelor unit? (30m is the prescribed minimum)
Responses: 22m²x1 30m²x4
8. How appealing do you find the prescribed rentals and rental mix? 0 1 2 3 4
Responses: 1 1 3
9. How open are you to government regulation of the project? 0 1 2 3 4
Responses: 3 2
10. How willing are you to deal with tenants who are low-income 0 1 2 3 4
earners in the R 1,500 – R 7,500 p.m. range?
Responses: 1 2 2
11. How willing are you to interact with various government 0 1 2 3 4
departments, especially at local authority level?
Responses: 2 1 1 1
12. To what extent (a) Municipal services? 0 1 2 3 4
would the
following factors (b) The Rental Housing Act and Prevention 0 1 2 3 4
be a positive of Illegal Eviction (PIE)?
influence when
(c) Political climate? 0 1 2 3 4
considering long-
term involvement
in social housing (d) Economic climate? 0 1 2 3 4
projects?
Responses: (a) 1 1 3
(b) 1 1 1 2
(c) 4 1
(d) 1 1 3
13. How well informed are you about social housing? 0 1 2 3 4
Responses: 1 4
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14. Do you believe that the private sector should be involved in 0 1 2 3 4
social housing?
Responses: 1 4
15. How open are you to consultation with the public sector on the 0 1 2 3 4
likely participation of the private sector in social housing?
Responses: 1 4
An analysis of the response of the private sector to the above questionnaire indicates
that, 60% considered the opportunity to engage in a social housing project, attractive.
20% were cautious, and 20% were not attracted at all. This indicated a willing, but
cautious response. When asked if they would be satisfied with an IRR of 18%, 80% said
no, and then indicated that they would prefer an IRR of above 20%. As much as 60% of
the respondents did not consider a 15 year project term reasonable, preferring a shorter
project term of less than 10 years. Both the preferred selections of the higher IRR and
the shorter project term indicate that the private sector are not convincingly attracted to
the incentives as offered and would be inclined to seek higher initial returns and shorter
project terms in order to off-set risks associated with future uncertainties.
As much as 80% of the respondents indicated that they were in favour of the prescribed
10% (of total project cost) equity required to be paid up-front. Similarly, 80% of the
respondents indicated that they were satisfied with the prescribed minimum floor area of
30m .
When asked about the prescribed subsidised rentals and rental mix, 60% said it was
good, 20% said satisfactory and 20% said unsatisfactory. This response indicates that
the private sector, although not fully in agreement with the prescribed rentals and rental
mix, are prepared to work around them. The response to regulation and compliance
monitoring of the project by the SHRA was fairly positive, with 60% saying that it was
satisfactory and 40% saying that it was good. The willingness of the private sector to
work with low-income earners in the R1500 – R 7500 pm range was positive, indicating
that they were favourably disposed towards this income group. The response to their
willingness to interact with government departments on various levels was satisfactory,
indicating that they were prepared to endure a necessary process as a means to an end.
When asked about the municipal services, the Rental Housing Act and PIE, and the
political and economic climate, the respondents generally agreed that each of these
would have an important influence on their decision to engage in social housing in the
long term. Since the general opinion is that municipal services are expensive and
inefficient, the Rental Housing Act and PIE are negatively disposed towards the role of
the landlord, and there is an element of uncertainty in the political and economic
climate, these sentiments would negatively influence the private sector.
Surprisingly, 80% of the respondents considered themselves well informed about social
housing. This opinion was not put to the test, but other reliable research has indicated
that the private sector lacks awareness about developments in the social housing sector.
(Supply and Demand of Rental Accommodation in South Africa, 2008:44) An
encouraging observation supported by 80% of respondents, was that the private sector
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firmly believes they should be involved in social housing and are favourably disposed
towards consultation with the public sector on ways to do so.
For the purposes of the financial model, a case study project was prepared using
accurate information obtained from a current “greenfields” social housing project in the
Gauteng region. The information is considered reliable and consistent with prevailing
conditions in the sector. A typical feasibility study was conducted taking into account
the requirements of the social housing programme and more specifically, the incentives
available to the private sector. Table 1 below highlights some of the relevant details
relating to the case study project.
Table 1: Case study project details
Case Study Project Details (As at June 2008) Total Per Unit
Number of units 300
(50 x Bachelor, 50 x 1-Bed, 200 x 2-Bed)
Floor area of units 13350 m 44.5 m
(Bachelor = 30m , 1-Bed = 37m , 2-Bed = 50m )
Cost of land including transfer fees (23156m ) R 4,948,796 R 16,496
Total project cost (Including land & VAT) R 83,308,571 R 277,695
Assuming 30% of units reach Primary Target Market
and remainder are let under R2500pm
Number of Primary Target Market units 90
Monthly rental at commencement R 553,299 R 1,844
(90 units x R750 + 210 units x R2452) - 5% Vacancy
Monthly direct operating costs at commencement R 92,198 R 307
Monthly overhead operating costs at commencement R 83,564 R 279
Monthly utility costs at commencement (Recoverable) R 85,500 R 285
The required information was then fed into a financial model which among other things,
calculated the IRR of the project over a 20 year life-cycle, and determined the minimum
debt service ratio. In addition, the financial model provided the IRR at exit from the
project after 15 years and determined the amounts that would need to be settled after 15
years such as the equity share capital, outstanding shareholders loans, and outstanding
debt. Against this backdrop, various scenarios numbered from 1 – 11, were tested to
determine their viability in each case. The scenarios also took into account the effect of
some of the responses to the questionnaire, such as achieving an IRR of above 20%, and
reducing the project term to 10 years and less.
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The case study results for scenarios 1 - 11 as tested in the financial model are indicated
in tables 2 - 5 below.
Table 2: Case study results. Scenarios 1 - 4
Scenarios Total Internal Internal Minimum Amounts to be settled at exit
Common factors: development rate rate debt after 15 years
• 10% Equity up‐front. cost of return of return service
• Land included at market price. (including (IRR) (IRR) ratio Equity Outstanding Total
• 300 Units land over project at exit (with 1.3 share capital debt
• Project life of 20 years with exit after 15 years. and VAT) life of after hurdle) and
• Debt term of 20 years. Margin on debt = 0. 20 years 15 years outstanding
• Construction period of 14 months. (with 18% shareholders
hurdle) loans
Specific factors:
1 • 30% of units reach prime target market.
• Remaining units do not exceed R 2,500 p.m. R 83 308 571 16.52% 14.34% 1.17 (R 6 175 272) (R 14 613 718) (R 20 788 990)
2 • 50% of units reach prime target market.
• Remaining units do not exceed R 2,500 p.m. R 83 619 541 14.26% 11.79% 1.05 (R 43 556 371) (R 12 275 624) (R 55 831 995)
3 • 70% of units reach prime target market.
• Remaining units do not exceed R 2,500 p.m. R 83 954 197 10.44% 7.44% 0.84 (R 88 396 799) (R 9 950 675) (R 98 347 474)
4 • 30% of units reach prime target market.
• Remaining units let at market related rental R 81 543 099 12.27% 9.50% 0.74 (R 86 328 925) (R 27 395 674) (R 113 724 599)
Table 3: Case study results. Scenarios 5 – 9
Scenarios Total Internal Internal Minimum Amounts to be settled at exit
Common factors: development rate rate debt after 15 years
• 10% Equity up‐front. cost of return of return service
• Land included at market price. (including (IRR) (IRR) ratio Equity Outstanding Total
• 300 Units land over project at exit (with 1.3 share capital debt
• 30% of units reach prime target market. and VAT) life of after hurdle) and
• Remainder of units do not exceed R 2,500 p.m. 20 years 15 years outstanding
• Project life of 20 years with exit after 15 years. (with 18% shareholders
• Debt term of 20 years. Margin on debt = 0 hurdle) loans
• Construction period of 14 months.
Specific factors:
5 • Reduce construction period to 12 months. R 82 744 056 16.90% 14.80% 1.09 (R 6 941 263) (R 14 175 241) (R 21 116 504)
6 • Reduce construction period to 12 months.
• Reduce capital expenditure by 7%. R 81 461 294 20.18% 18.46% 1.29 (R 820 000) (R 13 537 200) (R 14 357 200)
7 • Reduce construction period to 12 months.
• Reduce capital expenditure by 7%.
• Reduce operational costs by 8%. R 81 461 294 20.86% 19.20% 1.33 (R 820 000) (R 13 537 200) (R 14 357 200)
8 • Reduce construction period to 12 months.
• Reduce capital expenditure by 7%.
• Reduce operational costs by 8%.
• Adjust debt margins from 0 to ‐2 R 81 400 758 20.90% 19.24% 1.33 (R 820 000) (R 13 509 455) (R 14 329 455)
9 • Reduce construction period to 12 months.
• Reduce capital expenditure by 7%.
• Reduce operational costs by 8%.
• Adjust debt margins from 0 to ‐2
• Land donated by municipality. R 76 470 358 24.93% 23.64% 1.61 (R 770 000) (R 11 071 603) (R 11 841 603)
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Table 4: Case study results. Scenario 10
Scenarios Total Internal Internal Minimum Amounts to be settled at exit
Common factors: development rate rate debt after 10 years
• 10% Equity up‐front. cost of return of return service
• Land included at market price. (including (IRR) (IRR) ratio Equity Outstanding Total
• 300 Units land over project at exit (with 1.3 share capital debt
• 30% of units reach prime target market. and VAT) life of after hurdle) and
• Remainder of units do not exceed R 2,500 p.m. 20 years 10 years outstanding
• Project life of 20 years with exit after 10 years. (with 18% shareholders
• Debt term of 20 years. Margin on debt = 0 hurdle) loans
• Construction period of 14 months.
Specific factors:
10 • Reduce construction period to 12 months.
• Reduce capital expenditure by 7%.
• Reduce operational costs by 8%.
• Adjust debt margins from 0 to ‐2
• Land donated by municipality.
• Project term of 10 years. R 76 470 358 24.93% 19.19% 1.80 (R 770 000) (R 15 915 811) (R 16 685 811)
Penalties for early exit from project:
• Repayment of one fifteenth of the restructuring capital grant in respect of every uncompleted year of the 15 year project term.
‐ Value of restructuring capital grant = R 48,636,000
‐ Number of uncompleted years = 5 Years
‐ Calculation: R48,636,000 x 5/15 = R 16,212,000 (R 16 212 000)
• Payment of interest at prime + 2% on the reducing amount of the grant for every completed year of the 15 year project term.
‐ Value of restructuring capital grant = R 48,636,000
‐ Number of completed years = 10 Years
‐ Interest rate: 15.5% + 2% = 17.50%
‐ Interest on: R 48,636,000 x 10/15
@ 17.5% for 10 years = R 36,436,312 (R 36 436 312)
Total (R 69 334 123)
Table 5: Case study results. Scenario 11
Scenarios Total Internal Internal Minimum Amounts to be settled at exit
Common factors: development rate rate debt after 5 years
• 10% Equity up‐front. cost of return of return service
• Land included at market price. (including (IRR) (IRR) ratio Equity Outstanding Total
• 300 Units land over project at exit (with 1.3 share capital debt
• 30% of units reach prime target market. and VAT) life of after hurdle) and
• Remainder of units do not exceed R 2,500 p.m. 20 years 5 years outstanding
• Project life of 20 years with exit after 5 years. (with 18% shareholders
• Debt term of 20 years. Margin on debt = 0 hurdle) loans
• Construction period of 14 months.
Specific factors:
11 • Reduce construction period to 12 months.
• Reduce capital expenditure by 7%.
• Reduce operational costs by 8%.
• Adjust debt margins from 0 to ‐2
• Land donated by municipality.
• Project term of 5 years. R 76 470 358 24.93% (3.53%) 1.80 (R 770 000) (R 18 846 168) (R 19 616 168)
Penalties for early exit from project:
• Repayment of one fifteenth of the restructuring capital grant in respect of every uncompleted year of the 15 year project term.
‐ Value of restructuring capital grant = R 48,636,000
‐ Number of uncompleted years = 10 Years
‐ Calculation: R48,636,000 x 10/15 = R 32,424,000 (R 32 424 000)
• Payment of interest at prime + 2% on the reducing amount of the grant for every completed year of the 15 year project term.
‐ Value of restructuring capital grant = R 48,636,000
‐ Number of completed years = 5 Years
‐ Interest rate: 15.5% + 2% = 17.50%
‐ Interest on: R 48,636,000 x 5/15
@ 17.5% for 5 years = R 8,224,880 (R 8 224 880)
Total (R 60 265 048)
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An analysis of the above case study results indicates that scenario 1, based on 30% of
the units reaching the primary target market and the remaining units not exceeding
R 2,500 per month, would not be regarded as viable and would therefore not qualify for
the capital grant. This is due to its failure to achieve the prescribed IRR and minimum
debt service ratio hurdles over a 20 year period, of 18% and 1.3 respectively. Scenario 1
also fails to meet the expectations of the private sector in that the IRR at exit after 15
years is only 14.34%, as opposed to 20% or more. In addition, the private sector would
be required to settle an outstanding amount of R 20,788,990 at exit. Scenarios 2 and 3,
which consider 50% and 70% of the units respectively reaching the primary target
market, have produced results that are progressively weaker than those of scenario1.
Scenario 4, which looks at letting the remaining 70% of the units at market related
rentals, produced the poorest results.
The conclusion drawn by observing scenarios 1 – 4, is that scenario 1 would be the best
option to work with in order to achieve the viability required to qualify for the capital
grant and more specifically, to satisfy the expectations of the private sector. Therefore,
using scenario 1 as the base line for further research, various adjustments have been
made to it with compounding effect. Each adjustment being represented by a scenario
numbered from 5 – 9.
In scenario 5, the construction period was reduced from 14 months to 12 months. This
adjustment did not succeed in achieving the desired results. In scenario 6, the capital
expenditure was reduced. This adjustment produced an acceptable IRR of 20.18% over
20 years, but failed to achieve the minimum debt cover ratio hurdle of 1.3 in order to be
considered viable. The IRR at exit from the project after 15 years was 18.46%, still
lower than the 20% or more, preferred by the private sector. In scenario 7, the operating
costs were reduced. As a result, the required hurdles for a project with a 20 year life-
cycle were achieved, the project was considered viable, and it qualified for the capital
grant. The IRR at exit from the project after 15 years was still below 20%, and therefore
not yet attractive to the private sector. In scenario 8, the debt margins were adjusted
from 0 to -2%. This produced results very similar to scenario 7 with marginal
improvements in terms of viability, but still falling short of the requirements set by the
private sector. Finally, scenario 9 took into account the possibility of the land being
donated by the municipality. This scenario, representing the combined effects of
scenarios 5 – 9, finally produced the desired results, i.e. an IRR of 24.93% over 20
years, a minimum debt cover ratio of 1.61, and an IRR of 23.64% at exit from the
project after 15 years. In addition, the amount of R 11,841,603 that would need to be
settled at this stage, could be regarded as reasonably achievable given the market value
of the housing stock.
The results of scenarios 5 - 9 indicate that all of the adjustments would need to be
possible in order to both qualify for the capital grant and satisfy the requirements of the
private sector. While this may be the ideal, it would not be possible without some
detailed investigation, innovative thinking, and careful decision making. The notion of
the land being donated by the municipality may be challenged by the authorities. The
reduction of the capital expenditure and the operating costs may also be challenged by
the private sector. Other methods that could be used to increase the IRR would be, for
National Treasury to increase the amount of the capital grant, to reduce the minimum
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floor area of the units, to rent out parking bays, to include commercial units in the
development, to take advantage of competitive tender conditions in a quieter property
market, to incorporate preferential tax treatment such as the UDZ tax incentive, to
arrange for subsidised municipal services, etc.
Scenarios 10 and 11 each considered the request of the private sector to reduce the
project term. Scenario 10 looked at a 10 year project term and scenario 11, at a 5 year
project term. Both scenarios achieved viability over 20 years and qualified for the
capital grant since they were based on the same conditions as scenario 9. In scenario 10,
the IRR at exit after 10 years was 19.19%, only marginally lower than the required 20%
set by the private sector. The combined sum of the amounts to be settled and the
penalties to be paid for exit from the project earlier than the prescribed 15 year period,
came to a sizeable R 69,334,123. Scenario 11 failed in that it achieved a negative IRR at
exit after 5 years. In addition, the combined sum of the amounts to be settled and
penalties to be paid at exit came to a considerable R 60,265,048.
Observations drawn from these last two scenarios suggest that, while a decision to exit
from the project anywhere between 10 and 15 years may be a viable option, for
anything below 10 years viability becomes increasingly difficult, if not impossible. At
the point of exit, the private sector would need to weigh up the market value of the
housing stock against the amounts still to be settled, as well as consider whether the
IRR achieved, is acceptable. The private sector for-profit company may also consider
keeping the housing stock on its books, re-financing the project and letting the units at
market related rentals as opposed to selling.
5 Conclusion and Further Research
In conclusion, the incentives offered by the social housing programme are attractive to
the private sector on face value, but with some reservation. Given the opportunity, the
private sector would request that some changes be made, for example they would prefer
an IRR of more than 20% and a project term closer to 10 years. This would have the
effect of bringing the expected returns into line with other market related private sector
projects. It would also have the effect of introducing risk mitigating measures in that, a
higher IRR could provide a cushion against unforeseen costs, and the shorter project
term could reduce the period of exposure to risks associated with social housing. When
the preferences of the private sector are tested in the financial model, the achievement
of an IRR of more than 20% at exit after 15 years, assumes that 30% of the units are
reaching the target market and the remainder are being let at rentals not exceeding R
2,500 per month. It assumes a construction period of 12 months, that capital expenditure
is kept to a minimum, that operational costs are kept to a minimum, that margins on
debt are set at -2%, and that the land is donated by the municipality. These assumptions
are not easy to achieve and are the exception, requiring innovative thinking, careful
decision making and a healthy working relationship with the municipality. Reducing the
project term to 10 years also relies on the above assumptions being a possibility in order
to achieve results that are acceptable to the private sector. Reducing the project term to
5 years simply does not work, and is therefore not a proposition.
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Other incentives that could have a positive influence on decisions by the private sector
to engage in social housing include, the UDZ tax incentive, and recent reports indicating
that the rental sector is significant, that there is significant unmet demand for affordable
accommodation, and that vacancy rates are exceptionally low at between 1% and 2%.
Since the assumptions made in scenarios 1 – 9 in order to achieve project viability are
not guaranteed, there is the possibility that the incentives offered by the social housing
programme are not considered attractive enough by the private sector to ensure their
participation. However, in spite of this risk and other debilitating factors such as, poor
quality and costly municipal services, the expensive and inefficient legal process of
dealing with evictions, bureaucratic government processes, access to equity, debt
finance and government funding, the lack of suitably located serviced and affordable
land and buildings, the political and economic climate, potential market distortions, and
a host of other impeding factors related to social housing, the private sector believes that
they should be involved in social housing and as such are willing to engage in
consultation with government towards this end. It is recommended that this positive
approach by the private sector should be taken seriously. Government should take the
initiative and invite the private sector to collaborate in a process that would result in the
formulation of a mutually acceptable model that would meet the needs of both the
public and private sector.
Further research could be undertaken to;
• Solicit and test proposals on working models for the successful engagement of
the private sector in social housing
• Develop a financial model specifically suited to the express requirements of the
private sector in the context of a working relationship with the public sector.
• Develop a funding model that can structure purpose made funding packages to
suit specific project requirements.
• Develop an indigenous social housing model that is suitable to the South African
context.
6 Acknowledgement
The authors wish to acknowledge the support and input of Mr. A. Diephout of the
National Department of Housing who was exceptionally generous with his time and
thoughts.
7 References
Department of Housing, (2005). A Social Housing Policy for South Africa.
Pretoria. http://www.shf.org.za. (01/08/2007)
Department of Housing, (2006). Social Housing Programme Guidelines.
Pretoria.
Department of Housing, (2007). Social Housing Bill. Pretoria.
http://www.shf.org.za. (02/09/2008)
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K A L Trusler and C E Cloete, pp 1094-1112
Department of Housing, (2008). Mandate, Vision and Mission of the Department.
Pretoria. http://www.housing.gov.za (10/04/2008)
Social Housing Finance Review, (2005) Organizational Equity in Social Housing.
Johannesburg. http://www.shf.org.za (01/08/2007)
Social Housing Finance Review, (2006) Financial Viability in Social housing
Projects. Johannesburg. http://www.shf.org.za (01/08/2007)
Social Housing Finance Review, (2006) Operational Loans in Social Housing
Projects. Johannesburg. http://www.shf.org.za (01/08/2007)
Social Housing Foundation, (2007) Financial Standardized Model Version 5.3 – 02
November 2007. Johannesburg.
Social Housing Foundation, (2008) Supply and Demand of Rental Accommodation in
South Africa. Johannesburg. http://www.shf.org.za (02/09/2008)
Social Housing Trends, (2005) The New Social Housing Policy For South Africa.
Johannesburg. http://www.shf.org.za (01/08/2007)
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Jeremy Gibberd, pp 1113-1124
The South African Constitution: are sustainable buildings
mandatory?
Jeremy Gibberd1
1
CSIR,
Pretoria, 0001,
South Africa
Email: [email protected]
Abstract:
The South African Constitution is widely recognised as one of the most progressive
constitutions worldwide. The Constitution has a strong focus on human rights and the
environment. This recognised through a requirement for reasonable legislation and other
measures to be developed to ‘secure ecologically sustainable development and use of
natural resources while promoting justifiable economic and social development’
This paper aims to understand the implications for the built environment of this
statement through interpreting and expanding this into an explicit set of requirements
for the built environment. The paper discusses these requirements in light of existing
legislation and reflects on whether adequate measures are being taken in the built
environment to implement and promote environmental aspects of the South African
Constitution.
Keywords:
• Built Environment, Constituition, Sustainability
1 Introduction
This paper reviews the environmental and sustainability implications for the built
environment of the South African Constitution. In particular, Section 24 on
environmental rights is analysed to ascertain the implications and obligations of this for
the built environment.
The analysis shows that the Constitution includes a set of explicit rights in relation to
the environment and sustainable development. The Constitution also requires that these
rights to be realised through ‘through reasonable legislative and other measures’. 1 In
order to ascertain whether these rights are being realised through these means the paper
reviews key building-related legislation in the form of building regulations, health and
safety legislation and environmental management legislation.
1
Section 24 of the South African Constitution
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The review reveals that current building-related legislation only partially addresses the
environmental and sustainability rights stated in the Constitution. The paper outlines a
number of areas where legislation falls short of Constitutional requirements and makes
some recommendations on how these gaps could be addressed.
2 The South African Constitution
Constitutions set out how government is organised and defines how power should be
shared and wielded. Like a contract between those in power and those who are
subjected to this power, a Constitution defines the rights and duties of citizens, and
outlines the mechanisms to keep those in power in check. (South African Constitutional
Court, 2009)
The South African Constitution was developed in 1996. As the supreme law of South
Africa it may not be superseded and government and other parties may not violate
provisions within this. It contains a Bill of Rights that enshrines the rights of all people
in South African and affirms the democratic values of human dignity, equality and
freedom. The Bill has sections covering equality, human dignity, privacy, freedom of
religion belief and opinion, environment, property, housing, healthcare, food, water and
social security, children, education, language and culture. Through a section on equality,
the Bill requires that all people have full and equal enjoyment of these rights and
freedoms:
Everyone is equal before the law and has the right to equal protection and benefit of the
law.
Equality includes the full and equal enjoyment of all rights and freedoms. To promote
the achievement of equality, legislative and other measures designed to protect or
advance persons, or categories of persons, disadvantaged by unfair discrimination may
be taken. 2
Rights in the Bill are however subject to limitations. These are outlined in Section 36 of
the Bill:
The rights in the Bill of Rights may be limited only in terms of law of general
application to the extent that the limitation is reasonable and justifiable in an open and
democratic society based on human dignity, equality and freedom, taking into account
all relevant factors, including ¬
a. the nature of the right;
b. the importance of the purpose of the limitation;
c. the nature and extent of the limitation;
d. the relation between the limitation and its purpose; and
e. less restrictive means to achieve the purpose. 3
2
Section 9 of the South African Constitution
3
Section 36 of the South African Constitution
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The role and responsibility of government is also outlined in the Bill. This specifically
requires government to achieve the rights outlined in the Bill:
The state must respect, protect, promote and fulfil the rights in the Bill of Rights. 4
Environmental rights in the Bill of Rights include the right to an environment that
supports health and well being. It also requires legislation to be developed to ensure that
the environment is protected and that development that does occur is both sustainable
and justifiable:
24. Environment
Everyone has the right
a. to an environment that is not harmful to their health or well-being; and
b. to have the environment protected, for the benefit of present and future
generations, through reasonable legislative and other measures that
i. prevent pollution and ecological degradation;
ii. promote conservation; and
iii. secure ecologically sustainable development and use of natural
resources while promoting justifiable economic and social development 5
2.1 Implications of Section 24 of the Constitution for the Built Environment
There are a range of implications for the built environment of Section 24 outlined
above. This requires some interpretation of the Section and for the following questions
to be answered:
• What is defined as an environment?
• How is health and well being defined?
• What does ecologically sustainable development mean?
• What is meant by justifiable economic and social development?
2.2 The Environment
There is no comprehensive international treaty on human rights and environment that
can be used to understand how the environment should be defined in the Bill of Rights
(South African Human Rights Commission, 1996a). The 1972 Stockholm Declaration
on the Human Environment adopted by the UN Conference on the Human Environment
however begins to define rights and obligations of man in regard to the environment:
Man has the fundamental right to freedom. Equality and adequate conditions of life, in
an environment of quality that permits a life of dignity and well being, and he bears the
solemn responsibility to protect and improve the environment for present and future 6
4
Section 7 of the South African Constitution
5
Section 24 of the South African Constitution
6
UNEP http://www.unep.org viewed: 06/06/2009
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The African Charter on Human and People’s Rights adopted by Heads of States of the
Organisation for African Unity in 1981 sets out how the environment should be
interpreted in terms of human rights within an African context:
All peoples shall have the right to a general satisfactory environment favourable to
their development. 7
Section 24 of the Bill of Rights indicates that the environment can be defined both as
natural and man-made environments. De Waal suggests that this definition includes
‘man made objects and cultural and historical heritage’ (De Waal 1999). Feris argues
therefore that in interpreting Section 24, traditional rights, needs and values and the
dignity of indigenous people should be taken into account (South African Human
Rights Commission, 1996b).
2.2.1 Implications for the built environment
Therefore the following implications of the South African Constitution can be inferred
for the built environment:
• The built environment should create environments favourable for the
development of people.
• Built environments should take into account the traditional rights, needs and
values of indigenous peoples.
2.3 Health and Well Being
The World Health Organisation (WHO) defines health in the following way:
Health is a state of complete physical, mental and social well-being and not merely the
absence of disease or infirmity.8
Given this broad definition it is clear that environments conducive to health and well
being are likely to be described in different ways by different people and socio-
economic groups. Wealthy people may wish to protect the environment in order to
avoid mental or aesthetic discomfort. Poor rural people, on the other hand, would want
to protect the environment because they rely on this directly for clean water and food.
(South African Human Rights Commission, 1996a)
2.3.1 Implications for the built environment
Therefore the following implications of the South African Constitution can be inferred
for the built environment:
• The built environment should ensure that built environments support physical,
mental and social well being.
7
African Commission on Human and People’s Rights. http://www.achpr.org viewed: 06/06/2009
8
Preamble to the Constitution of the World Health Organization as adopted by the International Health Conference,
New York, 19 June - 22 July 1946; signed on 22 July 1946 by the representatives of 61 States (Official Records of
the World Health Organization, no. 2, p. 100) and entered into force on 7 April 1948.
http://www.who.int/suggestions/faq/en/index.html viewed: 06/06/2009
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• Criteria used to define physical, mental and social well being in built
environment must take into account, and respond to, the particular situation of
the people who occupy and use these built environments.
2.4 Ecologically Sustainable Development
Principles from the Rio Declaration on the Environment and Development can be used
to define the sustainable development. The principles below from the Declaration
indicate that development must be equitable and that environmental protection must be
integrated into development:
Principle 3
The right to development must be fulfilled so as to equitably meet developmental and
environmental needs of present and future generations.
Principle 4
In order to achieve sustainable development, environmental protection shall constitute
an integral part of the development process and cannot be considered in isolation from
it. 9
2.4.1 Implications for the built environment
The following implications of this definition for the built environment can be inferred:
• Development of the built environment should ensure that developmental and
environmental needs of present and future generations are achieved in an
equitable way.
• Conservation and protection of the environment should be integrated in to any
built environment development process.
2.5 Justifiable Economic and Social Development
Justifiable economic and social development can be interpreted through reference to
other sections of the Bill of Rights. These sections include rights to housing, healthcare,
food, water and social security and education:
26. Housing
Everyone has the right to have access to adequate housing. 10
27. Health care, food, water and social security
Everyone has the right to have access to ¬
a. health care services, including reproductive health care; 11
29. Education
Everyone has the right ¬
b. to a basic education, including adult basic education; and
9
UNEP http://www.unep.org viewed: 06/06/2009
10
Section 26 of the South African Constitution
Section 27 of the South African Constitution
11
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c. to further education, which the state, through reasonable measures, must make
progressively available and accessible.
d. sufficient food and water; 12
It can be argued that development that helps to ensure that these rights are achieved can
be classified as justifiable economic and social development. Conversely, development
that does not directly contribute to the achievement of these rights may not be deemed
justifiable.
2.5.1 Implications for the built environment
Therefore the following implications of the South African Constitution can be inferred
for the built environment:
• Development of built environments that directly contribute to the achievement
of rights outlined in the Bill of Rights may be deemed to be justifiable
• Development of built environments that do not contribute to the rights defined in
the Bill of Rights may be deemed not to be be justifiable.
2.6 Discussion
Given the above interpretation of Section 24 of the Bill of Rights, it is possible to
review current building related legislation in order to ascertain whether this is effective
in upholding the Constitution. Legislation used to control building development in
South Africa include the Building Regulations (South African Bureau of Standards
1990), the Occupational Safety and Health Act (Department of Labour 1987, 1988,
1983), and the National Environmental Management Act (Department of Environment
and Tourism 1998). This legislation is reviewed below to ascertain its alignment with
the environmental and sustainability building implications of the South African
Constitution.
2.7 Health and Well Being
Legislation on health and well being in built environments can be found in the Building
Regulations and in the Occupational Health and Safety Act. The Building Regulations
set out minimum requirements for lighting and ventilation (South African Bureau of
Standards, 1990). Other aspects such as thermal and acoustic performance are not dealt
with, because it is argued, these can only be judged in a subjective manner:
There are other aspects to a building which may affect only the comfort or convenience
of people but many of these, such as acoustic or thermal performance, are judged in a
subjective way and are not readily amenable to control in a sensible manner by
regulation. It is also obvious that the market will limit the degree to which these matters
can be considered in the design of a building. 13
12
Section 29 of the South African Constitution
12
Section 24 of the South African Constitution
13
SABS (1990), Code of Practice for the Application of the National Building Regulations. South African Bureau of
Standards, Pretoria. pp 101-115
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The Occupational Health and Safety Act addresses health and well being through the
Facilities Regulations and the Environmental Regulations for Workplaces. The
Facilities Regulations require minimum standards for sanitation, changing rooms,
dining rooms, drinking water and seating. The Environment Regulations for Workplaces
sets out requirements for hot and cold working environments, lighting, windows,
ventilation, space and noise.
The legislation does not address thermal conditions in working or living environments
where temperatures are between 0 and 30oC. Temperatures between this range, for
instance 2oC, and 29 oC, are therefore deemed acceptable, even though these may not be
conducive to health and well being.14 This gap in legislation has resulted in many
buildings such as housing, offices and classrooms being built without insulation and
passive or active cooling or heating systems.
The legislation is not responsive to different requirements of sections of the population
in terms of health and wellbeing. For instance, babies, children and sick people who are
more sensitive to heat and cold are not catered for, and temperatures in school
environments can reach 45°C. (Dolley and Hermanus, 2009)
Similarly, legislation allows poorly constructed housing with no insulation to be built.
This is often occupied by people with few resources to counter, through heating or
cooling, discomfort and ill health caused by high or low temperatures (Mathews et al
1995). Open fires are also used to heat housing, leading to suspended particulates being
found to be between 3 to 12 times higher than those prescribed by the World Health
Organisation (Terblanche 1992).
It can therefore be argued that building related legislation does not sufficiently uphold
the right to health and wellbeing outlined in Section 24 of the Bill of Rights. In
particular, building legislation does not prescribe any minimum thermal or acoustic
standards in building. The lack of legislation in this area can lead to thermal and
acoustic environments in buildings which are damaging to health and well being. In
addition, the legislation does not address other issues such as the presence of volatile
organic compounds in air, as a result of off gassing from carpets, adhesive or paint
which have also been shown to have a harmful effect on health (Wieslander et al 1996).
2.8 Indigenous Construction
The Building Regulations are performance-based and aim to avoid prescriptive
requirements.15 Theoretically this approach should allow, and encourage, alternative and
indigenous construction materials and designs that are more affordable and supportive
of health and well being. In reality however, local authorities have been wary of
approving anything considered ‘alternative construction’ without further information, as
outlined below.
14
For instance, human comfort is indicated as being between 20 OC and 27OC on the comfort chart used in American
Society of Heating, Refrigerating and Air-Conditioning Engineers, 1992. ANSI/ASHRAE Standard 55-92 Thermal
environmental conditions for human occupancy., Atlanta, GA,1992.
15
SABS (1990), Code of Practice for the Application of the National Building Regulations. South African Bureau of
Standards SABS, Pretoria. pp 40.
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Where there is doubt as to the efficiency of any design or method of construction
proposed the local authority may call for further information which normally would
take the form of one or more of the following -
(i) a test report from the SABS;
(ii) a test report from the CSIR;
(iii) an Agrement certificate;
(iv) verification of a design by an independent Professional Engineer. 16
This clause can be used by local authorities to prevent any construction other than
standard ‘European’ type construction. This has resulting in most buildings in South
African towns being constructed of brick and corrugated steel, even through in rural,
unregulated areas, mud brick and thatch are traditionally used as building materials.
It therefore could be argued that building related legislation does not sufficiently uphold
traditional rights, needs and values and the dignity of indigenous people, if this included
in the definition of ‘well being’ outlined in Section 24 of the Constitution. It does this
by making it more difficult, and more expensive, for alternative and indigenous building
methods to be used by required test reports, certificates or verification from a
professional engineer.
2.9 Ecologically Sustainable Development
The Building Regulations and the Occupation Health and Safety Act do not include any
reference to sustainable development or conservation and protection of the environment.
This however is addressed by the National Environment and Management Act (NEMA)
(Department of Environment and Tourism 1998). This states that:
(3) Development must be socially, environmentally and economically sustainable.
(4) (a) Sustainable development requires the consideration of all relevant factors
including the following:
i. That the disturbance of ecosystems and loss of biological diversity are avoided,
or, where they cannot be altogether avoided, are minimised and remedied;
ii. that pollution and degradation of the environment are avoided, or, where they
cannot be altogether avoided, are minimised and remedied;
iii. that the disturbance of landscapes and sites that constitute the nation’s cultural
heritage is avoided, or where it cannot be altogether avoided, is minimised and
remedied;
iv. that waste is avoided, or where it cannot be altogether avoided, minimised and
reused or recycled where possible and otherwise disposed of in a responsible
manner;
v. that the use and exploitation of non renewable natural resources is responsible
and equitable, and takes into account the consequences of the depletion of the
resource;
16
SABS (1990), Code of Practice for the Application of the National Building Regulations. South African Bureau of
Standards SABS, Pretoria. pp 43.
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vi. that the development, use and exploitation of renewable resources and the
ecosystems of which they are part do not exceed the level beyond which their
integrity is jeopardised;
vii. that a risk averse and cautious approach is applied, which takes into account
the limits of current knowledge about the consequences of decisions and actions;
and
viii. that negative impacts on the environment and on people’s environmental rights
be anticipated and prevented, and where they cannot be altogether prevented,
are minimised and remedied. 17
In order to implement these principles NEMA uses a number of mechanisms including
the application of environmental management tools. These are required to:
a. promote the integration of the principles of environmental management set out
in section 2 into the making of all decisions which may have a significant effect
on the environment;
b. identify, predict and evaluate the actual and potential impact on the
environment, socioeconomic conditions and cultural heritage, the risks and
consequences and alternatives and options for mitigation of activities, with a
view to minimising negative impacts, maximising benefits, and promoting
compliance with the principles of environmental management set out in section
2;
c. ensure that the effects of activities on the environment receive adequate
consideration before actions are taken in connection with them;
d. ensure adequate and appropriate opportunity for public participation in
decisions that may affect the environment;
e. ensure the consideration of environmental attributes in management and
decision making which may have a significant effect on the environment; and
f. identify and employ the modes of environmental management best suited to
ensuring that a particular activity is pursued in accordance with the principles
of environmental management set out in section 2. 18
In addition, NEMA allows the Minister to identify activities which may not be
commenced without prior authorisation. It can also be used to identify areas in which
specified activities may not be commenced without prior authorisation:
(a) identify activities which may not be commenced without prior authorisation
from the Minister or MEC;
(b) identify geographical areas in which specified activities may not be commenced
without prior authorisation from the Minister or MEC and specify such activities;
19
17
DEAT (1998), National Environmental Management Act. Department of Environment and Tourism, Pretoria.
Chapter 1
18
DEAT (1998), National Environmental Management Act. Department of Environment and Tourism, Pretoria.
Chapter 5
19
DEAT (1998), National Environmental Management Act. Department of Environment and Tourism, Pretoria.
Chapter 5
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This legislation is used to control the development of activities such as billboards, large
water reservoirs, masts (over 15m), roads (wider than 15m), hospitality facilities and
landing strips in sensitive areas identified by provinces. Sensitive areas identified
include conservancies, indigenous state forests, protected areas and areas zoned for
public open spaces in urban areas.
While this legislation is a clear attempt to support the Section 24 of the Constitution
there is a gap between the principles espoused in the Act and how this implemented.
Chapter 1 of NEMA (see above) states that development must socially, environmentally
and economically sustainable. This however is never fully defined or followed through
in the Act, which instead dwells at some length on defining development activities and
geographical areas where legislative control may be exerted. The legislation is not
explicit on what types of development would be considered sustainable and therefore
high density urban housing, which may be seen as more socially, environmentally and
economically sustainable is not given preference or support over development that may
be seen as being less sustainable such as golf courses or casinos.
It can therefore be argued that current legislation does not adequately define or describe
sustainable development, or ensure that this achieved. Existing legislation tends to be
used to limit particular types of development in specified geographical areas. It can be
argued that sustainable development, as defined in the Constitution, has broader and
more far reaching implications.
2.10 Justifiable Economic and Social Development
Building related legislation does not define justifiable economic and social
development. This however is alluded to in Chapter 5 from NEMA (see above) which
suggests that development should ‘maximise benefits’. This could be interpreted to
mean maximising social and economic benefits.
Legislation, therefore, does not provide guidance on whether development can, or
cannot be deemed justifiable. Without this, it is difficult to promote ‘justifiable’
development such as schools, housing and health facilities that ensure that rights in the
South African Constitution are fulfilled, in preference to other development which does
not.
Chan and Yung argue that greater flexibility should be used in the way building
legislation is applied to ensure that there is greater flexibility and support for land uses
that are beneficial to communities or which can be ‘justified’ in this way. In their review
of building related legislation for Hong Kong they show that legislation tends to hamper
innovation and can produce unsustainable infrastructure (Chan and Yung 2003).
2.11 Conclusions and Recommendations
This paper suggests that building related legislation does not adequately uphold and
support Section 24 of South African Constitution. It suggests that the rights outlined in
Section 24 have not been sufficiently translated into clearly defined minimum built
environment requirements, or recognised and supported, through enabling legislation. A
number of recommendations are outlined below which could be explored to ensure that
building related legislation was more effective in meeting Constitutional obligations.
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• Health and well being: Minimum thermal performance requirements could be
prescribed for building. In particular, prescribing minimum R-values in roofs of
buildings which is a low cost measure could be used to significantly improve
health and well being in many buildings (Mathews et al, 1995).
• Indigenous and sustainable construction: Indigenous and more sustainable
alternative construction should be recognised and supported through deemed-to-
satisfy clauses in the building regulations. This would enable buildings with this
type of construction to readily achieve approval from local authorities without
additional expense.20
• Sustainable development: Sustainable development must be translated into
mandatory requirements for the built environment. This could include
mandatory energy and water efficiency measures as well as prescribed labour
intensity, health and education performance requirements. 21
• Justifiable development: Justifiable development could be defined in
legislation and steps taken to promote this over development that was less
justifiable or unjustifiable. This legislation could be used to ensure that
development that fulfilled Constitutional rights such as rights to housing,
education and health were supported and achieved in preference to development
that did not.
While these recommendations could improve building standards and equity, the law is
still likely to be seen as a rule based system dictated by government. Building related
legislation will continue to be used to define only minimum standards and may be seen
as largely irrelevant to the design process (Patlis, 2005).
In order for sustainability and Constitutional requirements to be more effectively
integrated into buildings, a more explicit and practical understanding of their
implications for the built environment needs to be developed. This should be used to
inform built environment decision-making processes in order to achieve built
environments that were more sustainable and reflected the South African Constitution
better. The law from this perspective would enable and support a process of integrated
decision-making guided by practical norms based on human rights and sustainability
(Reisman and Aaron, 1987)
3 References
Chan, E. W. and Yung, E. K. (2003), Is the development control legal framework
conducive to a sustainable dense urban development in Hong Kong? Habitat
International, Volume 28, Issue3, September 2004, pp 409-426.
Department of Environment and Tourism (1998), National Environmental Management
Act. Department of Environment and Tourism, Pretoria.
20
A move in this direction can be found in SABS 1989, Code of Practice for the construction of dwelling housings in
accordance with the National Building Regulations. South African Bureau of Standards. Pretoria
21
SANS 204 developed by SABS in 2008 could be used as a basis for energy efficiency legislation for buildings.
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Jeremy Gibberd, pp 1113-1124
Department of Labour (2003), Occupation Health and Safety Act, Construction
Regulations. Department of Labour, Pretoria.
Department of Labour (1987), Environmental Regulation for Workplaces, Department
of Labour, Pretoria.
Department of Labour (1988), Facilities Regulations, Department of Labour, Pretoria
De Waal, J., Erasmus, G. and Currie, I. (1999), The Bill of Rights Handbook. Juta,
Johannesburg, 2001, pp 393.
Dolley, C. and Hermanus D. (2009), Fire Rages as Cape boils. Pretoria News.
http://www.pretorianews.co.za/?fSectionId=&fArticleId=vn20090306050138369C7630
77 viewed: 1/06/2009.
Patlis, J. (2005), The role of law and legal institutions in determining the sustainability
of integrated coastal management projects in Indonesia, Ocean & Coastal
Management, Volume 48, Issues 3-6, Sustainability of Integrated Coastal
Management, pp 450-467.
Reisman, M.W. and Aaron, M.S. (1987), Jurisprudence: understanding and shaping the
law. Yale University Press, New Haven.
Mathews, E.H., Richards, P.G, van Wyk, S.L. and Rousseau P.G. (1995), Energy
efficiency of ultra-low cost housing. Build. Environ. 30, pp 427-442.
South African Bureau of Standards (1990), Code of Practice for the Application of the
National Building Regulations. South African Bureau of Standards SABS, Pretoria.
South African Constitutional Court (2009), What is the definition of a constitution?
http://www.constitutionalcourt.org.za/site/home.htm viewed: 06/06/2009.
South African Human Rights Commission (1996a), Reflections on Democracy and
Human Rights. South African Human Rights Commission, Johannesburg. pp 119
South African Human Rights (1996b), Reflections on Democracy and Human Rights.
South African Human Rights Commission, Johannesburg, pp 120.
South African Human Rights (1996c), Reflections on Democracy and Human Rights.
South African Human Rights Commission, Johannesburg, pp 120.
Terblanche, P. (1992), The health and pollution dimensions of domestic energy sources,
atmospheric impact management, CSIR, Pretoria.
Wieslander G., Norbäck D., Björnsson, E., Janson, C. and Boman, G. (1996), Asthma
and the indoor environment: the significance of emission of formaldehyde and
volatile organic compounds from newly painted indoor surfaces International
Archives of Occupational and Environmental Health Volume 69, Number 2 /
December. Springer Berlin / Heidelberg, pp 115-124.
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Maizatun Mustafa, pp 1125-1135
Urban forest protection from the perspective of environmental
law in Malaysia: issues and challenges
Assistant Professor Dr. Maizatun Mustafa1
1
Ahmad Ibrahim Kulliyyah of Laws,
International Islamic University, Malaysia,
P.O. Box 10, 50728 Kuala Lumpur, Malaysia.
Email: [email protected]
Abstract:
Within a society, ongoing urbanisation can lead to the increasing importance of urban
green spaces as contributors to the quality of the urban environment and urban life
globally. Forest and tree resources are known to have a wide range of socio-cultural,
economic and environmental values. The value of the forest is also increasingly
recognised as extending beyond rural areas and so trees must become compatible with
and functional in the urban environment. At present, the emerging realization of the
importance of these values has become apparent to many countries, including that of
Malaysia. Upon this realization, Malaysia began to consider ways to optimize and
incorporate forest values within its urban environs in a sustainable way while responding
to the wide range of needs, local priorities and expectations. This paper examines the
scope of urban forest and the role of urban greening in enhancing the living quality of
urban populations of Malaysia. The paper is deliberately biased towards environmental
issues and aims at highlighting provisions under environmental law relevant to urban
forest protection. Some issues pertaining to possible challenges that can undermine the
efficacy of the law are also highlighted.
Keywords:
Environmental law, Environmental protection, Urban forest, Urban forest protection.
1 Introduction
Malaysia covers a total of 329 750 square kilometres and is geographically divided into
two parts, The Peninsular Malaysia and the North Bornean territories of Sabah and
Sarawak. Malaysia is a multicultural and multiracial society with the current population
of 27.7 million (Department of Statistics Malaysia, 2009A). Malaysia’s humid tropical
location provides excellent conditions for thousands of plant species to thrive and evolve
(Abidin, 1999), and places it among the 12 countries internationally recognized as
possessing mega diversity (Sani, 1998). However, like many other developing countries
in Southeast Asia, Malaysia has experienced extremely high rates of urbanization
especially for the past 20 years when the economy undergone major changes. These
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changes have led to, among other things, significant influx of rural people and migrants
to urban centers, and the creation of more urban areas around the country (Aiken, 1982).
The term “urban areas” as applicable in the context of Malaysia, is defined by the
Department of Statistics (Department of Statistic Malaysia, 2009B), based on the
Population & Housing Census Malaysia 2000 (Department of Statistics Malaysia,
2009C), as “gazetted local authority areas with a specified population threshold and
gazetted areas with their adjoining built-up areas which had a combined population of
10,000”. The present trend in Malaysia is that the rural population is on the decline,
whereas the percentage of urban population is on the increase with the projection of 75
per cent by the year 2020 (Department of Statistics Malaysia, 2009A). At present,
urbanisation’s main primacy in Malaysia is the three main city regions of Kuala Lumpur,
George Town and Johor Bahru, around which conurbations are being formed (Federal
Government of Town and Country Planning Malaysia, 2009).
While continuous urbanization is inevitable, higher concentration of people and industry
in urban areas have unavoidably caused considerable issues including that of assimilative
capacity and environmental quality. Among environmental threat facing cities and urban
areas of Malaysia are inland water pollution due to siltation, industrial and household
discharges; air pollution from industrial and motor vehicle emissions; and deforestation
and other land clearing activities (Department of Environment Malaysia, 2007). For
Malaysia, in its effort to enhance the quality of urban environment as promulgated by
National Policy on the Environment (Department of Environment, 2002), it is important
that existing environmental issues are dealt with seriously.
Indeed, various measures have been, and can be, applied to help attain these quality
living objectives. For this tropical country that has bountiful forests, protecting and
maintaining such forests and other green spaces are among ways of dealing with
environmental quality issues. It is generally accepted that urban forest is one of the
resources of an urban area. It is part of the urban infrastructure and is integral to the
quality of life of its residents as can be found, for example, within the Kuala Lumpur
Structure Plan (City Hall Kuala Lumpur, 2003). For Malaysia which is facing continuous
environmental threats due to its rigorous economic development, urban forest would
definitely provide various benefits to the community. Among social benefits of urban
forest are those relating to health, employment, education, recreation, aesthetic and
landscape benefits. Whereas in the context of environmental protection, urban forest and
other green areas can provide the following services to urban areas of Malaysia:
- climate change and air quality improvement;
- energy savings, reduction of global warming and carbon dioxide;
- noise abatement;
- water use, reuse and conservation;
- soil conservation;
- solid wastes and land reclamation; and
- nature conservation, wildlife habitat and biodiversity.
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The importance of tree planting and green spaces within urban areas is getting more
noticeable in Malaysia. This can be indicated by policy statements such as that of the
National Urbanization Policy Malaysia (Federal Department Town and Country Planning
Peninsular Malaysia, 2006) and the National Policy on the Environment Malaysia
(Department of Environment, 2002). Nevertheless matters relating to the protection and
management of urban forest are still something rather new for this country. Initial study
has shown that the term “urban forest” is not applied within any existing policies and
legislations relevant to the matter (Mustafa, 2008). On the other hand, it comes under the
range of various disciplines such as that of urban planning, forestry and even
landscaping. The issue is further compounded by the facts that Malaysia practices a
federal system of government whereby natural resources and environmental related
matters can come within the jurisdiction of either federal or state government (Mustafa,
2009). In other words, there can be no specific law and agency that have exclusive
powers over urban forests in Malaysia, but such powers are spread within various related
laws and government institutions.
Despite the complexity of the matter, it is argued that environmental law can nevertheless
offer certain degree of protection to urban forest. This protection can come in various
forms such as that of environmental quality enhancement, natural resources conservation,
and pollution control. This paper is meant to be a preliminary study to look as possible
ways in which existing environmental law in Malaysia can help towards forest protection
within urban areas. At present, there exist over 30 legislations in Malaysia that are
directly related to environmental protection, and some of which are relevant to that of
urban forest (Mustafa, 2008). However, for the purpose of this paper, examination will be
done only on selected and most relevant legislations. Firstly, the paper seeks to identify
the meaning and scope of urban forest for regulation purposes. Then it will look at
possible legal protection given to urban forest against environmental pollution and other
harms. After that, the paper will discuss possible challenges that can undermine the
efficacy of these legislations towards urban forest protection.
2 Scope of Urban Forestry
When delineating the issue of urban forest particularly from the perspective of urban
environmental protection, it is necessary to identify the context in which “urban forest” is
understood. Generally, “urban forest” can be referred to as a part of the forest found
within the built environment (Food and Agriculture Organization of the United Nations,
2009). However, in this paper, this concept will be looked at from a bigger perspective
based on existing policies and laws of Malaysia relevant to the subject. For this reason,
terms such as “open spaces1” and “green area” (Federal Department Town and Country
Planning Peninsular Malaysia, 2006) will be considered to be part of urban forest.
Arguably, urban forest and environmental protection work in both ways. On one hand,
urban forest, if properly managed and protected, can help improve the environmental
1
See section 2 of the Town and Country Planning Act 1976, Act 172.
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quality of urban areas. For a tropical country like Malaysia, wildlife and other natural
resources such as rivers and trees are integral parts of a forest. Thus, pockets of urban
forests, together with natural resources and wildlife therein, provide natural and tropical
elements within urban areas of Malaysia. On the other hand, the protection of urban
forest from harms associated with environmental degradation is also vital to ensure that
such forest are well kept to enable the city dwellers to enjoy its full benefits. In this
regard, environmental law can be applied to provide protections to urban forest, whether
in the forms of pollution control, natural resources conservation, or even environmental
impact assessment. Environmental related legislations relevant to urban forest protection
are examined below.
3 Urban Forest Protection under Environmental Legislations
As already pointed out, environmental degradation and depletion of natural resources
particularly due to land clearing and other economic related activities are among major
threat to urban forests in Malaysia. In many urban areas such as Kuala Lumpur and
Penang, greater urbanization means that land is getting to be a scarcer resource which is
increasingly sought after. In urban areas of Penang for example, many forests reserved,
including hills and catchment areas are already being cleared for the purpose of
development (Ngai, 1998). When forests are being cleared, it can lead to many
environmental problems such as deforestation, decimation of water catchments,
destruction of endangered fauna and flora, soil erosion, landslides, water pollution,
sedimentation and downstream flooding.
The roles of environmental legislations here are to provide protections to urban forest
against such problems, apart from helping towards its enhancement and conservation.
The most relevant legislation for this purpose is the Environmental Quality Act 19742
which deals mainly with the prevention, abatement, control of pollution and enhancement
of the environment (Mustafa, 2009). Arguably, while the term “urban forest” is not
specifically available within this Act, its scope is nevertheless wide enough to cover that
of urban forest. This is evident from the definition of relevant terms within the Act. For
example, the term “environment” is defined as3:
“the physical factors of the surroundings of the human beings including
water, atmosphere, climate, sound, odour, taste, the biological factors of
animals and plants and the social factor of aesthetics”.
The term “element” in relation to the environment for the purpose of the Act is defined to
mean4:
2
Act 127.
3
Section 2 of the Environmental Quality Act 1974.
4
Section 2 of the Environmental Quality Act 1974.
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Maizatun Mustafa, pp 1125-1135
“any of the principal constituent parts of the environment including water,
atmosphere, soil, vegetation, climate, sound, odour, aesthetics, fish and
wildlife”.
From the definitions above, it is argued that, despite the general nature of the Act, its
scope is extensive to cover urban forest, being part of the environment and natural
resources, for purposes that include health, safety and welfare of the public. The same
argument applies when looking at the definition of the word “pollution” which is defined
by the Act to mean5:
“any direct or indirect alteration of the physical, thermal, chemical, or
biological properties of any part of the environment by discharging,
emitting, or depositing environmentally hazardous substances, pollutants
or wastes so as to affect any beneficial use adversely, to cause a condition
which is hazardous or potentially hazardous to public health, safety, or
welfare, or to animals, birds, wildlife, fish or aquatic life, or to plants or to
cause a contravention of any condition, limitation, o restriction to which a
licence under this Act is subject”.
Within the Act, various environmental strategies introduced are relevant towards urban
forest protection. One of which is environmental impact assessment (EIA) as provided
under section 34A. generally, EIA is considered essential for the purpose of sustainable
development particularly in attaining the acceptable balance of environment protection
and economic development.
Specifically, section 34A requires that any person intending to carry out proposed
activities is required to submit a report containing an assessment of the impact the
activity is likely to have on the environment. There are 19 activities classified as
“prescribed activities” that require the submission of the EIA report for the purpose of
section 34A. The list of these activities is provided in the Environmental Quality
(Prescribed Activities)(Environmental Impact Assessment) Order 19876. They include
activities relating to agriculture; airports; drainage and irrigation; land reclamation;
fisheries; forestry; housing; industry; infrastructure; ports; mining; petroleum; power
generation and transmission; quarries; railways; transportation; resort and recreational
development; waste treatment and disposal; and water supply7.
From the list above, it is contended that, there are a number of activities that may cause
harm to urban forest or its surroundings if not properly regulated such as that of forestry
or housing development. For these activities, possible adverse effect can occur in various
forms. They include water logging, salt water intrusion, alteration of river features, soil
erosion and sedimentation. For these reasons, EIA is important to ensure that not only the
development of a particular project is properly located and planned, its environmental
degradation is also avoided or minimised. Here, EIA can help ensure, among other
5
Section 2 of the Environmental Quality Act 1974.
6
PU (A) 362/1987.
7
See Schedule of the Environmental Quality (Prescribed Activities)(Environmental Impact Assessment) Order 1987.
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things, that urban forest or natural resources therein are not disturbed or polluted, and that
deterrence and mitigating measures are identified to protect existing ecosystems and
communities. Apart from that, EIA is also applicable to assess activities that are
indirectly affecting urban forest. They include that of waste disposal that may cause
pollution through the discharge of effluent. Strict penalty is imposed by section 34A for
those who failed to submit the EIA report, or to those who failed to abide by conditions
stipulated in the report namely a fine up to RM100000, or jail up to five years, or to both.
Another relevant strategy under the Environmental Quality Act 1974 is that relating to
pollution control. Under this Act, urban forest can be protection against pollution that
may come through various sources. For instance, section 24 deals with the control of soil
pollution and restricts any person from polluting any soil or surface of any land.
According to clause (2) of section 24, a person is deemed to pollute any soil or surface of
any land if he does any of the followings:
- he places in or on any soil or in any place where it may gain access to any soil any
matter whether liquid, solid or gaseous; or
- he establishes on any land a refuse damp, garbage tip, soil and rock disposal site,
sludge deposit site, waste-injection well or otherwise used land for the disposal of
or a repository for solid or liquid wastes so as to be obnoxious or offensive to
human beings or interfere with underground water or be detrimental to any
beneficial use of the soil or the surface of the land.
Arguably, this section can be applied to protect urban forestry against pollution such as
from non-point discharges of a liquid wastes. The same provision may also be applied to
landfill owners, or any person who discharged wastes onto any urban forest and caused
such wastes to produce leachate that leaks and cause pollution to any water resources
within such forest. Under section 24, any person who is found guilty may be liable to a
fine of up to RM100 000, jail of up to five years, or to both.
Apart from soil pollution, the Act is also relevant to protect water resources within an
urban forest through section 25. It is contented that, being a tropical country, forests,
including that within urban areas, play an important role for Malaysia as water cathments
for the purpose of water supply. Any activity that disturbs urban forests may cause
disruption to water cathment and consequently affecting water availability. Under section
25, any person is restricted from emitting, discharging or depositing any environmentally
hazardous substances, pollutants or wastes into any inland waters. The scope of “inland
waters” is very wide to include “any reservoir, pond, lake, river, stream, canal, drain,
spring or well, or any part of the sea above the low water line along the coast, or any
other body of natural or artificial surface or subsurface water8”. Penalty imposes on any
person who is found guilty of committing an offence under this section will be a fine of
up to RM100000, jail for up to five years, or to both.
Another possible protection that can be given by the Environmental Quality Act 1974 is
that relating air pollution control, particularly due to open burning that causes haze. In
8
Section 2 of the Environmental Quality Act 1974.
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Malaysia and elsewhere, haze, which is caused by the presence of a large number of
particles suspended in the air, is a form of poor air pollution that affect health and
wellbeing of the public (Sani, 1998). In the context of environmental quality protection,
there is an interrelation between urban forest protection and air pollution control. Within
cities and urban areas, forest and other green areas are pertinent in helping to minimize
the effect of air pollution, notably from motor vehicle emissions and that of industries.
However, activities involving the burning of forest areas, that are meant to provide new
areas for housing, agricultural, industrial and other purposes, are major contributor
towards the haze phenomenon (Department of Environment Malaysia, 2007). In order to
deal with the haze issues, the Act introduces section 29A9 on the control of activities
relating to open burning. This section imposes a complete ban on “open burning” by
strictly prohibits any person from causing open burning on any premises, and any land.
The penalty imposes by this section is a fine of up to RM500 000, and a jail term for five
years, or both. Perhaps, this provision is not directly concerned with urban forest
protection. However, it is argued that, the impact of such prohibition may deter possible
clearance of urban forests and other urban green areas, and consequently help protect
their wellbeing and that of natural resources therein.
While the Environmental Quality Act 1974 concerns mainly with environmental
pollution control, the most important legislation in Malaysia on forest protection is the
National Forestry Act 198410. This Act was enacted to provide for the administration,
management and conservation of forests and forestry development within the states of
Malaysia. Among the most relevant provisions on urban forest protection are sections 7
and 10 that empower the state government to constitute any land a “permanent reserved
forest” and to classify these reserved forests under various classifications. They include:
- timber production forest under sustained yield;
- soil protection forest;
- soil reclamation forest;
- flood control forest;
- water catchment forest;
- forest sanctuary for wild life;
- virgin jungle reserved forest;
- amenity forest;
- education forest;
- research forest; and
- forest for federal purposes.
Once a forest land has been gazetted as a permanent reserved forest, various protections
can be given to such forest. For example, under section 15 (1), any person is prohibited
from taking any forest produce from a permanent reserved forest except under the
authority of a licence. Penalty provided for any person who contravene this section is a
fine not exceeding RM500000 and to imprisonment for a term between one to twenty
9
The Environmental Quality Act (Amendment) 1998, Act 1030, s.3.
10
Act 313.
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years and imprisonment11. Apart from that, offensive littering of reserved forest is also an
offence under section 83 of the Act, namely to create an objectionable stench or degrades
the beauty or the appearance of property or detracts from the natural cleanliness or safety
of property. Among actions that constitute offensive littering under section 83 includes
discarding any rubbish, trash, garbage, debris or other refuse; or draining of mining
sludge, industrial effluent, sewage or the drainage from contaminated sources. Penalty
imposed for offences committed this section is a fine not exceeding RM10000 or to
imprisonment for a term not exceeding three years or to both.
Indeed, provisions within the National Forestry Act 1984 are very relevant in providing
protection to forests including that within urban areas. For example, within Kuala
Lumpur, there exist three reserved forests namely the Bukit Nanas Forest Reserves, Bukit
Sungai Puteh Forest Reserve and Sungai Besi Forest Reserve. These residual forests are
Kuala Lumpur’s very important areas of natural environment but at the same time are
facing threat of development. Thus, provisions on permanent reserved forest are pertinent
for the purpose of their protection.
4 Issues and Challenges
Examination here has shown the importance of environmental legislations in Malaysia in
providing various protections to urban forest. However, like many other developing
countries, common internal issues faced when enforcing these laws can seriously
undermine their efficacy. Among these issues include that of manpower capacity,
adequate funding, strictness of enforcement, and availability of implementation’s
requisites. Additionally, external issues such as problems arising from the inherent
fragmentation of the federal system, conflict of environmental authorities, and conflict of
laws are other notable challenges faced by Malaysia. Being a federal system of
government, possible clashes of laws may arise since urban forest protection and
management cut across various sectors. For the same reason also, legislations such as the
Environmental Quality Act 1974 cannot be relied upon in providing a full environmental
protection to the urban forest. This is due to the fact that, despite being the most
important environmental law, matters relating to natural resources conservation and
urban planning relevant to urban forest come under the scope of other legislations. Thus,
having different laws dealing with aspects of urban forest protection may cause possible
conflicts among these laws, or among agencies enforcing them.
Another challenge faced is that of the conflict of policies particularly between economic
development and environmental protection. Being a developing country that strives to
achieve the status of a developed nation in the near future (Mohammed, 1993), economic
development is therefore given prominence particularly under the country’s New
Development Policy (Jabatan Perdana Menteri, 1991). The quest for economic growth
has however involved the utilization of a great portion of the environment and natural
resources, including that of forest. In order to respond to the demand for environmental
protection and natural resources conservation, Malaysia began to treat environmental
11
Section 15(2) of the National Forestry Act 1984.
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issues more seriously notably through the enactment of the Environmental Quality Act in
1974. However, it is a complicated task for Malaysia in coordinating the otherwise
conflicting policies of environmental protection and economic development. There is
always a strong pressure upon the government to meet economic expectations, which, in
certain cases, has the upper hand over environmental protection (Sahabat Alam Malaysia,
2001).
One specific example of the possible clashes in policy and law can be found within the
implementation of the EIA under section 34A of the Environmental Quality Act 1974.
This issue relates to the facts that different authorities are in-charged of the whole EIA
process. In any situation, a project proponent must submit the EIA report to the
Department of Environment for approval before the commencement of the project. The
Department of Environment, being an agency established to enforce the Environmental
Quality Act 1974, has the power whether to approve the EIA report or otherwise. On the
other hand, the power to approve the commencement of the project lies ultimately upon a
different agency, namely the approving authority. In Malaysia, there are different types of
approving authorities that has the power to approve any development project depending
on the nature and geographical location of such project. These authorities include the
National Development Planning Committee for the Federal Government sponsored
projects; the State Executive Council for state government sponsored projects; the
various local authorities or Regional Development Authorities with respect to planning
approval within their respective areas; and the Ministry of Trade and Industry for
industrial projects. This is where possible collision may occur. Such collision may not
simply be confined to a jurisdictional clash but also a clash of economic and other
interests when these agencies have different set of policy objectives with one another.
Similar example can be found within the application of section 7 of the National Forestry
Act 1984. Whereas a state government is empowered to constitute any land as a
“permanent reserved forest”, the actual legal meaning of the concept of “permanent
reserved forest” does not carry the meaning of reservation in perpetuity. There is in fact a
possibility for the excision of land from the permanent reserved forests as provided in
section 11. Arguably, this further demonstrates the issue pertaining to possible conflict
between economic development and urban forest protection. Specifically, by virtue of
section 11, the state authority can excise such land on the following grounds12:
- where it is no longer required for the purpose for which it was classified;
and
- where it is required for economic use higher than that for which it is being
utilized.
The second justification above for excision is the point of contention here on what
constitute “higher economic use”, and who has the final say over such decision. For
urban areas of Malaysia, especially areas that are facing greater demand on land such as
those within Kuala Lumpur or Penang, this provision might pose a threat to urban forest
protection. This is particularly threatening considering Malaysia’s aggressive
12
Section 11(1) of the National Forestry Act 1984.
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development strategies that cause harms to natural resources, including that of urban
forests (Ngai, 1998).
5 The Way Forward and Conclusion
Malaysia already recognized the importance of urban forest in enhancing the
environmental quality of urban areas apart from providing esthetic values to the cities.
Thus, from the perspective of urban development and environmental quality
enhancement, it is vital that continuous attention is given to the importance of urban
forest protection. In this regard, environmental law has been identified by this paper as an
important mean in providing such protection. The paper already discussed various
provisions relevant to urban forest protection that can be found within the existing
environmental legislations in Malaysia. They include that relating to pollution control,
quality enhancement and even forest conservation. However, while environmental law
may be one of the most suitable mechanisms towards urban forest protection, there are
underlying issues that need to be resolved. The paper has revealed possible issues that
can undermine the efficacy of the law on the matter. They include that arising from
internal problems, conflicts of laws and institutions as well as that of policies. While
findings in this paper are not meant to be extensive and comprehensive, they are
nevertheless important in highlighting challenges within urban forest protection that
require further examination. For Malaysia, existing issues and their complexity should
not be considered as stumbling blocks hindering effective application of the law on urban
forest. On the other hand, Malaysia must put efforts to comprehend these and other
challenges and move towards overcoming them. Arguably, if these challenges are met,
and with commitments given towards the betterment of urban forest protection, it is
possible that Malaysia’s objectives of sustainable and quality urban living environment
can be achieved.
6 References
Abidin, Z. and Akbar, Z. (1996), Conservation and Faunal Biodiversity in Malaysia,
Penerbitan Universiti Kebangsaan Malaysia, Bangi.
Aiken, R., Leigh C., Leinbach, T. and Moss, M. (1982), Development and Environment
in Peninsular Malaysia, McGraw-Hill, Singapore, pp 200-244.
City hall Kuala Lumpur, (2003), Draft Structure Plan Kuala Lumpur 2020, City Hall
Kuala Lumpur, Kuala Lumpur. p 6.
Department of Environment, (2002), `The National Policy on the Environment
Malaysia’, Department of Environment Malaysia, http://www.doe.gov.my/ , viewed:
25/6/2009.
Department of Environment Malaysia, (2007), Environmental Quality Report 2006,
Department of Environment Malaysia, Kuala Lumpur.
Department of Statistics Malaysia, (2009A), `Key Statistics’, Department of Statistics
Malaysia, http://www.statistics.gov.my/, viewed: 10/4/ 2009.
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Maizatun Mustafa, pp 1125-1135
Department of Statistic Malaysia, (2009B), `Glossary’, Department of Statistics
Malaysia,http://202.75.5.49/glossary/index.php?module=code&nav=def3&alp=all&b
hs=English, viewed: 25/6/2009.
Department of Statistics Malaysia, (2009C), `Population & Housing Census of Malaysia
2000 Household Characteristics, 2000’, Department of Statistics Malaysia,
http://www.statistics.gov.my/ viewed 25/6/2009.
Federal Department of Town and Country Planning Malaysia, (2006), National
Urbanization Policy, Ministry of Housing and Local Government, Kuala Lumpur, pp
63, 104-105.
Federal Department of Town and Country Planning Malaysia, (2009), `National Physical
Plan’, Federal Department of Town and Country Planning Malaysia,
http://www.npptownplan.gov.my/, viewed: 25/6/2009.
Food and Agriculture Organization of the United Nations, (2009), `The Potential of
Urban Forestry in Developing Countries: a Concept Paper’, Forest Department, Food
and Agriculture Organization of the United Nations, http://www.fao.org/, viewed:
10/4/2009.
Jabatan Perdana Menteri, (1991), Second Outline Perspective Plan 1991-2000, Jabatan
Perdana Menteri, Kuala Lumpur, p 4.
Mohammed, M. (1993), `Malaysia: the Way Forward’, In: Ahmad Sarji Abdul Hamid
(Editor), Malaysia’s Vision 2020, Pelanduk, Petaling Jaya, pp1-50.
Mustafa, M. (2008), International Encyclopaedia of Laws, Environmental Law Malaysia,
Kluwer Law International, The Netherlands, pp 35-37, 180-184, 195-204.
Mustafa, M. (2009), `Environmental Quality Act 1974: Development and Reform’, MLJ,
[2009] 2, pp lv-lxxxviii.
Ngai W. C., (1998), `Environmental Hazards Associated with Hill Land Development in
Penang Island, Malaysia: Some Recommendations on Effective Management’,
Disaster Prevention and Management, Vol.7 No.4, pp 305-318.
Sahabat Alam Malaysia, (2001), Malaysia Environment Alert 2001, SAM, Penang, pp 8-
9.
Sani, S. (1998), The Encyclopedia of Malaysia: Volume I: The Environment, Archipelago
Press, Kuala Lumpur, p 98, 108-111.
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
N Scholten and A Vrouwenvelder, pp 1136-1146
Eurocodes and the structural safety of existing buildings –
considering the publication of the Dutch NEN 8700
Dr. N.P.M. Scholten PhD1 , prof. A.C.W.M. Vrouwenvelder 2
1
Expertcenter Regulations in Building, 2TNO Built Environment and Geosciences
The Netherlands
Email: [email protected]; [email protected]
Abstract:
Since 1992 there have been a number of proposals to renew calculation methods
available to assess the structural safety of existing buildings. But without operational
results.
Upon publication of the Eurocodes NL decided to renew and to include them in the
Dutch building regulations. The question was how.
One decided to develop a new Dutch national standard: NEN 8700. That shows how, in
conjunction with the 58 Eurocodes, an expert opinion can assessed on the structural
safety of an existing building.
The Building Decree 2003 will refer to this standard for load actions that have to be
taken into account, the response of the structure and the required strength of structure,
and will reference to the Eurocodes. The set up of the new standard is explained.
A building is classified as an existing building after it has been completed.
So the standard applies to all building stock, but the owner primarily must ensure that
during the design working lifespan the legally required performance remains satisfied
accept accidents.
The safety assessment of an existing building differs from that of a new one in ways that
are elaborated:
- cost in relation to safety;
- safety in relation to the reference period;
- availability of actual status data versus design data.
Unlike the regulations that apply to new buildings the new standard includes:
- probability theory;
- harmonisation of the Eurocodes with safety of existing building constructions on
a arbitrary moment;
- acknowledgement of durable safety requirements other than a 1 year period;
- exclusion of requirements pertaining to the uncertainties that may arise during
the theoretical designlife;
- amendment of determination methods for the properties of the structural
materials used; and
- the ability to review at any time the actual constructed situation.
The new standard also establishes the lowest limits of safety levels in the renovation,
alteration or enlargement of an existing building.
Reliability and load factors are summarized extracted from the underlying TNO report .
.
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Keywords:
Safety assessment, regulation, existing building, renovation, standard, Eurocodes, NEN
8700.
1 Introduction
On October 1st 1992 the Building Decree came into force together with some 6
Ministerial Orders. As from that moment quantifiable calculation methods became
available to assess the structural safety of existing buildings as laid down in the
Building Decree and later the Building Decree of 2003.
These calculation methods were based on the well-known Dutch TGB standards series
together with the more detailed regulations in the Ministerial Order on structural and
user safety. This Order has been legally and administratively simplified a number of
times but the content is unchanged. This Order was based on the TNO Building
Research report B-91-832.
There have been a number of proposals since to publish a separate TGB series to deal
with existing buildings, but this hasn’t come to anything.
The above-mentioned TNO report was issued in 2004 and published as TNO B&O
report 2004-CI-R0159.
After the publication of the Eurocodes and the decision to include them in the Dutch
building regulations (following the introduction of the third issue of the Building Decree
in 2003) the question arose of what to do about the regulations concerning the structural
safety of existing buildings. The choice was not difficult because making 58 standards
to cover existing buildings or alternatively making 58 sets of follow-up regulations to
cover existing buildings in the 58 Eurocodes was not an option. The choice was made to
develop a new Dutch standard: NEN 8700. This standard shows how, in conjunction
with the 58 Eurocodes, an opinion can be arrived at on the structural safety of an
existing building.
The following research questions are solved for the Dutch situation:
1. What are the differences between the public requirements for structural safety
between newly built buildings and existing buildings?
2. What are the backgrounds of the safety philosophy to motivate these differences and
how can the assessment of the safety of existing buildings used in practice?
3. What are the logical structural safety requirements by renovation of the structure of
existing buildings?
In a national or international perspective the research can be placed as following:
New Eurocodes for the assessment of newly built buildings are introduced in de
European Union. In the Dutch building regulations also requirements are given for the
minimum performance of existing buildings. So the existing regulations have to be
changed to bring them in line with the 58 Eurocodes parts. In 2010 the Eurocodes will
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be compulsory. At that moment also the requirements for existing buildings and
renovation should be available.
Within the EU discussion is opened to develop also Eurocodes for existing buildings.
The Dutch NEN 8700 and background report can be a good starting point.
The main conclusions and recommendations of the project are:
a) The safety philosophy of newly built buildings can also be used for existing building
and renovation.
b) The reliability-index can be decreased for the assessment of existing buildings and
for buildings in renovation, because economical aspects have to be dealt with in
another way than by newly built buildings. Because of another reference period the
actions can be decreased. Also durability aspects are not the same. The way safety
figures of the structure itself may be used gives also a different assessment.
c) The study and standards provide direction how to judge in an practical way whether
the minimum safety requirements are fulfilled.
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2 The structure
The intention is that the Building Decree 2003 will refer to NEN 8700 for load actions
that have to be taken in account , the response of the structure and the required strength
of structure. The new standard will make reference to the Eurocodes.
NEN 8700 NEN-EN
Basis - buildings 1990
Minimum safety level Basis
NEN-EN 1991 NEN-EN 1997
Actions on structures Geotechnical design
General loads Cranes and NEN-EN 1998
machines Earthquake resistance
Silo’s and Traffic loads
tanks
NEN-EN NEN-EN 1993 NEN-EN NEN-EN NEN-EN NEN-EN
1992 Steel 1994 1995 1996 1999
Concrete Steel- Timber Masonry Aluminium
concrete
General General, General, General, General, General,
Buildings, Buildings, Buildings, Buildings, Buildings, Buildings,
Fire Fire Fire Fire Fire Fire
Bridges Bridges Bridges Bridges Fatigue
Constructions Towers, masts,
for storage of chimneys, tanks,
powders silo’s, pipelines,
sheet steel
piling, crane
tracks
Figure 1 – Overview of the standards structure
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The paragraphs in NEN 8700 correspond one-to-one with those in NEN-EN 1990.
Where the content of the paragraph is the same then NEN 8700 refers to NEN-EN 1990.
Therefore when reading NEN 8700 you need to have both documents in front of you.
3 Purpose of the standard
The standard applies to all existing buildings, regardless of their age. A building is
classified as an existing building after it has been completed.
The owner of the building must ensure that during the reference period the legally
required standards are or remain satisfied other than caused by an accident. The legally
required standards are the safety standards required by legislation at the time of
construction, unless a building permit as defined in article 40 of the Housing Act has
expressly permitted a lower standard (for example in the case of renovation) or if
knowingly or unknowingly an incorrect building construction is approved. The legal
regulations that determine new structural safety standards apply to the entire reference
period, which is defined as the design working life of the building.
If the legally required safety level is not met, then article 13 of the Housing Act may
require the building owner to modify the building construction. Whether this is invoked
depends amongst others like on the timing of the infringement in relation to the
remaining service life of the building. The Municipal authorities have the discretion to
accept a certain degree of deviation from the regulations.
A separate issue is the private relationship between contractual parties. If a contractual
agreement has not been met then the disadvantaged party has the right to a civil law
process and the other party is liable for not fulfilling his contractual obligations.
4 Main contents
The safety assessment of an existing building differs from that of a new one in a number
of essential ways:
• Firstly increased safety levels usually involve more costs for an existing building
than for buildings that are still in the design phase. The safety provisions embodied
in safety standards have to be set off against the cost of providing them, and on this
basis these costs are more difficult to justify for existing buildings. For this reason in
certain circumstances a lower safety level is acceptable.
• Secondly the remaining lifetime of an existing building is often different than the
standard reference period of 50 years or 15 years that applies to new buildings. This
aspect plays an important role in determining if the building construction is still
adequately safe.
• Thirdly in an existing building actual measurement can be made in order to gather
the facts.
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More information on these aspects and their influence in determining the reliability
levels chosen in the standard is contained in a report produced by TNO and the
Expertcenter Regulations in Building: TNO-Report 2008-D-R0015/B.
Unlike the regulations that apply to new buildings the requirements of the new standard
include:
• The regulations in NEN-EN 1990 which concern probability theory. This pays no
attention to individual structural materials but is dependent on the purposes for which
the building is used and pays attention to the probability of load stresses occurring
over a short reference period. Herewith account is taken of known actions on the
building taken place in the past and the probable properties of the building itself and
not the structural properties of the building products as products in the market from
which the building is made.
• Taking the opportunity to harmonise the Eurocodes with the basic principles on the
safety of existing building constructions on a arbitrary moment. The safety
assessment assumes a remaining lifetime of 1 year. Reference periods in determining
the size of the load factors are 1 year for buildings in class CC1A and 15 years for
buildings in class CC1B, CC2 and CC3. This is therefore a different assumption to
the durable safety requirements of a newly built construction.1 These have in the case
of permanent buildings a design lifetime and a reference period of 15 or 50/100 years
dependent on the class of the building. For this reason the reliability index β and the
load factor γ can be lower than those for new construction.
• Formal acknowledgement that guarantees on the durable safety requirements need
other than to cover a remaining lifetime period of 1 year.
• Excluding requirements that relate to the uncertainties that may arise during the
theoretical, paper design of the building.
• Amendment of the methods to determine the properties of the structural materials
used in the building; and
• The ability to review at any time the actual constructed situation (a review based on
the original design may be sufficient where there are no indications that the actual
situation is worse).
Because the introduction of the Eurocode standards NEN-EN 1990 up to NEN-EN 1999
represents a breakthrough in the traditional assessment methods, there is justification for
further transforming the old ways of working to the way that has been adopted with the
Eurocodes as described above. NEN 6720 assesses concrete on its cube compressive
strength, whilst NEN-EN 1992 assesses concrete on its cylinder compressive strength.
Timber has now introduced strength classes, whilst for years visual control was the
method used despite the need for an objective strength assessment. These are just a few
examples.
In the development of the new standard we have tried not to change the confidence
levels by which building structures were declared unsafe and were upheld by legal
bodies up to the time of publication of the new standard.
1
The NEN 8799 and the Eurocodes make a difference between the reference period which expresses the size of the
loads to be taken as basis for the calculations and the service life or remaining lifetime. The remaining lifetime is the
indicator for the safety of the structure when loads are applied.
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In the transition from the TGB 1990 standards to the Eurocodes (NEN-EN 1990 to
NEN-EN 1999) the safety classes recognised in NEN 6700 have been transformed to
consequence classes. This classifies buildings differently than in NEN 6700. To avoid
this having unintended effects for existing buildings the consequence class CC1 has
been split into class CC1A and CC1B. Class CC1A includes buildings that according to
NEN 6700 fall in safety class 1 and according to the Building Decree 2003 may be
assessed using a reference period of 1 year until the time of the introduction of the new
standard. In Class 1A human safety will be subsidiary.
5 Renovation
The new standard also establishes the lowest limits of safety levels in the renovation,
alteration or enlargement of an existing building. These limits differ from those which
apply to newly constructed buildings and which are laid down in NEN-EN 1990. Note
that granting exemptions to a level of the standard that may be below an already legally
sanctioned level is not the intention. By doing so the authorities would be accepting a
lower standard than they had originally sanctioned. However the authorities could well
take account of the building’s remaining lifespan when granting a permit for renovation,
alteration or enlargement. The remaining lifespan can be different from that of an
entirely new building. Exceptional circumstances also may occur whereby exemption
could be granted, for example after the occurrence of an accident.
The standard does not contain specific rules relating to minimum safety levels for
renovation, alteration or enlargement of a building whereby the remaining lifespan and
therefore the reference period of the building to be renovated is taken into account. The
TNO B&O report 2008-D-R0015/B does include recommendations for this.
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6 Summary on reliability and load factors
Extracted from the TNO report and applies to the different situations the reliability
indices are shown in Table 1.
Table 1 — Minimum values for the reliability index β with a minimum reference period (extreme limit) of 15 years for
CC1B
Consequence Minimum New Repared Summone
class Reference constructionc βr βb
period βn
for existing
building
wn wd wn wd wn wd
b
1A 1 year 3.3 2,3 2,8 1.8 1.8 0.8
b a a
1B 15 years 3.3 2,3 2,8 1.8 1.8 1.1a
2 15 years 3.8 2.8 3.3 2,5a 2,5a 2.5a
3 15 years 4.3 3.8 3.8 3.3a 3.3a 3.3a
wn: wind not dominant
wd: wind dominant
a
In this case the minimum limit for personal safety is normative.
b
In this case a distinction is made between class 1A (loss of life unacceptable) and 1B
(danger of loss of life is small).
c
For reference period and service life NEN-EN 1990 applies.
d
For reference period and service life local authority discretion (≥ 15 years) applies
e
With a remaining lifetime of 1 year.
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Figure 2 illustrates how the regulations are intended to work based on an example in
consequence class 2 (with a service life of 50 years for new construction and 15 years
for renovation and in both cases the wind is not taken into account).
Strictly speaking the reliability indices relating to various lengths of service life and remaining lifetime
cannot be captured in a single graph because to do this the β’s should be calculated on the basis of 1
year. This has not been done.
Figure 2 –Effect of the regulations on structural safety shown in terms of the required reliability of the
building against time
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Table 2 shows the conversion to load factors.
Table 2 - Overview of load factors
NEW CONSTRUCTION RENOVATION EXISTING BUILDING
Load factors ULS, New construction (STR/GEO and extreme) Load factors ULS – Renovation (repair) Load factors: ULS – Existing buildings
Reference period is 15/50/100 years; service life is Reference period: dependent on the situation Reference period 1 year with CC1A 1 year and with
15/50/100 years (≥ 15 years; service life: dependent on the CC1B and 2 and 3
situation (≥ 15 years) ≥ 15 years; remaining lifetime 1 year)
Load combination Permanent load dominant variable other variable load Extreme load Permanent load Variable load wind force fire Permanent load variable load wind force fire
Un- load un- un-
favourable favourable favourable favourable favourable favourable
STR/GEO (6.10a)
Consequence class 1 1,2 0,9 1,35Ψo 1,35 Ψo - 1,1 0,9 1.10Ψo 1,10Ψo - 1,1 0,9 1.00Ψo 1,10Ψo -
Consequence class 2 1,35 0,9 1,50Ψo 1,50 Ψo - 1,3 0,9 1.30Ψo 1,30Ψo - 1,2 0,9 1.15Ψo 1,30Ψo -
Consequence class 3 1,5 0,9 1,65Ψo 1,65 Ψo - 1,4 0,9 1,50Ψo 1,50Ψo - 1,3 0,9 1,30Ψo 1,50Ψo -
STR/GEO (6.10b)
Consequence class 1 1,1 0,9 1,35 1,35 Ψo - 1,1 0,9 1.10* 1,10* - 1 0,9 1.00* 1,10* -
Consequence class 2 1,2 0,9 1,5 1,50 Ψo - 1,2 0,9 1.30* 1,30* - 1,1 0,9 1.15* 1,30* -
Consequence class 3 1,3 0,9 1,65 1,65 Ψo - 1,3 0,9 1,50* 1,50* - 1,2 0,9 1,30* 1,50* -
Extreme (6.11)
All classes 1 1 1 1 1 1 1 1 1 1 1 1
dominant" multiply by Ψo
Dependent on the reference period the following applies for variable loads: If NEN-EN 1991 has no directive, as with floor loads, then the following may apply:
1- ψ 1 t
Ft = Ft0 {1 + ln( )}
9 t0
Where:
is the adjusted extreme value of the variable equally spread load for the remaining lifetime;
is the extreme value of the variable equally spread load for a service life of 50 years;
is the ψ -factor value from table A1.1 in the standard;
is the service life or the remaining lifetime;
t0 is the service life of 50 years.
1145
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1146
COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Julie Adshead and Tim Andrew, pp 1147-1160
Environmental Crime and the Role of the Magistrates’ Courts
Julie Adshead 1 & Tim Andrew2
1
Salford Law School,
University of Salford, Salford, M5 4WT,
United Kingdom
2
Burton Copeland LLP,
Salford, M3 5LE,
United Kingdom
Email:[email protected]; [email protected]
Abstract:
There are broad and long-standing concerns with enforcement mechanisms and practice
in environmental law. In particular, criticisms have been raised with regard to the low
number of prosecutions, the level of penalties imposed by the courts and the ability of
local magistrates’ courts to deal with environmental crime. Such dissatisfaction must be
viewed within a complex contextual back drop. For many years there has been debate
as to whether breaches of environmental regulation should in fact be seen as ‘real
crime’. The current wider ‘better regulation’ agenda of the government is at the same
time seeking to ease burdens on industry. There has also been a paradigm shift in the
broader context of criminal justice from bringing offenders before the court and
imposing sentence to the adoption of a wide range of fixed penalties and fiscal fines.
The limited resources of government and regulator are also influential factors,
especially in the current economic climate. These pressures are set against increasing
environmental awareness and the imperative of global warming. There is also a body of
thought that maintains that environmental crime should be viewed and dealt with more
seriously than is currently the case. This paper explores the competing arguments and
considers whether criticism of the current administration of justice in environmental
cases in the magistrates’ courts (where the vast majority of cases are heard) is justified.
Consideration is also given to the future role of the magistrates’ courts in the light of
new provisions recently introduced in the Regulatory Enforcement and Sanctions Act,
2008.
Keywords:
Environmental law, Magistrates’ courts, Regulatory Enforcement and Sanctions Act,
2008.
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1 Introduction
There has long been criticism of the magistrates’ courts and their ability to deal
effectively with environmental law cases. Features of this include the low number of
prosecutions, the level of penalties, the lack of ability in magistrates’ courts to deal with
the complexity of environmental prosecutions, magistrates’ inexperience and lack of
training and guidance.
The first section of this paper reviews these common areas of criticism. They are
considered in turn although they are inextricably linked. The low level of prosecutions
impacts upon magistrates’ experience and their ability to deal with the complexity of
many environmental law cases. Inadequate training and guidance also affect the ability
of magistrates to deal effectively with environmental law offences and deliver an
appropriate level of penalty. It must also be borne in mind that, although many argue
that the fines imposed in environmental cases are too low, there are those who do not
view environmental crime as ‘real crime’ and thus believe that the level of penalties
meted out by the magistrates’ courts is more than adequate.
The paper then proceeds to consider a number of additional factors that, it is argued,
contribute to the perceived inability of magistrates to deal effectively with
environmental crime. Consideration is given to the role of the Environment Agency and
its approach to prosecution. Magistrates would be aided by clear presentation of the
prosecution case and the presentation of written schedules and the practice in these
areas is examined. Finally the lack of tariff guidelines for sentencing is considered.
Studies have previously been conducted into these various aspects of practice in the
magistrates’ courts in 2003 (Dupont & Zakkour) and 2005 (Moran) and a further study
was carried out in Salford in 2007 by Andrew. The first two sections of the paper draw
upon the results of these studies as well as more current data in order to establish that
trends identified from 1999 were still apparent in 2007.
Prevailing opinions about the nature of environmental crime, the Government’s agenda
and limited resources form part of the contextual backdrop to current practice in the
magistrates’ courts and criticism of the manner in which environmental justice is
delivered there. The paper looks briefly at these elements of the external environment,
which may influence practice and drive reform and then provides an overview of some
of the solutions that have been suggested and reports prepared leading up to the
Regulatory Enforcement and Sanctions Act, 2008 (RESA).
At a point when no orders have been made for civil sanctions, limited predictions can be
made as to the effect of Part 3 of RESA. It certainly seems that the intention was to
divert a part of environmental justice away from the courts. However, the possibility of
many cases going to appeal in the new First Tier Tribunal may mean that ultimately this
is not the case. There is also fertile ground for litigation in terms of the compliance of
RESA with the provisions of Art 6 of the European Convention of Human Rights
(ECHR). Some areas in which RESA might possibly be in breach of the Convention are
considered in the final part of this paper.
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2 Traditional Areas of Criticism
The level of penalties for environmental crime in the courts generally and in the
magistrates’ courts specifically has attracted comment and criticism over some period of
time. It is arguable that the small number of cases heard before the magistrates and
their relative lack of experience in dealing with environmental cases, together with the
lack of training and guidance available to them and the often complex and technical
nature of the cases all contribute to the perceived lack of ability to deal with
environmental crime and sentence effectively.
2.1 Level of Penalties
There is a considerable body of opinion that penalties for environmental crime in the
courts are too low (Environmental Audit Committee (2004), Hampton Review (2004),
DEFRA (2006)). The Environment Agency (EA), whose responsibility it is to enforce
environmental law in England and Wales, has consistently voiced its frustration at the
low level of fines imposed (e.g. Spotlight on Business, 2006). Importantly, as noted by
both the Environmental Audit Committee and the Hampton Review, the penalties
imposed, in the majority of cases, do not reflect the economic benefit derived from the
non compliance and, therefore, do not act as a deterrent.
The study by Dupont & Zakkour found an average level of fine for organisations
between 1999 – 2002 of £5887 and the survey of Salford Magistrates by Andrew for the
same period produced a very similar result. The Andrew study revealed little change by
2004, with an average fine for organisations appearing before Salford Magistrates’
Court of £5825. The latest figures available from the Environment Agency (for 2007)
indicate an average fine for organisations across all courts in England and Wales of
£8000. The Agency note that there has been in the region of a 5% increase in the level
of fine annually, which is just about in line with inflation. (Stott, 2009).
2.2 Inexperience
Historically there has been a very low number of environmental prosecutions (Carter,
1992) and this has been attributed to an informal regulatory style, incorporating a
cooperative approach (Vogel, 1986). However, following the formation of the
Environment Agency in 1995, a greater willingness to bring offenders to court has
emerged (Moran, 2005). Nonetheless, prosecution numbers remain low. The average
number of environmental offence prosecutions in England and Wales between 1999 and
2003, per court, was 14.
Dupont and Zakkour looked at one court in the South East of England and in a survey of
149 magistrates, out of 32 respondents, 12 had not dealt with any environmental
prosecutions, nine with less than one per year, nine with one to two cases per year and
two with two to three cases. During the same period, 19 separate defendants were dealt
with at Salford Magistrates’ Court. Responses to the Salford survey also showed that
Salford Magistrates had little experience of environmental offences. In fact one
respondent commented ‘In 13 years on the Bench, I have never dealt with any of the
cases identified in Annex 1’. In 2007, the Environment Agency, in England and Wales,
brought successful prosecutions against 163 individuals (with a success rate of 95%).
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The Agency notes that the number of prosecutions has been fairly static over the past 8
years (Stott, 2009).
2.3 Training and Guidance
When experience is lacking, training and guidance are of paramount importance. There
is guidance in place for magistrates’ courts in the form of the Magistrate’s Court
Sentencing Guidelines (a new edition of which was published by the Magistrates’
Association in 2008). However, there is only a small section that deals with both health
and safety offences and environmental offences and, unlike with other criminal
offences, there are no published tariff guidelines. (This latter failing will be discussed
further in the next section of the paper). In 2003 the magistrate’s toolkit ‘Costing the
Earth’ was published and this does incorporate example case studies. However, for
guidance documents to be of benefit, magistrates must be aware of and utilise them. In
the survey conducted by Dupont and Zakkour, one third of respondents were unaware of
relevant guidance and one tenth had not read it. The Salford study showed similar
results, with not a single respondent being aware of the magistrate’s toolkit.
The necessity to supplement guidance with training is acknowledged (Costing the Earth,
2003) and yet Moran found in the 2005 study that only 23 out of 198 magistrates
questioned had received any training on environmental law issues in the preceding four
years. The Salford study revealed that three magistrates had received training delivered
by the Environment Agency. Concerns have been raised with regard to the prosecuting
body training the decision makers (Parpworth, Thompson & Jones, (2005)). It is also
interesting to note that despite having received EA training, the Salford Magistrates
remained unaware of ‘Costing the Earth’, which does not feature in the Agency’s
training package. Resources are clearly an issue here and there is certain to be a
reluctance to dedicate training resources to an area in which few cases are actually heard
in the magistrates’ courts.
2.4 Complexity of Cases
It seems that magistrates with little experience and training and limited awareness of
available guidance are, on occasion, required to hear environmental cases, which, by
their nature, are often complex and technical. There are those who doubt the suitability
of the criminal courts to deal with such cases at all (Lord Woolf, 1992, Rowan-
Robinson and Ross, 1994, Moran, 2005). Lawyers, themselves, are not immune to the
complexities and this is illustrated in Parpworth’s (2007) analysis of two cases1. He
notes that
‘the two cases serve as useful illustrations of the inherent dangers in charging a
defendant with the wrong offence, or, if the correct offence has been charged then
failing to present the case in the most appropriate way.’
This serves to demonstrate the intrinsic complexity of some environmental offence
cases as well as the role played by the prosecuting authority.
1
Gateway Professional Services (Management) Ltd. v Kingston-upon-Hull County Council
[2004] Env LR 42 and London Borough of Camden v Mortgage Times Group Ltd.[2006] EWHC
1615 (Admin).
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2.5 Summary
In summary, it does seem that certain features of environmental prosecutions in the
magistrates’ courts, identified by commentators over the years, remain valid. Levels of
penalties in the courts are still low and there are only a small number of cases brought
before magistrates who have limited guidance and training to assist them with the often
complex and technical issues involved.
3 Other Factors
In section two, above, the role of the Environment Agency as enforcer and prosecutor
and the sentencing guidelines available to magistrates’ courts were touched upon.
Arguably, these are potentially very significant factors, influential upon, what are
perceived as, extremely low fines imposed by the courts. This section of the paper will
examine these in further detail.
3.1 The Role of the Environment Agency
Over 90% of all environmental offence cases are brought by the Agency (Dupont and
Zakkour, 2003). Hence, its role in determining the number of prosecutions coming
before the courts must necessarily be a significant one. It has been suggested that the
regulator ‘passes the buck’ to the magistrates’ courts (Watson, 2005). The argument
being that there is no point in bringing cases before magistrates who do not understand
the area of law and deliver derisory sentences and thus the low number of cases being
prosecuted is explained. The Environment Agency denies any reluctance to bring
prosecutions (Stott, 2003 – in response to Watson, 2003) but maintain that they are
concentrating resources on behaviour that represents the greatest risk to the
environment. It is interesting to note, however, that despite the Agency policy to
prosecute all incidents of ‘major’ impact, Ogus and Abbott (2002) noted that in 1999 –
2000 only 23% of such incidents resulted in prosecution. They argue that the Agency is
applying ‘the realistic prospect of conviction’ test too rigidly and this assertion is, to
some degree, supported by the Agency’s 95% success rate. It should, however, be
remembered that the strict liability nature of most environmental offences is also
instrumental in the Agency’s high level of successful prosecutions.
The Environment Agency consistently criticises the low level of fines in the courts and
yet there is a clear argument that the underlying problem may be the reluctance of the
regulatory bodies to prosecute. As Watson (2003) argues
‘If prosecutions became more common magistrates would be better equipped to
treat environmental offences as serious crimes’
(see also Moran, 2005). The result is a vicious circle. Most offences are not
prosecuted, the magistrates gain little experience and deliver lenient sentences. This, in
turn, discourages future prosecutions.
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Criticism, suggesting a risk averse attitude on the part of the Environment Agency and a
reluctance to prosecute, must, however, be considered within the context of limited
resources and this crucial factor will be explored further in the next section of the paper.
However, figures for 2004 show that the Agency spent only 3% of its regulatory budget
on enforcement activity and as Watson (2004) points out ‘there is a powerful case could
be made for devoting more resources to the prosecution of environmental criminals’.
3.2 Presentation of the Prosecution Case
Of those breaches of environmental legislation that do find their way to court, there is a
further issue with regard to the presentation of the case to the magistrates. The
complexity of many environmental offences has already been noted and this, coupled
with the inexperience of the magistrates, suggests that clear presentation of the case and
the relevant aggravating and mitigating factors would aid the magistrates in their
decision and sentencing. The survey conducted of Salford magistrates by Andrew in
2007 addressed these particular issues. Respondents were of the view that, on the
whole, prosecutors explained relevant legislation satisfactorily. However, answers to the
questionnaire seemed to suggest that practitioners in Salford tended to ignore the
recommendation in R v Friskies Pet Care (UK) Ltd.2 to provide written schedules of
mitigating and aggravating factors. No respondent indicated with certainty that either
the prosecution or defence had presented written schedules. This omission is significant
in terms of magistrates determining an appropriate penalty.
3.3 Sentencing Guidelines
Magistrates’ courts would, no doubt, be further assisted by clear guidance for the lower
courts with regard to sentencing for environmental law offences. The Environment
Agency is of the view that the lack of specific criteria for sentencing (which are
provided for mainstream crime) is one of the major reasons for disparity in sentencing.
The Sentencing Advisory Panel (2000) also recognised the lack of experience of
magistrates and the complexity of the sentencing exercise as well as the perception that
the fines imposed by magistrates’ courts were too low. The panel noted that guidelines
from the Court of Appeal would be an important contribution to consistency in
sentencing for environmental offences in the lower courts.
The Court of Appeal had the opportunity to follow the Panel’s advice and set tariff
guidelines in the case of Environment Agency v Milford Haven Port Authority3 . It
declined to do so, referring instead to guidance in the case of R v F Howe and Son
(Engineers) Ltd.4 The Court of Appeal has twice since declined to issue tariff
guidelines5.
In 2006, Macrory recommended that it would be helpful for the Sentencing Guidelines
Council to publish sentencing guidelines for cases of regulatory non compliance and the
Council is to consider this in its current work programme. The proposal is to develop
2
[2000] 2 Cr App R (s) 40.
3
[2000] 2 Cr App R (S) 423.
4
[1999] 2 AER 249 (CA (Crim Div)).
5
R v Yorkshire Water Services Ltd.[2002] Env LR 18, R v Anglian Water Services Ltd. sub nom
R v Anglian Water Services Ltd. [2004] 1 Cr App R (S) 62.
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general guidelines regarding regulatory offences which could also encompass issues
concerning environmental offences.
3.4 Summary
Reluctance on behalf of the Environment Agency to bring environmental prosecutions
may explain the low level of cases seen before the magistrates’ courts. This directly
impacts upon the experience of magistrates in terms of sentencing and may, therefore,
in part, serve to explain the low levels of fines handed out. The magistrates are not
aided in their sentencing function by the lack of a tariff guideline for environmental
offences and the absence of written schedules of mitigating and aggravating features.
4 The Backdrop
There are clearly multiple factors at play that result in what some see as inadequate
penalties for environmental crime. These have to be viewed in a context of scarce
resources, attitudes to the environment and the current government agenda.
4.1 Real Crime?
An important consideration when looking at the level of penalties in the magistrates’
courts for environmental crime is the variation in how seriously such offences are
viewed. There is an argument that environmental offences are not, in fact, ‘real crime’
and even that they do not legitimately form part of the business of the criminal justice
system. Some view such offences as mere ‘quasi crime’. Viscount Dilhorne in
Alphacell v Woodward6 referred to environmental offences as
‘acts which are not criminal in the true sense but are acts which in the public interest
are prohibited under statute’.
This perception will clearly affect notions of moral culpability and it may be that
magistrates have their own views on this issue or that they are influenced by defence
lawyers and this is reflected in the sentences imposed. The strict liability nature of most
environmental offences may well serve this cause (De Prez, 2000).
On the other hand, there is an alternative view as expressed by Rt. Hon. Lord Justice
Sedley (Costing the Earth, 2003).
‘environmental crime, if established, strikes not only at a locality and its population,
but in some measure too at the planet and its future. Nobody should be allowed to
doubt its seriousness’
This sentiment is echoed by the Environmental Audit Committee (2004).
4.2 Shift in the Criminal Justice System
In mainstream crime there has been a move to alternative disposals such as
administrative penalties. These are widely used by the Police and the Crown
6
[1972] AC 824.
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Prosecution Service. In 2006, in excess of 51% of all criminal arrests were dealt with
by alternatives to prosecution such as fixed penalties and conditional cautions (The
Guardian, 2007).
This trend does not, however, align to developments in Europe7. A new Directive on
the protection of the environment through criminal law clearly recognises the
importance of criminal sanctions in enforcing environmental regulation. It should,
however, be noted that the Directive recognises that there are some member states that
have no criminal sanctions for environmental law breaches at all and that a key aim is to
bring all states up to a minimum standard.
4.3 The Better Regulation Agenda
The better regulation agenda is driven by the Department for Business, Enterprise and
Regulatory Reform (BERR). It forms part of a programme of reform to address the
complaints of business and frontline public and third sector workers about the time
spent on regulation and the ways that they find rules frustrating. Key elements of the
agenda are;
• Regulating only when necessary and doing so in a light-touch way that is
proportionate to the risk
• Setting exacting targets for reducing the cost of administering regulation
• Rationalising inspection and enforcement arrangement
• Supporting compliance and tackling businesses that deliberately or consistently
flout their regulatory responsibilities
BERR reason that better regulation promotes efficiency, productivity and value for
money and that proportionate regulation and inspection can help to drive up standards
and deliver better outcomes on the ground.
4.4 Resources
Lack of resources with the Environment Agency has already been mentioned and this is
undoubtedly a factor in the targeting of enforcement action and the level of
prosecutions. The Agency is heavily reliant on central government funding (60% grant
aid) and a large proportion of its expenditure goes on flood defence (55% - 2006/2007).
In 2006/2007, grant aid from The Department of Food and Rural Affairs (DEFRA) was
reduced by a total of £28 million as a result of budget difficulties within DEFRA. Nor
is the resource issue restricted to the funding of the regulatory body. Our system of lay
magistrates requires central support and funds are necessary to provide training and
publish guidance. The current financial climate can only serve to accentuate the
scarcity of resource and make probable further decreases in grant aid to the Agency.
4.5 Summary
The factors considered in parts two and three above, which undoubtedly influence
practice in magistrates’ courts, form part of a larger picture in which other external
7
Dir 2008/99EC on protection of the environment through criminal law OJL 328 6.12.2008 p 28
– 37,
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influences have contributed to the call for change in the way in which environmental
offences are dealt with. There are recognised needs to conserve scarce resources, ease
the burden on industry and align with a shift away from criminalisation of ‘quasi
criminal’ offences.
5 Reports and Government Action
Given the criticisms outlined above, the ongoing debate with regard to environmental
crime in the magistrates’ courts and the current trends identified in the preceding
section, it is hardly surprising that attention has been focused upon regulatory crime
generally and environmental crime in particular. DEFRA has commissioned a series of
reports on such matters as sentencing, the possibility of an environmental tribunal or
court, the use of civil penalties and enforcement. Two influential reviews in 20058 and
20069 subsequently led to the enactment of RESA in 2008.
5.1 An Environmental Court
There is a body of argument, which advocates that all matters relating to environmental
law (criminal and civil) including planning law should be dealt with in a ‘stand alone’
environmental court. As long ago as 1992, Lord Woolf suggested that there was general
justification for a specialised environmental court (Woolf, 1992). In the same year,
Carnwath (1992), looking specifically at planning enforcement issues, suggested that
‘there may be a case for reviewing the various courts and combining in a single
jurisdiction as in the Land and Environment Court of New South Wales’.
There have been mixed views expressed as to the success of the New South Wales
project and its potential for application in this country (e.g. Day et al, 2001, Ryan, 2002,
Stein, 2002). Support for an environmental court reached its peak early this century,
and by 2004, Carnwath, who had previously supported the idea, admitted to being less
ambitious about the project.
5.2 A Specialist Magistrates’ Court
Another alternative way of better dealing with environmental offences is by means of
specially designated magistrates or district judges in home courts or even specially
designated courts. This idea was supported by the Environmental Justice Project of
2004 and has found some support with commentators (e.g. De Prez, 2000). A similar
model is adopted with health and safety prosecutions which are brought to a single
magistrates’ court in a particular region10. If such a model were to be adopted, training
could then be focused upon a small pool of magistrates or district judges and their legal
advisers.
8
Hampton Review (commissioned by the Treasury).
9
Macrory Review (adopted by the government).
10
There are ten across England.
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5.3 The Hampton Review
This review, published in 2005, looked at regulatory systems in general. It advocated a
risk based approach to regulation and the relief of the burden of regulations on business.
The Report highlighted the low levels of fines, in particular for environmental offences
and concluded that these were generally not commensurate with the severity of the
offences and lacked deterrent effect. The Report also recognised the need to broaden
the range of sentences for regulatory offences and advocated the adoption of
administrative penalties. The possibility of introducing restitutive and/or restorative
justice orders was also considered.
5.4 The Macrory Review
The Macrory Review very much complemented the Hampton risk based approach. It
recommended non-criminal penalties, specifically monetary administrative penalties, in
order to resolve some cases more effectively and quickly. The overall tenet was for a
flexible system of regulatory sanctions that yet preserved the importance of the criminal
prosecution. The Review recommended the adoption of enforceable undertakings and
the strengthening of statutory notices as well as the consideration of restorative justice
and other alternative sentencing options.
5.5 The Regulatory Enforcement and Sanctions Act, 2008
The 2008 Act adopted, almost wholesale, the recommendations of the Macrory Review.
Part 311 of the Act creates civil sanctions in relation to regulatory offences. There is a
series of sanctions, provision for which may be made by a minister, by order. A fixed
monetary penalty is one option. This must be preceded by a notice of intent and there is
provision for the possibility of payment of a lesser sum. The monetary penalty cannot
exceed the maximum amount of the fine for the offence. Another alternative is the
imposition of one or more discretionary requirements. These can take the form of a
variable monetary penalty or a requirement to take whatever steps the regulator may
specify. An offender can make an undertaking as to action and if this is accepted then
the regulator can take this into account in deciding on discretionary requirements.
The power to serve stop notices is provided for in the case of serious harm to human
health, the environment or the financial interests of consumers or when there is likely to
be a relevant offence committed. Compensation is available. Non compliance with a
stop notice is an offence. The regulator does not need to be satisfied beyond reasonable
doubt that an offence has been or is likely to be committed in serving a stop notice.
There is a further power to accept enforcement undertakings when there are reasonable
grounds to suspect that the person has committed a relevant offence. This effectively
allows for retrospective compliance or a restoration undertaking. Appeals are to a
‘General Regulatory Chamber’ of the First Tier Tribunal established pursuant to the
Tribunals Courts and Enforcement Act, 2007. A DEFRA Project12 will consult with the
Environment Agency and Natural England on the potential use of this range of civil
sanctions. No orders are likely to be in place until at least 2010.
11
Sections 36 – 71.
12
Fairer and Better Environmental Enforcement Project.
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5.6 Summary
A series of reports and recommendations have ultimately seen a move away from the
notion of a discrete environmental court or specialist tribunal to the adoption of a
broader range of possible sanctions, incorporating administrative penalties. The
enactment of RESA reflects the risk based approach adopted by the Hampton and
Macrory Reports and the BERR agenda to ease the burden upon business and conserve
resources.
6 Consequences
The issue of the perception of environmental offences was discussed above. The
introduction of administrative sanctions and the possible diversion away from the courts
of certain sections of environmental crime can only serve to reinforce the idea that
environmental offences are less serious than ‘traditional’ crime. Some see this
development as heralding the beginning of the decriminalisation of environmental
offences (Black, 2007). There is a recognisable paradox here as this trend sits alongside
an increasing emphasis globally, regionally and nationally upon the global warming
imperative and the serious consequences of environmental crime.
The risk based approach adopted by the Hampton and Macrory Reviews and reflected
in RESA appears to be intended to reserve criminal prosecution for only the most
serious of cases. It is difficult at this stage to predict the effect of the adoption of
alternative sanctions when this, in fact, does occur. However, given the current
prosecution policy of the Environment Agency and the evidence presented earlier in this
paper with regards to the low level of prosecutions, the question might be asked as to
how this will differ from the status quo (Black, 2007). In all probability, the new
alternative sanctions will mean fewer environmental cases in the Magistrates’ Courts as
the more serious offences will simply pass on to the Crown Court.
When regulators’ powers are extended such that these sanctions can be operated, the
situation will exist whereby the enforcing body will also be making decisions with
relation to criminal offences and penalties. This will mean a realignment of the courts
and the regulators and, it is argued, the subsequent weakening of the enforcement
process (Black, 2007). There is also a distinct possibility that the new administrative
sanctions will simply be treated as a business expense by industry and cease to have any
deterrent effect at all.
Much has been made of the time and cost to be saved by bringing fewer cases before the
courts. The Minister of State (Lord Jones) when introducing the Bill on its second
reading commented
‘Less time preparing for court might be bad news for lawyers – I used to be one –
but is very good news for everyone else’.
However, it is predicted that there will be much business for lawyers in appeals to the
First Tier Tribunal (Pickles, 2008). Those who championed an environmental court
might wish to watch closely the development of the General Regulatory Chamber of the
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First Tier Tribunal, which may well ultimately fulfil just the role that they foresaw for a
specialist court.
There may, in fact, prove to be a wealth of richness in litigation if challenges under
human rights provisions emerge. Despite being named as civil sanctions, it may be the
case that, for the purposes of the European Convention of Human Rights (ECHR), the
RESA sanctions will be considered criminal in nature (Maurici and Turney, 2008). This
raises the possibility of challenges under Art 6.2 ECHR. It is arguable that the sanctions
scheme fails to give effect to the presumption of innocence and there is no option for the
subject to choose criminal proceedings13. There is also some doubt about the adequacy
of the appeal process, which is limited to errors of fact, errors of law, unreasonableness
and the nature of the penalty. The burden appears to be on the subject (contrary to the
presumption of innocence). Also, the regulator is, in effect, making the decision as to
whether the matter is proved beyond reasonable doubt. Without recourse to a full
appeal, this decision of the regulator will not be subject to review.
The Art 6.3 rights to a fair trial following the charge of a criminal offence may also be
breached, in particular, the requirement for legal aid. The position with regard to
appeals to the new tribunal body in this respect is currently unclear. It may be the case
that there are other rights to be invoked such as protection against self-incrimination.
It is, as yet, unclear what kind of level of fixed penalty might be levied. Certainly, the
penalty cannot exceed the maximum fine and figures in the region of £500 maximum
have been mentioned. It may well be that another area of challenge will surround the
proportionality of penalties. In the International Transport Roth14 case, a fixed penalty
was found to be incompatible with ECHR rights.
7 Conclusions
Previous studies (Dupont & Zakkour, 2003 and Moran, 2005) have found that there are
problems with the way in which our magistrates’ courts dispense environmental justice.
The study conducted by Andrew (2007) seems to indicate that this has not changed. It
would appear that lack of experience, guidance and training together with the complex
nature of many environmental law cases, mean that magistrates are not in a position to
always reach sound decisions on guilt and sentence.
It can be argued that the Environment Agency, through a risk averse attitude and a
reluctance to prosecute, contribute to the consequent lack of experience in the
magistrates’ courts. Magistrates are not aided in their task, either, by the way in which
the prosecution case is presented, the lack of written schedules and the absence of tariff
guidelines for sentencing.
Financial pressure, the better regulation agenda and a trend towards the use of
alternative disposals in other areas of criminal offence have all been influential in a
13
As in Part 1 of the Criminal Justice and Police Act, 2001 and under fixed penalty notices in
Part 111 of the Road Traffic Offenders Act, 1988.
14
International Transport Roth GmbH v SSHD [2003] QB 728.
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Julie Adshead and Tim Andrew, pp 1147-1160
series of reviews on environmental justice. Calls for a discrete environmental court or
tribunal have now fallen by the wayside and the two most recent reviews15 have led to
the adoption of an Act that introduces civil sanctions for regulatory offences.
In all probability this will mean a further decrease in environmental cases coming
before the courts and almost certainly so in the magistrates’ courts. It may not,
however, mean an overall decrease in related litigation. There are likely to be many
appeals to the First Tier Tribunal, which may ultimately take on some features of an
environmental court. With potentially hundreds of relevant offences, challenges under
human rights law may well provide another fertile ground for litigation.
With no orders yet made under RESA, it is far too early to assess its impact. However,
if civil sanctions do signify the beginning (or in fact the continuation) of a trend to
devalue environmental crime and become a mere business expense, then these will be
unfortunate consequences indeed. One cannot help wondering if, by tackling some of
the problems that surround the administration of environmental justice in our
magistrates’ courts and perhaps following the example of the way in which our existing
courts deal with health and safety offences on a regional basis, environmental justice
might be better served.
8 References
Black, J. (2007), ‘Tensions in the Regulatory State, Public Law, Spring p 67.
Carnwath, R. (1992) ‘Environmental Enforcement: The Need for a Specialist Court’,
Journal of Planning and Environmental Law, Sep., p 799.
Carnwath, Lord Justice (2004) ‘Judicial Protection of the Environment: At Home and
Abroad’, Journal of Environmental Law, Vol 16 (issue 3), p 326.
Carter, H. (1992) ‘The Criminal Law as a Tool for Environmental Protection’,
Environmental Law, Vol 6 (issue 1).
Day, M., Stein, R. and Birtles, W. (2001) ‘An Environmental Court – Part 2’, New Law
Journal, 11th May, Vol 151 No 6983, p 697.
De Prez, P. (2000) ‘Excuses, Excuses: The Ritual Trivialisation of Environmental
Prosecutions’, Journal of Environmental Law, Vol 12 (issue 1) pp 65 – 77.
Dupont, C. and Zakkour, P. (2003) ‘Trends in Environmental Sentencing in England
and Wales’, A Report by Claire Dupont and Dr. Paul Zakkour, Environmental
Resources Management Ltd. (ERM), November 2003 DEFRA.
Environment Agency (2006) Spotlight on Business, Environmental Performance in
2005 ‘The Environment What’s in it for you?’, July 2006, p 6.
Hampton, P. (2005) ‘Reducing Administrative Burdens: Effective Inspection and
Enforcement’, March 2005, HM Treasury.
House of Commons Environmental Audit Committee (2004) ‘Environmental Crime and
the Courts: Sixth Report of Session 2003 – 04’ HC 126 May 2004. p10.
Macrory, R. (2006) ‘Regulatory Justice: Making Sanctions Effective, Final Report’ Nov
2006, Cabinet Office.
15
The Hampton and Marcrory Reviews.
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RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Julie Adshead and Tim Andrew, pp 1147-1160
Maurici, J. and Turney, R., (2008) ‘Possible Legal Issues Arising under the Regulatory
Enforcement and Sanctions Act 2008: Lessons to be learnt from the Alphasteel
Greenhouse Gas Emissions Trading Penalty Appeal’, Landmark Chambers.
Moran, T. (2005) ‘Magistrates’ Courts and Environmental Regulators – Attitudes and
Opportunties’, Journal of Environmental Health Research, Vol 4 (issue 1),
Ogus, A. and Abbott, C. (2002) ‘Sanctions for Pollution. Do we have the Right
Regime?’, Journal of Environmental Law, Vol 43 (issue 3), p 286.
Parpworth, N. (2007) ‘Section 34 (1 (b) of the Environmental Protection Act 1990: The
Scope of the Offence’, Justice of the Peace, January 20, pp 33 – 35.
Parpworth, N., Thompson, K. and Jones, B. (2005) ‘Environmental Offences: Utilising
Civil Penalties’, Journal of Planning and Environmental Law, May 2005, p 564.
Pickles, S. (2008) Seminar ‘Background and Introduction to the Regulatory
Enforcement and Sanctions Act, 2008’ 38.
Rowan-Robinson, J. and Ross, A. (1994) ‘Enforcement of Environmental Regulation in
Britain: Strengthening the Link’, Journal of Planning and Environmental Law,
p213.
Ryan, P. (2002) ‘Court of Hope and False Expectation: Land and Environment Court 21
Years on’, Journal of Environmental Law, Vol 13 (issue 3), p 301.
Sentencing Advisory Panel, Wasik, M. (Chair) (2000) ‘Environmental Offences: The
Panel’s Advice to the Court of Appeal, March 2000 p1.
Stein, P.L. (2002) ‘Specialist Environmental Courts: The Land and Environment Court
of New South Wales, Australia’, Environmental Law Review, Vol 4 (issue 1) p 5.
Stookes, P. (2003) ‘Costing the Earth: Guidance for Sentencers’, (Editor) Magistrates
Association, October 2003.
Stott, D. (2003) Low Fines for Environmental Offences? Blame the Regulators not the
courts’, Justice of the Peace, Vol 167, 29th March, p 235.
Stott, D. (2009) ‘Environmental Enforcement in the UK’, Journal of Environmental
Monitoring, Vol 11, pp 470 – 474.
The Guardian Newspaper, May 2007.
Vogel, D. (1986) National Styles of Regulation, Cornell University Press.
Watson, M. (2003) ‘Low Fines for Environmental Offences? Blame the Regulators not
the Courts’, Justice of the Peace, Vol 167 (issue 4), January, 25th pp 50 – 52.
Watson, M. (2004) ‘What is to be Done About Environmental Crime?, Justice of the
Peace, Vol 168 7th August, p 610.
Watson, M. (2005) ‘Magistrates and the Sentencing of Environmental Offences’,
Justice of the Peace, Vol 169 18 June, p47.
Woolf, Lord (1992) Are the Judiciary Environmentally Myopic?’, Journal of
Environmental Law, Vol 4 (issue 1), p12.
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Asanga Gunawansa and Harn Wei Kua, pp 1161-1174
DRAFT: WORK IN PROGRESS – NOT TO BE QUOTED
Lessons on climate change mitigation and adaptation strategies
for the construction industry from three coastal cities
Asanga Gunawansa1; Harn Wei Kua1
1
Department of Building, School of Design and Environment, National University of
Singapore, 4 Architecture Drive, S117566, Singapore
Email: [email protected]; [email protected]
Abstract:
The success of climate change strategies depends on how well mitigation and adaptation
measures are implemented. While mitigation has entered mainstream policymaking, adaptation
still lags behind in many ways, especially in the case of building and construction industry, one of
the biggest greenhouse gas (GHG) emitting industries in the world. This is observed and
confirmed in this paper in comparing current initiatives in three coastal cities, namely, Miami-
Dade, San Francisco and Singapore. The paper argues that mitigation strategies need not start
from scratch and that the existing disaster management systems and knowhow could provide a
good platform for adaptation programs in the construction sector.
Keywords: Climate Change Mitigation, Adaptation, Construction Industry, Policy,
Coastal Cities
1. Introduction – Climate Change and the Construction Industries in
Coastal Cities
Of the human induced causes of climate change, it is said that the energy sector is responsible for
about of the carbon dioxide (CO2) emissions in the world (IPCC, 2001). The construction
industry is said to be not too far behind. According to the American Institute of Architects (AIA,
2000), the biggest source of emissions and energy consumption both in the United States and
around the globe is said to be the construction industry and the energy it consumes each year.
According to a briefing note prepared for the International Investors Group on Climate Change
(Kruse, 2004), the cement sector alone is said to account for 5% of global man-made CO2
emissions. Further, mining and manufacturing of raw materials used in construction and the
transportation of heavy building materials are said to be contributing significantly to climate
change.
Weather related impacts such as hurricanes, flooding, and coastal erosion for which climate
change at least partially responsible, would encourage the use of new building techniques and
materials to withstand adverse weather conditions. Such events would also influence the choice of
site for construction projects and the building designs, especially in coastal cities. However, a
point to note is that the introduction of energy efficient technologies and environmentally friendly
designs and construction methods as measures to mitigate and adapt to climate change is likely to
influence cost increases in construction. Further, the various regulatory measures put in place to
control the emission of GHGs) and promote green buildings are likely to increase the cost as well
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as the complexity of construction. Furthermore, although some authors (e.g. Mimura et al., 1998)
note that cost increases for disaster rehabilitation and countermeasures against natural calamities
could expand the market for the construction industry, the flip side is that flooding and other
extreme weather related events mentioned above that could damage buildings and infrastructure
could cost countries billions of dollars to replace the damage. This would require diversion of
precious funds earmarked for other development activities. Thus, whilst the GHG emissions by
the construction industry is one of the major causes for climate change, the construction industry
in coastal regions could also be one of the worst affected industries due to impacts of climate
change.
2. Efforts to Reduce GHG Emissions
Several countries have been working towards reducing the emission of GHGs at the national
level. Some effective regional initiatives too have been taken. Some of these initiatives take the
form of specific legislation aimed at imposing penalties and taxation to force those governed by
such legislation to adapt climate friendly behavioral patterns and to promote sustainable
development. The reason for such specific measures being taken perhaps is the realization that the
quest for sustainable development cannot rely upon voluntary or soft law mechanisms alone.
Some others are mere policy initiatives without specific legislation to back them. There are also
industrial standards that have been introduced, some being mandatory, and others merely
voluntary. Some initiatives have come forth as a result of judicial activism in the law making
process. The recent judgment by the US supreme court in the case of MASSACHUSETTS ET AL.
v. ENVIRONMENTAL PROTECTION AGENCY ET AL., 549 U.S. 497 (2007), to overrule the
decision made by the US Environmental Protection Agency (EPA), that it lacked the authority
under the US Clean Air Act to regulate GHGs, and that, even if the EPA did have such authority
the EPA should decline to regulate GHGs in relation to global warming, could be cited as a good
example.
As far as the construction industry is concerned, the recent initiatives to mitigate climate change
have focused attention on the environmental performance of buildings and construction activity,
particularly, emissions from buildings. Thus, the focus of these initiatives is on mitigation. It is
important to understand that mitigating climate change alone will not be able to avoid all impacts
of climate change. In that circumstances, what we need is a three-pronged system of initiatives,
namely those that: 1) Mitigate climate change by reduction of GHG emissions; 2) Minimize the
impact of climate change related disasters through better preparedness; and 3) Measures to adapt
to current impacts of climate change.
Initiatives that fall under the first category above are clearly visible in most countries. A good
example would be the initiatives taken by Annex 1 countries to the Kyoto Protocol to reduce their
GHG emissions by 5% below the levels that existed in 1990. Comparatively, the adaptation
discourse to current impacts of climate change as well as initiatives to prepare for future threats
lag behind in terms of both scale and depth. According to the IPCC, adaptation is “concerned
with responses to both the adverse and positive effects of climate change.”; “It thus implicitly
recognizes that future climate changes will occur and must be accommodated in policy” (IPCC,
1996). However, several reasons can be conjure to explain the delay in concerted effort on
adaptation strategizing. Burton (1994) opined that there may be a perception that discussion on
adaptation “could make a speaker or country sound soft” on mitigation. Another reason may be
that adaptation is associated with ‘fatalism’ about the human effects on our climate. However,
given that there is no scientific evidence that climate change could be completely reversed, there
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is a need to anticipate and deal with the consequences of a changing climate while at the same
time working to achieve long term reductions in GHG emissions. A point to be made here is that,
if countries fail to take proactive measures to deal with the current impacts of climate change and
prepare the current generation for future impacts that might affect them, although the efforts to
reduce GHGs would benefit the future generations, the needs of the current generation would be
neglected and ignored. Furthermore, if appropriate policy frameworks and measures to implement
them are not put in place, certain actions that may be taken at individual levels to deal with the
impacts of climate change might negate some expected benefits of the current actions to mitigate
climate change. A simple example would be the case of individuals increasing the use of air-
conditioners and heaters to deal with current impacts of climate change, whilst the countries try to
introduce measures to reduce GHG emissions.
With respect to the construction industry, strategies that aim to increase the energy efficiency of
building technologies and utilize renewable energy sources are examples of mitigation policies.
One may even argue that mitigation strategies can help to strengthen efforts toward minimization
of, and adaptation to, climate change impacts. Specifically, it could be argued that mitigating
climate change will help to at least reduce the seriousness of likely negative effects of climate
change, in the event that they cannot be totally displaced. Coastal land loss is a likely outcome of
a rise in sea-level; an adaptative measure is to relocate coastal communities inland while
strengthening the coastal regions with appropriate embankments. Since this relocation will
increase the population in the cities or sub-urban districts, sustainable initiatives such as district
cooling will be required to reduce the energy requirement of these cities as an effective strategy
against the urban heat island effect. Simply put, mitigation strategies will complement and
support adaptation strategies.
In the circumstances, in assessing the climate change policy/legislation system of a country or a
city, one must study not only how well-developed are the three-pronged system of initiatives
mentioned above, but also the extent to which initiatives in each category reinforce and support
one another. In this paper, we focus on comparing amongst three coastal cities in two countries –
Singapore, San Francisco and Miami. Some of Singapore’s mitigation policies bear a strong
resemblance to the United States’ and since coastal cities will be worst hit by climate change
effects, comparing the mitigation and adaptation across these cities will reveal useful lessons for
other coastal regions as well.
3. POLICIES AND LEGISLATIONS IN SINGAPORE
Having ratified the Kyoto Protocol in April 2006, Singapore has made a voluntary commitment to
reduce its carbon intensity by 25% from 1990 levels by the year 2012. According to the
Singapore Ministry of Environment and Water Resources (MEWR), the country had achieved a
22% reduction in 2004 (MEWR, 2006). Further, according to figures from the National
Environment Agency (NEA), Singapore’s carbon intensity was at 0.28 kilotons per million
Singapore dollars in 1990. That figure has declined to 0.21 in 2005, representing a 25%
reduction. Thus, it could be said that Singapore is well on track to meet its reduction goals by
2012.
Until the late 1990’s, the laws on environment that existed in Singapore were diverse and
scattered throughout many Acts. Further, State Agencies in charge of environment related
subjects were many. However, this problem has been resolved to a considerable extent with the
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enactment of two key statutes, namely, the Environmental Public Health Act (EPHA)1 which
controls waste including toxic, domestic and industrial waste; and the Environmental Protection
and Management Act (EPMA)2 which consolidated various laws including the Clean Air Act and
the Water Pollution Control and Drainage Act. It applies to air, water, noise, land contamination
and hazardous substances.
In 2002, Singapore established the National Environmental Agency (NEA)3. NEA’s powers
include inter alia:
“…prescribe and implement regulatory policies, strategies, measures, standards or any
other requirements on any matter related to or connected with environmental health,
environmental protection, radiation control, resource conservation, waste minimization,
waste recycling, waste collection and disposal and such other subject matter as may be
necessary for the performance of the functions of the Agency”4.
Today, Singapore’s framework for environmental management is based on five fundamental
principles, namely, control of pollution at source; pre-emption and taking of early action; the
“polluter pays” principle; innovation and new technology; and environmental ownership.
According to the Singapore’s Ministry of Environment and Water Resources (MEWR) it’s
mission is to “to deliver and sustain a clean and healthy environment and water resources for all
in Singapore.”
The legislations mentioned above, although dealing with the subject of environment, were not
enacted with the specific aim of dealing with climate change impact. Thus, Singapore too has not
passed any specific laws designed to reduce GHG emissions since ratifying the Kyoto Protocol.
However, a strong national strategy has been put in place and promising industrial standards have
adopted under existing regulations to help the country achieve its emission reduction targets. In
addition, several mitigation schemes have been introduced to promote green buildings and energy
efficiency. These are now included under the policy umbrella of the National Climate Change
Strategy (NCSS).
3.1. Singapore’s National Climate Change Strategy
According to the NCCS, Singapore is committed towards addressing climate change in an
environmentally sustainable manner that is compatible with its economic growth. The NCCS
provides that in developing it, the country adopted the following guiding principles that climate
change actions must:
- Be environmentally sustainable and compatible with the country’s economic growth.
- Need individual, corporate and government effort, as meeting the challenge of climate
change cannot be solely a government initiative. Stakeholders from the various
government agencies, industry representatives, academia, non-governmental
organizations and the general public must be engaged in these initiatives.
1
Cap 95
2
Cap 94A
3
National Environmental Agency Act (Cap 195)
4
Section 11 of the National Environmental Agency Act.
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- Be developed through a consultative, multi-stakeholder approach, taking into
consideration the views of stakeholders and the public at large.
The key mitigation initiatives or requirements for the construction industry are the following.
3.2. Mitigation Strategies
Energy use in buildings made up 16% of Singapore’s energy demand in 2004. Given Singapore’s
tropical climate, the need for air-conditioning forms a large part of its electrical demand. It is
expected that rising temperatures would increase the demand for cooling. Thus, in order to
promote buildings designed to encourage greater use of natural light and ventilation, and with
proper insulation that ensures less energy is used to cool down buildings, the Building
Construction Authority (BCA) of Singapore has established minimum energy efficiency
standards under the Building Control Regulations. Specifically, air-conditioned buildings must be
designed with a high-performance building envelope that meets the Envelope Thermal Transfer
Value (ETTV) of 50W/m2. The regulations also require air-conditioning equipment and lighting
to comply with minimum efficiency standards prescribed in the Singapore Standard Codes of
Practice for Building Services and Equipment.
To encourage best practices beyond what are specified in the standard building codes, two
labeling schemes have been introduced by BCA (2007). The first of these schemes is the Green
Mark Scheme (GMS) introduced in January 2005, which rates the environmental performance of
a building based energy efficiency, water efficiency, site/project development and management,
good indoor environmental quality and environmental protection and innovation. Depending on
the score, the rating is categorized in four levels – Platinum, Gold Plus, Gold and Certified. It
enables the benchmarking of the building's environmental performance and allows comparison
between buildings.
The second labeling scheme is the Energy Smart Labeling Scheme. Developed by the Energy
Sustainability Unit of National University of Singapore (NUS) and NEA, this was launched in
December 2005, and is the first energy efficient building label in Asia. Under this scheme
“Energy Smart” labeling is given to the top 25% most energy-efficient buildings in Singapore that
also demonstrate good indoor environmental quality. It recognizes developers and owners who
design and maintain efficient buildings and is also a benchmarking scheme, where building
owners can compare the energy efficiency of their buildings against a national benchmark. It is a
pre-requisite for an existing commercial building to achieve the Energy Smart label in order to
win the Platinum Award, the highest award, under the Green Mark scheme.
In addition to the above, other mechanisms have been put in place in Singapore to help it achieve
its abatement targets. The Building Energy Efficiency Master Plan (BEEMP) details the various
initiatives taken by the BCA to fulfill a number of recommendations made by the Inter-Agency
Committee on Energy Efficiency (IACEE) on strategic directions to improve the energy
efficiency of the buildings, industries and transport sectors. Carrying out energy audits of selected
buildings, review and update of energy standards, introduction of energy efficiency indices and
performance bench marks and the introduction of performance contracting (also known as 'third
party financing' or 'contract energy management – a means of raising money for investments in
energy efficiency that is based on future savings) are among the key recommendations that have
been made by the IACEE..
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The law relating to buildings, and matters connected therewith is contained in the Building
Control Act5 (BC Act). This Act provides inter alia that the Minister may make regulations for or
in respect of “Environmental sustainability measures that improve the total quality of life and
minimizes adverse effects to the environment, both now and in the future”6. This is the enabling
provision under the Act to pass regulations promoting environmental sustainability. In fact,
Singapore has amended the BC Act to introduce mandatory provisions to ensure minimum
environmental sustainability standards in the construction industry. This has been done by way of
the new Building Control (Environmental Sustainability) Regulations 2008, under which
certification under the GMS has become mandatory except for alteration to existing buildings that
does not involve major retrofitting works is not subject to this requirement.
3.3. Adaptation Strategies
In the NCSS, the NEA identified the potential impacts of climate change in seven ways: increased
flooding, coastal land loss, water resource scarcity, public health impact from resurgence of
diseases, heat stress, increased energy demand and impacts on biodiversity. As such, adaptation
policies are designed to address these seven potential impacts (NCSS, 2008).
In early 1970s, many areas in Singapore were prone to flooding during the monsoon months; over
the last 30 years, the Public Utilities Board (PUB) has been implementing infrastructure policies
to reduce flood-prone areas from 3200 ha in the 1970s to about 124 ha in 2006. It aims to further
reduce the area to less than 66 ha by 2011. This is expected to help ameliorate inland flooding
incurred by either by sea-level rises (that may make it more difficult for rainwater to drain back
into the sea) or storm surges at the shoreline caused by strong winds blowing inward from the sea.
Singapore has a relatively flat coastline and being land-strapped means that the coasts of
Singapore are well-utilized for a range of purposes, including recreational facilities and
residential buildings. It is believed that sea level rise of up to 59 cm can result in some coastal
erosion and land loss in Singapore. Currently, about 70% to 80% of Singapore’s coastal areas are
protected by hard wall or stone embankments; the remaining 20% to 30% are either natural areas
such as beaches and mangroves. According to our queries, the NEA and MEWR are looking into
developing more efficient ways to strengthen and protect vulnerable regions.
Singapore has been successful in facing up to its limited water resources with a series of
integrated water policies. Rising global temperatures may result in changes in rainfall patterns
and thus reduce the amount of water captured and stored in reservoirs. Diversification of its water
sources – a key component of its current water policy – will be helpful in tackling this likely
rainfall reduction due to climate change. Specifically, Singapore has been successful, and is
improving, in the recycling of used water to produce water that is safe enough to be consume
(also known as NEWater); it is also developing desalination (MEWR, 2005).
An increase in global temperature will have profound effect on Singapore, which is a tropical
island. Thus, innovative measures are needed to reduce or change the use of air-conditioners in
buildings and facilities, as air-conditioners are one of the most energy-intensive mechanical
systems utilized in cities as a response extreme heat. One way is to ensure that renewable energy
resources are used to power the utilities; another approach is to increase the energy efficiency of
these mechanical systems, either through a change in the design of the technology or
5
Cap. 29.
6
Sec. 49 (2) (e) (viii).
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improvement in the operation and maintenance of the systems. A third way is to reduce the need
for the use of air-conditioners by introducing new building design elements that would increase
natural ventilation. In recent years, Singapore has also started exploring more extensive use of
passive methods to reduce the heat island effect and the need to use mechanical ventilation
systems. An example is the deployment of urban greenery in the city and modification of building
layouts and designs to reduce the cooling load of buildings (for example, through the use of
building materials with better thermal properties and lighter-colored building surfaces). Such
policy targets to adapt to changing climate conditions also have the effect of contributing to
climate change mitigation. This shows that mitigation policies can also serve as adaptation
strategies and vise versa.
Singapore’s public health and medical policies have been developed to address inter alia the
control of tropical vector-borne diseases, particularly dengue fever. Dengue patterns are affected
by many factors, including climate (MOE, 2004). NEA is currently studying the link between
climatic factors such as temperature, humidity and rainfall with dengue cases. Authorities have
put in place a comprehensive mosquito surveillance, control and enforcement system, which
includes a review of building designs to reduce potential breeding habitats, including forbidding
the use of roof gutters in new buildings except in special circumstances (MEWR, 2008).
The most current planned policy strategies in Singapore that are relevant to dealing with climate
change are setout in the Singapore’s Sustainable Development Blueprint that was released in
April 2009 by the Inter-Ministerial Committee on Sustainable Development (IMCSD) which was
established to formulate a clear national framework and strategy for Singapore’s sustainable
development in the context of the emerging domestic and global challenges. This report titled, “A
Lively and Livable Singapore: Strategies for Sustainable Growth” details several key goals and
initiatives for the period from now until 2030 to improve resource efficiency and enhance
Singapore’s urban environment (MEWR, 2009). Some of the key initiatives that are of particular
relevance to the construction industry and the built environment are listed below:
- Reduction of the energy intensity (per dollar GDP) by 35% from 2005 levels by 2030;
- Targeting 80% of the existing building stock (by GFA) to achieve at least Green Mark
Certified rating (minimum level of energy efficiency) by 2030;
- Introduction of Solar technology at 30 public housing precincts nationwide as a Pilot
Project.
- The Housing Development Board (HDB) to reduce energy use of common areas of
public housing by 20% to 30% and build more eco-friendly HDB housing.
- Providing 0.8ha of park land per 1,000 persons by 2030
- Implementation of a S$100 million Green Mark Incentive Scheme for existing buildings
to undergo energy efficiency retrofitting;
- Introduction of a Green Mark GFA Incentive Scheme for new buildings that can attain
Green Mark GoldPlus and Platinum rating;
- Incorporation of Green Mark GoldPlus and Platinum requirements will be as part of land
sales requirements; and
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- Improve air quality by reducing ambient PM 2.5 (fine particles) levels to an annual mean
of 12µg/m3 and capping ambient SO2 (sulphur dioxide) levels at an annual mean of
15µg/m3.
All of the above initiatives and goals and the others set by the Singapore Blueprint are
commendable as effective and efficient means by which a country with hardly any natural
resources is trying to incorporate concepts of sustainability into its development and nation
building policy architecture. A key weakness in the blueprint is the lack of any significant focus
on climate change adaptation. However, in summary, it could be said that Singapore has made
preliminary connections amongst different mitigation and adaptation strategies; these include
strategies relevant to the construction industry. In other areas of urban development, the various
authorities are improving existing measures in anticipation of potential negative climate change
impacts. However, more needs to be done for Singapore to be adequately ready to deal with the
adverse effects of climate change. In particular, we take the view that more research is needed in
the area of building designs with better adaptive capacity. Further, such research should be
supported with appropriate legislations and implementation mechanisms.
4. Mitigation and Adaptation Strategies in San Francisco, California
and Miami-Dade, Florida
Although the United States is not yet a signatory to the Kyoto Protocol, and at the Federal level
not many significant initiatives have been taken to address climate change, as of 2006, 28 states
have programs to curb CO2 emissions. In addition, approximately 166 United States cities have
agreed to apply the Kyoto emission reduction standards to their communities (Prato and Fagre,
2006). An example is the State of California. In August 2006, the California State Legislature
passed the Global Warming Solutions Act (AB32) which is designed to reduce the state’s impact
on global warming. AB32 requires a reduction of statewide GHG emissions to 1990 levels by
2020, using a mandatory statewide cap on emissions beginning in 2012. It covers emissions from
electricity consumed in California as well as other “significant” sources of GHG emissions in the
state to be determined by the California Air Resources Board (CARB).
Similar to California, the Governor of the State of Florida signed three executive orders in July
of 2007 that set GHG emissions reduction targets for the state (PEW Centre, 2007). This lends
support to a series of sustainable building related policies at the state level. The Florida Building
Code (FBC) sets specific requirements on energy efficiency, which in turn dictates building
design pertinent to energy consumption. For example, section 402.2 of the FBC states that the
minimum operable area to the outdoors shall be 4 percent of the floor area being ventilated.
4.1. San Francisco Mitigation Strategies
Effective November 2008, Chapter 13C of the San Francisco Building Code requires all new
buildings constructed in the city to meet green building standards in accordance to Leadership in
Energy and Environmental Design (LEED) green building rating system developed by the US
Green Building Council (USGBC). Detailed requirements for different types of new buildings
are documented in the 2007 green building report (2007). For example, all new large commercial
buildings (over 25,000 square feet or 75 feet in height) completed in 2008 must at least be
certified by LEED and all new high-rise residential buildings (over 75 feet in height) completed
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in 2010 must at least attain LEED Silver. According to the City’s Mayor’s Accountability
Reports (2008), over long term, San Francisco’s Department of the Environment (SFDE) hopes to
accomplish a reduction in CO2 of at least 60,000 tons and an energy savings of at least 220,000
megawatt hours of power by 2012.
SFDE also provides various incentives to encourage the uptake of sustainable design and resource
management. For example, it allows priority-permitting, which gives projects that commit to
LEED Gold certification higher priority in permit processing through coordination with the San
Francisco Planning Department (SFPD), Department of Building Inspection, and Department of
Public Works (SFPD, 2006). According to SFDE, under the program titled “GoSolarSF”, rebates
for installation of photovoltaic systems are available from the Public Utilities Commission.
Further, supported by initiatives such as the California Solar Initiative, rebates and federal tax
credits, the program can pay half the cost of a solar power system installed in San Francisco.
Rebates are also provided for new and existing homes (single and multi-family) and commercial
buildings to increase energy-efficiency. For example, under the California Multifamily New
Homes (CMNH) Program, monetary incentives are provided for buildings that are 15% more
energy efficient than required by the code (Title 24, California Code of Regulations). The CMNH
advocates design strategies such as using high efficiency windows, energy efficient water heating
systems, improved wall and ceiling insulation, high efficiency space heating and cooling
equipment and high efficiency appliances and lighting (California Multifamily New Homes
program). The EnergyStar is adopted as the scheme by which the building systems are assessed
and selected; this exemplifies how policies at the local level can be integrated with federal ones.
At the county-level, to promote environmentally sensitive design and construction, the Miami-
Dade County Commissioners passed an ordinance in June 2005 to expedite the permitting process
for green buildings certified by LEED (United States Green Building Council (USGBC, 2009).
This ordinance required all new county-owned and county-financed facilities and all major
renovations of greater than 50% of replacement cost to achieve LEED Silver. County renovations
owned/operated/financed of less than 50% of replacement cost are required to achieve LEED
Certified of the appropriate rating system (New Construction, Existing Buildings, Commercial
Interiors, Core and Shell).
4.2. Miami-Dade Mitigation Stratergies
In May of 2006, Miami-Dade County passed an ordinance to require all new municipal or
publicly-funded construction to incorporate LEED guidelines and principles. The ordinance also
offered expedited permit review for all private residential or commercial projects pursuing LEED
certification (USGBC, 2009). To coordinate with this incentive, in 2007, the Miami-Dade County
Office of Sustainability was created through Ordinance 07-65; the Office amended the Code of
Miami-Dade County to establish a Sustainable Buildings Program. Under this policy, new
buildings in the county must attain at least the LEED Silver status and all remodeling/renovation
projects to attain the LEED certification. This specification is different from the FGBC
certification program, the latter of which allows for place-based adoption of the basic categories
considered by LEED. In addition, according to the Miami-Dade Building Code Compliance
Office (MBCCO), the county government requires buildings’ energy performance to be increased
by 15% above that required in the 2004 edition of the FBC, effective with the implementation of
the 2007 edition of the FBC on December 31, 2008 (MBCCO, 2009).
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4.3. San Francisco Adaptation Stratergies
The San Francisco Climate Action Plan (SFDE, 2004) underlines detailed challenges that the city
will face on its infrastructure. It is said that if the city experiences 4 to 5 inches of rain over the
course of a month, the water drainage system is capable of handling the rainfall; however, if that
much rain were concentrated in the course of a week, there are likely damage to catchment
systems, flooding of streets, and clogging of sewage drains. However, the Plan is primarily one
focused on reducing GHG emission instead of adapting to future impacts.
In November 2008, Governor Schwarzenegger issued an Executive Order, S-13-08, to enhance
the state's management of climate impacts from sea level rise, increased temperatures, shifting
precipitation and extreme weather events. The California Climate Adaptation Strategy (CCAS)
was later drawn up and under this strategy and six working groups were formed. One of these
groups focuses on adopting its infrastructure and transportation systems to possible changes in the
future. These groups have pre-empted inundation of rail lines and roads in the coastal areas and
more frequent disruptions to travel due to storm surges. Potential solutions considered include
relocating these roads and elevating of streets and bridges wherever practical and possible.
(CCAS, Infrastructure Working Group, 2008).
In the above study, the infrastructure study group has identified a few likely changes to the urban
areas. The group’s draft report (CCAS, Infrastructure Working Group, 2008) indicates that
relative sea level is likely to increase at least by 0.3 meter (1 foot) across the region and possibly
as much as 2 meters (6 to 7 feet) in some parts. As the sea surface temperature increases, there is
an increase of 10 percent chance that hurricanes will form off the coast. Depending on the nature
of these storms, facilities at or below 9 meters (30 feet) could be vulnerable to direct storm
surges’ impacts. While the expected increase in temperature may either increase or decrease the
average annual rainfall, the intensity of individual rainfall events is likely to increase.
In the circumstances, the California state government as well as the San Francisco city
administration should advocate the need to strengthen building codes in coastal areas to provide
additional protection for properties from wind and storm surges. The placement and design of
infrastructures (for example, wastewater treatment facilities and power plants) should be
relocated to protected areas. Storm water management needs to be improved to minimize
flooding; adoption of the Low Impact Development practices is one possible option. More shades
and reflective surfaces through building and landscape design should be implemented to make
buildings more comfortable under warmer climate. Further, as suggested by the Florida Planning
Tool Box (2007) developed by the Florida Atlantic University's Center for Urban and
Environmental Solutions, Retrofitting of roads and bridges via elevating them or developing
engineering techniques that allow them to float or withstand flooding, are crucial to ensure the
robustness of the transportation infrastructure.
4.4. San Francisco Adaptation Stratergies
The County Government of Miami-Dade established the Climate Change Advisory Task Force
(CCATF), under the Ordinance # 06-113 passed in July 2006. Membership and expertise of this
force was drawn from various stakeholder groups and there is even a committee that is being
assigned to look especially at solutions for the built environment. In May 2008, this Task Force
recommended 35 actions that it believed would ready the county for adversarial effects of climate
change (Miami Today, 2008). Those recommendations relevant to the construction industry
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include acquiring of undeveloped lands and develop them for adaptive settlement (this in turn
requires providing county with more financial support so that it can acquire these pockets of
land), constructing of more facilities to store alternate fuels and curtailing further new
developments along vulnerable coastlines.
5. Comparison of Initiatives in the Three Cities
Clearly, strategies for mitigation are far more elaborated than adaptation in the three coastal cities
considered in this paper. This is largely due to the fact that we have been involved in mitigation
discourse and policymaking longer than in adaptation. The common mitigation approach is rating
buildings and communities according a set of sustainable design guidelines; these are usually
supported by product labeling schemes (such as the EnegyStar scheme) that distinguish energy-
efficient building-related products.
Concerning the two US coastal cities, although the relevant state governments do not demand the
acceptance of the LEED rating system, policies in Miami-Dade and San Francisco clearly
advocate the use of LEED as the preferred sustainable design guideline. However, the fact that
the states adopt a much more flexible mindset implies that the county and city governments are
permitted to apply LEED and additional guidelines that may address local challenges, including
any additional requirement on energy efficiency over what is required at the state level. In
comparison, due to its smaller geographical size, and also given that Singapore is a city state with
a unitary government; Singapore does not face such a situation. Singapore clearly does not have
as many different types of voluntary schemes and incentive programs for adoption sustainable
building practices as the others. However, both Singapore and Miami-Dade have promulgated
laws and building codes requiring various categories of buildings to conform to local sustainable
building standards.
Given that most of the adaptation strategic work plans were drawn up only in the past few years,
the measures to cope with likely effects of climate change is less defined and more conceptual in
nature. There are reasons to believe that the pace of adaptation policymaking will be faster than
what we have seen for mitigation policymaking for the past decades. Firstly, although the
discourse on mitigation began long before the IPCC confirmed the anthropogenic contribution to
global warming in their fourth assessment in 2007, the resurgence in the discussion of adaptation
started around the same time when people more clearly understand the magnitude of the
challenges confronting the global mitigation efforts. Secondly, as we can see from the three cases
considered, cities and countries are leveraging on their present capacities to address natural
disasters and local developmental issues to boost up their adaptive capabilities. This theoretically
means adaptation can be jumpstarted easily, using existing knowledge as the foundation.
Of the three cases, only the Florida Building Code explicitly considers disaster management in its
building design. This exemplifies how existing sustainable building codes and standards should
include guidelines on climate change adaptive technique. Although the LEED has not considered
these even in its latest editions, counties and cities can certainly take the initiative to include
demands for these techniques as additional standards. In fact, as we have seen in all these three
cases, mitigation and developmental strategies can also help jurisdictions to adapt; these include
using application of urban greenery and minimizing coastline erosions.
Adaptive policymaking is still in its infancy but there already exist programs that help cities build
local level governance, which is very important in driving any essential mindset changes (for
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Asanga Gunawansa and Harn Wei Kua, pp 1161-1174
example, local residents may need to be persuaded to learn evacuation drills in times of disasters).
In fact, being part of the international network under the ICLEI means that member jurisdictions
get to learn from one another, and then tailor global strategies to suit local conditions. This is
something Singapore can certainly learn from the other two cities as well as other members of the
ICLEI.
6. Lessons for Other Coastal Cities
It is important to understand that mitigation and adaptation are not alternatives and that both need
to be pursued actively and in parallel. Mitigation is essential and adaptation is inevitable
(UNFCC, 2006). Global efforts are more advanced in mitigation whereas adaptation actions are
in their infancy. Our comparisons of these three coastal cities review that mitigation strategies for
the construction industry are very similar to one another, although they modify fundamental
standards to address local challenges.
Coastal cities should concurrently build their capacities for adaptation, leveraging on their
existing mitigation strategies and disaster management systems. But this requires them to identify
those mitigation measures that will also help them to adapt. Our review shows that there are
major similarities amongst the cities’ adaptation approaches, with minor modifications of the
general concepts to address local issues (such as coral reefs preservation). This shows that more
international efforts on adaptation should be encouraged, and that the conventional assumption
that adaptation, compared to mitigation, has a more localized scope is not entirely correct.
Governments should not leave adaptation entirely to social or market forces. Essential forms of
adaptation will demand that institutions, both public and private, plan their strategies and take
action in advance. Thus, in addition to introduction of necessary legislations and regulations, both
the public sector and the private sector entities should take the initiative to promote industry
guidelines and good practices as well as public awareness. Such initiatives from the private sector
can include initiatives such as the promotion of novel building designs and construction standards
by professional bodies of architects and engineers and industrial groupings consisting of
contractors. Further, authorities and support agencies could also have a role in encouraging
adaptation in new buildings and in retrofitting actions through motivating and educating the
community, setting an example, providing incentives and regulation through approval functions..
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Mark Stallworthy and Jill Morgan, pp 1175-1187
Legal frameworks for losses attaching to increased incidence
of floods in an era of climate change
Mark Stallworthy and Jill Morgan, Swansea University, UK
Introduction
The broad context for this paper is the need to address the increasing exposure of
people and their property to flood-related harms in consequence of climate change.
The focus is from a UK perspective and is twofold. A first, general theme concerns
ways in which losses in face of expected impacts of climate change can be
indemnified, and which for the UK primarily entails thus far reliance upon (first party
property related) insurance cover. Here the UK is in a position by no means common
across equivalent jurisdictions, in continuing to depend predominantly on the
commercial market for flood risk insurance, provided as standard. Considerable
importance therefore attaches to the dynamics of the relationship between insurance
providers and public policy makers. An attempt will be made to assess the continuing
viability of commitment the status quo; and in so doing comparisons will be drawn
between the UK’s approach and those in similar jurisdictions.
A second, more specific theme, consequential upon an approach to flood related
losses based on privately available flood insurance, relates to problems affecting
levels of insurance take-up. Whilst this phenomenon is typically relevant in respect of
low income households,1 with an eye to the previously stated theme, it is becoming
apparent that wider potential impacts must be anticipated, particularly in the event of
reduced future availability and/or affordability of appropriate cover in consequence of
actual and anticipated processes of climate change.
Background: the Summer 2007 English Floods
Serious floods affected large parts of England in 2007 (‘the 2007 floods’), causing
extensive harm and suffering, particularly in Yorkshire, Gloucestershire, and the
Thames Valley.2 The causes were two extremely high rainfall events, compressed
within two short bursts,3 following a long period of wet weather which had left water
tables exceptionally high; and resulting in mostly surface water,4 with to a lesser
extent river,5 flooding. Thirteen lives were lost, and flooding directly affected around
1
The support of the RICS Education Trust in funding a research project across several flood
prone UK regions of the UK is gratefully acknowledged by the authors
2
The regions most affected were (in June) Humberside and South Yorkshire, with
Derbyshire, Lincolnshire, and Worcestershire; and (in July) Gloucestershire, Herefordshire,
Lincolnshire, Warwickshire, and Worcestershire, as well as the Berkshire and Oxfordshire in
the Thames Valley
3
On some estimates representing a return period of a 1-in-150 year event
4
Pluvial flooding typically occurring where precipitation exceeds capacity for draining away,
particularly a problem for urban areas with high ratios of non-porous surfaces (related also to
sewer flooding where there is combined drainage)
5
Fluvial flooding occurring where river channel capacity is exceeded resulting in overtopping
of banks
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Mark Stallworthy and Jill Morgan, pp 1175-1187
44,000 homes and 7,000 business premises.6 Whilst one of the most problematic
features of the 2007 floods was the severe strain placed on service infrastructures
(especially affecting supplies of water and electricity), it was also apparent that
significant levels of under and non-insurance existed, affecting small businesses, but
more especially householders.
In the aftermath of the 2007 floods the UK Government commissioned an
independent review, chaired by Sir Michael Pitt, the objects of which were to draw
lessons from events and to make recommendations for more effective future
responses, and the final report was published in June 2008.7 Subsequently, a draft Bill
(affecting England and Wales) has been proposed with the purpose inter alia of
putting in place some key recommendations of that review.8 It is also the UK’s
response to a 2007 EC Directive on the assessment and management of floods.9 It
may appear surprising that the European Community had come also relatively late to
such questions, but it has traditionally moved but cautiously into areas of spatial
planning, and in relation to water has predominantly focused on quality and resource
issues.10 However, in a way that prefigured a more strategic response also in the UK,
a catalyst for the European Commission lay (as well as in the face of growing threats
from climate change) in a series of major flood events.11 The Commission duly sought
to reduce and manage risks to human health, the environment, infrastructure and
property, through promotion of a risk-based approach, placing duties on Member
States relating to the production of river basin flood risk assessments and mapping,
and thence flood risk management plans. 12 The priorities were stated as being based
on goals of ‘prevention, protection and preparedness’, placed within a regime that
accorded flexibility to Member States regarding the setting of management objectives
and administrative responsibilities. Such an approach reflects a new generation of
Community approaches to environmental protection, evidenced especially in the
Water Framework Directive, the river basin management planning introduced under
which will be of central relevance to the development of flood risk management plans
under the new domestic legislation.13
The UK proposal would further introduce for the first time a comprehensive
regulatory structure in this area, with the objective of enabling improved risk
6
See summary contained in Environment, Food and Rural Affairs Select Committee,
Flooding, 5th Report 2007-08, HC 49 (May 2008), paras. 1-4
7
Pitt, Learning Lessons from the 2007 Floods,
http://archive.cabinetoffice.gov.uk/pittreview/thepittreview/final_report.html
8
Draft Flood and Water Management Bill, Consultation Paper, Cm 7532 (Defra/Welsh
Assembly Government, April 2009)
9
Directive 2007/60/EC on the Assessment and Management of Flood Risks [2007] OJ L
288/27
10
In particular Directive 2000/60/EC establishing a Framework for Community Action in the
Field of Water Policy [2000] OJ L 327/1, which is still in course of being transposed across the
Community. See also Directive 98/83/EC on the Quality of Water Intended for Human
Consumption [1998] OJ L330/32, Directive 2006/7/EC concerning the Management of
Bathing Water Quality and repealing Directive 76/160/EEC [2006] OJ L64/37
11
In particular, the 2002 Danube and Elbe flooding disaster, together resulting in around 700
fatalities and displacement of 500,000 people: see European Commission, Explanatory
Memorandum to original proposal for a Directive on the Assessment and Management of
Floods, COM(2006)15 final (18 January 2006)
12
Articles 4-8
13
That is, in accordance with requirements of Directive 2007/60/EC, note 9 above
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management of all forms of coastal and inland erosion and flood risks, and enhancing
to this end the strategic role of the Environmental Agency. This would include a
commitment (again for the first time) to a coherent regulatory strategy for risk
management in relation to ground water and surface water flooding (including for
sustainable drainage systems for new developments). The aim overall is to afford
communities what is described as greater ‘security, service and sustainability’,
through enhanced planning for, and prediction of, floods, and improved protection of
threatened water and other essential supplies. The proposals notably do not seek to
address issues related to indemnity against losses that will continue to be borne
primarily by individuals, and it seems that no significant amendments to ruling law
and policy approaches are envisaged in the foreseeable future.
Of circa 23.5 million UK households, 2 million are regarded as being at risk from
coastal or inland flooding, with 0.4 million of these categorised as at ‘significant risk’.
Such problems are not confined to fluvial and coastal flooding, for (though more
difficult to predict) around 1.6 million UK properties are at risk from groundwater-
related flooding (not actually a major contributor in Summer 2007), with many more
at risk from pluvial (or surface water) flooding.14 Numbers at risk are expected to
increase, notwithstanding improved overall flood management, as a consequence of
two main factors: the inevitability (despite recently more restrictive planning
approaches) of further development in exposed locations, and more generally
anticipated impacts of climate change.
Losses consequent upon floods are, as stated above, mainly met through the insurance
sector. According to the Association of British Insurers (ABI), total insured losses
relating to the summer 2007 floods amounted to around £3 billion.15 Other residual
sources of disaster funding support exist, whereby mainly taxpayer-funded support is
made available mainly from central Government, on an ad hoc basis, in the event of
flooding and other disasters. At present support comes from three main sources.16 The
first includes the more established schemes, in particular, Department of Work and
Pensions payments from a ‘Social Fund’: consisting of either ‘Community Care
Grants’ (CLGs) (non-repayable, for those on income-related benefits with no capital
or resources); or Crisis Loans (repayable, for those on benefits or low income).17
Secondly, and more significantly, new Flood Recovery Grants (FRGs) were made
available for the first time, administered by central Government, but paid to lower-tier
local authorities for purposes of discretionary distribution to support local recovery
work and those in greatest and most urgent need.18 These are not directed at
compensation for loss, but those without insurance cover are likely to meet the
criteria, especially in light of likely problems encountered as to habitability of
14
See further Pitt, note 7 above, 4.46-7
15
Claims representing around 13,000 domestic and 30,000 commercial policies (there were
also 20,000 motor claims). Average property insurance claims costs were estimated at circa
£30-40,000 (domestic) and £90,000 (commercial)
16
The European Solidarity Fund provides assistance toward governmental costs burdens in
meeting the needs of urgent financial assistance in the event of an emergency Council
Regulation (EC) 2012/2002 of 11 November 2002 establishing the EuropeanSolidarity Fund,
OJ L 311/3 (14.11.02)
17
Amounting respectively to around £0.75k and £0.075k.
18
The amount disbursed in Summer 2007 was around £18.5 million
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accommodation.19 Thirdly, voluntary gift aid produced significant sums, especially
through the British Red Cross ‘National Floods Appeal’, applied through grants to
local authorities and the voluntary sector for purposes of assisting those most in
need.20 There were instances also of local funds being generated, for instance under a
‘Gloucestershire Relief Fund’ (GRF).21 Further ancillary support for business, and
local authorities in meeting the immediate costs of exceptional emergencies are not
discussed further here.22
The UK’s Approach to Flood-related Losses
Flood risk insurance has, since 1961, been offered in the UK as standard by the
insurance industry, for purposes of households and business. Whilst the UK remains
reliant on commercial insurance provision in respect of flood related harms, problems
of risk assessment are producing increasing pressure for the markets. Heightened risks
are posed by two particular factors: relating to first, a legacy of weak restrictions on
development in inappropriate flood plain and other locations, combined with land
management practices that have led to deterioration in natural drainage capacities,
alongside increased budgetary pressures on the meeting of public flood defence
commitments; and, secondly, the implications of the onset of climate change,
including a changed pattern of sea level rise, alongside changing weather systems
(with, from the perspective of a temperate region in which the UK is placed, markedly
increasing precipitation levels and greater propensity for storms).
Continuation of insurance cover on the current basis into the longer term cannot be
guaranteed. The insurance industry presently operates in accordance with a non-
binding agreement between the UK Government and the ABI: the Statement of
Principles on the Provision of Flood Insurance (‘the Statement’), which was reviewed
in the aftermath of the 2007 floods, culminating in a new, July 2008 Statement being
agreed. The renegotiation was conducted at a time of intensified pressures from the
industry and otherwise, on the state, respectively to increase both control over
inappropriate development proposals and expenditure on defences. Indeed the basis
for its continuation has been tied explicitly to progress by Government across a range
of related policy areas, including as to the adequacy of flood defences.23
Under the Statement, the insurance industry commits (until end June 2013) as
follows: first, in circumstances where annual flood risk is ‘not significant’ (no greater
than 1.3%, i.e. 1-in-75 years), to continue flood insurance for domestic properties and
small businesses as standard; and secondly, in circumstances of ‘significant’ risk, to
commit to maintaining cover only for existing customers and their (otherwise
19
Whilst the FRG was paid out to authorities subject to a ratio of numbers of households
affected, Pitt raised some questions as to how the CLGs were largely disbursed within the
Yorkshire and Humber region, expressing a need for studies into the incidence of non-
optimised take-up elsewhere: see further Pitt, 28.15-16
20
This source generated proceeds of £3.8 million
21
Which Pitt reported also helped meet uninsured financial losses, as well as costs relating to
damaged possessions, equipment and, for businesses, machinery’. GRF generated proceeds
of £1.8 million
22
See Pitt, 28.20-67
23
Prior to the recent renewal of the arrangement the ABI has reported to the HC Treasury
Select Committee, 4th Report, 2007-08, para. 124, that it would only be continued if there
were considered to be adequate risk management by Government
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satisfactory) successor. In each case, this is subject to the condition that the
Environment Agency has announced and notified plans to reduce risk to below the
‘significant’ threshold over a 5-year timescale. It is notable that new property build,
from 2009 onwards, has since been excluded from the above guarantee.
Looking beyond the above arrangements, the effect of the industry’s developing risk-
based approach will inevitably lead to a greater incidence of differentiation of cover.
This may have the further effect of gradually breaking down the wide degree of risk
pooling on which the UK’s approach has arguably depended.24 Further, in
consequence of threats to affordable risk insurance, questions will inevitably arise as
to how far government is willing to step in as insurer of last resort, with even a long
term potential for questioning the viability of the market in this sphere of risk
response. The importance of such issues is likely to be exacerbated in the event of
more intensified risky development patterns, especially to meet severe housing stock
shortfalls, in the future.25
Some Comparative Perspectives within the EU
Whilst the continuation of the current arrangements is for now a successful exercise in
holding the line, it is instructive briefly to consider the position in equivalent
jurisdictions. Comparative treatment is problematic, in light of strongly divergent law,
social policy and cultural traditions, as well as relative geographical vulnerabilities,
which have both direct and indirect impacts on questions of indemnity against loss.
After consideration of some approaches in Europe, attention will turn to the United
States where, especially at the coasts (the eastern seaboard in particular) a legacy of
inappropriate development and high vulnerability produces in certain respects
interesting comparisons with the UK.
The UK’s arrangements, with flood insurance written by the commercial sector
generally available as standard, are relatively unusual. The approach can be described
as a form of half-way house, which in part avoids the effects of both a tendency to
adverse selection (especially where incidence of insurance and non insurance reflects
rational choice) which can threaten the advantages of risk pooling that is inherent in a
wholly voluntary scheme; and the cross-subsidisation that is likely to result from a
compulsory scheme, assuming that the costing of premiums is not wholly risk-based
by reference to individual risks.
Looking first at the situation in Germany, where a scheme is founded on the
availability of private insurance through the markets, experience demonstrates marked
dissimilarities to those in place in the UK. There, natural hazards insurance (that is,
extending beyond otherwise standard storm and fire damage cover), has since 1991
been available as a voluntary supplement to buildings and contents insurance.
24
See Huber, M. ‘Reforming the UK Flood Insurance Regime: The Breakdown of a
Gentleman’s Agreement’ (2004) ESRC Centre for Analysis of Risk and Regulation,
Discussion Paper n. 18, 17-18, describing a process of indirect regulation, whereby the
industry as ‘regulator of last resort’ defines ‘conditions of insurability by deciding about land
use and property values’
25
For instance, within designated areas for urban growth around London, along ‘the Thames
Gateway’. This will in turn influence the distribution of Government allocations to the
Environment Agency’s flood defence budget
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Evidence suggests that there has been a low general level of take-up in large parts of
the Federal Republic.26 Indeed costs of the central European floods in 2002 amounted
to around €18 billion, of which €3 billion was borne by the private insurance
industry.27
The position in France offers a contrasting approach, albeit that it does not exclude
the insurance industry, for available private insurance has since 1982 been
supplemented by a scheme of state subsidised reinsurance. This achieves increased
spreading of risk by way of a standard surcharge on all (motor, home or business)
insurance policies; and encourages high levels of take up. The approach however has
come at a cost, the surcharge having increased to 12% (from an original 9%), with
further ad hoc Government capital injections to make good shortfalls having been
further required.28
A greater contrast, if perhaps not such a strong point of comparison, can be drawn
with the Netherlands. There, for a variety of reasons, but especially including the high
vulnerability of its territory and hence strong public commitment to vital defences,
has traditionally excluded commercial insurance coverage altogether in respect of
such risks. In effect, the state operates as de facto insurer of last resort,29 although for
reasons similar to those already identified pressures for change appear now to be
building.
Experience of Flood Loss Cover in the US
A strongly contrasting picture, by reference to the above approaches, emerges from
US experience. The US solution illustrates a tension between a commitment to the
idea of insurance, alongside a recognition that in light of extreme levels of threat at
many locations the markets are unable to absorb the risks in the ordinary way. In
order to address significant levels of exposure,30 therefore, and following a prolonged
post-war debate,31 a scheme offering federal (that is, state) cover commenced in 1968,
under the ‘National Flood Insurance Program’ (NFIP).32 This offers in effect a
26
Thieken, AH, et al, ‘Insurability and Mitigation of Flood Losses in Private Households in
Germany’ (2006) 26(2) Risk Analysis 383, 387, cite figures of 4% (residential buildings) and
10% (contents), and comparing higher residual insurance receptivity by consumers in the
former East Germany, on account of formerly standard schemes (49.5% of households
affected by the 2002 Elbe floods).
27
Munich Re, Annual Review: Natural Catastrophes 2002, 2003,
http://www.munichre.com/en/publications/default.aspx. The disparity (cf note 26 above) partly
reflects high levels of infrastructure damage, not insured by state agencies in the market
28
Cited by Pitt, note 7 above 2.11-12
29
L. Every & J. Foley, Managing Water Resources and Flood Risk in the South East,
Commission on Sustainable Development in the South East, 2005, 34; also, EUrosion Project
Report, Living with Coastal Erosion in Europe: Sediment and Space for Sustainability (June
2004), 76, discussing the Netherlands (and Germany)
30
12% of the population reside in ‘special flood hazard’ areas (based on a 1-in-100 year
return period): see further, Blanchard-Boehm, RD, Berry KL & Showalter, PS, ‘Should Flood
Insurance be Mandatory? Insights in the Wake of the 1997 New Year’s Day Flood in Reno-
Sparks, Nevada’, 21 Applied Geography 199 (2001)
31
White, GF, Human Adjustment to Floods, 1945; Choice of Adjustment to Floods, 1964
(Chicago: Univ. of Chicago Press); Kates, RW, Hazard and Choice Perception in Flood Plain
Management, 1962 (Chicago: Univ. of Chicago Press)
32
National Flood Insurance Act 1968, P.L. 90-448, Title 13 (codified at 42 U.S.C. 4001-4028
(1994)); also, Flood Disaster Protection Act of 1973PL 93-234
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subsidised, voluntary scheme of state run insurance.33 The private insurance market is
not excluded: there however a general willingness to cover against storm or hurricane
damage is not extended to damage caused by floods or erosion. The NFIP is
administered by the Federal Emergency Management Agency (FEMA),34 which body
also maps exposed areas, as well as having a separate strategic emergency function.
Cover is generally made available in respect of both flood and erosion risks, subject to
local municipalities meeting certain conditions, which in particular relate to standards
of flood mitigation management for new development.35 Key to the NFIP scheme is
that cover, though subject to fixed upper limits,36 is provided irrespective of risk. The
net subsidy effect sees premium costs typically around 40% less than would be the
case under market conditions. This proportionately benefits not only properties in
areas of higher risk but also existing properties, as opposed to newer development that
is generally subject to more onerous conditions.37
Overall take-up under the scheme has persisted at surprisingly low levels, reflecting
its non-compulsory ‘insurance’ status.38 For instance, in research carried out across
five varied communities and locations, all with historic experience of flooding,
proportions of households with flood insurance fell within a range of between just 3.5
and 5.9%.39 Tighter FEMA measures – for instance in closer monitoring of mortgagor
insurance, and in offering significant discounting of premiums – have contributed to
higher levels of take-up; which was for instance estimated at around 46% of those
households in New Orleans devastated in 2005 by Hurricane Katrina.40 Nevertheless
the continuing low levels of take up can be explained on two main grounds: namely,
problems of penetration in poorer areas, alongside, more generally, the availability as
a near-certainty of generous federal subsidy in times of declared emergency.41
33
See Burby, RJ, ‘Flood Insurance and Floodplain Management: the US Experience, 3 Global
Envtl Change Part B: Environmental Hazards 111 (2001)
34
In March 2003 FEMA became part of the Department of Homeland Security: see S. King,
‘Hurricane Katrina Shows that America’s Free Market Does Not Have all the Answers’,
Independent, 5 September 2005, inter alia suggesting a reorientation of hazard priorities
35
Such as lower floors of buildings to be above 100-year flood levels
36
$250,000 on residential property (plus $100,000 for contents); $500,000 on both business
premises and contents
37
Burby, note 33 above
38
Browne, MJ & Hoyt, RE, ‘The Demand for Flood Insurance: Empirical Evidence’, 20 Journal
of Risk and Uncertainty 291 (2000). This is despite the requirement since 1973 that in
principle government related mortgage funding in such areas is subject to procuring cover
39
Lave, TR & Lave, LB, ‘Public Perception of the Risks of Floods: Implications for
Communication’, 11(2) Risk Analysis 255, 259 (1991)
40
J.Nisse & T. Webb, ‘Insurers Balk at Paying Out to One Million Katrina Flood Victims’,
Independent, 11 September 2005; though only 25% in the poorer areas: R. Knight, ‘Insurers
Face Battle Over Liability for “Flood” Repair’, Financial Times, 12 September 2005. The
estimated NFIP exposure to losses in the wake of Katrina were just $3 billion: Agence France
Presse, ‘One More Woe for Katrina Victims: No Insurance’, 7 September 2005
41
These include disaster assistance and casualty loss income tax deductions). Federal
government promised to aid full rebuilding costs in the wake of the floods. Katrina-related
insured losses (in respect of hurricane damage, mainly commercial, including to oil rigs,
refineries and under marine policies, and related disruption) were variously estimated at $40-
60 billion; and total losses at $125 billion: Knight, ibid..
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It has been suggested that such widespread federal subsidy of natural risks leads to
repeated cycles of loss, compensation, and reconstruction,42 so underwriting ‘a system
of perverse incentives that have encouraged dangerous and irrational building
patterns’.43 It can certainly be said that universal protection in such a form potentially
exacerbates the operation of moral hazard, especially through incentivising risk taking
in relation to location decisions with low levels of mitigation activity.44 It has even
been argued that any move to make NFIP cover compulsory would come at the cost
of further increasing moral hazard.45 This is questionable, for not only is the operation
of behaviour in furtherance of moral hazard more complex,46 but careful attention to
techniques of risk assessment and management can mitigate against such further
downside risks.
The argument now turns to the more specific themes outlined at the head of the paper,
commencing with consideration of particular problems from a UK perspective of non-
insurance and continuing viability of private insurance. Thereafter the related, wider
question concerning the implications for individuals and whole communities at
vulnerable locations, should current arrangements persist, will be addressed.
Implications of Gaps in UK Levels of Flood Insurance Take-up
The UK approach outlined above entails a heavy reliance on individual autonomy (in
terms of right of self protection balanced against potential liability for first party
losses), alongside standard cover against loss. In consequence there are relatively high
levels of take-up, especially as compared with apparent discouragement elsewhere, in
light of such factors as unwillingness to meet additional costs or otherwise strong
expectations of state help. Yet in the UK extensive problems of non-insurance also
give increasing cause for concern. Nationally, for instance, around 25% of households
have no ‘home contents’ insurance. In certain pockets the picture is markedly worse.
Thus in the context of the Summer 2007 events, whilst around 75% of all flood losses
were insured losses, non-insurance (including as to buildings, but more particularly as
to contents, cover) affected around 75% of domestic properties in some affected areas.
Underinsurance also generally remains a problem, and one which is of particular
concern in respect of small businesses.47
Low take-up has numerous consequences. Systemically, it undermines the value and
effectiveness of general insurance provision, negating the fullest benefits to be
derived from the spreading of risk. Whilst satisfied with the current system in relation
to flood cover, the Pitt Report also looked to central Government and the insurance
42
R. H. Platt, Disasters and Democracy – the Politics of Extreme Natural Events, Washington
DC: Island Press, 1999, 9
43
T. Beatley, D. J. Brower & A. K. Schwab, An Introduction to Coastal Zone Management, 2nd
ed., Washington D.C.: Island Press, 2002, 71
44
Blanchard-Boehm, 2001, note 30 above
45
McLeman, R & Smit, B, ‘Vulnerability to Climate Change Hazards and Risks: Crop and
Flood Insurance’, 50(2) Canadian Geographer 217, 224
46
For instance, Thieken, note 26 above, cites a study in the aftermath of the 2002 Elbe
floods, reporting higher risk awareness and participation in emergency networks on the part of
insured parties (48.5 to 33.9%), as well as a greater likelihood of engaging in some self-
protecting mitigatory action (28.5 to 20.5%)
47
See K. Clemo, ‘Preparing for Climate Change – Insurance and Small Business’ (2008) 33
The Geneva Papers 110
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industry to work to deliver a public education programme and develop options to
improve the availability and uptake of flood risk insurance by low-income
households. Individually, it results in the most deleterious impacts falling on the most
vulnerable. Here the poorest sections of the community are the most exposed, being
less likely overall to identify a need insure whilst at the same time being least able to
self-insure.
Addressing Resistance Issues
Forms of exclusion can variously result from such factors as lack of awareness of risk,
forms of psychological or cultural resistance, or resource related problems including
inability or unwillingness to pay attendant costs. The effective channelling of targeted
information appears an essential precondition to transforming flood related attitudes
and behaviour.48 The Pitt Report cites two exemplary illustrations: first, in the US,
outreach and media campaigns seeking to encourage increased measures of flood
resilience and resistance;49 and in the Netherlands, a campaign seeking increased
awareness amongst the public as to flood risks and consequences, encouraging
improved preparedness.50
Progress has been made in the UK regarding information-related measures. For
instance, the Environment Agency (EA) remit includes a public information role, and
it has focused on producing accessible guidance, including website availability of
such documents as Preparing for a Flood and Simple Ways to Protect Your Home
from Flooding.51 And yet the EA also points to concern at ‘widespread apathy’ and
denial, with only 52% of respondents aware of living in an at-risk area, and only 57%
taking any advance measures relating to flooding.52 This picture is borne out by
figures that relate to levels of householder take-up of the EA’s direct emergency
information alerter service (that is, around the time of flood events). Its Floodline
Warnings Direct system, available generally via consumer ‘opt-in’ (with some
automatic registration from publicly available sources) to the highest risk 276,000
households, has notably low levels of take-up, including 41% for England & Wales as
a whole.53
Meanwhile, inability to pay remains a significant determining factor in non-take up of
household insurance,54 a problem particularly endemic in the rental sector. Pitt
encouraged any future ‘moves by the letting industry to introduce a voluntary code of
practice to inform tenants of flood risk’. It is not clear how this might best be
48
See generally, Pitt, note 7 above, chapter 20
49
Such as the NFIP’s Floodsmart scheme in the US; see Pitt, 2.10.
50
This is known as the ‘Think Ahead’ scheme: Denk Vooruit (www.crisis.nl.); see Pitt, 2.22
51
Environment Agency, http://publications.environment-agency.gov.uk/pdf/FLHO1007BNET-
e-e.pdf. The latter includes recommends the taking out of ‘adequate insurance. Flood damage
is included in most buildings insurance policies, but do check your home and contents are
covered’
52
Ipsos MORI, Survey for Environment Agency (April 2008)
53
This overall figure masks instances of even lower regional take-up (35%, Midlands; 28%,
Thames; 17%, North East; 9%, Anglia).
54
Whilst it may be questioned how far behavioural boundaries can be classified as distinct,
note that typical reasons for non-insurance suggested by Whyley, C et al (1998) ‘Paying for
Peace of Mind: Access to Home Insurance for Low-Income Households (Policy Studies
Institute) 60, include: price exclusion (49%), lack of awareness (20%), objection on principle
(4%); awareness/inaction (20%); awareness/distrust (16%); or cover refused (2%)
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achieved, and a requirement to attach suitable guidance and advice to contract
information might be the best approach.55 Even in relation to social housing providers,
whilst it appears that relevant information is generally provided by individual
landlords, there is in place neither a duty-based scheme nor yet an agreed sector-wide
code of practice. Important opportunities arise at the time especially of a tenant’s
induction to raise such issues with a clear focus. Best practice appears to lie in the
opportunities offered especially by certain larger providers for tenants to access
contents insurance under schemes typically run in partnership with a named insurer,
which schemes can usefully be supplemented by targeted guidance.56
Wider Implications for Location Dependent Vulnerabilities
Returning to wider questions of exposure to risk in the UK, the present discussion
must be seen in a context of greater levels of flood threat (including to the integrity of
floodplains, and of coastal inundation). Here it is useful to look behind public policy
and contract-dependent foundations by considering the wider liability context within
which the system continues to operate. A wider framework for any debate concerning
flood risk exposure can be seen in common law assumptions concerning protection
against water damage and the various consequences for liability. Efforts to protect
one’s property have traditionally been sustained by a venerable doctrine with murky
foundations: a ‘common enemy rule’, which suggests that no liability will normally
attach to operations to defend against water ingress onto one’s property. This is
broadly subject to the proviso that, once having come onto such property, it is not
then diverted elsewhere (save by means of natural channels). The key feature
therefore is that defensive measures that protect say Property A from water ingress by
inundation (by say pluvial or fluvial flooding) may lawfully increase risks for
Property B or elsewhere. With even the state assumed to be able to rely on this rule, a
consequence of what amounts to a strongly atomised system (from first principles
blind to wider issues of public interest) is that risks must be borne by individual
property holders (and thus also their insurers). The system reflects private property
justifications in a domain that might arguably be better viewed as suitable for the
acknowledgement of common good, or even common ownership, approaches. Yet in
consequence of a common law stance to flood risk that appears to mirror the rooted
lack until now of long-term strategic thinking in the UK,57 the potential costs
attaching to increasing threats are still to be borne by individuals.
Indeed there is a real future risk that, paradoxically at a time of increased public
pursuit of more sustainable approaches,58 especially should the terms of agreement
under the Statement be substantially altered or withdrawn, insurance cover will
become increasingly unaffordable or unavailable to many. Even now, maintenance of
cover is not guaranteed, the insurance industry examining risks on a case by case
55
See further, Pitt, note 7 above 20.48
56
Gloucestershire County Council, in consequence of experiences during the 2007 floods,
has further produced (in collaboration with Zurich Insurance) a flood guide (Your Essential
Flood Guide), which is offered as a template for other local authorities and housing
associations as an example of best practice
57
M. Stallworthy, ‘Sustainability, Coastal Erosion and Climate Change: an Environmental
Justice Analysis’ (2006) 18 Journal of Environmental Law 357
58
See for instance, Future Water – the Government’s Water Strategy for England (Defra,
February 2008)
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basis, a process best described as the use of ‘best endeavours’ to insure. Whilst, for
now, existing customers and their successors (that is, contracting with the same
insurer) can expect continued cover, availability and costings must be expected to
reflect risk levels, as renewals will increasingly be adjusted in respect of for instance
premiums and excess requirements.
Should this process accelerate, then increasing disaggregation in respect of insurance
availability will result, reflecting differential risks in individual locations. Moreover,
as has been seen in other contexts (such as data availability following advances in
genetics), the availability of more sophisticated information, increasingly the case in
respect of flood mapping models available to insurers, exacerbates this likelihood of
ever more differentiated treatment of policy holders.59 As risk pooling arrangements
in this context become less viable commercially, such resulting differentiation can
only be countered by legislative intervention,60 with or without state underwriting of
otherwise non-recoverable losses affecting a growing group of vulnerable people.
Disproportionate impacts for the most vulnerable individuals and communities are
therefore potentially severe. In this light it may for instance be necessary to question
the reasonableness of maintaining expectations that all householders (and also certain
business owners) must rely on insurance to cover flood related risks.61
Private Property Owners
In some ways, problems presented by vulnerable private owners are the more
intractable, although a focus on improved information at the transaction stage will
lead to incremental improvements through greater awareness and transparency. For
instance, one avenue is via a fuller setting out of pre-contractual information for the
benefit of those engaged in property transactions.62 Information may be available via
selling agents, although statutory duties in relation to misdescription do not extend to
any clear duty to inform potential purchasers. Solicitors should carry out flood risk
searches of the EA (and more detailed, property-specific, data is available from
private search agencies). It is left to good practice to raise preliminary enquiries in
relation to flood risk, and this suggests that further review of the law profession’s
standard inquiry procedures is required in relation to flooding.63 In order to maximise
transaction-based information, Pitt somewhat tentatively called for agreement
between relevant professional bodies to consider how to proceed for the future.64 An
opportunity missed thus far can be seen in the exclusion of flood risk from the
59
For a brief discussion of the proliferation of data becoming available to enable more
sophisticated geographical risk analysis and flood mapping, see C. Batchelor, ‘The Cold and
Costly Reality of Climate Change Insurance’, Financial Times, 9 July 2005
60
J. Steele, Risks and Legal Theory, Oxford: Hart Publishing, 2004, 149: discussing F. Ewald,
‘Genetics, Insurance and Risk’, in T. McGleenan, K. Wiesing & Ewald (eds.), Genetics and
Insurance, Oxford: BIOS Science Publishers, 1999
61
Every & Foley, note 29 above, 43
62
See generally Pitt, note 7 above, 20.25-30
63
Water companies, where aware of any previous incident, may have information concerning
pluvial (surface water, from drains or sewers) flooding, although this will only extend to
‘industry standard’ frequent events (that is, at least 1-in 10 years)
64
Pitt, note 7 above, 20.30
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Mark Stallworthy and Jill Morgan, pp 1175-1187
mandatory information categories that domestic property sellers are required to
provide to buyers.65
Though as can be seen from the above conditions for insurability can be described as
being in a state of flux, the prospect of blight has not thus far appeared to be a major
factor, according to a 2004 survey for the RICS which pointed to the broader
advantages of maximising information and indeed subsequent benefits in relation to
terms of insurance that may follow.66 Further studies suggest ‘marginal’ adverse
affects on market transactions for properties in areas with most frequent flood
histories, although these may also be further alleviated by suitable resilience
measures.67 In an interesting postscript Pitt identified a lack of flood resilience on the
part of small and medium-sized enterprises, particularly with reference to
preparedness, suggesting that ‘fire safety is often considered more important’ and
calling for improved resilience measures as part of business continuity planning.68
Conclusions
There have been suggestions that a limited scheme for general state insurance might
offer a coherent solution to problems considered above.69 There might for instance be
selective replacement of private floods insurance as standard by a targeted state
compensation scheme available to those in areas of high risk. Availability could
further be restrictively defined in the case of new build developments. Yet this
solution, even as part of a more strategic approach to society’s future relationships
with water, is likely to be deeply unattractive to the state, both in light both of concern
at potentially open-ended spending commitments and its traditional preference for the
brinkmanship of the status quo. There may be further practical disadvantages,
potentially for instance leading to the progressive withdrawal of insurance cover (as
seen in the US).
The imposition of mandatory insurance requirements, the best known of which in the
UK are those applicable to motor insurance (third party, fire and theft) and employers’
liability, would create significant practical, as well as to some ethical, difficulties in
the field of housing. Such approaches are in any event unlikely to be acceptable in a
first party context, that is, outside the fields of liability policy. A variant on the current
arrangements would be to supplement the current scheme, by seeking to maintain
conditions whereby private insurance remains as standard, but with the state operating
as insurer of last resort. As has been seen, a scheme of a similar genus exists in
France, and indeed UK analogies could also be drawn with the idea of a state-backed
insurance pool as operated through Pool Re in respect of terrorist damage. In this way
customers in high risk areas might be offered flood insurance, premium passing to the
65
The Report further recommended, at 20.34, that Home Information Pack searches be
extended to flooding, plus further specific information to be required of the vendor, such as
personal resilience measures carried out and indicative insurance quotes
66
J. Lamond and D. Proverbs, ‘Does the Price Impact of Flooding Fade Away?’,
www.emeraldinsight.com
67
Pitt, note 7 above, 20.36-40, citing an average loss of 9-12% in property value
68
Idem, paras 24.11-13.
69
Priest, GL, ‘Government Insurance versus Market Insurance’ (2003) 28 Geneva Papers on
Risk and Insurance 71
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pool, and in the event of the pool being exhausted then subject to the terms of any
levy on insurers the state could underwrite the costs of further claims.
An alternative approach (which is also being fostered thus far through state assisted
investment in informal methods of tackling financial exclusion more generally) is to
secure incremental improvements to insurance take-up within the present system.
Going further, and with particular reference to the (whilst particularly vulnerable also
particularly accessible) tenanted sector, obligations could be placed – by way of a
code of practice or mandatory requirements of the regulator, or otherwise explicit
statutory obligation – upon social housing providers to both investigate the
availability of contents insurance schemes and make such a scheme available to
tenants (in partnership with an identified private provider or otherwise). Such schemes
can offer low-cost terms, dependent on objective risk factors (albeit impacting on
levels of cover), as well as those affecting insurability of particular individuals. Where
such schemes are established then equivalent measures need to be in place to enable
premium payments ‘with rent’, or where payments are to be made direct to the
insurance company (that is, ‘at arm’s length’) to ensure that transaction costs are
reasonable.
As for whether the UK’s current scheme (as will inevitably be adjusted in response to
risk) could be retained, it might have appeared until recently that this may not be
viable, especially in the face of climate change and pressures on the public purse,
alongside related problems in maintaining the continued general engagement of the
insurance industry. However, as has been seen, the Environment Agency has now
assumed a wide general responsibility for strategic defence in respect of both inland
and coastal flooding, and is seeking to establish a longer-term defence strategy in
relation to targeted sources of threat. Whilst UK civil society may have preferred not
to have started from here, problems in distribution of the kinds of risk discussed
above strongly relate to the common good. In this context, especially in view of the
now dawning public recognition of impacts of climate change, the implications for
vulnerable individuals and communities of necessary strategic adjustments should be
viewed in light of past experience: in other words, we are not starting from a putative
year zero. The consequences of longstanding, now questionable public approaches to
flood and coastal risk (and which arguably have given rise, even now, to certain
legitimate expectations), can be described as having been ‘strategically determined’
rather than (as governments might prefer) the product of ‘random uncertainty’.70
Ultimately, as society seeks to adapt to and mitigate the risks from climate change, for
so long as the UK also continues to rely on the insurance industry in relation to flood
risk, then coherent strategies to maximise certainties (in what are becoming notably
uncertain environmental times) – especially for those most threatened – have become
essential.
70
D. A. Dana, ‘National Preservation and the Race to Develop’, 143 U Pa. Law Rev 655, 670
(1995)
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Azlinor Sufian, pp 1188-1201
Equitable distribution of low-cost houses: a Malaysian legal
perspective
by
Azlinor Sufian
Private Law Department
Ahmad Ibrahim Kulliyyah of Laws
International Islamic University Malaysia
P.O Box 10
50728 Kuala Lumpur
Email: [email protected]
Abstract:
It has been stated in the Ninth Malaysia Plan that continous efforts shall be undertaken
to ensure all Malaysians of all income levels shall have access to adequate, affordable
and quality housing with greater emphasis on the lower income group with better urban
services and healthy living. The Ninth Malaysia Plan also emphasised that the private
sector shall be encouraged to build more low-cost and low-medium-cost houses in their
mixed-development projects while the public sector shall concentrate on building low-
cost houses as well as houses for public sector employees. It is therefore sufficiently
clear that the government has been employing serious strategies in achieving this aim.
Despite the active involvement of both public and private sectors in providing low-cost
houses to the lower income group however there are a few drawbacks in implimenting
the objectives of the Ninth Malaysia Plan. For instance the issue of improper
distribution of low-cost houses has always been brought up by certain quarters in
society.
This paper will delve into the Open Registration System (“ORS”) introduced by the
Ministry of Housing and Local Government of Malaysia (“MHLG”) in managing the
registration of intended purchasers of low-cost houses and distributing it to the targetted
groups. This paper will try to identify the drawbacks of the system and suggest reforms
in terms of legal and institutional frameworks.
Keywords:
Housing Law, Housing Policy, Low-Cost Houses, Open Registration System, Equitable
Distribution.
1. Introduction
According to the record of the Department of Statistics Malaysia, until 9th September
2008, the population of Malaysia is approximately 27.73 million1 consisting of a
multitude of ethnicity, race and religion. Apart from that it is estimated that until July
The figure is updated on 9th September 2008. See the official website of Department of Statistics Malaysia at
1
http://www.statistics.gov.my/eng/index.php?option=com_content&view=article&id=50:population&catid=38:kaystat
s&Itemid=11 (Accessed 5th May 2009).
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2006, there are approximately 800,000 illegal immigrants2 which to a certain has
become a liability to the Malaysian government especially in achieving the objective of
having zero-squatters. This is because under the zero-squatters’ policy, the intention of
the government is to clear the squatters by the year of 2005. However even the time has
passed, the target is still failed to achieve. One of the reasons is that there are many
illegal immigrants who set up illegal settlement areas, especially in the area close to the
urban areas. Irrespective the Malaysian government has introduced the low-cost houses
scheme mainly to cater the needs of the lower income bracket of the population to own
houses, the policy excluded illegal immigrants i.e. non-citizens from enjoying such a
benefit. Consequently in general zero squatters’ policy seems to be mere fantasy.3
As far as the low-cost houses scheme is concerned, from early independence until the
time of the Ninth Malaysian Plan, there are several of policies affecting the low-cost
houses which have been introduced and implemented. In this paper, discussions from
the legal perspective will be based on the issue of distribution of low-cost houses under
the recent policy of ORS.
2. Brief Overview on Law and Policy on Low-Cost Houses
The Malaysian government through its various Malaysia Plans has continuously
addressed the issue of poverty as well as housing of the poor. This is in line with the
Istanbul Declaration on Human Settlement and Habitat Agenda (1996) to ensure
adequate shelter for all. Through Vision Development Plan 2001 (which will be carried
out during 2001-2010), the government will be the main provider of low-cost houses
while the construction of medium and high cost houses are left to the private sector. A
significant number of low-cost houses have been constructed both by public and private
sectors during various Malaysian Plans.
The mechanisms used to implement the Malaysian housing policy are translated
through various policies that have been introduced beginning from the colonial period
until the Malaysian Development Plan as shown in Table 1.4 Similar with other
developing countries, the Malaysian housing policies were drafted to tackle the need of
public housing for the medium and lower income groups (Vincent and Joseph, 2000).
2
http://en.wikipedia.org/wiki/Illegal_immigration#Malaysia (Accessed 5th May 2009).
3
For further reading on squatters issues in Malaysia refer to Friel-Simon and Khoo Kay Kim (1976, August). The
Squatters as a Problem to Urban Development - A Historical Perspective. Paper presented at the 3rd Convention of
the Malaysian Economic Association, Penang. Pushpa Lela Ramanujam (1989). The Physical Economic and Social
Implications in the Resettlements of Squatters: A Case Study in Kuala Lumpur, Thesis, Degree of Master of Arts in
Geography, University of Malaya, Kuala Lumpur. Azizah Kassim (1982). Squatters in West Malaysia With Special
Reference to the Malays in Kuala Lumpur. Occasional paper No. 5, Department of Anthropology and Sociology,
University of Malaya, Kuala Lumpur.
4
This table is adapted from Shuid, S (nd). Low medium cost housing in Malaysia; issues and challenges. Department
of Urban and Regional Planning, Kulliyyah of Architecture and Environmental Design, International Islamic
University Malaysia. Available online: http://www.iut.nu/Malaysia_low%20cost%20housing.pdf (Accessed on 5th
May 2009) and Idrus, N & Ho Chin Siong (2008). Affordable and quality housing through low cost housing
provision in Malaysia, a paper presented at the Seminar of Sustainable Development and Governance, Department of
Civil Engineering and Architecture, Toyohasyi University of Technology, Japan. Organised by Toyohashi University
of Technology and University of Technology Malaysia. Available online
http://eprints.utm.my/6624/1/NoraliahIdrus_HCSiong2008_AffordableAndQualityHousingThrough.pdf (Retrieved
on 5th May 2009)
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Consequently, the Malaysian government has also formulated the uniform price, design
and size for the low-cost houses as shown in Table 2.
In relation to the ceiling price of low-cost houses, the Real Estate and Housing
Developers Association (REHDA) has forwarded its memorandum (Memorandum on
Budget 2009) dated 21st April, 2008 to the Ministry of Finance seeking the
government’s consideration to increase the minimum ceiling price of low–cost houses
from RM42,000 (about USD11,865) per unit to RM60,000 (about USD16,950) per unit.
In the same memorandum it has also appealed for the government’s consideration to
allow private developers to concentrate on other categories of houses and the
government will take part an active role in providing low-cost houses. It is yet to see
whether this memorandum is going to be considered by the government or not. Even
though Malaysia is not considered as a welfare country, but serious commitment of
government is needed in ensuring that its citizens will have a better quality of life by
owning an affordable houses. Hence the pressure from private developers should not be
a reason for Malaysian government to sacrifice this basic need of the lower income
groups. In order to balance the interest of developers, government and citizens, certain
incentives should be given to developers that involve in the construction of low-cost
houses to enable them to deliver houses at the quality and price control by the
Government.
Table 1 : Summary of Malaysian Housing Policy
(Source : Various Five Year Malaysia Plans)
Policy
Focus of
Phase Period Strategies Key Documents Analysis
Attention
Colonial Before • Housing for • Construction • Briggs Plan, 1952 • Governm
Period 1957 government of • Land Resettlement ent are
staff Quarters government Act, 1956 the key
• Resettlement quarters • Housing Trust player in
of people based on Ordinance, 1949 housing
during department • G. Ruddock Report, provision
communist requirement. 1950's • Physical
insurgencies • Building of oriented
to the new houses in the • Ad-hoc
village. new policies
• Resettlement settlements
of people to with
Felda facilities for
Scheme more than
• Provision of 500,000
housing people.
especially for • Planning and
low income development
people in of Felda
urban areas. Scheme with
the housing
and
facilities.
• Setting-up of
Housing
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Trust in
1952.
Early 1957 - • Continuing • Implementat • First and Second • Governme
stage of 1970 the colonial ion follow Malaya Plan (1955- nt as key
Independ government the colonial 1964) player in
ence policies with policies with • First Malaysia Plan housing
minor limited (1965 - 1969) provision
improvement budget. especially
. • Housing low cost.
• Emphasis on Trust • Private
housing involved sector to
especially for actively low focus on
low income cost housing medium
group in development and high
urban areas. in urban cost
• Private sector areas such as housing.
involvement KL and
in housing Penang.
provision. • Private
• Improvement sector to
of basic concentrate
infrastructure on medium
. and high
cost housing.
New 1971- • Eradication • High rate of • New Economic • Private
Economi 1990 of poverty & rural-urban Policy, 1971 sector as
c Policy restructure migration • Second Malaysia key
the society. • Private Plan to Fifth player in
• Implementati sector was Malaysia Plan housing
on of Human responsible (1971-1990) provision
Settlement to built large including
concept in portion of low cost.
housing housing for
development. people
• Housing for including
low income low cost.
group was • Ceiling price
given priority for low cost
in national house was
policies. set at
• Private sector RM25,000
play as key in 1982.
player in • Government
housing established
provision. state
agencies.
• Encourage
national
unity in
housing
development
.
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National 1991 - • Continue • To build • National • Private
Develop 2000 implementati more Development sector
ment on of NEP affordable Plan,1991 still play
Plan policies and housing • Sixth and Seventh as key
strategies. especially Malaysia Plan (1991 player in
• Human low and low - 2000) housing
Settlement medium cost • Agenda 21 provision
Concept with housing. (UNCHS), 1994 but
emphasis on • Low • The Habitat Agenda governm
sustainable medium cost 1996 ent
development. housing as created
• To ensure all major many
people component new laws
regardless of in housing and
their income provision guideline
to live in since s to
decent house. Seventh ensure
• Private sector Malaysia quality
continue to Plan (1996- housing.
responsible 2000)
in housing • Emphasis on
provision for squatters
the people. elimination
by the year
2005
• Government
created new
laws and
guidelines to
control
private
sector
Vison 2001 - • Emphasis on • Continue • Vision Development • Governm
Develop 2010 sustainable effort to Plan 2001 ent as
ment urban provide the • Eight Malaysia Plan, key
Plan development guidelines 2001 - 2005 player in
and adequate and inculcate provision
housing for the citizen of low
all income understandin cost
group. g towards housing
• Housing sustainable provision
development development .
will be and
integrate with encourage
other type of citizen to
development participate in
such as housing
industry and development
commercial. in line with
• Emphasis on Local
ICT. Agenda 21.
• Government • Encourage
as key player more private
in low cost developer to
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housing construct
provision and low medium
private sector cost house.
for medium • Setting-up
and high cost Human
housing. Settlement
Research
Institute or
MAHSURI
to encourage
research and
development
in housing.
Table 2 : House Price Structure and Target Groups
(Source : Ministry of Housing and Local Government Malaysia, 1998)
House Price Target Groups/
Category
Per Unit Income per month
Before June 98
Low Cost Below RM 25,000 Below RM750
Low Medium Cost RM25,001 – RM60,000 RM750 –RM1,500
Medium Cost RM60,001 – RM100,000 RM1,501 – RM2,500
High Cost More than RM100,001 More than RM2,501
After June 98
Low Cost Below RM 42,000 (Depend on Location) Below RM1,500 (Depend on
house type)
Low Medium Cost RM42,001 – RM60,000 RM1,501 –RM2,500
Medium Cost RM60,001 – RM100,000 Not stated
High Cost More than RM100,001 Not stated
Apart from that there are several sets of statutes, regulations and policies which have
been introduced to govern the development of the housing industry including the
development of low-cost houses. For instance as early as 1969 when private developers
started to involve themselves actively in the housing industry, the Housing Developers
(Control and Licensing) Act, 1966 (now known as the Housing Development (Control
and Licensing) Act, 1966 has been enacted mainly to govern housing development
undertaken by private developers. At present the application of the Act has been
extended to both public and private developers as well as societies. Following the Act
several other regulations have been enforced to control the business of housing
development of developers such as the Housing Development (Control and Licensing)
Regulations 1989 and Housing Development (Tribunal for Homebuyers’ Claim)
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Regulations 2002. Similarly the enforcement of the Strata Titles Act, 1985 and the
Building and Common Property (Management and Maintenance) Act, 2007 are also
significant since there are many multi-storey buildings comprising of low-cost houses.
Besides that other statutes governing land development in general are also significant to
the development of low-cost houses. This would include inter alia the National Land
Code 1965, the Town and Country Planning Act, 1974, the Street, Drainage and
Building Act, 1976 and the Uniform Building By Laws, 1984.
Besides that through the New Economic Policy, since 15th August 1982 the federal
government has imposed a policy (continuing at present) that at least 30 per cent of the
houses developed by private developers under one particular project should consist of
low-cost units. This requirement may be considered as a mandatory social obligation
imposed by the government towards private developers even though practically
developers will cross-subsidise the regulated cost price of low-cost houses by
increasing the cost of other categories of houses. However there are certain
circumstances where private developers are given exemption to this policy. This may
happen when the projects undertaken are within the areas that are considered as “prime
and elite areas”. For instance areas within having close vicinity to the city centre and
where the land price is at an optimum. For instance, Sri Hartamas, Damansara Heights
and Kenny Hill in Kuala Lumpur and Sierramas in Sungai Buluh, Selangor. It is
therefore not really accurate to state that the government policy on 30 per cent above
has been fairly implemented.
The Ninth Malaysia Plan has come out with several packages to promote
homeownership for the lower income group. Among others, buyers of low-cost houses
are given full stamp duty exemption on all instruments, including loan agreements.
(Malaysian Government, 2006). On the other hand, in terms of housing provision, an
allocation of RM330,000,000.00 also is provided to the National Housing Department
to complete 6,500 units to be rented out or owned under the People’s Housing
Programme in 2009. In addition, the National Housing Department will also build
33,000 low-cost houses (House of Representative, March 2009).
Similarly in order to ensure that the construction of low-cost houses adopt certain
minimum standards of design and quality, the Construction Industry Standard 1 and
Construction Industry Standard 2 (CIS 1 and CIS 2) have been introduced by the
Construction Industry Development Board (CIDB) to provide guidelines of design for
single storey low-cost houses and multi-storey building of low-cost units respectively.
Nevertheless the application of policies and guidelines issued by the federal level is
subjected to the endorsement by the state authority since land (including housing) falls
within the powers and jurisdiction of the state.5
5
Ninth Schedule of the Malaysian Federal Constitution. Under the Federal Constitution, there are three lists that
listing the powers and jurisdictions of the federal, state and joint powers and jurisdictions of federal and state. This is
known as federal list, state list and concurrent list respectively. Housing is then fall under the state list.
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3. An Open Registration System (ORS)
3.1 ORS 1997
The computerised ORS for low-cost houses has been introduced in 1997 by the Ministry
of Housing and Local Government but was not standardised (Ministry of Housing and
Local Government, 2004). The ORS comprised three main data collections. The data is
used by the Ministry of Housing and Local Government to ensure only the targeted and
eligible buyers will be able to buy and eventually own low-cost houses in Malaysia.
(Rashid et al. 1997) The data criterion are:-
a. The Applicants’ monthly income;
b. The Applicants’ background-occupation, size of family, health, etc., and
c. The extent of housing needs of the applicants-displaced persons, squatters, etc.
(Rashid et al. 1997)
The main purpose of ORS among others is to provide a countrywide “waiting list” of
eligible low-cost house buyers, to standardised the criterion for the selection of eligible
buyers that are considered qualified and therefore be “shortlisted,” to avoid misconduct
in the selection of eligible low-cost house buyers and to make the selection process
more transparent (Ministry of Housing and Local Government, 2004).
In order to implement the objectives of the ORS, the modus operandi of the ORS is
begun by imposing certain criteria that shall be considered in determining the eligibility
of the applicant to buy the low-cost house. Certain scores (marks) will be given and an
applicant then will be registered in the list. The shortlisted applicant will then be called
for an interview. The processes involve several stages and agents of the Ministry of
Housing and Local Government. The marks score for each criteria are shown in Table 3
while the process of application is shown in Chart 1 below6:
Table 3: Maximum of Marks Allocation Based on Criteria Under the Computerised ORS
(Source: Guidelines for Low-Cost House Buyers Selection under the Computerised ORS,
National Housing Department, 1998.)
No Criteria Marks Percentage
a. Lost of house 100 29.85
b. Monthly household income 50 14.93
c. Status of current house 50 14.93
d. Marital status 25 7.47
e. Occupation 25 7.47
f. Dependents (child) 25 7.47
g. Disabled 10 2.98
h. Other dependents 10 2.98
i. Age of applicant 10 2.98
Both Table 3 and Chart 1 adapted from A. Rashid, K, Ibrahim, M, A.Mohit, Mohamad, M, Shuid, S and Dali, AS
6
(2005, Sept). Eligibility and Selection Criteria Under the Open Registration System (ORS) for Low-cost Houses in
Malaysia. Paper presented at the Asia-Pacific Network for Housing Research Conference: Housing and
Globalization, Kobe University, Kobe, Japan.
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j. Place of work 10 2.98
k. Duration living in the current house 10 2.98
l. Place of birth 10 2.98
Total 335 100%
Chart 1: Low-Cost House Buyers Selection Process Under the Computerised ORS
(Source: National Housing Department, Ministry of Housing and Local Government, 1998)
Application Form
State Housing Section District Office
Applicant Information
Input
Short-listed applicants to be called for List of successful candidate sent to
interview National Housing Department for
record
Interview
Selection of eligible applicant using computer
State selection committee
List of successful
applicant
National Housing District Office State Development Private Sector
Department Agencies
The administrative framework for the ORS as shown in Chart 1 above seemed to be
ideal and able to minimise the problem of lack of transparency and political influences
in selecting buyers of the low-cost houses. However it has been observed by the
committee that was set up by the National Land Department to study the
implementation of ORS (1997) that there are several weaknesses in the system.7 These
7
The study entitled “A Study to Determine Criteria for Eligibility and Appropriate Scoring System for Low-Cost
Houses under the ORS, IIUM-NHD, 2004” was conducted between May 2004 and February 2005. This finding has
been presented in the Asia-Pacific Network for Housing Research Conference: Housing and Globalization, Kobe
University, Kobe, Japan, 6-8th September 2005.
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include: weaknesses in the selection criteria and marking scheme8, bureaucracy, lack of
transparency and groups with special needs were not given due consideration.
3.2 ORS 2006
In view of the abovementioned drawbacks, the new ORS was launched in 2006 which is
aimed at having a uniform system that comprises of the three main features that is (a)
year-long open registration; (b) award of points and (c) on-line selection of low-cost
housebuyers in all states.
Under this new system, all states would use a standard form for applicants to register for
a low-cost house.9 Among the conditions are the applicant must be a Malaysian aged 18
and above, does not own a low-cost house and has a household income of not more than
RM2,500 a month.10 Besides that, through the Ninth Malaysia Plan, the eligibility to
purchase low-cost houses is not mainly for the lower income level but also for other less
advantaged groups that include single mothers, families with many dependents and
those with handicapped members (Malaysian Government, 2006). Thus the ORS now is
available for a more wider group of people as compared to when it was first introduced
in 1997.
The success of the system is dependent on the proper implementation by the relevant
government agencies at federal and state level. It is therefore hoped that it will promote
an equitable distribution of the low-cost houses and promoting a sustainable housing
policy. The ORS is therefore supposedly enabled to overcome or at least minimise the
problem of duplication in data and duplication of applications from the people. Hence, it
seems that the possibilities of cheating and irregularities could also be minimised,
Nonetheless even after about 12 years of the implementation of ORS,11 there are still
about 500,000 peoples who are already registered under the ORS in all states which are
still waiting for the low-cost houses ( New Straits Times, 11th January 2009). It is quite
a surprise to see these figures since all states had imposed 30 per cent requirement on
the private developers to develop the low-cost units in each project that they undertake
and there was active participation from the government agencies; among others the
State Economic Development Corporation and the Department of National Housing.
Thus there are certain mechanisms that must be used to improve the situation.
4. A Few Proposals for Implementation of ORS
The first proposal is related to enforcement of specific law on distribution of low-cost
house. It has been mentioned earlier that one of the problems of the ORS when it was
8
There were differences of criteria, sub criteria and maximum marks considered by the states in determining the
eligibility to purchase the low-cost houses. For instance the Ministry of Housing and Local Government set up 66
criteria and sub criteria and the maximum marks was 335. On the other hand the state of Selangor set up 94 and 86
respectively. See A Study to Determine Criteria for Eligibility and Appropriate Scoring System for Low-Cost Houses
under the ORS, IIUM-NHD, 2004’ A Study to Determine Criteria for Eligibility and Appropriate Scoring System for
Low-Cost Houses under the ORS, IIUM-NHD, 2004’
9
At the time of the OPR been introduced in 1997, specific form was used but the states added with their own criterias
and conditions.
10
http://www.kpkt.gov.my/kpkt/main.php?Content=sections&SectionID=150&DC= (Accessed on 5th May 2009) At
the time when the OPR introduced in 1997, the income of the applicant should be less than RM1,500 per month
(about USD426)
11
Considering the ORS has been established since 1997.
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first introduced is non-uniformity of the practices among the states. The state may add
their own criteria that do not comply with the guidelines given by the Ministry of
Housing and Local Government. This has led to a problem for instance, where a
centralised database cannot be created and therefore may be a person is qualified to
purchase a low-cost house in Selangor but not in Kelantan. Besides that due to in
absence of a centralised database, there would be the possibility where one person may
register at more than one state and therefore may acquire more than one unit of low-cost
house.
In order to curb this problem the federal government has a power to impose this
standard guideline to the states on the rationale of creating a uniformity of the system.
Even though land is a state matter as provided in List II of the Ninth Schedule of the
Malaysian Federal Constitution, the federal government by virtue of Article 74 of the
Federal Constitution can enact any statute to ensure uniformity of certain laws that shall
be applied to whole Peninsula Malaysia or Malaysia. The Land Acquisition Act 1960
and Street, Drainage and Building Act 1976 are the two examples of the statutes that
have been introduced mainly to create the uniformity of the application of law of the
states in Peninsular Malaysia. Therefore any criteria or process or modus operandi of
the ORS should not remain as “Guidelines”, but should be incorporated in a proper
statute. It is suggested that a statute regulating the low-cost houses (or now is proposed
to be called as affordable houses12) be enacted. For instance there is the National
Affordable Housing Act enforced by the US Department of Housing and Urban
Development mainly to cater to all matters related to affordable housing for instance on
mortgage, houses for the disabled, repair and tenancy. If there is a specific statute, then
all policies and guidelines relating to low-cost houses or even public housing may be
organised in a form of statutory provisions having the force of law. For instance the CIS
1 and CIS 2 that were mentioned earlier can become part of the regulations. This
suggestion is based on the concern of the author of the practice of certain local
authorities which do not bother enough to tie up the approval of the building plan (for
the low-cost or public housing) subject to compliance with certain policies and
guidelines relating to low-cost houses (and public housing). However once the policies
and guidelines become law, there is no way for those impositions to be simply lifted
out.
The second proposal is imposition of restriction in interest against the title of the low-
cost house. (Wan Nor Azriyati and Nor Rosly Hanif, 2005) alleged that there are a few
of purchasers of low-cost houses rent the houses or sell the houses soon after purchasing
it. This conduct may cause insufficiency of supply of the low-cost houses because the
same purchasers may register again under the ORS. Under the law it is possible that this
conduct may be curbed by specifying a restriction in interest on the title of the low-cost
house. “Restriction in interest” is referred to as any limitation imposed by the State
Authority on any of the powers conferred on a proprietor or on any of proprietor’s
powers of dealing13 where in this respect the restriction in interest that may be imposed
is that no transfer of the low-cost house can be affected unless with the permission
12
The Housing Research Centre of the University of Putra Malaysia proposed that the term low-cost should be
renamed as affordable house. The “rebranding” of the term of the low-cost probably may change the perception of
certain quarters who always think that low-cost means low price and low quality.
13
Section 5 of the National Land Code, 1965.
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granted by the state authority. The transfer may be allowed only when the state
authority is satisfied that the new purchaser is also a person that is entitled to own a
low-cost house. The new proprietor then shall observe the same restriction in interest
that was imposed on the original proprietor. Therefore although a purchaser enjoys
indefeasibility of title14 over the house but there are certain restrictions in interest on his
title that he is subjected to.
The third proposal is the imposition of special conditions on the title of the low-cost
house. “Condition” under the National Land Code 1965 refers to any conditions
attached to the land but it does not include restriction in interest15. In this respect the
low-cost house shall not be allowed to be rented out. In the event of failure by the
proprietor to observe the said condition, the State Authority has the power to take action
against the proprietor by way of forfeiture. 16
The fourth proposal is equitable consideration on other disadvantaged groups. As
already stated earlier, the Ninth Malaysia Plan identified that the ORS 2006 should
consider the disadvantaged group to purchase the low-cost houses. However it is
suggested that similar criteria under ORS imposed on others shall be imposed on these
groups too, but the priority shall be given to them. Similarly disabled persons shall be
given priority only when they fulfil the criteria to purchase the low-cost houses.
However the 20% discount on the purchase price of a low cost house for disabled
persons, as announced in the budget 2004 should be implemented immediately.
The fifth proposal is related to the standard sale and purchase agreement between the
vendor and the purchaser of the low-cost houses. In Malaysia the sale and purchase
agreement of a house (regardless of category of houses i.e. either low-cost, medium cost
or high cost) between a purchaser and a developer which is developing more than four
units of houses is regulated by the Housing Development (Control and Licensing) Act,
1966. Pursuant thereto a statutory form of contract of sale and purchase of a house is
already incorporated therein. It is suggested that, the standard form of contract involving
the sale and purchase of a low-cost house should be different from others. This standard
form may emplace under the proposed specific statute as proposed in the first proposal
above. Similarly the loan agreement for financing the purchase of a low-cost house
between a financier and a borrower-purchaser should be different from other type of
houses. This is because in the ordinary loan agreement there would be a clause on the
right of a financier to foreclose the property upon default of a borrower-purchaser to
serve the loan. In order to protect the low-cost purchaser, it is suggested that there
should be one clause in the loan agreement that provides for the case (default of
borrower-purchaser) to be referred to the special tribunal or arbitration before
foreclosure action is taken by a financier. Therefore it is suggested also that this
standard loan agreement for financing of a low-cost house can be part of the regulation
pursuant to the proposed act as mentioned in first proposal above.
14
Section 340 of the National Land Code 1965 provides that upon registration of the title (or interest as the case may
be) the proprietor is guaranteed of their title from being challenged.
15
Section 5 National Land Code 1965.
16
Provision on forfeiture is available in Part Eight of the National Land Code 1965. The state authority has a power
to forfeit the land from any proprietors in two circumstances i.e. when there is a breach of condition and non-payment
of rent.
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The sixth proposal is related to the process of the ORS. It is suggested that the list of
successful applicant should be displayed to the public at a prominent venue. For
instance it can be displayed at the land office for a month to enable any person to object.
This is to ensure there is transparency in the selection of buyers of the low-cost houses.
5. Conclusion
The issue of distribution of low-cost house is always alleged to be allied with political
influence in which who has a close link with the governing party, will have a better
chance to purchase low-cost houses irrespective whether he is qualified or not. The
government has to work hard in proving that t his allegation is false and the ORS is
the best model that the government must fully implement and consequently can proudly
assert that there is equitable distribution of low-cost houses in Malaysia. Besides that if
the government feels that the existing policies and guidelines have deteriorated, it is
better for them (the government) to consider having a proper statute to regulate all
issues and matters under one particular statute.
References
A. Rashid, K, Ibrahim, M, A.Mohit, Mohamad, M, Shuid, S and Dali, AS (2005, Sept).
Eligibility and Selection Criteria Under the Open Registration System (ORS) for Low-
cost Houses in Malaysia. Paper presented at the Asia-Pacific Network for Housing
Research Conference: Housing and Globalization, Kobe University, Kobe, Japan
Department of Statistics Malaysia at
http://www.statistics.gov.my/eng/index.php?option=com_content&view=article&id=50:
population&catid=38:kaystats&Itemid=11 (Accessed on 5th May 2009).
Friel-Simon and Khoo Kay Kim (1976, August). The Squatters as a Problem to Urban
Development - A Historical Perspective. Paper presented at the 3rd Convention of the
Malaysian Economic Association, Penang.
Idrus, N. & Ho Chin Siong. (2008, June). Affordable and quality housing through low
cost housing provision in Malaysia, a paper presented at the Seminar of Sustainable
Development and Governance, Department of Civil Engineering and Architecture,
Toyohasyi University of Technology, Japan. Organised by Toyohashi University of
Technology and University of Technology Malaysia. Available online
http://eprints.utm.my/6624/1/NoraliahIdrus_HCSiong2008_AffordableAndQualityHous
ingThrough.pdf . (Accessed on 5th May 2009).
Kassim, A (1982). Squatters in West Malaysia with special reference to the malays in
Kuala Lumpur. Occasional paper No. 5, Department of Anthropology and Sociology,
University of Malaya, Kuala Lumpur.
Malaysian Government. (2006) Ninth Malaysia Plan, Kuala Lumpur: Government
Printing, Kuala Lumpur.
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Azlinor Sufian, pp 1188-1201
National Housing Department, Mesyuarat Majlis Perumahan Negara Bil 1/20042004.
Kertas Kerja 1: Isu-su berkaiatn pengagihan rumah kos rendah, 13th May, 2004, Kuala
Lumpur.
National Housing Department, Mesyuarat Majlis Perumahan Negara. Bil 1/20042004.
Kertas Kerja 2: Sistem Pendaftaran Terbuka (SPT) Berkomputer bagi pengagihan
rumah kos rendah di Malaysia, 13th May, 2004, Kuala Lumpur.
Ramanujam, P.L. (1989). The Physical Economic and Social Implications in the
Resettlements of Squatters: A Case Study in Kuala Lumpur, Thesis, Degree of Master of
Arts in Geography, University of Malaya, Kuala Lumpur.
Shuid, S. (nd). Low Medium Cost Housing in Malaysia; Issues and Challenges,
Department of Urban and Regional Planning, Kulliyyah of Architecture and
Environmental Design, International Islamic University Malaysia. Available online:
http://www.iut.nu/Malaysia_low%20cost%20housing.pdf . (Accessed on 5th February
2009).
Supplementary Supply (2009). Bill 2009. House of Reprsentative. 10 March 2009.
Vincent, I.O. and Joseph, E.O. (2001), Housing policy in Nigeria: towards enable of
private housing development, Habitat International, Volume 25, Issue 4, December
2001, pp.473-492.
Wan Nor Azriyati and Noor Rosly Hanif. (2005). Business partnership in meeting
housing needs of the urban poor. Global Environment Review (United Kingdom).
Volume 5. Issue 2. pp39-49.
http://www.edgehill.ac.uk/Faculties/HMSAS/icdes/gber/pdf/vol5/issue2/Article2.pdf.
(Accessed on 13th March 2007).
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Michael Rui Guan, pp 1202-1211
Common area design in high-rise residential buildings and its
building control in Asia Megacities -- a Study of Singapore,
Hong Kong and Beijing
Rui GUAN Michael
Department of Architecture,
The University of Hong Kong, Hong Kong, Pokfulam Road,
People’s Republic of China
Email: [email protected]
Abstract:
Urbanization in many Asia cities has shifted the majority of city residents into sky-
living buildings. However, traditonal neighbourhood communities, which normally
expand horizontally, are never transformed into high-rise houses. Rethinking the sky-
living model brings renovations to both architectural design and building regulation
controls. Innovative cases and studies from Singapore, Hong Kong, and Beijing are thus
considered to be interesting references. Practice review, data analysis, and comparative
studies are used to make this comprehensive research. Lastly, the common area, as a
key component of reforming vertical communities in high-rise residential buildings, will
be concluded with further discussions of its building regulation control.
Keywords:
common area, high-rise residential building, vertical community, building control
1 Introduction
1.1 The Urbanization Process and Emergence of Sky-living
In the last few decades, many Asian cities have experienced a very rapid development.
The urbanization process has caused a dramatic increase in the urban population.
However, limited buildable land resources in many cities cause problems in city
expansion, which have inevitably changed city growth from horizontal spread to
struggles with vertical growth. As a result, skyscrapers have become dominant in urban
life, and the traditional living patterns have been changed simultaneously. More and
more horizontal neighbourhoods have been wiped off of the city maps and replaced
with sky-living buildings. Cities like Singapore, Hong Kong, and Beijing have
established dense housing strategies for many years.
1.2 Concept of “Vertical Community” and Building Control
In the earlier stages, high-rise residential buildings were created with a simple
duplication of many stacked up dwelling units. This piling-up model made a simple
house type, which subsequently reformed the dwellers’ traditional living community in
both physical and mental aspects. The traditional living community was formed by a
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familiar group of dwelling units. These residents shared common spaces for various
activities like Chinese courtyard-living, where communities expanded in horizontal
manners. However, these common spaces were removed when all dwelling cells were
superimposed on top of each other within dense rigid structures. High-rise houses
solved the critical habitation demand at the beginning, while creating distant
neighbourhoods in the sky.
It was not until recent years that the vertical community in sky-living was addressed in
some Asia cities for improving the sky-living environment. Refreshing ideas, designs
and practices were tested for new sky-living models. However, as highlighted by
designers and developers, the building control revolution was very critical to this
exploration. It should be more supportive in design control issues. So, examples of
contemporary experiments of new sky-living models with relevant building controls
from Singapore, Hong Kong and Beijing are thus presented for reference.
2 Cases and Building Control
2.1 Singapore Housing Exploration of Sky Garden Living
The Singapore government tried to encourage downtown living in the 2001 concept
plan of the city centre. The Urban Redevelopment Authority (URA, 2001) indicated that
the purpose was to increase the total number of homes from 30,000 to 120,000 in the
long term. With this background and the pursuit of new ideas of sky-living buildings, an
international competition of “the pinnacle @ Duxton”, launched in 2001, opened the
most interesting discussions about future sky-living in Singapore.
The site is about 2.5 hectares with a gross plot ratio of up to 8.4, which is triple of the
normal 2.8 for public housing. The project can provide 1,500 to 1,800 homes, and is
required to offer creative solutions for providing communal spaces within the sky
structures.
2.1.1 Central Public Sky Garden
Figure 1. The Pinnacle @ Duxton by ASAU Singapore, 2001
(Source: Singapore Architects, 2001)
The winning scheme was designed by a local firm “Arc Studio Architecture +
Urbanism.” It has seven high-rise towers woven together by two sky gardens on the
26th and 50th floors. Pavilions, lush plantings, a jogging track, a walking trail and look-
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out view points are integrated with the sky decks at both mid-level and on the rooftop.
Community spaces are also provided in two gardens creating a warm touch to the 1,800
residential units. At ground level, a natural park is designed as open space with urban
linkages to the surroundings.
This scheme was subsequently constructed and it should be finished in 2009. However,
there are questions regarding the huge scale sky gardens. Can such large gardens and
facilities help to promote social interactions? How can safety and security issues such as
controlling numerous anonymous crowds in these big public sky gardens be solved?
Will the biggest gardens help to create a sense of belonging in the vertical community
reformation? Doubts have been raised followed by extensive discussions. However,
there is another comparable merit prize scheme, which brings more consideration of the
scale of common areas and issues of relevant building controls.
2.1.2 Dispersive Common Sky Yard
Local architecture firm WOHA presents a different model of dispersive common sky
yard design. As explained, these sky parks are suspended in vertical gaps of seven
mega-towers. Each yard is created for a smaller cluster of around 20 to 30 residential
units, having approximately four to six stories in height. With such smaller scale nature-
parks, the architect wishes to create a common-shared vertical neighbourhood, which
gives the residents a sense of community belonging and privacy. Most sky yards face
east-west with greenery planted to filter out strong tropical sunshine and wind. The
scattered yards provide a comfortable outdoor space for communal activities.
Figure 2. The Pinnacle @ Duxton by WOHA Singapore 2001
(Source: Singapore Architects, 2001)
Both schemes focus on redesign of the common area in high-rise residential buildings.
They approach different scales of sky-gardens or sky court-yards integrated with the
common areas. Such invention of sky communal spaces may bring issues of redefining
the common area and modifying its building control in high-rise houses.
2.1.3 Singapore Building Regulation Control on Sky-Living Buildings
In Singapore current building control system, the URA plays an important role. The key
control variable of GFA (gross floor area) was adopted by the URA in 1989 for all
developments. In this system, the overall development GFA contains two parts of floor
areas: the dwelling unit internal floor area and the external common area. That is:
Overall Development GFA = Habitation Unit GFA + Common Area GFA
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However, the government development charge is computed by the overall development
GFA, which makes it a critical part of development cost. So, to create more habitation
area, which is the only sellable GFA to buyers, developers will always maximize the
habitation part and minimize the common areas as a balance.
Recently, to encourage innovative designs in sky-living buildings, the URA refined the
building codes to allow qualified common areas to be GFA exempt from the overall
development GFA calculation. That makes the large sky gardens possible. But for
smaller ones, it may not work that well.
Building Control on Sky Garden -- “Concept of 45 Degree” and GFA Exemptions
As the URA control requires (URA, 2007), the sky garden areas that could be exempt
from development charge computations are defined by the 45 degree line taken from the
underside of any permanent or opaque structure. To further qualify, it must fulfil the
following conditions.
(1) The sky gardens, as open-sided terraces, must be accessible to all occupants.
(2) Access to the sky terrace must be from common areas ONLY.
(3) The Sky terraces are used for communal activities or for landscaping.
(4) At least 40% of the perimeter wall of a sky terrace must be open.
Furthermore, on top of this exemption, additional residual areas falling outside the 45-
degree line could be exempted with a cap of 20% of the same floor plate, subject to the
following criteria (URA, 2007):
(1) The areas within the 45-degree line must occupy at least 60% of the floor plate. The
remaining 40% (max) can be used for complementary uses.
(2) The residual area must form an integral part of the sky terrace remaining
unenclosed, communal, and non-commercial in nature.
(3) At least 60% of the perimeter of the sky terrace floor should be kept open with low
walls.
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Figure 3. Plan Illustration of the Concept of 45 Degree and Residual GFA Exemption
(Source from URA, Singapore, 2007)
As the above diagram illustrates, these controls secure the quality of sky garden designs
in the following areas:
(1) Enough height and good space quality can be secured in the sky terrace. The higher
the sky garden, the more GFA could be exempt, which is beneficial to both developers
and users. That creates a platform for further recreating various vertical communities in
sky level through different innovative architectural approaches.
(2) Public usage and easy accessibility is available.
(3) Good environmental quality is ensured. The control of perimeter openness provides
better interactions to external environment both in view, natural lighting, and in
ventilations at sky level. The landscaping and facility provisions could also make sky
gardens lively.
(4) Flexibility in future alteration and additional designs are possible. The additional
GFA exemptions give sky gardens flexible areas for future changes in upgrading
landscaping or communal space.
2.2 Hong Kong Private Domestic Building Study
Rapid city growth, with limited buildable land resources, makes HK one of the densest
and highest cities in the world. Normal residential blocks are always 20 stories or above,
with 6 to 10 dwelling units located around the central circulation core at every story. To
increase living population density, the habitation area is always maximized and the
common area is compressed to the least possible space. Many developments follow the
lowest control standard to design the common area which worsens the space quality
both in the natural environment and in the social communities.
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Figure 4. Tai Koo Residential Area and the typical residential floor plan of “8 units per core” in HK
(Source from Watching the City of Hong Kong, 2002)
2.2.1 Hong Kong High-rise Residential Building Block
The above residential floor plan and its versions are typically used for many houses
built in HK since the 1970s. To maximize the habitation area, common corridors are
designed to minimum width, and shortened to the most efficient length. But, the living
quality in such buildings is poor. There is no direct sunlight or natural ventilation in the
common corridors. The condensed floor plan also limits every unit with restricted
external facing, which caused a series of problems in natural lighting, cross ventilation,
privacy issues, etc. The two-meter wide recess gap, as regulated in building codes for
lighting and ventilation, never works well for its purposes, but causes even more dead
angles worsening the problem. As Wong comments (Wong, 2002) the typical plan of “8
units per core” in HK residential building designs is the perfect solution to maximize
development profit through increasing the habitation efficiency. The living quality in
both internal units and external common areas is thus sacrificed. The only way to
overcome this profit-based design is to reform the building controls in HK.
In recent years, HK building authorities have realized the serious problems of poor
living conditions and have tried to pursue innovation design models. More GFA
exemptions are granted for many green building designs and features, such as balconies.
However, as pointed out by researchers, the local building ordinance, as a key control
regulation established in the1950s, could never act as an effective promoter without
positive essential reformations.
2.2.2 Building Control on Domestic Buildings
Like the Singapore system, Hong Kong building controls also uses GFA as a key
control variable in residential development. The difference from Singapore is about the
control of sellable areas. In the HK system, the sellable area includes both habitation
unit GFA and common area GFA. There is no clear definition or specific controls on
each part. In fact, most developments will maximize habitation area for more usable
space. The key means in securing this is through the control of habitation efficiency.
Habitation Efficiency = Habitation Unit GFA / Overall Development GFA
As shown in the above formula, the higher efficiency a project has, the larger habitation
area it could get. In thousands of HK domestic buildings, the habitation efficiency is
controlled at approximately 80%, some even as high as 90%, with the widely used
application of the typical “8 units per core” floor plan. Such efficiency control not only
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leads to many environmental problems, but also creates uniform designs in HK houses.
In local building control systems, the mixed-component GFA makes any pertinent
control requirements even more difficult. Although building codes have GFA
exemptions to encourage design flexibilities and enhance living quality, these can be
easily abused. As a result, the quality of common areas could hardly be secured, and the
formation of vertical communities in sky-level becomes even more difficult.
From a real estate perspective, many interviewed developers wish to provide more
communal sky gardens for dwellers. However, in current systems these common spaces
consume overall development GFA, and cause a reduction in the habitation area.
Ultimately, many innovative designs are still restricted by the building controls.
To promote vertical communities and support innovations in sky-living buildings, there
are two possible improvements for the current HK building code.
(1) Differentiate controls on common areas and private habitation areas in high-rise
residential buildings. It is just like the current Singapore system, and with this
precondition, further specific requirements can be released specifically to common
space promotions.
(2) Keep current controls on floor areas and impose a maximum limit to the habitation
efficiency, which indirectly secures the common floor area provision.
Take the typical “8 units per core” floor plan as an example. As shown in the table
below, the habitation efficiency in this plan is around 86%. Assuming that the overall
floor area is 10,000 square feet per level, the private habitation units GFA (Part I) is
8,600 square feet and the common area GFA (Part II) is 1,400 square feet. As shown in
the following table:
Figure 5. Comparison of Two Means of Adjustments in Building Control for Better Common Areas in
HK Sky-living Buildings
In the first proposal, by separating controls into two parts, building codes can keep the
control requirements of Part I, which secures the residents’ population density.
Furthermore, building codes could design more specific controls on Part II, which could
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not only ensure the basic circulation need but also promote creations of vertical
community spaces. For example, more GFA exemptions could be focused on Part II to
enhance the common space quality.
In the second proposal, building codes could predefine a spectrum of approximately 60-
70% for habitation efficiency of sky-living buildings subject to the development nature.
With this imposed range, the proportion of habitation areas and common areas is
controlled, which indirectly secures the common space quality.
Proposal one keeps the dwelling population density while creating a larger or higher
building block. Proposal two preserves the building mass while reducing resident
density. In fact, both proposals could be feasible subject to the site and urban design
conditions. For urban sites, when building bulk is significant and needs to be strictly
controlled, the second method would be more appropriate. For other sites with less
stringent requirements on building mass, the first method would be a better solution.
2.3 Beijing Mixed-use Residential Building Design Experiment
Beijing has undergone tremendous change in the past few decades. In regard to city
housing, thousands of traditional low-rise courtyard houses were wiped out from the old
city patterns, and replaced by more and more high-rise houses. Simultaneously, the
original living model and neighbourhood communities were removed. High-rise houses,
as functional machines of habitation, had formalized Beijing with thousands of blank
sky structures everywhere. Unfortunately, most houses are mainly focused on basic
living functions and omitted the transformation of previous community space for the
sky dwellers. Only ten years ago, the SOHO (Small Office Home Office) projects
started to design larger common areas in mixed-use houses and brought about a new
thinking of reforming the vertical communities within sky-living buildings.
2.3.1 Beijing SOHO Buildings
The first remarkable SOHO project is the SOHO New Town located in the eastern city
centre and built in the 1990s. Different from other houses, the concept of small offices
in residential buildings requires more common areas as business support, which
identifies an important change in high-rise house design. The second project of JianWai
SOHO further popularized the idea with broad discussions about vertical
neighbourhoods in sky-living.
SOHO projects, due to their small office-business nature, are available for public
access, and need more communal and office-work facilities. The developments provide
more areas for this by enlarging common corridors and lift lobbies. Larger common sky
void spaces are also proposed in buildings for flexible usage. These re-natured common
areas make SOHO buildings a real mixture of various occupancies.
Although, there has been some criticism in regard to abuse of those transformed
common areas, the flexible provisions in common space create a sustainable platform
for both common activities and individual extensions. Vibrant identities are formulated
through different expressions in using the areas. Some common areas are used as office
or house extensions; some are turned into business gallery exhibitions; and some are
even used for art performances.
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Figure 6. SOHO Projects in Beijing, SOHO New Town and JianWai SOHO
(Source from “SOHO China – 10 Years of Pioneering, 2006)
Beijing SOHO projects have not only tried a refreshing model of mixed-use sky-living
buildings, but also brought new issues to building regulation controls on new building
typology. In fact, local building codes do not have appropriate regulations for the
SOHO type. However, it is this grey area in between office and house control that is
utilized by developers for advantages from both sides to create flexible designs in
common areas.
2.3.2 Building Control on SOHO in Beijing
Common corridors and lift lobbies are usually the most important components in
common areas. In many SOHO projects, developers have difficulty with this since many
of these areas are in a control gap of current building codes. For example, according to
office building requirements, the minimum corridor width is 1.4 meter for double-
loaded offices within a length of 40 meters; this requirement is 1.2 meter in residential
buildings. Other than the density control issues, fire safety control also has different
requirements for office and residential buildings. All different requirements need to be
clarified for SOHO buildings, while no specific control strategy can be applied.
According to normal building control strategy for mixed-occupancy buildings, if it is
non-separated occupancies, the entire building must be regulated according to the most
restrictive requirements in height, area, and fire protections for each of the multiple
occupancies (Ching, 2007). However, Beijing SOHO projects have tried a different
strategy. Some controls follow the looser requirements; some follow the stringent ones;
and some uses compromised requirements.
In overall development density control aspect, JianWai SOHO follows the more relaxed
ratio of office requirement in building distance control, and creates a business
environment for the overall project.
In building common area controls, the corridor width is designed following the looser
office requirement, while the corridor length is controlled according to the travel
distance requirement in fire evacuation, which uses the stringent residential
requirements.
However, the control gap still leaves some problematic issues, such as privacy concerns,
ownership, and building maintenance. Furthermore, there is no control on GFA
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Michael Rui Guan, pp 1202-1211
exemptions for such common area provisions. As a result, the private-owned unit area is
decreased with more common-shared area provided, which certainly limits the further
provision of the common areas.
3 Conclusion and Discussions
As more people move into sky-living houses, the design of vertical communities in
high-rise buildings is becoming critical. The above cases illustrate different
transformation models in reforming the neighbourhoods at sky level. From the in-depth
analysis and comparison of current popular GFA-based building control systems, the
relationship between habitation areas and common areas is uncovered. Common areas,
as a key component of reform in the vertical community, are examined. It further
suggests that the code-writing strategy should be more objective-based thinking. To
achieve this, for many GFA-based building control mechanisms, a re-understanding of
building performance is first needed. Based on that, clear categorizations in controlled
GFA can be established, which secures the controls to be more pertinent and effective.
Then, GFA exemptions could always perform as a good promotive tool for the
objective. This GFA promotion tool shall be used with full consideration of urban
issues, such as ground level openness, building bulk control, building height control,
etc. Building codes shall also leave proper control gaps for innovative explorations. In
this aspect, performance-based codes are more advisable than prescriptive-based codes.
4 References
Buildings Department (BD), The Government of the Hong Kong Special Administrative
Region of the People’s Republic of China, 2009, “Building Ordinance”, BD, Hong
Kong SAR, http://www.legislation.gov.hk/eng/home.htm.
Francis D. K. Ching, Steven R Winkel, 2007, Building Code Illustrated – A Guide to
Understanding the 2006 International Building Code, John Wiley & Sons, Inc
Hoboken, New Jersey.
Ministry of Housing and Urban-Rural Department of the People’s Republic of China
(MOHURD), 2005, “Code for fire protection design of tall buildings (GB 50045-
95)”, MOHURD China, http://www.cin.gov.cn.
Pan Shiyi, Zhang Xin, The Symbol SOHO China – 20 Years of Pioneering, Tsing Hua
University Inc., 2006.
The Urban Redevelopment Authority of Singapore (URA), 2007, “Building Circular on
Sky Garden Control”, URA Singapore, http://www.ura.gov.sg.
The Urban Redevelopment Authority of Singapore (URA), 2001, “The Singapore 2001
Concept Plan”, URA Singapore, http://www.ura.gov.sg.
Wah Sang WONG, Watching the City of Hong Kong, HuiXun Inc., Hong Kong, 2002.
WOHA Singapore, 2001, “Duxton Plain Public Housing Competition”, WOHA,
Singapore, http://www.wohadesigns.com .
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Jill Morgan, pp 1212-1222
Family intervention tenancies: the de(marginalisation) of
social tenants?
Jill Morgan
School of Law,
Swansea University, Singleton Park, Swansea SA2 8PP,
United Kingdom
E-mail: [email protected]
Abstract:
As well as fulfilling the basic human need for shelter, a home is also a place where
individuals can put down roots, engage with community, and exercise citizenship
rights. At the same time as the United Kingdom government has been gradually
disengaging from housing policy which guarantees accessible, decent and secure
housing for all, it has introduced a raft of measures to address anti-social behaviour,
particularly in relation to social housing.
This paper discusses the introduction by the Housing and Regeneration Act 2008 of
Family Intervention Tenancies (FITs), i.e. voluntary, non-secure tenancies granted by
registered providers of social housing to those against whom possession has, or could,
have been ordered in relation to their former homes because of their anti-social
behaviour. The aim is to improve behaviour by providing tenants (and/or members of
their households) with intensive support services away from the location of their
former properties so as to enable them to break links with local connections and make
a fresh start. It is expected that in most cases FITs will run for between 6 months and
a year or possibly even longer and, once the support programme has ended, they can
be converted into a more secure form of tenancy. The paper considers whether FITs
are another example of ‘authoritarian intervention’ in the private lives of a
‘marginalised underclass’, or of welfare conditionality or whether, in fact, they do
offer a new opportunity for the ‘de-marginalisation’ of certain tenants and for
breaking cycles of deprivation and social exclusion.
Keywords:
Anti-social behaviour, family intervention tenancies, housing,
1 Introduction
Over recent years, concern that anti-social behaviour is a widespread and possibly
growing problem has led to the introduction of a range of legislative measures to deal
with those who perpetrate it. Indeed, the present Government seems incapable of
passing any housing legislation which does not include new provision relating to anti-
social behaviour (Hunter, 2009:29). While most legal interventions have been either
punitive or conditional in nature, Family Intervention Projects (FIPs), which
ostensibly focus on rehabilitation, may be indicative of an important change of
approach. However, the Family Intervention Tenancies (FITs) to which such projects
can be linked have been constructed in such a way that they may prove to be yet
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another means by which punitive sanctions can be used against problem tenants. This
paper begins by explaining the nature of FITs. Attention is then turned to the reasons
why social housing has been targeted by successive governments in relation to anti-
social behaviour and the nature of the measures put in place to tackle it.
2 Family Intervention Tenancies
FITs are granted by local housing authorities and registered social landlords/registered
providers of social housing to people against whom possession orders have or could
have been made in respect of their secure or assured tenancies or those who (if they
had a secure or assured tenancy) could have had such a possession order made against
them. The final category means that they may also be offered to tenants of private
landlords.
FITs carry no security of tenure and are offered for the purposes of providing
‘behavioural support services’. The ‘behavioural support’ comes through family
intervention projects (FIPs) which provide intensive social work support to families
who are homeless or at risk of eviction because of anti-social behaviour. Using an
‘assertive’ and ‘persistent’ style of working, project workers develop support plans for
individual family members in an attempt to stop the offending behaviour. The
purpose of FIPs is ‘to help rehabilitate these families so that they can ultimately live
within the community without causing further nuisance’ (DCLG, 2008: 7.2)
A number of FIPs use ‘dispersed’ and ‘core’units. ‘Dispersed units’ - to which
families move from their existing accommodation - are properties taken from general
needs stock which have been specifically designated for use by the project. ‘Core
units’ are purpose-built premises in which families live with project staff. Previously,
because tenancies in dispersed or core units generally fulfilled all the requirements to
be secure (under the Housing Act 1985) or assured (under the Housing Act 1988) and
thereby enjoyed security of tenure, it could be difficult to move on families whose
support came to an end or evict those for whom support proved ineffective (Hunter,
2009: 29). FITs are intended to provide the solution: ‘a simple means of moving
families between mainstream and dispersed accommodation or purpose-built units’
(DCLG, 2008: 7.4).
Before entering into a FIT, the landlord must serve the prospective tenant with a
notice stating why the new tenancy is being offered, any requirements in respect of
behaviour support services, the security of tenure available under the tenancy and any
loss of security of tenure which could result from taking it up. The tenant must also
be notified that the offer need not be offered nor any existing tenancy surrendered.
While FITs are therefore, ‘voluntary’, failure to accept the offer of such a tenancy
may well be followed by the landlord seeking to repossess the tenant’s existing home.
By ss 4ZA(5)(b) Housing Act 1985 and 12ZA Housing Act 1988 (introduced by s.297
Housing and Regeneration Act 2008), the notice must also identify ‘the dwelling-
house in respect of which the tenancy is to be granted’. All FIPs involve outreach
support to family members in their existing homes and it is clear that the wording of
the legislation would permit FITs to be granted in such circumstances. Nevertheless,
an explanatory memorandum issued by the Department of Communities and Local
Government states that ‘FITs will only be offered to those families who are moved
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into dispersed accommodation or purpose-built [i.e. core] units’ (DCLG, 2008: 7.3).
At the end of the support period, the local authority or housing association should
endeavour to find the family a new settled home as speedily as possible.
Where anti-social behaviour continues, it may be considered appropriate that the FIT
should be brought to an end during the support period. Because a FIT confers no
security of tenure, it can be terminated by notice to quit. However, before serving
such notice, a local authority landlord must serve a written notice stating that, inter
alia, it has decided to serve a notice to quit, and giving the reasons for its decision.
Local authority tenants have a right to request a review of the authority’s decision to
evict. While no statutory review process for housing association FITs exists, the
Tenancy Services Authority (the new social housing regulator) expects associations to
offer a review process which closely follows that offered by local authorities.
3 Anti-social behaviour: a growing problem?
The Crime and Disorder Act 1998 effectively defines anti-social behaviour as
behaviour which causes or is likely to cause ‘harassment, alarm or distress to one or
more persons not in the same household’1 while the Housing Act 1996 refers to
conduct ‘capable of causing nuisance and annoyance to any person’ and/or ‘use of the
premises for unlawful purposes’.2 The elasticity of the term and the absence of any
commonly agreed definition - let alone a consistent legal definition - has two
consequences. First, taken with the lack of any reliable recording by landlords and
other agencies, it makes it difficult to assess the size and severity of the problem. For
most people in England and Wales, anti-social behaviour is not a major concern. It is,
however, a serious issue for a sizeable minority in some areas, notably those in inner
city and deprived areas (Millie et al, 2005: 11, 13). Nonetheless, although ‘there is
little hard evidence as to the extent of anti-social behaviour and whether this has
changed over time’ (HCHAC, 2005: 12), there does seem to be a consensus among
social landlords that there is a genuine upward trend which is often associated with
drug and alcohol misuse and disruptive behaviour by mental health sufferers (Pawson
et al, 2005: 30). Whether, however, there has been an actual rise in misconduct is
unclear. That victims are increasingly inclined to report incidents may stem in part
from the publicity given by the media to anti-social behaviour which has, in turn,
raised its political profile but it may also be that social landlords are more willing to
respond to it (ibid: 30). Possibly too, communities are less able or willing to reach an
informal solution to problems and disputes between their members.
Secondly, the absence of a standard definition makes it more difficult to develop an
effective policy response or to judge the effectiveness of legal or other remedies. It is
clear, however, that since the 1990s, anti-social behaviour has become a common
feature in politics and the media and a range of strategies has emerged. Flint suggests
that the problem has been, and will continue to be, addressed on at least four levels:
prioritisation within rhetoric and discourse; changes in the housing management
practices and policies of landlords; multi-agency partnerships; and an increasing range
of legislative powers (Flint, 2004b: 4). It is the last of these on which this paper will
1
Crime and Disorder Act 1998, s.1(1).
2
Housing Act 1996, s.153A.
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Jill Morgan, pp 1212-1222
focus. However, before exploring the place of FITs in the context of other legal
interventions in housing, it is worth considering why - although problems can arise in
any tenure - social housing is where they appear to be most commonly encountered
and why it has been the focus of government interventions.
4 Anti-social behaviour and social housing
Areas of bad urban housing have existed in Britain ever since the industrialisation of
the nineteenth century encouraged mass migration to the towns and cities (Papps,
1998: 640). Until the development of council housing, the urban poor lived in
privately rented accommodation situated near centres of industry and commerce
(ibid). Well into the post-war period, crime and social disorganisation tended to be
associated with these declining neighbourhoods which were dominated by
deteriorating housing and high levels of turnover (Murie, 1997: 24). The expectation
that such problems would be solved by slum clearance proved to be ill-founded.
Nevertheless, even though parts of the council stock in most cities had a poor
reputation and were avoided by all except those who had no choice (ibid: 28), most
areas of council housing consisted of stable neighbourhoods occupied by respectable
employed working class families, their ‘informal and formal processes of social
control’ often being linked to ‘family and kinship networks, and workplace
relationships’ (ibid: 24). In estates where there was a dominant local employer,
neighbours often worked together - frequently belonging to the same trade union -
‘and the disciplines and relationships associated with work spilled over into the
organisation of neighbourhoods’ (ibid). The association of crime (and, it may be
added, anti-social behaviour) with council housing is not therefore ‘inherent in
council housing provision’ but can be explained in terms of the sector’s changing role
(ibid: 25).
Even though it has declined in size over the last twenty five years and now
accommodates some of the most economically deprived households, social housing is
expected to deal with and manage the consequences of ‘risks that are being
decontainerised as a result of welfare restructuring’ (Allen and Sprigings, 2001: 392-
3). Thus, as well as having to house sexual offenders, individuals requiring care in the
community, refugees and asylum seekers (often in the most difficult to let local
authority stock), it is also expected ‘to tackle the perpetrators of anti-social behaviour’
(Flint, 2004b: 4). Most policy interventions appear to be based on the premise that
problems occur in social housing because of ‘deficiencies in the conduct and cultural
and social capital of residents’, rather than a recognition that ‘the actions of
government and the utilisation of resources by more affluent and powerful
populations’ are themselves partly responsible for ‘the spatial concentration of social
problems’ (Flint and Rowlands, 2003: 216). A reason exists therefore for government
intervention. Most tenants of local authorities have secure tenancies which are
subject to the Housing Act 1985 while those with housing association landlords are
likely to have assured tenancies governed by the Housing Act 1988. Despite the use
of various mechanisms such as large-scale voluntary stock transfers and arm’s length
management organisations to transfer ownership and management of much social
housing out of local authority control, social housing in the UK is still owned by an
easily identifiable and closely regulated group of providers. Governmental
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Jill Morgan, pp 1212-1222
intervention is made possible therefore because social housing provides a legal,
organisational and often geographical framework which is absent from other tenures.
Card notes that the changing nature of ‘the political discourse surrounding anti-social
behaviour’ has contributed to the identification of social housing and its tenants as
‘marginalised or excluded’, such labels allowing for ‘more punitive and rehabilitative
measures to be applied to those who fail to conform or fail to act responsibly towards
the community in which they live’ (Card, 2001: 201). Hawarth and Manzi take a
similar view, suggesting that the concepts of ‘social exclusion’ and ‘residualisation’,
although not themselves explicitly judgmental, ‘nevertheless allow an implicit agenda
to be shaped, within which traits of stigma and culpability can be introduced’
(Hawarth and Manzi, 1999: 158). The designation of social housing as a ‘safety-net’
limited to those in greatest housing need has, they argue, contributed to the shift in
housing management practice towards more interventionist policies designed to deal
with a ‘marginalised underclass’ (ibid: 159). Because the allocation of local authority
housing is subject to the discretion of local authority officers and members, their role
as ‘gatekeepers’ and ‘the designation of tenants and housing applicants as ‘deserving’
and ‘undeserving’’ has become more explicit in housing discourse. The categorisation
of local authority residents as ‘passive recipients of welfare’ may mean that they are
more inclined to accept ‘authoritarian intervention’ in their private lives and the fact
that these interventionist policies have been introduced against the background of
reduced funding means that ‘moral values’ can assume a greater prominence (ibid:
153).
The responsibilisation agenda of recent governments has also had a part to play in the
ways in which anti-social behaviour is perceived and addressed. The notions of
‘social protection, social rights and collective provision’ associated with a post-war
welfare state in which universal access to health, education and social insurance was
seen as a passport towards social citizenship (Marshall, 1950) have given way in
recent years to market-oriented policies and a focus on individual responsibilities.
which emphasises the obligations and responsibilities of welfare recipients.
As Rose explains,
‘The state is no longer to be required to answer all society’s need for order,
security, health and productivity. Individuals, firms, organizations, localities,
schools, parents, hospitals, housing estates must take on themselves – as
‘partners’ – a portion of the responsibility for their own well-being’ (Rose
1999: 142).
Instead of being required to answer all society’s needs – including order - the state has
become a facilitator, an enabler or animator (ibid).
Anti-social behaviour has come to be seen as a community concern with everyone
being urged to ‘play their part in setting and enforcing standards of behaviour’ (Home
Office, 2003: 1.14). A consequence of this increased emphasis on the civic
responsibilities of individuals has been the identification of local neighbourhoods as
the most appropriate location of government intervention and the greater weight
placed on ‘social and communal relations…in the success and sustainability of policy
interventions’ (Flint, 2004b: 7). While the affluent who are seen as successful citizens
and consumers, increasingly live ‘an individualistic and privatised existence’, poorer
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groups, including social housing tenants are urged ‘to adopt collective
neighbourhood-based responses to their social exclusion’ (Flint and Rowlands, 2003:
223).
5 Legal responses to anti-social behaviour
Legal responses to anti-social behaviour may be seen as having taken two forms. The
first is premised on the belief that, as discussed above, anti-social behaviour is a
problem of social housing, and more particularly those who occupy it. The second
does not link the problem to a particular tenure or even housing in general but
acknowledges that it affects the wider community (Hunter, 2001: 223). Nonetheless,
the Government has continued to introduce housing-specific measures to deal with
anti-social behaviour. However, they may also be said to recognise the fact that social
landlords are ‘senior stakeholders’ in the community which can ‘demand and …draw
in other service provision when necessary’ (DTLR, 2002: 7).
Throughout the history of social housing, landlords have sought to control access to
their housing and the conduct of their tenants (Burney, 1999) but they have become
increasingly dominant concerns in recent years. By controlling access and excluding
‘undesirable’ applicants from their housing, landlords can avoid potential anti-social
behaviour. As a result of changes made to the allocations process by the
Homelessness Act 2002, ‘unacceptable behaviour’ is now a ground upon which local
authorities may treat an applicant as ineligible for housing or deny them ‘reasonable
preference’. At the same time, the move towards choice-based lettings is aimed
towards the creation of sustainable communities in which a sense of community
cohesion can be fostered and social control exerted over standards of behaviour.
A feature of this responsibilisation of tenants has been a transactional discourse of
right and responsibilities, with tenants being made aware that keeping their home is
conditional upon responsible behaviour towards neighbours and the community
(Home Office, 2003).
‘…[T]he state’s conceptualisation of the tenant has shifted from the protective
embrace of much of the 19th century towards a more responsibilised
conception…[in which] the tenants are required to exercise their own self-
regulation and to conform to the norms of civil society. There is a twin
meaning here of responsibility – it relates, at once, to the necessity for the
tenants to conform to the contractual relationship with their landlord; but it
also relates to a broader (non-legal) contractual relationship with their
community or neighbourhood. The state has become concerned with how the
tenants should exercise their responsibility qua tenant’ (Cowan and
McDermont, 2006: 155).
As such, it is symptomatic of ‘a broad and far-reaching shift towards greater
conditionality in welfare’ which is predicated on the view that welfare assistance
should be made available only to those who fulfil certain conditions regarding their
own behaviour and that of their children. Deacon suggests that this ‘marks the
abandonment of the largely structural explanations of deprivation and exclusion
which dominated left and centre left thinking for much of the post war period’, and
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also recognises the role played by ‘the choices’ lifestyle and culture of the poor
themselves’ (Deacon, 2004: 912). The ‘non-judgmentalism’ on which the provision of
welfare rights was formerly based has thus been replaced by the adoption of a more
moralistic approach.
An example of welfare conditionality in the housing context can be found in
introductory or starter (i.e. probationary) tenancies which local authorities and
housing associations may use in order to assess the suitability of tenants for fully
secure or assured tenancies. A landlord who wishes to recover possession during the
trial period (which may be extended to last for up to 18 months) must obtain an order
for possession but is not required to prove any grounds although its decision to evict
is subject to review. It can be argued, therefore, that in contrast to households in other
tenures who are not required to earn their security, the introductory or starter tenancy
involves the withholding of a secure or assured tenancy until such time as the tenant
has shown himself to be ‘deserving’ of a settled home (Haworth and Manzi, 1999:
161). Some maintain that this distinctive treatment may be said to reinforce images of
a ‘marginalised underclass’ in social housing which facilitates the use of ‘punitive
solutions’ (ibid). An alternative view is that introductory tenancies can help to build
sustainable communities, the existence of which depends on tenants feeling confident
that compliance with their tenancy agreements will enable them to ‘keep their long-
term family homes’ (Law Commission, 2002: 1.21, 1.22). Similar thinking lies
behind demoted tenancies (which were introduced by the Anti-social Behaviour Act
2003), the effect of which is temporarily to reduce the security of tenure of, and
remove several other rights from, an existing tenant. In effect, they ‘remove the time
constraints from the probationary period’ associated with the introductory tenancy’
(Sylvester, 2005: 4) although, unlike introductory or starter tenancies, demoted
tenancies can only be made by order of the court.
Repossession - the archetypal, punitive method of dealing with anti-social behaviour -
is only partially effective in that it fails to deal with the underlying causes of problem
behaviour and can simply result in the problem being transferred elsewhere - often to
the private sector. Generally speaking, landlords will consider possession
proceedings only in respect of ‘serious’ offences, e.g. violence or threats of violence,
racial harassment and illegal possession of drugs or drug dealing. Occasionally,
however, where other measures have been unsuccessful and the perpetrator’s
behaviour remains unchanged, some landlords will - as a ‘last resort’ - serve notices
seeking possession in cases of less serious but persistent nuisance, e.g. noise nuisance
or dog fouling, hoping that ‘the ‘shock value of a notice’ can help to alter a tenant’s
conduct where all other means …have failed’ (Pawson et al, 2005: 79). Deciding
whether or not a case should be pursued via possession action will also depend on,
e.g. how confident the landlord is that the complainant (and/or aggrieved and
frightened neighbours) will be able and/or willing to provide credible evidence in
court, and whether the alleged perpetrator was subject to any form of vulnerability
such as mental ill-health which could affect his behaviour.
The courts have often looked towards the impact that the offending behaviour will
have had and could continue to have on adjoining occupiers but the interests of the
immediate community in the repossession process have been made explicit by the
insertion of new provisions into the Housing Acts 1985 and 1988 by the Anti-Social
Behaviour Act 2003. Now, in deciding whether it is reasonable to order possession
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on grounds of ‘nuisance and annoyance’, the courts are directed to consider the effect
that anti-social behaviour has had on ‘persons other than the person against whom the
order is sought’ and ‘would be likely to have’ if the conduct were to be repeated.3 In
London and Quadrant Housing Trust v Root,4 the Court of Appeal held that in
deciding to make an outright possession order rather than a postponed order, the judge
had correctly applied the relevant provisions in balancing the needs of the tenant and
her three children against the very considerable hardships (including threats and
intimidation) to which the neighbours had been exposed. This was despite the fact
that the main perpetrator of the anti-social behaviour was the tenant’s partner who had
departed from the property, having been made the subject of an ASBO excluding him
from the immediate area. The total breakdown in the relationship between the tenant
and her neighbours meant that, in the words of Sedley LJ in Lambeth LBC v Howard5
‘the shadow of the past [was] too heavy upon the present’ to allow for those
relationships to be repaired (para. 39). The case preceded the introduction of FITs.
Today, the use of a FIT in such a situation – involving the removal of the family to a
dispersed or core unit – would clearly be preferable to repossession but whether the
landlord would want to offer one is another matter. In Root, even after the tenant’s
partner had moved out, the outside of the premises remained in an unacceptable state
and the tenant refused access to the landlord’s officers to inspect the inside. There was
said to be not only a breakdown in the relationship between tenant and neighbours but
also between the tenant and her landlord. If FITs are to work an element of
reciprocity between landlord and tenant is essential. The latter must be prepared to
accept behavioural support but, in the first place, the landlord must be prepared to
offer it.
More intensive housing management and a greater use by social landlords of ‘formal,
punitive forms of social control’ (Flint and Rowlands, 2003: 222) such as introductory
tenancies, demoted tenancies and repossession may be regarded as sitting uneasily
alongside the pressure being placed on local authorities to adopt a ‘holistic’ approach
by developing strategies which address the underlying causes of anti-social behaviour
and which therefore involve ‘prevention and resettlement as well as enforcement
action’ (Hunter and Nixon, 2001: 90). There is a tension too between the role of
social landlords as agents of social control and the consumer-oriented’ approach to the
delivery of housing services in which social tenants are portrayed as active citizens’
who should be involved in decision-making processes’ and be able to exercise choice.
While recognising their conditional nature, Dean suggests that measures which seek
to enforce the obligations which people owe to each other are ‘not incompatible with
policies to widen opportunities for self-fulfilment and to reduce social exclusion’ and
that it is a mistake to view them therefore as ‘necessarily disciplinary in intent or in
effect’ (Deacon, 2004: 911). FIPs can therefore be interpreted as a means of
addressing ‘the underlying causes’ of anti-social behaviour and enabling the families
involved in such projects to play their part as ‘active citizens’. Despite the
reservations of some commentators, who regard FIPs as a further example of top-
down punitive authoritarianism which forces parents ‘to fulfil their responsibilities by
conforming to normative definitions of successful and competent parenting’, thus
helping to secure ‘wider goals of economic prosperity and social stability’, (Parr,
3
Housing Act 1985, s.85A ; Housing Act 1988, s.9A.
4
[2005] HLR 28 (CA).
5
(2001) 33 HLR 58 (CA).
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2008 : 5) they have generally proved successful in curbing anti-social behaviour (see
Nixon, 2008). Uncertainties remain however as to the use of FITs.
Repossession on the discretionary ‘nuisance and annoyance’ grounds of the housing
Acts 1985 and 1988 depend upon the court being satisfied that it is reasonable to
make an order. This means that ‘the judge is to take into account all relevant
circumstances as they exist at the date of the hearing...in...a broad commonsense way
as a man of the world,...giving such weight as he thinks right to the various factors’.6
It may well be that the landlord’s failure to offer a support package to the family who
is in situ may make it unreasonable to make an order. On the other hand, judges may
be more inclined to consider it reasonable to make an outright order for possession if
an offer of an FIT has been made, even if it has been declined. Landlords may make
it a matter of policy therefore to offer a FIT when commencing possession
proceedings and if an outright possession order is made and a warrant for execution is
carried out, it will be too late if the support package fails to materialise. As indicated
above, a FIT can be terminated by 28 days’ notice to quit and no grounded to be
proved. Indeed, the legislation does not require the notice to quit to be triggered by
anti-social behaviour and there is a risk therefore that landlords who suspect that they
might have difficulty in securing possession through the normal statutory channels
may be tempted to offer FITs which are then ended prematurely.
Conclusion
Possibly because it is the tenure in which ‘active citizenship is represented as
normalised conduct’, (Flint, 2004a: 901) self-regulation and responsible behaviour are
taken for granted in the owner-occupied sector. While, historically, this has also been
the case with regard to private rented sector - a tenure which, from the viewpoint of
security of tenure, has been the subject of extensive ‘deregulation’ over the past two
decades - intervention in the context of anti-social behaviour has been extended here
too via selective licensing. No doubt this is attributable in part to the fact that private
renting is the only resort for many of those who are evicted from social housing.
Even so, it is social renting however which continues to be the centre of policy
interventions.
The metamorphosis from what Card describes as ‘social’ to ‘community’ government
in which ‘governments no longer govern from a “social” point of view but through
individuals as members of the many and various communities to which they belong’
results in a differentiation between the ‘affiliated’ and the ‘marginalised’ (Card, 2001:
203). Thus, instead of accepting the existence of an ‘environment of diversity and
value pluralism’, ‘politicians and professionals have attempted to narrow the
boundaries of ‘acceptable behaviour’ and to become increasingly prescriptive in their
approaches’ (Hawarth and Manzi, 1999: 157). Of course, ‘diversity and value
pluralism’ may entail ‘unacceptable levels of anti-social behaviour which can destroy
people’s enjoyment of their home and public space and undermines community spirit’
and it is those ‘families whose behaviour destroys communities’ who are likely to
become the subject of FIPs. It should be remembered that ‘the families themselves
become socially excluded and sometimes homeless…[and] children’s physical and
emotional development and educational attainment can be severely damaged’
6
Cumming v Danson [1942] 2 All ER 653 (CA).
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Jill Morgan, pp 1212-1222
(Respect Taskforce, 2007). It is to be hoped therefore that FITs will prove to be
agents of positive change than simply a new vehicle for securing possession from
‘undesirable’ tenants.
References
Allen, C. and Sprigings, N. (2001), ‘Housing policy, housing management and tenant
power in the “risk society”: Some crtitical observations on the welfare politics of
‘radical doubt’, Critical Social Policy, 21(3), pp 384-412.
Card, P. (2001), ‘Managing anti-social behaviour - inclusion or exclusion?’, in Cowan
and Marsh (Editors), Two Steps Forward: Housing Policy into the New Millenium,
The Policy Press, Bristol.
Cowan, D. and McDermont, M. (2006), Regulating Social Housing: Governing
Decline, Routledge-Cavendish, Abingdon.
Deacon, A. (2004), ‘Justifying conditionality: the case of anti-social tenants’, Housing
Studies, 19(6), pp 911-26.
Department for Communities and Local Government (DCLG) (2008), Explanatory
Memorandum to the Allocation of Housing (England)(Amendment)(Family
Intervention Tenancies) Regulations 2008 (2008, No 3015).
Flint, J. (2004a), ‘The responsible tenant: housing governance and the politics of
behaviour’, Housing Studies, 19(6), pp 893-909.
Flint, J. (2004b), ‘On the new front line: Social housing and the management of
“problematic populations”’, Housing Studies Association Conference on
Transforming Social Housing, Sheffield, April 2004.
Haworth, A and Manzi, T. (1999), ‘Managing the underclass: interpreting the moral
discourse of housing management’, Urban Studies, 36(1), pp153-65.
Home Office (2003), Respect and Responsibility: Taking a Stand against Anti-social
Behaviour, Home Office, London.
House of Commons Home Affairs Committee (HCHAC) (2005), Anti-social
Behaviour: Fifth Report of Session 2004-05 (HC80-1), The Stationery Office,
London.
Hunter, C. (2009), ‘Family Intervention Tenancies: coming soon to a social landlord
near you’, Journal of Housing Law, 12(2), pp 29-32.
Millie, A., Jacobson, J., McDonald, E. and Hough, M. (2005) Anti-social Behaviour
Strategies, The Policy Press, Bristol.
Murie, A. (1997), ‘Linking housing changes to crime’, Social Policy and
Administration, 31(5), pp 22-36.
Nixon, J., Parr, S., Hunter, C, Sanderson, D. and Whittle, S. (2008), The Longer Term
Outcomes Associated with Families who had Worked with Intensive Family Support
Projects, DCLG, London.
Papps, P. (1998), ‘Anti-social behaviour strategies: individualistic or holistic?’,
Housing Studies, 13(5), pp 639-56.
Parr, S. (2008), ‘Family Intervention Projects: a site of social work practice’, British
Journal of Social Work. Advance Access, published 23rd April,
doi:10.1093/bjsw/bcn057.
Pawson, H., Flint, J., Scott, S., Atkinson, R., Bannister, J., McKenzie, C. and Mills, C.
(2005), The Use of Possession Actions and Evictions by Social Landlords, ODPM,
London.
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RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Jill Morgan, pp 1212-1222
Respect Taskforce (2007), Family Intervention Projects - a toolkit for local
practitioners
http://www.respect.gov.uk/uploadedFiles/Members_site/Documents_and_images/Sup
portive_interventions/FIP_RTFtoolkit_V1Jul07_0104.doc, viewed: 13/08/2009.
Rose, N. (1999), Powers of Freedom: Reframing Political Thought, Cambridge
University Press, Cambridge.
Sylvester, C. (2005), ‘Demotion or suspension? Tackling anti-social behaviour
through the possession process’, Landlord and Tenant Review, 9(1), pp 2-6.
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Biemo Soemardi and Reini Wirahadikusumah, pp 1223-1333
The Indonesian Construction Law: Challenges toward
Globalization
Biemo W Soemardi1 and Reini D Wirahadikusumah1
1
Faculty of Civil and Environmental Engineering,
Bandung Institute of Technology,
INDONESIA
Email: [email protected] ; [email protected]
Abstract:
Construction industry has for long been the backbone of Indonesian economic and
social development. Since the early days of modern era of 1900s, during the
colonization, the Dutch engineers has brought in and introduced the technology as well
as professional practices of the industry to the area. Until 35 years after proclaiming its
independence in the 1945, Indonesia has virtually yet to have its own national regulation
concerning the construction industry, during which the only known construction legal
reference was the colonial inheritance of the Dutch’s AV41. In that period the
construction industry was dominated by the government role in both providing the
infrastructure and regulating the industry.
The political reform of 1998 put Indonesia into a new governance paradigm, which in
turn also affected practices of the construction Industry. The first Indonesian
Construction Law was put into effect in 1999, which was then followed by three
government decrees. The three government decrees address issues relating to the
business and role of construction society, the practices of construction industry, and
construction industry development. This new set of legal construction standard of
practices was established in response to increasing demand of local autonomy and
global competition challenges. Under this regulation the role of centralized government
in infrastructure and construction industry has shifted to allow more participation of
private sector and the community. Among important issues addressed in this regulation
includes governance, professionalism, and the role of society.
This paper discuss the rationale behind the development of the Indonesian Construction
Law, the threats and challenges that follow during the last decade of implementation, as
well efforts that have been carried by the government and the industry. In particular this
paper will discuss three government decrees and their impact to the national
construction industry
Keywords:
Construction law, Indonesia, governance, globalization
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Biemo Soemardi and Reini Wirahadikusumah, pp 1223-1333
1. Introduction
Construction industry has for long been considered as the backbone of Indonesian
economic and social development. In 2008, the construction industry’s direct
contribution to the gross national product was around 6%, and employing more than 4.5
million people, which is around 7-8% of the country’s overall labor force. Currently the
industry consists of more than 134.000 registered construction companies spread out in
the country’s 33 provinces, where more than 120.000 among them are classified as
small-scale business enterprises. In contrast, the largest 900 construction companies
have been entrusted with the 80%-90% of the country’s US$ 17 billion national
construction market. In order to widen the market, in recent years the government has
encouraged the construction companies to go global to include the international market.
Consequently, in the last ten to fifteen years, more international construction companies
have also joined the market. Such condition has created additional threats and
challenges to the growth of the industry. One of many challenges faced by the Indonesia
construction industry is availability of sound and effective legal framework.
This year marked the 10th anniversary of the Indonesian Construction Law. Yet, many
problems still arise and what was envisioned in that law is yet to be realized.
Complains such as lack of fairness and professionalism, and even the often conflicting
regulations, are among the problems faced by the industry. In addition, globalization
also requires the national construction industry to respond to the world progress in
international contract and regulations. In response, the government and other
stakeholder are currently working together to improve the construction regulations.
This research is part of that work that aims at measuring the effectiveness of current
legal framework of the Indonesian construction industry, as well as identifying the
potential solution on how the regulation can be improved. In particular, the work
emphasis on the role and function of Construction Service Development Board – CSDB
Indonesia, as the main body responsible for development of the national construction
industry. This work is mainly based on the analysis of the Indonesia Construction
Service Law and the three Government Decrees against critical issues that have been
raised by many stakeholders of the industry. This research will also include group
discussion involving academia, government officials, and practitioner of the industry.
2. Method of Study
This study aims at determining the effectiveness of the current construction regulatory
framework in catering and advancing the national construction industry. In general this
work will consist of three steps. This study started with the review of historical
development of Indonesian construction law and regulation, and in particular
identifying the significant progress made and its relevant condition during certain period
of time. This part of study will be used to gain better understanding the contextual
setting of the regulation. Next step will be to identify problems often encountered or
cited by various players and stakeholders of the construction industry. This process will
be done in two ways. The first one is by reviewing publications in public media, notes
of group discussion and meetings, whereas the other method is by conducting survey to
construction practitioners, government officials, as well as academia, and officials from
central and local Construction Service Development Board offices.
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A series of focus group discussions will be held to refine and elaborate finding from the
previous steps. This group will consist of representatives from construction
practitioners, professional associations, government officials, academia, and NGOs.
The focus group will also review similar regulations such as Building and Construction
Industry Improvement Act no 113 from Australia (BCII, 2005) or Act 520 - Lembaga
Pembangunan Industri Pembinaan Malaysia ACT (CIDB Malaysia, 1994) as references
for improvement of the current law. The objective of the discussions is to accurately
identify the problems and threats faced by the industry, as well as weakness of current
legal framework, and ultimately making recommendation for future revision of the
construction laws and regulation.
3. Historical Progress on the Indonesian Construction Law
The Indonesian construction law cannot be separated from its historical progress of the
industry. With regard to construction law and regulations, the industry’s historical
development can be divided into three periods; before independence or colonial period,
development period, and reform period.
3.1 Colonial Period
Until 35 years after proclaiming its independence in 1945, Indonesia has virtually yet to
have its own national regulation concerning the construction industry, during which the
only known construction legal reference was the colonial inheritance of the Dutch’s
AV41 (Algemene Voorwaarden Voor De Uitvoering Bij Aaneming Van Openbare –
1941). During that period the construction industry was dominated by the government
role in both providing the infrastructure and regulating the industry. Construction
contracts were also drawn from colonial civil law of Dutch’s Burgelijk Wetboek 1848.
After the independence into the late 1960s, Dutch’s own construction companies were
nationalized. During that period virtually no private company were involved, and those
state-owned companies became the sole engine of the construction industry. There were
no bidding involved, and the construction projects were appointed directly to the state-
owned contractors using cost plus fee contract. Most of these state-owned construction
companies are still exist today and become the top construction companies in Indonesia.
Their long experience has proven to be effective in adapting themselves in changing
construction regulations.
3.2 Development Period
This period span from 1967 to late 1990s, where the new order government regime was
in power. The Indonesian construction industry started experiencing growth, providing
significant contribution to the nation’s gross domestic product. Despite still inexistence
of standard construction regulation, the construction industry manage to grow and
expand; involving private sectors and successfully adopting various modern
construction practices and standards, such as open bidding procurement process and
FIDIC or JCT standard of contracts.
In 1980 the government has started to regulate its state-funded projects, including those
in construction sector. Presidential decree no 14 – 1980 has set standard process and
requirement for procurement of all projects under government budget (including those
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funded by overseas agencies). Through that decree, in order to maintain fairness and
accountability, the government also regulated the requirements for all construction and
consultant companies to be licensed, and grouped the companies according to their
classification and qualification. This decree was then revised and perfected several
times to accommodate changing practices and needs in procurement methods. At
present Presidential Decree no 29 – 2003 is used as guideline for procurement of all
government funded projects.
3.3 Reform Period
The political reform of 1998 put Indonesia into a new governance paradigm, which in
turn also affected practices of the construction Industry. The first Indonesian
construction law was put into effect in 1999 (Construction Services Law), which was
then followed by three government decrees. The three government decrees address
issues relating to the business and role of construction society, the practices of
construction industry, and construction industry development. This new set of legal
construction standard of practices was established in response to increasing demand of
local autonomy and global competition challenges. Under this regulation the role of
centralized government in infrastructure and construction industry has shifted to allow
more participation of private sector and the community. Among important issues
addressed in this regulation includes governance, professionalism, and the role of
society at large.
The Construction Service Law no 18 (Indonesia, 1999) was established in 1999 to
response concerns over the fact that high construction growth was not accompanied by
effective governance, which was reflected in, among others: a) low quality of product,
on time construction, and inefficient use of resources, b) lack of enforcement and
compliance to laws and regulations, and c) lack of fairness and synergic partnership
amongst providers and users of construction services in terms on rights and
responsibilities. Among many significant aspects, the law in particular has set the
foundation for establishment of an independent body that would shift most roles of the
government in leading and guarding the development and growth of the Indonesian
construction industry.
Following the establishment of Construction Service Law no 18, in 2000 the
government issued three Government decrees: 1) Government Decree no 28 on
Business and Society Role in Construction Services, 2) Government Decree no 29 on
Execution of Construction Services, and 3) Government Decree no 30 on Development
of Construction Services. In principle, the first Government Decree regulates the
professional requirements for entities to operate and the role of society in construction
industry. The Government Decree 29 essentially regulates how the construction industry
works in terms of contract, covering from selection of provider to execution of work, to
construction failure and dispute. The Government Decree no 30 emphasis on the
regulation concerning the role of government (both central and local) and construction
society in regulating, empowering, and monitoring the construction operation.
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Table 1. Summary of Indonesian Legal Framework for Construction Services
Year
Legal Document Purpose Remarks
Effective
Presidential Decree 2003 Guideline for Procurement of Developed based on
no 80 Goods and Services within Presidential Decree no
government jurisdiction 14, 1980
Law no 18: 1999 Guideline for promotion and Foundation for
Construction development of construction Government Decree
Services services no 28, 29, and 30 -
To maintain order of construction 2000
practices that would provide
assurance of fairness and adherent
to law and order
To realize and promote the role of
society in construction services
Government 2000 Regulation of construction The scope includes:
Decree no 28: business and role of construction business construction,
Construction society construction workers,
Business and construction society,
Construction and sanctions
Society
Government 2000 Guideline for Procurement and The scope includes
Decree no 29: Contract of Construction Services regulation concerning
Execution of procurement of
Construction construction services,
Services construction contract,
and construction
failure and disputes
Government 2000 To provide guideline for The scope of this
Decree no 30: regulation, empowerment, and regulation includes
Implementation of control of construction services. guidelines for central
Construction and local government
Service
Development
Guidance
4. Finding and Discussion
The successful implementation of Construction Service Law no 18 and its three
accompanying government decrees depends on how effective they are to address
various issues. Certainly there are other aspects to be considered. However the
following discussion describes only some issues that are considered as the most
influential ones.
4.1 Balancing the Demand for Local Needs and Challenge for Globalization
Liberalization of international trades in goods and services such as in WTO and AFTA
in 2000 has forced the construction industry to open its market for foreign competition.
Although these agreements have been taken into effect for some years, the industry is
still not fully prepared to cope with the challenges. In this industry only a very limited
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Biemo Soemardi and Reini Wirahadikusumah, pp 1223-1333
number of construction companies are ready for international market opportunities. In
addition to lack of international professional practices, many of them are also not
familiar with international contract standards such as FIDIC and alike. On the other
hand, supported with their advancement in technology, superior experience and strong
capital, the competition threat from foreign companies to local construction market is
growing significantly.
Although it is commonly acknowledged that such threat is mostly true only for large
projects, local competition is also faced with tough challenges. Statistic shows that
almost 90% of 134.00 registered construction companies are of small scale companies,
each with average annual market less than US$ 25.000. Of more than those 120.000
companies, it is estimated that only less than one-third are actively involved in
construction works, whereas the rest are listed as inactive or fictitious with inadequate
or no business and technical resources. The majority of these small-scale companies are
located in small cities across Indonesia’s 33 provinces. Within such limited local
market, these conditions eventually may lead to risk of illegal and unlawful practices
such as corruption and collusion.
4.2 Local Autonomy
The main spirit of Construction Service Law no 18 is to lessen the role and control of
government over the construction industry. In 1999 the government also established
Law no 22 in Local Autonomy and Law no 23 on Financing Balance between Central
and Local Government; which was then replaced by Local Government Law no 32,
2004. These two laws have string influence on the development of local construction
industry. Under these laws, local governments have more control over planning,
budgeting and execution of construction works, which in turn will help strengthening
the local construction industry. However, the capacity of local government and
construction industry is still limited. Thus, the needs to exercise more autonomic rights
are not balanced with adequate capacity to execute. Lack of adequate managerial and
technical skills, coupled with low professionalism attitude are among the factors often
cited as the low quality of construction practitioner and officials in local government. It
seems that what was envisioned in Government Decree no 30 has yet to be realized.
On the authority of local autonomy, in order to protect the interest of local construction
industry, many local governments established regulation that created a set of new
additional bureaucratic mechanism. Yet, this new set of regulation is often proven to be
ineffective and even contradict with other law and regulations.
4.3 Increasing Role of Private Sector and Public Private Partnership
In Jakarta and other major cities, where most commercial building construction works
took place, the capacity of the construction companies are among the best in the nation.
While state-owned construction companies can benefit from its long experience in
construction industry, some newer private companies are also able to compete due to
their more professional skills, and more flexible and less bureaucracy in adopting
technology and business practices. Unfortunately the largest part of the construction
industry does not possess those kinds of capacity. The majority of the Indonesian
construction industry consists of medium and small-scale private-owned construction
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companies, which mostly work in small scale building and commercial estate
constructions. Amongst these small-scale contractors it is not considered uncommon
practice where the winning bidders are not the ones who will execute the work but
rather act as construction broker. Due to lack of access to project information, this
group of companies often works without direct contract with the owner but rather as
second or third tier contractor at lower cost than what the winning bidder has initially
offer. Pre-arranged tendering process and puppet bidder are frequently cited as the
sample of bad practices involving construction companies. This condition certainly
causes inefficiency in construction industry.
Decreasing capacity of the government in providing adequate funding for construction
has improved the changes for the private sector to play larger role in the construction
industry. Like in many other countries, private sector is starting to take larger part in
infrastructure constructions, such as toll roads and ports, through public-private
partnership initiatives. Although this trend of partnership is expected to grow in the
future, where more and more infrastructure investment will be offer to private sector,
there are still some legal issues which are not yet specifically accommodated in the
current construction laws and regulations. This includes major issues such as standard
form of agreement and the responsibility and accountability of private sector to the
public.
4.4 Institution and Governance
One of the important initiatives in Construction Service Law no 18 deals with the
concept of good governance. Under this law, the central role of government was limited
and shifted to a more independent entity representing the interest of all stake holders of
the construction industry. The introduction of the notion of construction society put the
construction society and the society in general in the central role of the construction
industry.
Perhaps the most debated issue regarding the implementation of Construction Service
Law no 18 is section VII that regulates the role and responsibility of the construction
society. According to this regulation, construction society is defined as part of overall
society who has interest to and/or performs activities that are related to construction
business or construction works. Further in Government Decree no 28, the role of
construction society is to be formulized in the forms of Construction Service Forum and
an independent board. Based on those regulations, the government established
Construction Service Development Board – CSDB as the independent board that bear
the responsibility for development and enhancement of the Indonesian construction
services. This body consists of representative of professional associations, as well as
representatives or government and academia.
The Construction Service Forum is an informal body consisting of representatives from
construction business associations, professional associations, intellectual society,
NGOs, the government, and other necessary element. The objective of this forum was to
absorb society aspiration, formulize the direction for construction development,
providing advice the government, and encouraging society control over the
construction. On the other hand, the independent board is the manifestation of the
forum which has executive power to exercise its duty: a) to inspire and performed
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research and development of construction services, b) performed education and training
in construction services, c) conduct registration for all construction workers, d) conduct
registration for construction business entities, and e) encourage and improve the role of
arbitration, mediation, and expert judgment in construction service. The board is a body
similar to CIDB of Malaysia (CIDB Malaysia, 1994) or BCA Singapore (BCA, 2009).
The structure of Construction Service Development Board – CSDB consists of one
national CSDB at central level and one local CSDB in each of 33 provinces in
Indonesia.
In reality, the Construction Service Forum, which is supposed to be the highest body of
the board has only insignificant role in the society, whereas the board on the other hand
plays very dominating role in the construction industry. Since the law requires any
entity (individual or organization) working in the construction industry to be registered
and certified, then the certification becomes very crucial issues. So far, most of the
debate and complaints concerning the registration evolve around the role and function
of the CSDB.
Under the Government Decree no 28, certification is given as acknowledgement to the
classification and qualification of competence and capability possessed by individual or
construction business entity (Indonesia, 2000a). This certification can only be given by
CSDB. Alternatively, certification can also be given by construction associations that
have been accredited by the DCDB. Due to limited of capacity of CSDB to certify such
a huge number of individuals and construction business entities, the certification process
become an enormous burden to the industry. On the other hand, lack of control by
CSBD causes the certification by construction associations to face other problems. In
practice there is no enforced standard certification employed by association, as each
construction association may employ its own standard and mechanism. This condition
may lead to improper application of certification process, where certification becomes a
trade commodity. Individual person or company which failed the certification can form
its own association and, thus conduct its own certification for those who are willing to
pay.
4.5 Human Resources
Construction workers are the main player in the construction industry. The quality of
construction workers not only depends on the skill and competency of individual
workers but also on other factor such as regulation and system. In general, the quality
of human resource in Indonesian construction industry is considered low and inadequate
for modern construction. Low productivity and high rate of accident is often mentioned
to reflect lack of competency and professionalism.
Although has stated showing encouraging trend, the rate of construction accident in
Indonesia remains the highest amongst neighboring countries. This condition indicates
that the current system and regulation concerning construction safety and health has
proven to be ineffective to cope with this alarming condition. In particular, in a highly
competitive job market, the attitude of workers toward construction safety is generally
disappointing, as they are willing to take risk in return for simply being able to work.
Similarly, the current business practice of construction service has not been able to
convince the construction companies to start using productivity as factor to improve
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competitiveness in the industry. Lack of understanding on the importance of
productivity and construction safety by both the workers and the management often
considered as the major influencing factor. The majority of the industry still considers
safety and productivity improvement program as additional burden to construction cost
with no apparent benefit. (Soemardi et al, 2009)
5. Conclusion and Recommendation
Preliminary assessment to the effectiveness of legal framework for Indonesian
Construction Service has identified some issues that may be taken into consideration for
improving the current law and regulations.
Expanding the Scope of “Construction” and Restructuring the Construction
Industry
According to Construction Service Law no 18 – 1999, the term construction service
includes planning, execution, and monitoring and supervision of construction works.
This scope is considered to narrow and should be expanded to accommodate more
comprehensive scope of construction works. The term construction should not be
limited to that scope but should also be able to accommodate wider applications of
construction arrangement, such as those found in BOT contract. A full life-cycle
construction process must also include the operation, maintenance and refurbishment
and demolition. In addition, the new law should be able to accommodate other players
in the overall construction service supply chain, and should not limit itself into
contractors and consultants.
To assure the fairness and equal opportunity in the industry, the construction service
needs to be restructured. Classification and qualification of construction business entity
should be redefined as to accommodate and compatible with international standard,
such as CPC (central product classification).
Restructuring the Construction Human Resources System
Under the current law and regulations Construction Service Development Board holds
strategic position in relation to construction human resource development. To improve
the capacity and competence of the construction workers, CSDB must be more active to
promote and conduct training for construction workers of all levels. CSDB is also
expected to learn from success of similar organization in other countries, and to develop
programs which are more appropriate for national construction condition, as well as
capable to meet with global challenges.
According to Construction Service Law no 18, construction workers are categorized
into expert and skill workers. Meanwhile the Ministry of Labor and Transmigration has
already developed Framework for Indonesian National Qualification, a system of
qualification and career path which consists of nine levels of qualification. For that
reason, to ensure compatibility and equality amongst the workers in the construction the
classification and qualification of construction workers needs to be synchronized.
Further, CSDB must play larger role in enhancing the national construction industry by
actively promoting and enforcing the professional role and good governance of the
construction associations as the center for professional development at all levels.
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Reposition and Revitalization of Construction Institution
The capacity and governance of the Construction Service Development Board must
continuously be improved. While in the past this organization was often found itself
trapped within conflict of political interest of various parties, in the future this
organization should be able to play greater role in guiding the development of the
construction industry In order to do so, the organization needs to be able to distance
itself from politic and transform its character from a bureaucratic licensing board into a
professional organization serving and guiding the advancement of the construction
industry through advocating, education, and research.
It is apparent that under the current legal structure the responsibility for developing and
improving the national construction industry lies heavily on CSDB. However, due to
the lack of professional maturity of the industry, it is widely acknowledged by the
industry that the government should not distance itself from the current structure. While
the current CSDB structure has liberated the construction industry from government
dominated control, the need for strong government leadership and responsibility
remains imperative. As opposed to being a totally independent body, many in the
industry is considering to restructure CSDB to be more of a government controlled
agency, like those in Malaysia and Singapore.
Globalization and internationalization is something that the industry cannot avoid. The
ever growing participation of international construction companies must be responded
effectively. CSDB should play leading role in enhancing the capacity of local
companies to compete with their foreign counterparts. On the other hand, the
construction law and regulations should accommodate the demand for international
contracts as well as regulation concerning international partnerships.
6. Acknowledgement
This work is part of an ongoing effort to review the effectiveness and proposed
improvement for the Indonesia Construction Law which is initiated and jointly
sponsored by the Construction Service Development Board and Ministry of Public
Work. This paper would not be possible without the help and guidance from members
of the review team, including those from Community Action for Indonesian
Construction (KAKI). Their contribution is highly appreciated.
7. References
BCA Singapore. (2009), ‘Building and Construction Authority’, BCA Singapore,
http://www.bca.gov.sg/AboutUs/about_bca.html, viewed 29/05/2009
CIDB Malaysia, (1994), ‘Act 520 - Lembaga Pembangunan Industri Pembinaan
Malaysia ACT 1994’. Construction Industry Development Board of Malaysia,
http://www.cidb.gov.my/v6/?q=en/content/act-520, viewed 29/05/2009.
Government of Australia. (2005), ‘Building and Construction industry Improvement
Act no 113’, (http://www.comlaw.gov.au/), viewed 20/04/2009
Republic of Indonesia. (1999), ‘Undang-undang Republik Indonesia no: 18 Tahun 1999
Tentang Jasa Konstruksi’.
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RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Biemo Soemardi and Reini Wirahadikusumah, pp 1223-1333
Republic of Indonesia. (2000a), ‘Peraturan Pemerintah no. 28 Tahun 2000 Tentang
Usaha dan Peran Masyarakat Jasa Konstruksi.’
Republic of Indonesia. (2000b), ‘Peraturan Pemerintah no. 29 Tahun 2000 Tentang
Penyelenggaraan Jasa Konstruksi.’
Republic of Indonesia. (2000c), ‘Peraturan Pemerintah no. 30 Tahun 2000 Tentang
Penyelenggaraan Pembinaan Jasa Konstruksi.’
Republic of Indonesia. (2003), ‘Pedoman Pengadaan Barang dan Jasa Di Lingkungan
Pemerintah.’
Soemardi, B, Fajri, A., and Wulan, S. (2009), ‘Study on the Effectiveness of
Construction Safety Regulation in Indonesia,’ Proceeding of 1st ASEAN Civil
Engineering Conference, Chulalongkorn University, Pattaya, Thailand, March 12-
13 2009.
- 1233 -
COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
John Adriaanse, pp 1234-1242
Contractor Design and standard form contracts: A problem
solved?
John Adriaanse
Department of Property, Surveying and Construction,
London South Bank University, London SE1 0AA,
United Kingdom
Email: [email protected]
Abstract:
The ‘fuzzy edge’ between design and construction has always caused problems in the
traditional contract. This is especially so when liability for faults in workmanship or
design have to be resolved later. This interaction has been resolved by the growth of
D&B contracts. This has been followed by the express inclusion in traditional contracts
of a design element. The JCT 05 SFQ provides a design portion and the NEC 3 a design
option. Including design in the contract poses the question of what that design liability
should be? The common law imposes a fitness for purpose obligation onto contractors
who carry out design. By contrast, the standard forms of contract limit this liability to the
exercise of the reasonable care and skill. By doing so, it raises a number of potentially
difficult questions. These are examined through the analyses of the case law on the
requirement of reasonable care and skill in the context of professional design. Early cases
involving contractors where there was no express allocation of design liability are
examined in the light of the current contractual provisions. These express clauses in the
standard forms and their requirements are dissected together with the way they deal with
the consequences of design failure. This involves limitation of liability and the difficult
issue of consequential losses. The allocation of the consequences of design failure in
professional contracts is not an easy matter. Allocating it in contracts with contractors
and subcontractors creates the illusion that this aim has been satisfactorily achieved. In
reality it leaves all the parties exposed to litigation in order to allocate responsibility for
design failure later. What is clear is that despite comprehensive drafting of the SFC
contracts, the position is no clearer now than it was in the early cases where a solution
was required of the common law.
Keywords:
Common law, design liability, limitation of liability reasonable care and skill, standard
forms of contract
1 Introduction
The growth of Design and Build contracts (D&B) has been taken one step further by the
introduction in the traditional standard forms of contract of a contractor’s design portion.
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RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
John Adriaanse, pp 1234-1242
This provides the employer with much needed flexibility in the design and construction
process. To make this possible the standard forms have become more complex in their
drafting, in order to make this change in emphasis and practice work.
This paper examines the effect of these provisions and analyses the resulting changes
required in the standard forms. Provisions have to be made for the contractor’s design
liability, for consequential losses, and for limitation of liability. At the same time it has to
be emphasised that the modern contractor neither designs nor builds. In fact it manages
the process by subcontracting the actual carrying out of the design and the construction
work. This is so whether the contract is a traditional one or a design and build contract
(Adriaanse: 2007).
In order to demonstrate the nature of the problem, a number of cases on earlier attempts
to impose design liability at common law will first be examined. The nature of
professional liability will be analysed in order to demonstrate the problem with contractor
design liability in the standard forms. The drafting requirements of the traditional
contract with contractor design will then be evaluated.
2 The position at common law
In the cases that follow, the employer had to prove that the contractor’s design had been
carried out negligently. In Independent Broadcasting Authority v Bicc Construction Ltd
(IBA) 1 a television mast constructed at the frontiers of knowledge collapsed. This was
due to ice forming on the stays where the design assumed that it would fall way in the
high winds. The contractor played no part in the design. However, its tender it stated that
the offer was ‘for the design, supply and delivery of a 1,250 ft. high stayed cylindrical
mast in accordance with our line diagram drawing No. 3SP5134/4’. The use of the word
‘design’ allowed the House of Lords to conclude that the contractor had expressly
accepted liability for the design. It justified this on the grounds that it could recover the
costs from the subcontractor. In doing so the House considered Norta Wallpaper Ltd v
John Sisk2 which on the facts were similar but came to a different conclusion.
Tenders were invited for the construction of a factory. The employer negotiated and
approved the design of the factory superstructure. By a process of nomination the
contractor was instructed to enter into a subcontract for the design and erection of the
superstructure. This design itself was approved by the employer’s engineers. The roof
leaked due to faults with the design. As a consequence, the building contractors were
sued for damages for breach of contract but in the event, were held not liable. In the
course of his judgment Kenny J. said at p 130
It seems to me that if the design has been prepared by the sub-contractor and
approved by the employer, and if the contractor has had nothing to do with the
preparation of it and has not been consulted in relation to it, and indeed is bound
1
[1955-95] P.N.L.R. 179
2
(1978) 14 BLR 49
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RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
John Adriaanse, pp 1234-1242
to accept the sub-contractor and his design, then no reason exists why the sub-
contractor should be liable for defects in it [but not the contractor].
This case was decided on the basis of nomination. Prior to the use of D&B contracts,
nomination of specialist subcontractors was dealt with by the employer’s advisers. These
specialists provided design services and carried out the resulting work required. In such
an arrangement the contractor facilitates the work but has no involvement or liability for
the design. Although the subcontractor in IBA was also nominated, the court decided that
the contractor was in a position to check the design.
A failure in the design was also the issue in Cable (1956) v Hutcherson Bros Ltd3.
Though the documents described it as a ‘turn-key’ project, the high court of Australia
decided that at the time such a phrase had no legal content. They decided that it was in
fact a traditional contract in which the contract had no design input or responsibility. The
fault lay in the drawings which required the approval of the engineer.
What this selection of cases demonstrates is that there are circumstances where the
contractor can be held to be liable for design, in the traditional contract. This is however a
costly exercise and subject to the lottery of litigation. Each case was decided on its facts
and could as easily have had the opposite result. Why else were there appeals against the
judgments made at first instance (including in Cable (1956) the award of the arbitrator)?
A further question that arises is whether the parties could have arranged matters
differently and whether the outcome would have been different as well? Do the
provisions described below improve the situation?
3 The provisions in the standard forms
The JCT 05 Standard form of Building Contract with Quantities (JCT O5 SFQ) has a
complex clause that limits the design liability of the contractor to the exercise of
reasonable care and skill. The wording of the clauses does not make it that clear. Instead
Clause 2.19.1 states the contractor shall have in ‘respect of any inadequacy in such
design’ the same or similar liability of an architect or that of any other appropriate
professional designer holding himself/herself out to be competent to take on work of such
design. The clause also limits the duty to that created by statute or otherwise. Statute
would be for example s 13 of the Supply of Goods and Services Act 1982. It implies a
duty of reasonable care and skill into a contract for services: see: QV Limited v.
Frederick F Smith & others4. The designer under the JCT contract would have fallen into
the category of ‘other appropriate’ professional as the designer was a chartered builder.
The phrase ‘otherwise’ refers to the duty at common law of reasonable care and skill in a
professional designer’s contract: see Lanphier v. Phipos 5. This liability is also described
the same as that of a professional who enters into a separate contract with an employer.
3
(1969) 43 ALJR 321
4
[1998] CILL 1403
5
(1838) 8 C&P 475
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RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
John Adriaanse, pp 1234-1242
The wording of the clause is the same as in Co-operative Insurance Society Ltd v Henry
Boot Scotland Ltd and ors In a contract demolish, design and reconstruct a building in
Glasgow was let under the JCT 80 condition6s of contract with contractor’s design
supplement 1981 edn., (revised July 1994). Clause 2.2.1.4 contained the same wording as
Clause 2.19.1. The court held that the wording included checking the suitability for the
pre-contract design. JCT 05 through in Clause 2.13.1 specifically excludes this duty.
Instead it makes the contractor not be responsible for the contents of the Employer’s
Requirements or for verifying the inadequacy of any design contained therein.
By contrast the NEC 3 deals with design liability in a much clearer manner. Where
Option X15.1 The Contractor’s design is adopted - Clause X15.1 merely states that the
contractor is not liable for defects in the work due to his design so far as he proves that he
used reasonable care and skill to ensure that his design complied with the works
information. What if he does not? The requirement that the contractor proves that he used
reasonable care and skill is that the employer’s runs into the difficulty created by civil
litigation of having to prove its case in the first place. Eggleston too considers that the
wording is open to different interpretations (2007).
The JCT avoids this uncertainty by making addition provisions should the design prove
to be defective. In Clause 2.19.2 liability under 2.19.1 includes liability under the
Defective Premises Act 1972 (DPA). This duty according to Section 1(1) applies to: A
person taking on work for or in connection with the provision of a dwelling (whether the
dwelling is provided by the erection or the conversion or enlargement of a building) owes
a duty…to see that the work which he takes on is done in a workman-like or ...
professional manner, with proper materials and so that, the dwelling will be fit for
habitation when completed.
In Bole & Anor v Huntsbuild Ltd & Anor 7 both the contractor and the structural
engineers were held liable under the DPA for foundation failures in a newly constructed
house. HHJ Toulmin CMG QC at 179 decided the house as built was unfit for
habitations it was unsuitable for its purpose. The unstable foundations resulted in
movement and cracking and other defects caused by heave fell under s1 of the DPA. The
contractor had failed to do the work in workman-like manner and engineer had failed to
do it in a professional manner. Such a duty is excluded where commercial development is
carried out.
4 Consequential loss
In addition to the costs of repair, claims resulting from a defect in design can cause
consequential losses that can far exceed the cost of the work. In British Sugar plc v NEI
Power Projects Ltd8 the contract between the parties for the design, supply, delivery,
testing and commissioning of electrical equipment was for price of £106,585. The buyer
claimed damages of over £5 million due to increased production cost and the losses of
6
[2002] EWHC 1270 (TCC)
7
[2009] EWHC 483 (TCC)
8
(1997) 87 BLR 87
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RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
John Adriaanse, pp 1234-1242
profits caused by breakdowns to the supply of power. This was due to a poor design and
faulty installation of equipment. The clause excluding consequential loss had been agreed
after lengthy negotiations.
Clauses limiting consequential loss are quite common in such contracts. They are
essentially about risk allocation. Chadwick LJ in Watford Electronics Ltd v Sanderson
9
(with whom LJ Gibson and Mr Justice Buckley agreed) at 55 as observed that:
Where experienced businessmen [and women] representing substantial
companies of equal bargaining power negotiate an agreement, they may be
taken to have regard to matters known by them…They should be taken to be the
best judge on the question whether the terms of the agreement are reasonable.
Gibson LJ too went on to say that a court should not assume that where they have agreed
the risk allocation, that either party was likely to commit their company to unfair or
unreasonable terms. If the price agreed reflected the risk taken, then there was little scope
for a court to unmake the bargain of commercial people.
Clause 2.19.3 limits the Contractor’s liability for ‘loss of use, loss of profit or any other
consequential loss arising in respect of liability of the Contractor referred to in clause
2.19.1. Clearly a claim for loss of use and loss of profit might not be considered as
consequential loss as these are direct losses: see Hotel Services Ltd v. Hilton
International Hotels (UK) Ltd10. This leaves the generic phrase consequential loss whose
meaning is unclear. It is therefore preferable to state the limit of such losses in the
contract particulars. This is not compulsory under the contract and does not apply where
the contractor is not involved in work to which the DPA applies.
5 Proving design liability of a professional
A professional has a duty of reasonable care and skill in carrying out the work. This duty
exists at common law but may also be expressly provided for in the express terms of the
contract. On the surface, this obligation is reasonably straightforward. The duty is to
exercise the reasonable care and skill of the ordinary competent professional and this
duty arises both in contract and in tort. The standard of care required was explained it
particularly well Eckersley v Binnie and parts 11 by Bingham LJ. His judgment sums up
the degree of care needed not to be judged to be negligent. Ward LJ adopted it without
qualification in Michael Hyde and Associates Ltd v JD Williams and Co Ltd 12.
The law requires a professional to live up in practice to the standard of the ordinary
skilled person exercising their special professional skills. He or she does not need to
possess the highest possible skills.
9
[2001] EWCA Civ 317
10
[2003] EWCA Civ 74
11
(1988) 18 Con LR 1
12
[2000] EWCA Civ 211
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RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
John Adriaanse, pp 1234-1242
• The law does not impose liability for damage resulting from errors of judgment
unless the error was such that no reasonably well informed or competent member
of that profession could have made it.
• He or she should possess the body of knowledge which forms part of the
professional equipment of the ordinary member of their profession.
• He or she does not lag behind other hardworking and intelligent members of their
profession in knowledge of new advances, discoveries and developments in their
field.
• He or she should have awareness as an ordinary competent practitioner of the
deficiencies in their knowledge and the limitations in their skills.
• To their professional tasks he or she need not bring more that the ordinary
competent skills of their profession; the law does not require him or her to be a
paragon, combining the qualities of polymath and prophet.
Relatively speaking therefore, this standard of care is not particularly high. It applies to
the standard of care which is that of the ordinary competent practitioner and then only to
obligations of reasonable skill and care. For the difficulty of proving negligence, the case
of Wimpey Construction UK v Poole13 showed the difficulty of tying to prove that your
own designer had been negligent. Although the design failed the designer used the
current British standard. Thus under Bolam v Friern Hospital Management Committee14
it was entitled to the state of the art defence and thus not negligent in doing so.
Only in exceptional cases has a professional been found liable to produce a result. In
Greaves (Contractors) Ltd v Baynham Meikle & Partners 15, the court found an implied
term in the contract with a D&B contractor that the engineer had to produce a result by
designing a floor to carry specified dynamic loadings without distress. The application of
this principle which was based on the agreement of the parties is quite rare. Recently in
CFW Architects (A Firm) v Cowlin Construction Ltd 16 the architect was found to be
under a duty to produce the information in a timely manner to fit the D&B contractor's
programme. There are 30 years between these cases and illustrate the rareness of judicial
decisions making a professional obligated to produce a result.
Where designers have been sued at common law for not producing a result, the court has
had no difficulty in deciding the legal liability of a professional. Lord Denning in
Greavess stated that no general assumptions could be drawn from this case about
implying any term of fitness for purpose. He went on consider the position where an
architect or engineer is employed to design a house or a bridge. Was he under an implied
warranty that if the work was carried out to his design, it would be reasonably fit for its
purpose or is he only under a duty to use reasonable care and skill? He declined to answer
13
(1984) 2 Lloyd’s Rep 499
14
[1957] 1 WLR 582
15
[1975] 3 All ER 99
16
[2006] EWHC 6 (TCC)
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RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
John Adriaanse, pp 1234-1242
this question as a matter of law but observed in a future case it might need to be
considered. Brown LJ too emphasised the the decision laid down no general principle as
to the obligation and liability of professional men.
These questions raised in Greaves were considered in George Hawkins v Chrysler (UK)
Ltd and Burne Associates17. This was whether the engineer was liable for the injuries
caused by a defectively designed floor. An employee was injured when he slipped on the
newly laid floors of a shower room. The employer argued for an implied term that (a) the
engineer would use reasonable care and skill in selecting the material to be used for the
floor of the showers; and (b) there was an implied warranty that the material used for the
floor would be fit for use in a wet shower room. The court declined to imply terms into
the contract either as a matter of fact or of law. It decided that there was nothing in this
case that gave rise to any inference that a higher duty than reasonable care and skill was
required to be exercised by the designers. It stated that while there may be anomalies
between the position of contractor and sub-contractor in this respect (i.e., obligations of
fitness for purpose), as opposed to professional people: however it was not open to the
court to extend that duty except in special circumstances. It is this anomaly though that
creates the problem when the contractor carries out design. At common law a contractor
who carries out design has a fitness for purpose obligation18.
6 Application
What would the position be if in the three cases mentioned earlier in this paper, the
contract had included a design component? Would the results at common law be different
where the parties had made express provision for the allocation of design liability?
In IBA the arguments against the contractor was based on the common law. The
contractor’s defence was that it was at the frontiers of known knowledge and no tower
that high had been constructed before. It was held liable at common law for failing to
produce a product fit for its purpose. Had it been under the JCT contract its design
liability would have been reasonable care and skill. This question was never argued
before the House of Lords although it was before the court of Appeal. It is arguable that
the contractor might have had a defence that it did use reasonably care and skill had it
had that responsible for the design in the first place.
Norta raises quite different issues. Nomination has been deleted the from the JCT
contract. The sub-contractor could either have been named in which case the contractor
would be expressly liable for the design. If the JCT standard subcontract had been used
instead, both parties would have had their design liability limited to reasonable care and
skill.
As for Cable the result might have been that the contractor accepted liability for the
design. In such a case the engineer would have no input. The contractor might well have
been liable if it fell below the standard of reasonable care and skill of the average
17
(1986) 38 BLR 36 CA
18
Viking Grain Storage Ltd v. T H White Installations Ltd (1985) 33 BLR 103
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RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
John Adriaanse, pp 1234-1242
competent professional. However would it have designed the works without a site
investigation?
7 Suing contractors
In Associated British Ports v Hydro Soil Services NV & Ors 19 the contractor undertook
to a fitness for purpose obligation in its contract. The contractor in its defence argued that
unforeseen conditions had been the cause of the failure of the quay wall. HHJ Havery QC
rejected that claim. This was because the contractual term requiring the works to be fit for
its purpose was perfectly clear. He observed that what clause 12 (which offers protection
from unforeseen conditions) enable a contractor ‘to claim extra payment in certain
circumstances but does not relieve him from the obligation, or modify the obligation, as
to the fitness for purpose of the works. The burden remains on the contractor to prove his
clause 12 claim. There was however the burden also on the claimant to prove the ensuing
works was not fit for their intended purpose. This it did in a trial lasting 35 days and
requiring the services of 10 very eminent expert witness (para 10).
The contractor in Shepherd Homes Ltd v Enica Remediation Ltd and Green Piling Ltd
20
conceded that it had failed to use reasonable care and skill. Instead it concentrated its
arguments on showing that the developer had not mitigated its losses in reasonably. This
boiled down to what means it should have used to repair the houses that had settled and
cracked because of the ground conditions. The developer chose to buy the worst damaged
properties and to use an internal pilling system to stabilise the properties. The contractor
argued that it would have been cheaper to demolish and rebuild those houses.
Giving judgment Mr Justice Jackson held that the developer was entitled to substantial
damages and indemnities in respect of 54 properties. In respect of the other 40 properties
it was entitled to nominal damages of £2 per house. Ironically this was in the words of the
judge a result of the pattern of water flow at the end of the last ice age, not the design
skill of the contractor. These houses were in areas where the contours of the glacial till
were high. It was only due to this fact that the foundations of these houses were adequate.
It could be argued that in fighting a 5 week trial the contractor did at least mitigate its loss
on 40% of the damaged properties.
8 Conclusion
The inclusion of a design element in the standard form contract does provide an employer
with flexibility. It is easier to make changes with which the contractor is involved. Once
this is done, provisions have to be made for the allocation of design liability,
responsibility for errors in the employers’ proposal and consequential losses which may
result. The result is that the employer will need to prove that the contractor was
negligent in carrying out the design. Now the standard form such as NEC 3 requires the
contractor to prove it was not negligent but it is difficult to se how this will work in
19
[2006] EWHC 1187 (TCC)
20
[2007] EWHC 70 (TCC)
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RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
John Adriaanse, pp 1234-1242
practice. The claimant in civil litigation has to prove negligence to win its case, so
requiring the contractor to prove it was not negligent will be a matter for litigation in the
future. It seems strange to have express clauses in a contract that may need litigation be
sort out what the parties intended by the words they used in their contract.
In applying the contract terms to old cases decided at common law, it seems that the
results are not very clear if those provisions had been available at the time. The general
advantage of clear express terms is that it enables the parties to resolve issues between
them if the words used are clear. In attempting to limit the design liability of the
contractor, the outcome has been left unclear, a rather unsatisfactory outcome. In order to
decide who is responsible the parties may well have to litigate in the future to decide
what was agreed.
The anomaly between the common law’s treatment of contractors and subcontractors,
who carry out design, has not been resolved by the drafting. Even where the contractor
has accepted a fitness for purpose obligation, the contractor can make the employer prove
its case. The result is that the very problem identified earlier lack a clear solution in the
standard forms examined. Risk allocation is ultimately a matter of price and provided all
parties are aware of that risk, and can price for it, the compromises in the standard forms
may well provide a satisfactory solution to the parties. Whether this is indeed true may
well need to be decided by the courts at a future date.
9 References
Adriaanse J (2007) the Contractor’s liability for workmanship and Design: A matter of
status or competence? CIB World Conference Cape Town May 2007
Eggleston B (2007) The NEC 3 Engineering and Construction Contract A Commentary
Blackwell Publishing Oxford
The Engineering and Construction Contract NEC3 Thomas Telford Ltd and the ICE
The Standard Building Contract with Quantities SBC/Q (JCT 05) Sweet and Maxwell Ltd
- 1242 -
COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Jim Mason, pp 1243-1257
Corruption of the commercial process revisited
Jim Mason
School of the Built and Natural Environment,
University of the West of England, Bristol, BS16 1QY,
United Kingdom
Email: [email protected]
Abstract:
This paper is based on a report written over twenty years ago by John Huxtable, the then
Chairman of the Confederation of Construction Specialists. The report is a passionate
call to arms exposing the injustices felt by specialist contractors.
The emphasis for this paper moves slightly away from the original and centres on two
new objectives: firstly an academic enquiry into the validity of the findings of the
original report and secondly an update on John Huxtable’s material from the viewpoint
of a 21st century specialist contractor.
A good deal has changed in the construction industry since the report was written in
1983, much of it for the better. The radical provisions of the Housing Grants,
Construction and Regeneration Act 1996 have improved the specialist contractors’
position and would no doubt have been welcomed by John Huxtable. Advances by
progressive thinking main contractors in risk management/allocation and collaborative
working have also been made. However, several areas of deep concern remain for
specialist contractors, foremost amongst them the continued imposition of non-standard
onerous terms of subcontract. The continued use of these terms undermine the advances
made elsewhere and John Huxtable’s central theme – that this amounts to a corruption
of the commercial process –remains relevant to today’s industry.
Keywords:
Specialist contractors, subcontracts, onerous contractual terms, risk
apportionment.
1. Introduction
The original 49 page report (“the Report”) written by John Huxtable (“Huxtable”) was
the rallying cry for the Confederation of Construction Specialists (“the Confederation”)
timed as it was with that body’s inception in 1983. The Confederation was set up to
provide an effective national focus for the interests of specialist construction companies.
The Report (Huxtable, 1983) includes a Declaration of the Rights of Construction
Specialists and a ten point challenge to the wider construction industry to improve the
position of the specialists. The main section of the Report promotes Huxtable’s
contention that the imposition of one sided terms and conditions by main contractors on
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Jim Mason, pp 1243-1257
specialist contractors amounts to a corruption of the commercial process – the latter
forming the title of the Report.
The Report also contains a review of the non-standard terms and conditions from the
early 1980’s and a comparison chart for standard and non-standard subcontract
provisions. No distinction is drawn between the terms “specialist contractor” and
“subcontractor” either in this paper or the original Report. Both terms describe the
organisation/firms hired by main contractors to perform construction and engineering
operations on their behalf for the benefit of a construction client referred to here as the
“Client”. A key feature of this arrangement is the lack of any contractual link between
the specialist contractors and the Client. This remoteness is identified by Huxtable as
being the root cause for many of the problems experienced.
The narrative style adopted in this paper is to quote the Report in quotation marks and
italics in order to distinguish the original from this work.
2. The Argument
In the Report Huxtable wastes no time in setting out his main contention:
“This report represents the starting point of the campaign aimed at exposing and
rooting out contractual abuse which so damages the efficiency and harmony of the UK
construction industry.”
“This report exposes a major scandal of truly shocking proportions. The scandal stems
from the persistent and continuing imposition as a matter of deliberate policy by
building and civil engineering main contractors and major trade contractors of onerous
and unfair subcontract conditions onto the specialist companies who nowadays provide
the majority of the value input into most construction projects.”
“In construction a grossly disproportionate share of the risk is transferred down the
chain of responsibility to the specialist contractor. The Confederation considers that
many of what have become common practices in the construction industry amount to a
distortion or corruption of the commercial process and to a misuse of commercial
power by main contractor companies.”
Huxtable explains in his introduction that the Report is based on the broad experiences
of many specialist companies, covering the complete spectrum of construction work.
“[The report] is based on long experience of analysing and investigating individual
non-standard conditions and procedures and the consequent problems, uncertainties,
disputes and disruption (and all too frequent insolvencies amongst Specialist
companies) which inevitably follow.”
Huxtable goes on to identify the victims, which he draws more widely than one might
necessarily have expected.
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“The initial victims of onerous subcontracts and other forms of contractual abuse are,
of course, specialist subcontractor companies who are most directly in the firing line –
but the damage spreads much further. The distrust, every-man-for-himself attitude,
defensiveness, claims-consciousness and general lack of co-operation which inevitably
results when the main contractor abuses his commercial power also – inevitably - has a
damaging effect on the efficiency, cost, quality and safety of the construction project.
Thus the ultimate victim will be the client.”
The tone and content of Huxtable’s introductory comments will be familiar to some of
the other stakeholders in the construction industry, particularly main contractors for
whom vociferous sub-contractors airing their grievances are a common occurrence. At
this stage of the Report a considerable proportion of the readership might be tempted to
dismiss it. Such a reaction would be unjustified; the Report deserves and rewards further
scrutiny.
3. The Case for Subcontracting
Following his introduction Huxtable moves on to safer ground as he sets out the
benefits of subcontracting. The advantages of subcontracting and the relevance of his
comments can only have increased in the intervening years since the report was written.
As long back as the Simon Report in 1944 it was observed that it has become impossible
for any single Architect or Builder to have specialised knowledge and experience to
deal effectively with all the new processes… as a result specialist firms are operating on
a substantial scale.
At that time two thirds of work was carried out by specialist firms, according to the
Simon Report’s estimates. In the post war period the growth and extent of Specialist
work has been accelerated further by the development of new materials and technology
and increasing complexity of construction works. The figure of subcontracted works
now at 90% according to a CIOB/University of Reading Report.
The role of the Main Contractor is now predominantly that of organiser, coordinator or
manager of the project, relying on a team of specialist companies to provide virtually
all of the value input for the building or structure.”
The Report moves on to present the advantages of using specialist contractors as set out
below. Again, few would argue that the comments are accurate and that their accuracy
has only increased through the intervening years.
“1. Specialists can keep abreast and promote technological advancements in their field
and bring the benefit to the project
2. The use of specialist leads to a highly efficient and economical use of resources
provided they are co-ordinated properly by main contractors
3. Specialists are able to offer stability of employment to their workers by operating on
a steady stream of projects rather than the one-off nature of employment on behalf of
some main contractors.”
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The underlying theme to the first sections of the Report is that specialist contractors are
and will continue to be of vital importance to the construction industry. They therefore
deserve to be treated fairly.
4. The Ideal Subcontract
Huxtable identified that the key feature of most construction projects is the remoteness
in contractual and legal terms of the specialist contractor from the Client and that the
only link was indirect through a third party middleman –the main contractor. Huxtable
emphasised that the terms and conditions of the subcontract agreement thus assumed a
very great significance and importance in the smooth running of the project. Ideally, the
subcontract should:
“1. closely reflect the terms and conditions of the main contract
2. establish the rights and obligations of the subcontractor as clearly as possible
3. provide a fair balance between the interests of the main contractor and the
subcontractor
4. enable the client to get the best out of the specialist firm
5. ensure the specialist is fairly rewarded for its work.”
As for the standard forms of subcontract available, Huxtable lamented the situation at
the time that there was no representative of the specialist contractors on such pan-
industry bodies as the Joint Contracts Tribunal (JCT). The inclusion of the National
Specialist Contractor Council would presumably have addressed this grievance. The
other notable criticism in this section of the Report was that there was no JCT
compatible form of subcontract with the closest being DOM/1 and DOM/2. This has
also now changed with a subcontract in the JCT 05 suite of contracts. Similarly the New
Engineering Contract has made great efforts to ensure the terms of the main contract are
reflected in the associated forms of subcontract available.
It is probably fair to say therefore that the standard forms of contract available today go
much further than was previously the case towards fulfilling Huxtable’s wish-list shown
above. A specialist contractor using a modern and unamended form of standard contract
including such features as collaborative procedures, risk registers and gain/pain share
arrangements would be in an enviable position to their 1980’s counterpart. Research
into exactly how many of today’s specialist contractors are in this position would be a
worthwhile follow up to this work.
5. Non-Standard Terms
In Huxtable’s experience the use of unamended standard forms of contract was minimal
within the industry. The Report pointed out that whilst the RICS surveys of contracts in
use at the time showed 80% of construction work (84% on 2004 figures) is let on
standard forms the same is not true of sub-contracts where there is a far higher
incidence of using non-standard forms upon the main contractors’ insistence that they
are used. The Report therefore surmised that the use of an unamended form of
subcontract was the exception rather than the rule.
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Non-standard terms dominated the industry at the time the Report was written. Huxtable
makes some strident remarks in the Report about these non-standard terms.
“Non–standard terms are produced unilaterally with the aim of serving solely the
interests of the originator. Amid the infinite variety three broad types:
1. Fully produced subcontract document – more often than not plagiarised from one
of the standard forms but with significant amendments additions and omissions
which inevitably favour strongly the interests of the main contractor.
2. “Small print” sets of conditions which will typically appear on the back of the
order or of the tender documents. It seems like an irresponsible practice to “shrink”
the terms and conditions in this way and hide them away obscurely as micro print
on the back of the document.
3. Incorporation of a standard form of subcontract but subject to a schedule of
amendments and additions. This can be the most hazardous for an unwary specialist
what seems minor may very significantly alter the balance and meaning and expose
specialist to extra risk.
All have the feature of one-sided drafting contrasting sharply with the relative balance
of interests which genuine standard forms aim to achieve. Faced with the unenviable
task of disentanglement a specialist will often be under great pressure to sign in the
dark and hope for the best. If he is prudent he will seek every opportunity to protect
himself. The main contractor cannot complain about the defensiveness or claims
consciousness of the specialist because the contractor has set the tone of the project
from the outset.”
Huxtable supported his views with extracts from the Banwell report from 1964 which
condemned the practice of alteration or amendment to standard forms. Similar
messages can be taken from the Latham Report in 1994 where this tendency was again
specifically criticised. Huxtable met with Michael Latham in the build up to the latter’s
report and made the case to him from the subcontractors’ point of view. The latest
holder of the baton of change in the industry, Sir John Egan in his report in 1998 also
wanted to see an end to the use of one sided forms on construction contracts. The
frustration of Sir John Egan and the inability of government reports to make any
significant impact on the industry can be detected from the following quote from a
Building Magazine article:
“I am disappointed that the levels of improvement we asked for have not been achieved
but pleased we are at least making progress. Right from the start I said most government
reports end up in the waste bin so the fact Rethinking Construction had any impact at all
is an achievement.”
Specialist contractors need to look to themselves to protect their interests when faced
with this admission of relative impotence from the policymakers. The only effective
way to achieve this is for specialists to improve their awareness of the dangers inherent
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in non-standard terms and to position themselves to be able to negotiate properly their
commercial impact.
6. Common Features of Non-Standard Terms
The next section of the Report went on to examine the non standard terms themselves.
Exactly what terms were causing the commotion? The Confederation has over the years
compiled an extensive range of Analysis Notes, a “rogues’ gallery” of non-standard
terms that the Report claims are used by almost all of the “top 100” national main
contractors
Huxtable singled out six non-standard subcontract terms for particular comment. His
choice reflected the most common inequitable terms of the day. This snapshot of the
situation facing specialist contractors from 1983 is followed by a distillation of the most
common “unfair” terms as taken from the Confederation’s Analysis Notes for the period
2007-2009. Twenty-two analysis notes were examined for the purposes of this exercise.
Huxtable commented on his terms as follows:
1. “Pay-when-paid”
“Many main contractors seek to weaken their own obligation (to pay for work
performed/materials supplied) and thus their own side of the contractual bargain by
introducing a pay-when-paid provision into the subcontract…. The main contractor is
only obliged to make payment when (or if) he in turn receives relevant payment from the
Client.
2. Set-Off
“If a main contractor considers that he has – or might potentially have – a claim
against a sub-contractor he will in many cases wish to use the commercial leverage and
set-off his claim against the next interim payment due to the subcontractor
There are instances where in the event of even a minor breach causing little or no
financial loss the main contractor would be entitled to withhold all money due to the
subcontractor thus exacting a penalty out of all proportion to the breach.”
3. Time for Completion
“Standard forms of subcontract entitle the subcontractor to be awarded a fair and
reasonable extension if the progress has been delayed or disrupted by factors outside
his control. Non-standard forms typically restrict the entitlement to extensions to the
subjective and self-interested opinion of the Main Contractor.”
4. Protection of Works
“Subcontractor responsibility for unfixed material on site is common in standard forms
of subcontract. Non-standard forms often seek to impose more onerous terms to
“protect” the work for an extended period often following incorporation into the main
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works and long after the specialist contractor has left site. This often leaves the
specialist with an uninsurable risk and amounts to an abdication of responsibility by the
main contractor.”
5. Determination
“In standard forms of subcontract the main contractor’s right is strictly limited to cases
of fundamental default by the subcontractor, requiring a warning type notice to be
given. However, non standard subcontracts widen considerably the grounds for
determination to include “any default or breach of this subcontract” this includes
minor or trivial breaches and without a notice requirement. In practice these powers
are used mainly as a means of intimidating subcontractors and of enforcing other
onerous provisions or practices e.g. delayed payment.”
6. Omissions
“Non-standard forms of subcontract almost invariably omit many of the key features
providing rights or safeguards for the subcontractor. Frequent omissions include:
• any contractual right to suspend work if payment is not received
• any contractual right for the subcontractor to determine the subcontract
• The word “unreasonable” this qualifying word is almost always omitted
e.g. reasonable satisfaction rather than main contractor’s satisfaction.”
The above are the terms to which Huxtable drew specific attention. His choices are
characterised by terms transferring risk onto subcontractors and removing safeguards
from them. This study applied this approach to modern day terms and conditions as
reported in the sample subcontracts examined as part of the Confederation’s Analysis
Notes from 2007-2009. The point of this exercise is to ascertain how much things have
changed and how many of the same type of arrangements are still being encountered in
today’s industry. This study identified ten commonly occurring clauses from the data
examined.
1. Variation of Subcontract Terms
This type of clause provides the contractor with the ability to unilaterally vary the terms
of the contract in some way. Some clauses are quite general. Other clauses allow the
contractor to take away work from the subcontractor or to vary the timings of the
subcontract work and to instruct acceleration without compensation. Varying the terms
of the contract is a very different proposition from varying the works under a contract
where a mechanism is present for valuation of the variation and the granting of an
extension of time.
2. Determination
Huxtable’s commentary on these types of terms is entirely relevant to today’s clauses.
3. Design Responsibility
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Not something originally dealt with by Huxtable, the inclusion of this type of clause
reflects the further growth in importance of the design input of specialist contractors
into the construction process. Typically, this type of clause seeks to place the
responsibility for co-ordination of the subcontractor’s design into the rest of the works
onto the subcontractor. The duty of a subcontractor is more sensibly to co-operate with
other designers and the contractor to assist in co-ordinating the design.
4. Limitations on claims for additional time and money
This type of clause is commonly worded that the subcontractor can claim an extension
of time for any event for which the contractor has himself received an extension of time.
This will obviously exclude causes of delay stemming from the contractor or other
subcontractors. Other clauses seek to limit what constitutes a relevant event for the
purpose of claiming extensions of time and loss and expense.
5. Protection
Huxtable’s commentary on these types of terms is entirely relevant to today’s clauses.
6. Future Set-off
Huxtable’s commentary on these types of terms is entirely relevant to today’s clauses.
The remaining common inequitable clauses examined have come about as a
consequence of the Housing Grants, Construction and Regeneration Act 1996 (“The
Act”). As from 1 May 1998, the position of subcontractors was materially improved in
the Act’s introduction of mandatory provisions which all qualifying construction
contracts must comply with or have their terms replaced by statutory provisions, in
particular:
• Introducing payment and withholding notices so that the subcontractors could
see why they were not getting paid and the amounts set against each figure that
was being withheld.
• Bolstering the adjudication provisions for construction contracts so that the
subcontractors could do something about it if they were not happy with the
reasons given for non-payment
• Banning conditional payment of “pay when paid” clauses except in the event of
client insolvency
7. The Costs of Adjudication
Huxtable was writing before statutory adjudication was introduced and therefore at the
time of writing the Report no attempts were being made to limit its potentially harmful
effects to main contractors. The clause makes the referring party responsible for the
costs of the adjudicator, and/or inter-party costs irrespective of whom the adjudicator
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has determined has won. As the referring party will usually be the subcontractor this
means the subcontractor will usually pay the costs of adjudication and frustrates the
purpose of adjudication.
8. “Pay when Paid” Clauses
Conditional payment agreements are invalid under Section 113 of the Act except on the
grounds of the insolvency of the Client. However, some subcontracts still contain
measures that link payment under the subcontract in a variety of ways with payment
under the main contract. This is a conditional payment provision by another name.
9. Elongation of Time for Payment Period
Huxtable would no doubt have welcomed the provisions of the Act dealing with the
mandatory inclusion of mechanisms for determining when payment will fall due,
providing information on how much is to be paid, providing for withholding notices and
a final date for payment. However the Act allows for flexibility in the time periods
allowed and main contractors in the clauses studied have extended these periods far
beyond the four week period that would otherwise appear reasonable. Typical extended
periods run from 40-65 days and beyond.
10. Suspension
Another subcontractor friendly initiative under the Act (section 113) provided for the
ability on seven days written notice for the suspension of performance for non-payment.
It is not uncommon for subcontracts to contain provisions extending the notice that must
be given prior to suspension being legitimately allowed to fourteen days or twenty one
days.
The incidence of these terms in the twenty-two Analysis Notes studied is shown in
Table A below. The full description of the entries corresponds to the items listed 1-10
above.
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Table A – The incidence of non-standard terms in subcontracts
7. The Dangers of Non-Standard Subcontracts
Huxtable had strong views on the damaging effects of non-standard contracts.
“The contractual link is rendered un-necessarily vague and uncertain…. A busy
specialist firm may face literally hundreds of different sets of non-standard subcontract
terms and conditions and cannot reasonably be expected to assimilate all of the varying
procedures and requirements, or figure out all the legal intricacies of each set. These
terms are equally difficult to tender from effectively. It is almost impossible to price or
quantify accurately the obligations and liabilities of such widely drawn main contractor
powers.
Inevitably specialists are forced either to add a prudent margin to their pricing in the
hope it will cover all unquantifiable risks, uncertainties and liabilities or they succumb
to commercial pressures and price the job as competitively as possible while grimly
hoping that non of the risks will unduly affect them during or after the project. Either
way the client suffers.
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What happens to the specialist subcontractors who are subject to these onerous terms
and conditions? The resulting strangle on their cashflow causes some of them to starve
(at least commercially) and some of them are pushed under and drown in a sea of
insolvency, breaking up specialist teams and depriving the industry of solid chunks of
specialist expertise and experience…. There are very many cases where a competent
well-managed specialist company is simply cheated into oblivion by the onerous
conditions and procedures and behaviour of the Main Contractors under which it has
been obliged to work”.
Huxtable’s words in this section are stirring and such phrases as “cheated into oblivion”
linger in the mind. Is it though a balanced view?
As a matter of law there is nothing to prevent the parties from entering into any terms
and conditions they agree upon as long as they are not themselves illegal. According to
a leading academic (Uff, 2005) the written document is interpreted as the sole
declaration of the parties’ intention and it is from the words used that the intention must
be discovered. Why should attention be drawn to the terms and conditions of a
subcontract when the subcontractor should voice their concern before the contract is
entered into – if they do not like certain terms then why enter into the contracts in the
first place?
Huxtable is aware of this conundrum and addresses it in his Report.
“There is commercial risk in all business….It is argued by apologists for the Main
Contractors that this just “reflects commercial reality”. Perhaps it does, but it is an
ugly and unacceptable reality involving a corruption of the commercial process which
no civilised society should - or in the long run can afford to – tolerate.”
Another problem in the argument being advanced by Huxtable is that quite often
subcontractors do not help themselves in terms of acting consistently and/or collectively
in how they respond to the imposition of non-standard terms. This point picks up on the
main purpose of the Report – to provide a focal point for collective action in forming a
concerted response to the situation. The need for this co-ordinated response would
appear undiminished in the current prevailing economic conditions.
The underlying rationale to the Report appears sound although Huxtable’s language in
this section is emotive. Subcontractors being coerced into signing one-sided terms and
conditions have a direct correlation with business failure, additional costs and mistrust
in the industry. These consequences are unattractive enough in themselves to be a
motivation for avoiding them.
In the writer’s view there is an element in Huxtable’s argument which rings true
regardless of one’s starting point. There is a category of term in some forms of non-
standard subcontract which goes beyond reflecting the “commercial reality” of the
situation – i.e. the main contractor has bigger and better bargaining power – and strays
into the category of being unconscionable. This category of term makes a nonsense of
the commercial bargain struck and the roles being undertaken. Into this category falls
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such terms where risks are given to the subcontractor for matters over which they have
no control.
Table B returns to the ten most common inequitable terms identified above. For this
exercise, the terms have been coloured amber or red to denote the potential damage the
term could cause to the specialist contractor. The amber terms are those which a
specialist contractor could, in certain circumstances, be expected to manage in their
pricing structures as a quantifiable risk. The red terms appear so manifestly one sided
and unquantifiable from the specialist contractor’s viewpoint as to be hazardous.
Table B Grading of non-standard subcontract terms
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Taken as a percentage, approximately 50% of the terms examined are in the hazardous
red category. These are the clauses saddling the subcontractor with the costs of
adjudication, allowing main contractor future set-offs, limiting the recoverability of loss
and expense, placing design co-ordination on subcontractors and allowing for unilateral
variation of subcontract terms. The remaining 50% are in the second category of amber
terms. These terms are barely any more manageable for the subcontractor requiring
further guess work and predictions as to the behaviour of the main contractors involved.
One clear message to come out of this study of the Confederation’s Analysis Notes is
that legislation alone is not sufficient to improve the position of specialist contractors.
The benefits introduced by the Act have been blunted by non-standard terms and
conditions. The underlying question is how subcontractors find themselves in a position
where they feel they have no choice but to sign up to these types of provisions.
8. Huxtable’s Solution
Huxtable’s answer to the last question was clear and a theme he returned to in several
places in his Report.
“All clients of the construction industry, whether private concerns or individuals or
public sector bodies would be well advised to take a much greater interest in what goes
on at the specialist subcontractor level on their projects and also insist on their
professional advisers doing the same. …Despite the remoteness of the subcontracts
from him, the client and his professional advisers should realise he has a clear vested
interest in ensuring that the above are met.
Undue commercial pressures and the “every man for himself” attitudes which are an
inescapable by-product of onerous subcontracts have an adverse effect both on
standards of workmanship and efficiency to the lasting detriment of the client.”
Whether or not this solution is achievable - expecting the Client to look beyond their
arrangements with the main contractors – is debatable. Certainly considerable strides
were made towards this during the rise in collaborative and partnering arrangements in
the last ten years. The anecdotal evidence available today is that these
collaborative/inclusive arrangements are being overlooked in favour of a return to
competitive/adversarial type procedures. If this is right then it represents a retrogressive
step.
Perhaps a more realistic course of action for the Confederation to pursue would be to
continue along its course in exposing the types of contractual abuse identified in the
Tables set out above and promote self -help and education amongst its membership.
This goal of securing fairer future treatment for subcontractors from the other
stakeholders in the industry is entirely consistent with Huxtable’s mission. The
importance of this mission and of continuing the campaign for fairer contracts and
earlier involvement of specialists in the design process remains critical in today’s
industry.
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9. Conclusions
In section two of this paper I gave a warning that a large part of the industry would
dismiss Huxtable’s findings as a standard subcontractor rant against the other
stakeholders in the industry. The same individuals would no doubt point out that the
practices of the subcontractors themselves are to a large extent responsible for bringing
about the status quo and resulting lack of mutual trust and respect that exists in certain
parts of the industry. There may or may not be some truth in this.
This is the “chicken and egg” conundrum which goes something like this– we mistreat
you because you will mistreat us. Furthermore you expect us to mistreat you so we
cannot start being nice to you. The main thrust of the argument put forward by this
paper is that, whether or not you agree that this conundrum exists, and regardless of and
whether you would label these habits (as they have been) subbie-bashing, commercial
leverage or mere sound commercial sense, there is a category of risk transferring
contractual term shown red on Table B above which ought not to be allocated to the
subcontractor. The subcontractor has no power to control or even manage the outcome
of the risk assigned. To transfer this category of risk to subcontractor appears to be
without any logical justification and downright hazardous for the subcontractor to
accept. The work of the Confederation of Construction Specialists and other
organisations in disseminating this message is clearly of great importance.
10. References
Banwell, H (1964) The Placing and Management of Contracts for Building and Civil
Engineering Work, Ministry of Public Building Available from The Library of the
Chartered Institute of Building
Building Magazine article from 8 May 2008 – The Egan Report 10 years on accessed
on 7 May 2009 at http://www.building.co.uk/story.asp?storycode=3113047
Egan, J. (1998) Rethinking Construction. London, Department of the Environments
Transport and Regions. (http://www.rethinkingconstruction.org/).
Gray, C; Flanagan, R (1989) The Changing Role of Specialist and Trade Contractors,
Chartered Institute of Building
Housing Grants Construction and Regeneration Act 1996 available at:
http://www.opsi.gov.uk/acts/acts1996/Ukpga_19960053_en_1
Huxtable, J (1983) Corruption of the Commercial Process Published by the
Confederation of Construction Specialists
Latham, Sir M. (1994) Constructing the Team: Joint Review of Procurement and
Contractual Arrangements in the United Kingdom Construction Industry, HMSO,
London
RICS Contracts in Use Survey 2004 available at:
http://www.rics.org/Builtenvironment/Buildingcontractforms/Contracts+in+use+rep
ort.htm
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Simon, Lord (1944) The Placing and Management of Building Contracts: Report of the
Simon Committee: HMSO 1944
Uff, J (2005) Construction Law 9th Edition Thomson Sweet & Maxwell
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Florence Walker and Stephen Pryke, pp 1258-1275
Role, definition and dimensions of incomplete construction
contract documents
Florence Walker1, Stephen Pryke1
1
Bartlett School of Graduate Studies
UCL, London, WC1E 7HB,
United Kingdom
Email: [email protected]; [email protected]
Abstract:
The extent to which documentation incompleteness affects construction is well-recorded
in a plethora of anecdotes and data detailing inefficiencies generated by letting contracts
based on minimum information (Hughes and Barber, 1992). The inability to list entire
contingency ranges, reduced design fee levels, and limited time for document
development, all produce documents lacking exhaustive descriptions of parties’ rights
and obligations for every contingency (Murray and Langford, 2003; Andi and Minato,
2003; Murdoch and Hughes, 2008). Nevertheless, many parties intentionally produce
documents wherein production information, contingencies, obligations, and future
duties are intentionally left unspecified, to achieve efficient organization of exchange
and minimize transaction governance costs (Crocker and Reynolds, 1993; Al-Najjar,
1995; Saussier, 2000). Researchers call attention to theory focusing on the feasibility of
completely describing contingencies and sensitivities to all contract-period events, with
limited emphasis on the role of documentation incompleteness (Al-Najjar, 1995).
This study, informed by Al-Najjar’s (1995) approach to investigating this
incompleteness function, addresses this shortcoming. The approach requires that
contractual relations governance be conceptualized as: combining instruments to
minimize costs by evaluating transaction attributes. This conceptualization guides the
questions to be asked about incomplete documentation. It is suggested that researchers
should be concerned with reasons for incompleteness. Of particular interest here is:
defining degrees of document incompleteness and understanding influencing factors.
Also, are there situations when parties might choose incomplete documents over more
easily produced detailed documentation?
The TCE framework is considered best for systematically exploring issues surrounding
construction contract incompleteness and answering these questions. Accessing a
contract database, to review relationships between a regular building promoter and its
builders, should allow greater understanding of variability in documentation
incompleteness for the chosen project type. These results should supplement limited
theoretical guidance on the role of incompleteness and contribute to developing
consistent measures for construction documentation incompleteness and its impacts.
Keywords: contractual governance, documentation incompleteness, transaction costs
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1 Introduction
Many have observed that even when produced by the same design/construction teams,
working under seemingly similar circumstances, documentation incompleteness levels vary
from project to project. Similarly and concomittantly, there are varying results for efficient
project execution. In fact, the Tavistock (1996) and Yates and Hardcastle (2003) research
agendas provide support for the notion that an optimal level of documentation completeness
for every project is an enduring construction industry concern.
The authors are of the view that if construction project contributors, and in particular, clients,
develop sound understanding of factors influencing contractual incompleteness, they can be
better guided in contractual choices. Theorists (Al-Najjar, 1995; Crocker and Reynolds, 1993;
Saussier, 2000) and practitioners have sought to understand contractual choices and explain
variability. Unfortunately, however, only few studies empirically analyze contractual
documents generated in inter-firm relationships. Even fewer address contract completeness
levels chosen by contracting parties. Saussier (2000) identifies main contributions as being
made by Crocker and Masten (1991) and Crocker and Reynolds (1993). Although they
illustrate the methodological shift from the incomplete contracts theory (ICT) framework to
the transaction cost economics (TCE) framework for analysis of contractual incompleteness,
they do not elaborate on practical processes for defining contractual completeness and its
dimensions. Revealed from reviewing the construction literature is the confounding lack of
consensus on the importance of documentation-related construction process inefficiencies.
Some (Kumaraswamy, 1997b; Yates and Hardcastle, 2003; Yogeswaran, Kumaraswamy, and
Miller, 1997) cite incomplete documentation as a root cause for construction process
inefficiencies, while others (Diekmann and Girard, 1995) view documentation impacts as
symptomatic of other behavioural, process, and environmental root factors. Moreover,
although Yates and Hardcastle (2003) advise proactive reduction of contractual
incompleteness to improve efficiencies, they stop short of outlining procedures to achieve it.
Here, the assumption is: documentation incompleteness is a significant factor in achieving
construction project efficiency and understanding the rationale for incomplete documentation
should shed light on contractual choice questions. Current research seems to be inhibited by
the absence of a comprehensive research model or framework to enable holistic exploration of
contractual incompleteness. With this paper, we would like to contribute by proposing a
practical approach to explore contractual incompleteness. The theoretical framework for this
study is informed by the construction, law and economics, sociological and business literature
and illustrated in construction terms.
This paper proceeds by outlining developments in ICT and TCE. We then describe the
construction contract data acquisition, methodology for development of the incompleteness
measure, and explain potential results. We conclude by discussing the implications of
expected results and providing suggestions for future research.
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2 Why Are Contracts Incomplete?
Construction contracts are generally assumed to be incomplete. They are vague or silent on a
number of key features – notably, all contingencies that determine desirable choices and how
decisions are made in response to contingencies. A case in point is: structuring economic
institutions within the construction industry. Firms can be defined as nexuses of contracts
(Reeve, 1990). Applying Williamson’s (1986) logic, the construction industry can be viewed
as a network of contracts (Pugh and Hickson, 2007). Institutions are set up with loose
objectives such as: ‘to deliver improved industry performance resulting in a demonstrably
better built environment’ (Constructing Excellence (CE)); or ‘to make a measurable
difference to the value, cost and time of clients’ projects and to provide services that combine
to produce the best project and cost management in the industry’ (Davis Langdon)).
Before proceeding with contractual choice explorations, it would be helpful to introduce some
ICT terminology, as ICT seems to be the most commonly invoked framework for analysis of
problems in law and social sciences - probably because ICT is perceived to underlie some of
the most important issues in these fields (Tirole, 1999). Also, reviewing the ICT genealogy
would be instructive.
Now, Krugman and Wells (2009) describe economics as: involving creation of models that
draw on basic principles, with added assumptions, that allow modellers to apply those
principles to particular situations. Models are simplified representations of real-life situations,
designed to illustrate more complex processes. Positive economic analysis uses models to
answer questions about how the world works; while normative analysis uses models to
explain how the world should work. In contracting theory, models are used to describe
bargaining processes between agents in well-defined economic institutional settings (e.g.
uncertainty, information asymmetry, commitment and renegotiation), using the Principal-
Agent model (P-Am), which is an information asymmetry problem (an informed party meets
an uninformed party (Salanié, 2005)). The P-Am, generates two other problems – adverse
selection and moral hazard. Winch (2002) outlines these two problems in construction terms:
Adverse Selection - How can clients be sure that the most enthusiastic offer of required
resources is not the most desperate; that the lowest price is offered because nobody
else will contract with suppliers based on knowledge of their real capabilities?
Moral Hazard - How can clients be sure that firms, once hired, will fully mobilize their
capabilities on the clients’ behalf, rather than on their own behalf or for other clients?
In ICT, the complete contract is the benchmark for developing models to illustrate and aid
thinking on reasons for incomplete contracts (ICs) (Saussier, 2000). Usually two types of
complete contracts are distinguished - contingent-claims contracts (CCCs) and
complete/comprehensive contracts (CCs). CCCs are contingent on all variables relevant to
contract fulfilment. All states of nature are observable and verifiable (able to be observed by
transaction outsiders (e.g. contract enforcement authorities and courts)), leaving no possibility
for adverse selection or moral hazard. CCCs were originally conceived to model general
equilibrium – not as contracting models. This drastic simplification of contracting problems is
a highly unrealistic depiction of real-world contracts. In reality, there are contract-drafting
costs, limits on contract enforcement, and parties cannot instantly determine complex optimal
long-term contracts (Bolton and Dewatripont, 2005). It is useless to condition contracts on
variable values that cannot be settled in dispute. Even without negotiating and contract-
writing costs, and without legal system constraints, bounded rationality (BR) (parties not
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knowing precise conditions under which contracts will be executed (Winch, 2002)) forces
parties to neglect some variables whose effect on relationships is difficult to evaluate. Thus
far, economics research has made little progress in modelling BR (Salanié, 2005).
Therefore, ICT models were developed and used to account for certain standard economic
institutions that CCCs could not. CCCs are not feasible with private information, but CCs are.
For reasons outlined previously, CCs typically account for limited numbers of variables that
are believed to be most relevant; or those verifiable by courts. CCs take into account all
relevant information and are contingent on verifiable variables, enabling each party’s
obligations to be specified in all conceivable eventualities. Using CCCs as the benchmark,
therefore, ICs are contracts that do not even take all relevant variables into account.
Primarily, organizational issues motivated ICT modelling, e.g. what determines the size of the
firm; or how authority is distributed within firms? Due to conceptualization and modelling
difficulties in normative analysis of organizational issues, however, most organizations are
not set up as contracts specifying how decisions follow from eliciting information about
economies and societies. They do not deal explicitly with all possible contingencies and,
instead, leave many decisions and transactions to be determined later (Tirole, 1999). ICT
became a vehicle for analysing economic institutions and organizations, using models that
consider economic situations (Bolton and Dewatripont, 2005). At this stage of ICT
development, ICs are assumed to be prespecified, and control variables (range of instruments
for governing transactions) include: ownership titles, control rights, decision-making rules,
discretion, tasks, authority, and social conventions defining acceptable behaviour, to be
allocated among parties.
Under ICT, parties sign incomplete contracts because they would like to add contingent
clauses, but are unable to because states cannot be verified or because they are too expensive
to describe ex ante (Hart, 1995). Because of BR, contracting parties must determine some
transactions and decisions later.
3 Transaction Cost Economics and Role of Incomplete Contracts
3.1 Methodological Shift for Incomplete Contractual Analysis
Theorists seem generally satisfied with the ability of ICT to explain motivations for and
impacts of ICs. However, they specifically question the validity of ICT framework models to
formalize problems of: differences between contractual completeness levels and the extent to
which those levels result from parties’ goodwill. For an explanation of the rationale behind
contractual choice, we review Saussier’s (2000) criticisms of theorists’ efforts to model
problems within the ICT framework. Usually, ICT explanations for parties’ motivations to
sign ICs related to BR and verifiability of contract fulfilment variables. In this paradigm,
models generally make the following simplifying assumptions:
information symmetry exists between contracting parties;
contractual incompleteness is due to external constraints;
incompleteness is assumed as a basis for reasoning, rather than actually explained.
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The concern is that these assumptions are not entirely satisfied in practice and, the difficult to
formalize, BR concept is excluded from ICT analysis. Some theorists, therefore, turned to
TCE for analysis of contractual choice. In TCE, contractual incompleteness is represented as
an endogenous tradeoff between parties aiming to save transaction governance costs.
According to Crocker and Reynolds (1993), were contracting costless, in principle, it would
be possible to design arrangements complete enough to circumscribe all surplus-eroding,
redistributive tactics and intricate enough to mitigate investment distortions. In practice,
however, costs of identifying contingencies and devising responses increases rapidly in
complex or uncertain environments (usually the situation with construction contracts), placing
economic limits on agents’ abilities to draft and implement elaborate contractual agreements.
When designing contracts, parties may mitigate ex post opportunism and investment
distortions by using more complete agreements, but at the cost of increased resources
dedicated to crafting documents a priori. Consequently, environmental characteristics that
generate increased contracting costs should result in less complete contracts, whereas
conditions that exacerbate the potential for ex post efficiencies should lead to more
exhaustive arrangements.
In reality, negotiating construction projects is costly, engaging managers and lawyers.
Therefore, at some point during negotiations, costs of contemplating specific arrangements to
cover unlikely contingencies outweigh benefits. Also inability/unwillingness of courts and
third parties to verify ex post values of certain observed variables is costly. Therefore, parties
decide on a level of incompleteness. This TCE view of the role of ICs is represented
diagrammatically in Figure 1.
where
MB(L) MC(ω) p = probability that a contingency
not expressly covered by the
Costs agreement may arise
ω = degree of environmental
complexity
L = likelihood of opportunistic
(redistributive)
behaviour/activities
MC = marginal costs of contracting
MB = marginal benefit of increased
completeness
(1-p*) Contractual
Completeness
Optimal level
of Contractual
Completeness
Figure 1 The Relationship between Degree of Contractual Completeness and Marginal Costs and
Benefits of Contractual Completeness
(adapted from Crocker and Reynolds (1993))
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3.2 TCE Theory and The Role of Incompleteness in Contract Design
The limited empirical research on contract design has been heavily influenced by TCE. TCE
contract design theory is premised on ideas about contractual functions that were first
emphasized in legal literature. In particular, contracts are designed to facilitate transactions
between parties, and this purpose is achieved to the extent that contracts:
- align parties’ expectations with regard to the other’s obligations under agreement
- provide incentives for parties to fulfill these obligations,
- prevent costly disputes from arising
- provide a basis for resolving disputes that arise despite best efforts, whether the
disputes arise from opportunism or from honest misunderstandings.
Under TCE, where contractual incompleteness reflects attempts to achieve more efficient
organization of exchange by minimizing transaction governance costs, the upper bound CCCs
benchmark, is unattainable and parties do not always know optimal responses to foreseeable
contingencies (Saussier, 2000). Opportunistic and boundedly rational agents make contracts
incomplete. Also, since many investments in relationship-specific assets (having little value
outside of the relationship at hand) are nonverifiable, parties execute ICs to avoid being
expropriated of surpluses created by these specific investments.
Understanding ICs’ role can be built on the principle of combining governance instruments to
minimize transaction costs by considering primitive transaction attributes. Governing
complex transactions requires contracting parties to adapt performance to contingencies that
actually arise. Availability of other instruments, (other than explicit ICs), suggests that some
aspects of contractual performance will be governed by explicit contracts, while other
instruments (e.g. implicit social conventions contracts) govern remaining aspects. To develop
a picture of governance boundaries generated in contractual relationships, Al-Najjar (1995)
suggests imagining them coinciding with the boundaries of each governance method, over the
range of possible contingencies. These boundaries will vary across transactions to reflect
differences in primitive attributes. Boundaries will also change over time in response to
changing environments (e.g. market conditions, technological innovations).
ICT makes completeness levels difficult to evaluate, but TCE transforms the vital question
from ‘Why do parties sign incomplete contracts?’ to ‘Why are contracts incomplete in the
particular way observed?’ (Al-Najjar, 1995). For example, are gaps in performance
specifications symmetrically distributed across contracting parties in given transactions; or are
incomplete contracts lopsided - being more complete regarding obligations of one party
relative to another? Of particular interest here, is whether there are conditions under which
contracting parties might choose incomplete contracts even though more detailed contracts
could have been easily drafted. This motivates the search for definition of the degree of
contractual incompleteness of contracts and its influencing factors.
4 Definition of Incomplete Contracts
ICs have been defined as contracts that tend to specify every transaction dimension, but not
necessarily all relevant information. Furlotti (2007) defines completeness as leaving ‘no
possibility to improve efficiency by ex post adjustment of actions’. CCs can be achieved by
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determining contingencies and prescribing corresponding joint surplus-maximizing actions.
Applying this definition and relaxing CCCs assumptions enables a feasible upper bound to be
determined through a measure that considers all incompleteness dimensions. Under this
definition, CCs are contracts that utilize complex contractual governance apparatus,
contingency planning and specify transaction performance in every conceivable case. Using
this definition, a methodology can be devised to evaluate documentation completeness. This
definition assumes there are alternative governance mechanisms and behaviour prescription.
5 Construction Contracts and Incompleteness Dimensional Analysis
Through endogenizing completeness under TCE, theorists realized the impossibility of
achieving CCs through a single dimension. Before this realization, studies used differing
operationalizations to represent endogenized completeness. The focus was on measuring
degree of completeness through the various constructs. In order to truly evaluate degree of
completeness, the dimensions must be explored in greater detail.
We consider prior research evidence that supports minimizing transaction costs through
strategically incorporating contractual information based on exchange attributes. After a
comprehensive literature review, Furlotti (2007) regrouped the range of operationalizations
for endogenizing completeness under three conceptually-derived labels – specificity,
complexity, and contingency planning. These dimensions were not clearly distinguished from
each other, nor were they reconciled with the full range of contractual mechanisms observed.
Also, Furlotti (2007) opined that a single completeness dimension cannot satisfactorily
capture the extensive heterogeneity observed in contractual processes and mechanisms for
various functions (e.g. enforcement, adaptation, etc.). Furthermore, researchers examined
antecedents’ influences on contractual choice along different dimensions, without real
consensus. Thus, the recommendation is to perform systematic, empirical investigations into
all contractual completeness dimensions, to generate taxonomies based on those dimensions.
As most empirical research on contract structure treats observed contract designs as
equilibrium outcomes of competition (Argyres et al., 2007) without investigating
completeness dimensions, scarce evidence exists, prompting calls for empirical work on
contract documents (Brickley, 1999). Though much theoretical evidence exists in the
economics and construction literature, outside economics, contractual studies are rare (Smith
and King, 2007) with most empirical work ignoring completeness dimensions, in favour of its
antecedents. Few studies advise on a comprehensive practical approach.
Studies reviewed by Furlotti (2007) uncover a variety of operationalizations, fields and
contract forms. Results provide insight into corresponding construction contractual
provisions. This study proposes a more comprehensive methodology for construction that
contemplates entire documentation packages (i.e all production information (PI) and contract
forms). The completeness attribute is important for construction because parties usually sign
incomplete contracts in absence of objective criteria for determining degree of
incompleteness. The completeness determination can be a difficult choice that parties struggle
to make.
Now, as completeness determinations are expected to vary in accordance with metrics
deployed (Malatesta, 2009), our aim is to develop a single comprehensive completeness
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measure. Our approach combines a number of best practice recommendations for PI
generation and contract formulation into one unique methodology for assessing construction
contractual completeness. Also, this methodology is to be developed by analyzing an
appropriate sample set of contract documents of a particular building type and therefore,
should add content to the chosen construction industry subsector.
The construction industry is a fertile environment for observation of contract workings,
because, at 10%, it is sixth-largest GDP contributor to the UK economy (Adamson and
Pollington, 2006). So, with a broad range of subsectors and projects to choose from, evidence
can be based on large samples. Also, predominantly project-based work makes sophisticated
contracts an important feature of the business landscape. The contract will be the natural
choice for unit of analysis. Clients determine need for projects and then engage a number of
contractors to procure each project separately. This affords a rich data set to illustrate various
dimensions, while maintaining necessary sample homogeneity. From contract documentation,
completeness dimensions will be reviewed. The focus is on contract heterogeneity resulting
from contractual incompleteness. Other heterogeneity sources will be controlled by limiting
scope to similar projects e.g. in terms of size, value, a single owner, procurement route
(traditional) and relationship type (owner-main contractor). Recommended for this study are
the most widely used forms for major UK building work (JCT with Specifications and
Drawings or with Quantities to SMM7) (Cox and Clamp, 2003; Sullivan, 2004).
Empirical information is limited since detailed contractual information is not usually released.
Therefore, in addition to desk study of contract documents, those knowledgeable of contract
formulation processes, such as lawyers, client and contractor executives and personnel will be
consulted, through interviews, to obtain more detailed knowledge of project conditions;
provide greater insight into contract formulation; and confirm and/or supplement literature
findings. These individuals can also assist with dimension coding.
Dimensions can be classified as ex ante and ex post. From the Yates and Hardcastle (2003)
completeness definitions, ex ante dimensions (ambiguity/specificity, complexity, and
contingency planning) will be constructed from contract forms while ex post dimensions will
largely be derived from the PI (drawings, specifications, and bills of quantities). Ex post
dimensions, usually observable after contract execution, are manifested in phenomena such
as: ambiguities, errors and omissions in ex ante documentation. Generally, ex post dimensions
necessitate clarification of client/design team requirements and lead to variations.
6 Methodology for Evaluating Incompleteness Dimensions
6.1 Ex Ante Dimensions and Contract Forms
6.1.1 Contractual Ambiguity/Specificity
Parties use ambiguity to increase contractual adaptability and flexibility, and thus,
incompleteness. Ambiguous contracts broadly state requirements without restricting parties to
specific actions (Al-Najjar, 1995). e.g. In fixed price construction contracts, specification
ambiguity increases in order of: fixed design, scope design, cardinal points (Turner, 2004).
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To investigate the ambiguity/specificity dimension (ASD), we look to economics and
business research for guidance. As studies do not generally address ambiguity directly
(Furlotti, 2007), we turn to those designed to investigate contractual specificity/detail, and
thus conversely, completeness. We draw inspiration from the inductive Ryall and Sampson
(2009) approach, which satisfies our comprehensively objective requirements.
To operationalize ASD, first, Ryall and Sampson (2009) conduct in-depth analyses of their
sample contracts to determine forms taken by contractual terms. Next, they develop a
descriptive overview that details the structure of sample contracts. Once a general
understanding of all contract terms has been established, then the broad categories that
account for the largest portion of variance across contracts can be determined. For JCT 98, the
conditions (Cox and Clamp, 2003) cover multi-dimensional broad categories that can be
summarized as follows:
1) Intentions
2) Time Frames for Task Completion
3) Control and Contract Administration
4) Money
5) Statutory Obligations
6) Insurance
7) Termination
8) Miscellaneous
9) Disputes
10) Bonding Information
11) EDI Provisions
12) Supplemental VAT Agreement
After becoming fully conversant with the format, language, and terminology of the contract
set, some degree of consistency in types of terms used across contracts will be observable.
The aim is to identify those broad categories that would account for the greatest proportion of
variance across contracts. Next, from the most detailed form that a contract may take, the
clauses within these categories will be enumerated. e.g. JCT 98 categories 2), 4), 8), and 11)
may be deemed to account for the greatest proportion of variance. For the most detailed
contract in the set, the clauses within 2), 4), 8), and 11) will be enumerated.
Frequency and cross-frequency tables presenting incidences of occurrence and co-occurrence
of terms across contracts in the set will be developed. This structural presentation will provide
the benchmark, and thus, upper bound for ASD. Then we can check each contract against this
descriptive structure to determine how ‘fully specified’ are contracts in the set. Contractual
content can be measured by examining the number of terms within each broad category of
variance. Contract ASD can be constructed as an ordered variable, (0 to 6) based on the
number of possible clauses in the contract, across all broad variance categories.
Considering evidence from sociology and economics (Argyres et al., 2007; Brickley, 1999;
Crocker and Reynolds, 1993; Furlotti, 2007; Ryall and Sampson, 2009), the expectation is for
less detailed contracts to be formulated in environments characterized by much uncertainty.
Those contracts formulated by more experienced parties, or in the presence of heightened
perceptions opportunistic behaviour would probably receive a higher ASD designation.
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6.1.2 Complexity
Complexity dimension (CD) refers to the complexity of the contractual governance apparatus
employed to inflict penalties for uncooperative or violative behaviours. Because of BR,
parties implement contractual safeguards (stipulations in formal agreements), in conjunction
with other relationship governance alternatives, to prevent information problems, motivation
problems, and incomplete commitment problems. Usually, opportunism is inhibited by
prospective punishment (Parkhe, 1993). Heightened perceptions of behavioural hazards would
mobilize governance structures involving greater transaction costs (i.e. coordination efforts,
compliance costs, including high outlays for drafting, negotiating, monitoring, and
enforcement). According to Yates and Hardcastle (2003), construction contractual safeguards
normally take one or more of three forms, namely:
Appropriate incentives/disincentives, which usually involve some type of severance
payment or penalty for premature termination;
Procedures and mechanisms for efficient dispute resolution.
Trading regularities to support and signal intentions for ongoing and future business
relations.
Typical elements of construction contractual enforcement apparatuses are safeguards such as:
rights to examine and audit all relevant loss-and-expense claims records through a CPA firm,
arbitration and litigation, and premature termination provisions.
To compile a list of provisions making up the contractual enforcement apparatus for the
contract set under study, relevant literature and JCT construction contract forms can be
consulted and findings confirmed and/or supplemented by interviews with practitioners.
Consensus will also be sought from practitioner-provided information. Parkhe (1993), Helm
and Kloyer (2004), and Furlotti (2007) expect the intensity of these contractual safeguards to
decrease with intended relationship duration, transaction size and strategic importance,
behavioural and environmental uncertainty and generally, with the ease of observability of
counterparties’ actions.
From the foregoing, one would expect that with the perception of increased contractual
hazards, efficient/complete contracts would be more complex. Thus, more complex
(complete) contracts are expected to utilize more stringent language, be longer, include more
provisions, and provide for larger arrays of enforcement mechanisms. This reasoning inspires
research on contract complexity (Furlotti, 2007).
For the contract set under study, number and stringency for the CD can be evaluated, using
the Parkhe (1993) ‘contractual safeguards’ operationalization. This is an assessment of
strength of explicit contractual opportunism deterrents. Parkhe (1993) examines contracts for
the presence of provisions embodying the specific contractual enforcement apparatus for the
type of agreement in question. Once identified in the contract set, with the help of
practitioners, the provisions can be ranked in order of ‘increasing stringency’ to facilitate
stringency score assignment. Next, these scores can be summarized into an ‘index of
deterrents’ (IOD). For each contract, an IOD can be determined by arranging safeguards in
order of increasing stringency and assigning each its corresponding value. e.g. the first-ranked
safeguard would be assigned a value of 1, the third – 3, etc. The composite IOD would then
be computed as ∑(number of safeguard used/sum of number value of all safeguards used).
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One would expect to see higher IOD values for large, important contracts with heightened
perceptions of opportunistic proclivities.
6.1.3 Contingency Planning
For construction contracts, there are likely to be numerous important contingencies that
parties may wish to anticipate and provide for in their contracts. The contingency planning
(CP) dimension measures use of a particular strategy to achieve efficient adaptation (Furlotti,
2007). Including contingency plans in contracts is a key way of reducing contractual
incompleteness (Argyres et al., 2007). According to Mayer and Bercovitz (2008), CP clauses
specify actions to be taken by contracting parties in response to materialization of certain
world states. These clauses facilitate adjustment within a well-defined range by providing a
roadmap to follow if conditions change during contract execution. Clear codification of key
events, to enable both parties to agree on occurrence, enables one or both parties to be
required to take specific actions in response to certain events, to keep projects on track and
feasible for all parties. Usually extent of CP is based on prior interaction between parties and
characteristics of the current transaction. CP is favoured when there are greater ex ante
conflicts of interest and lower contingency specification costs.
Mayer and Bercovitz (2008) outline benefits of CP to include: preservation of flexibility and
reduction of opportunism risks. Flexibility facilitates adjustment when conditions change.
Detailing contingency plans in contracts ensures that all parties have common assumptions
and expectations, which should help facilitate adaptation. (e.g. If industry standards
unexpectedly change, CP clauses can specify responsibility for bearing new standard
compatibility costs). Also, CP lowers opportunism risks through clear specification, and thus,
can constrain parties’ responses. Difficulty and cost of writing applicable clauses, however,
complicates CP because additional resources (managerial time and firm capital) must be
expended. Clearly, parties face a trade-off in deciding how much to invest in CP.
In construction contracts, parties often plan for changes in technology, input prices,
government regulations, and product requirements. Though specific focus and wording of
these clauses may vary, generally, they are either relatively generic, specifying processes or
procedures to follow ‘in case something occurs’; or they can deal with possible occurrence of
specific events. Examples of contingency clauses are: instructions for variations (general),
change orders (general) and JCT 98 ‘relevant events’ (specific) clauses.
Probably, CP will be positively related to level of task interdependence, appropriability of
proprietary technology, and prior relationships between parties, as repeat interactions allow
partners to develop relationship-specific routines, so lowering costs and effort of explicit CP
(Furlotti, 2007). CP will probably be negatively related to contingency specification costs.
The study contract set will contain detailed descriptions of projects, including type of service
required, and parties’ responsibilities. Contracts can be graded on: ‘degree to which parties
develop explicit response rules for specific classes of events’, using the Mayer and Bercovitz
(2008) three-point CP scale:
0 if there is no CP for the project
1 if there is CP to accommodate ‘any’ kind of change
2 if there is more specific and detailed CP
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CP is expected to increase with the level of task interdependence, appropriability of
proprietary technology, and with working histories. Contracts executed in expensive
contingency specification cost environments will probably receive lower CP ratings.
6.2 Ex Post Dimensions and Production Information
6.2.1 Production Information and Ambiguities, Errors, or Omissions
The Construction Project Information Committee (CPIC) (2009) defines PI as ‘information
prepared by designers, which is passed on to construction teams to enable project to be
constructed’. PI describes the nature and quality of work to be constructed, must be based on
substantially complete design and is conveyed by drawings, specifications, bills of quantities
(BQs), or schedules of work (for smaller projects). PI must be of good quality to be effective
and for design to be satisfactorily realized. Poor PI causes delays, extra costs, and poor
quality, which, in turn, give rise to disputes over responsibility for problems. Effective
communication of complete, accurate, and coordinated PI is, therefore, of vital importance to
construction project success (CPIC, 2009).
Construction project evidence (Andi and Minato, 2003; Tilley, McFallan, and Tucker, 1999)
supports the notion that poor or missing PI causes many problems on site. NEDC (1987) also
claims that improved PI quality reduces the incidence of site quality problems and leads to
significant cost savings in construction work. Therefore, one would expect greater efficiencies
to be realized on projects managed with more complete PI.
The recommended approach to measuring PI completeness is largely similar to that
recommended for measuring ASD. The starting point would be to become fully conversant
with formats, language, and terminology of the contract set PI. After accounting for the
greatest proportion of variance, the expectation is for the greatest variability to be observed in
the PC Sums, Provisional Sums and Quantities; and in documentation Ambiguities, Errors, or
Omissions (AEO). These two categories will be dealt with separately. For the AEO category,
the practical guidance offered by CPIC (2009) for overcoming PI deficiencies can be utilized
to create checklists for review of PI documentation practice.
6.2.2 Bills of Quantities
Bills of Quantities (BQs) is a product-based cost model that measures finished work in place.
BQs provide an agreed basis for categorizing and analyzing finished work – according to an
industry-agreed convention: e.g. SMM7 (Kirkham, Greenhalgh and Waterman, 2007).
As many SMMs are in common use, we expect that all the BQs in the contract set will be
prepared using rules in a specified SMM. Thus, minimal variability in application of SMM is
expected and to arrive at a completeness rating, focus will be on actual BQs sums and
quantities. The most complete BQs (i.e. the contract with BQs containing fewest PC Sums
and Provisional Quantities and Sums) will serve as the upper bound for BQs for this type of
project. The lower bound contract will be that containing the most PC Sums and Provisional
Quantities and Sums. The BQs rating scale can then be calibrated to create a 5-point scale.
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The completeness level for all other BQs from the other contracts within the set are expected
to fall within these bounds and will be rated on a scale of 1-5, accordingly.
6.2.3 Drawings
A Drawings checklist will be prepared. The following are completeness considerations:
Spatial and Technical Coordination
Drawing Annotations – logical pattern of links between drawings
Drawing Arrangement – inclusion of a Drawing Register
Drawing Numbers and Titles – containing appropriate identification information
Revised Drawings – revision descriptions and dates
6.2.4 Specifications
Production specification defines construction mainly in prescriptive terms, describing
products to be used and important aspects of workmanship (CPIC, 2009).
The following are considerations for a checklist to evaluate Specifications completeness:
Specific to the project, with no irrelevant material
Comprehensive, covering every significant aspect of quality to a degree of detail
appropriate to importance and nature of work
Practicable, requirements being specified having regard to nature of the project and
available knowledge and resources
Constructive - helpfully specific so that all parties know what is expected.
Technically correct and up-to-date, reflecting current good building practice and
current statutory requirements
Enforceable, requirements being specified only if compliance can be demonstrated
economically and within an acceptable timescale.
Well-coordinated, with no conflicts or ambiguities, either within itself, or with
drawings and measured information.
Developed throughout the project lifecycle to become an essential part of as-built
information.
To determine AEO completeness, the checklists will be used to generate ratings for each
contract document package in the set. If the contract document package under review
specifies all listed items, then it will be given the maximum score. If documents do not
specify any items, then the PI information in question will scored 0. For intermediate levels of
AEO completeness, the number of checklisted items present in the package will be
determined. Then, this number will be divided by the total number of items specified on all
the AEO checklists in order to arrive at a completeness rating for the package under review.
6.3 Overall Completeness Rating
At this stage, all completeness ratings for all the contractual dimensions can be determined.
Summing all the completeness dimension values:
(ASD+CD+CP+BQs+AEO),
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will provide an overall score for contract documentation completeness that contemplates form
of contract and PI. This methodology provides an objectively quantitative analytical
procedure for determining contractual completeness.
7 Conclusion
The ICs theoretical framework development in the economics literature is summarized as
follows. Original ICT approaches to conceptualizing contractual relations governance led to
focus on why contracts are incomplete and incompleteness in and of itself. Typically,
contractual incompleteness is explained by inability to describe certain events ex ante, even if
those events and their implications are easily recognized ex post. The main issue for economic
analysis is: how to structure contractual incompleteness. (i.e. incentives, organizations’
decision-making procedures, discretion versus rules, and accountability (Bolton and
Dewatripont, 2005)). Contract formulations are rarely explained as optimization (choice of a
level of incompleteness) problems. Under TCE, the substantive change is to shift focus away
from procedural and institutional design to determining most efficient contracts for project
governance. The change of assumptions inspired research that focused on measuring ‘degree
of completeness’ and related concepts.
Awareness of economists’ use of models as satisfactory descriptive tools should guide
economics literature navigation. Each model has its own logic and should be interpreted
accordingly. Because economists base conclusions on models, variation in appropriate
simplifications, and therefore, different conclusions are always possible. Usually, consensus
develops with evidence accumulation, showing which models better fit facts. However, in
economics, as in any science, it may be a long time before research settles important disputes.
Since the world always changes, (making older models invalid or raising new questions and
problems), there are always new issues on which economists disagree. Researchers must
therefore, decide which framework to subscribe to.
Although the TCE theoretical framework does not yet allow complete problem formalization,
it allows derivation of testable propositions (Crocker and Reynolds, 1993; Saussier, 2000).
(e.g. Contractual incompleteness level is an endogenous choice for minimizing transaction
costs.) By removing the assumption that parties have complete, unconstrained rationality,
TCE imparted considerable thrust toward analyzing actual contracts (Williamson, 1975).
Some (Parke, 1993; Smith and King, 2009) believe that empirical analysis will quicken
consensus. Here, the authors believe that TCE offers the better vehicle to systematically
explore issues surrounding construction contract incompleteness and answer the
fundamentally important question of ‘How complete should contracts be?’
There are several other scientific benefits to a TCE analytical approach to construction
contractual incompleteness. Most importantly, a standardized methodology for
operationalizing documentation incompleteness, which can then be used as a documentation
metric, is provided. The method reviews the entire documentation package, rather than just
the contract form - the usual approach. Also, this methodology illustrates achievement of
sample homogeneity to enable true comparison between contracts for the full breadth of the
incompleteness variable.
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Additionally, access to a rich dataset would provide greater understanding of a chosen
industrial organization. There can be observation of details of how this organization manages
contractual development activities to devise responses to challenging development issues,
such as: dealing with opportunistic partners, contracting in complex and uncertain
environments, and how complete to make the contract documents. Not only will there be
better insight into antecedents of documentation design, but this research will enable
observation of contractual role beyond the legal function of providing third party resolution.
Contractual influences on project performance can be observed.
Given the sparse research base on building contracts formulation, we recommend that a model
linking incompleteness and contract documentation be developed. New empirical findings on
contract variation across incompleteness dimensions will add to a growing body of literature
on detailed contractual analysis. Such a study should make several other contributions to
construction contracting literature. It can be considered a response to the Ryall and Sampson
(2009) call for more holistic approaches to be taken to examine contracts and contexts with a
view to providing some empirical regularities for advancing theory development. Using this
methodology should make a contribution to empirical contract research, where studies dealing
with large sets of contractual provisions are still rare. For construction project management,
empirical proof of an efficient level of contractual completeness should be compelling.
Finally, this type of investigation should add to the construction contract documentation
literature by extending prior research on incompleteness and construction process
inefficiencies (Yates and Hardcastle, 2003). Empirical support for associated hypotheses
would have positive and normative implications, since it would suggest that later problems
could be mitigated by ‘front end’ procedures. Access to actual contracts to permit detailed
analysis is expected to be difficult and therefore, some form of sampling will have to be
employed. This could distort results if sampling is not properly performed. Notwithstanding
this limitation, we expect the results to provide provocative insight into considerations for the
process of designing an instrument to measure documentation incompleteness. Literature
reviews and subjective analysis is a good starting point, but with more formal empirical
analysis, this kind of study will complement existing theory and suggest some promising
directions for extension. Our analysis should provide a useful guideline for future studies to
better understand parties’ abilities for effective coordination; and ultimately, quantify
contractual incompleteness impacts for construction project management.
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
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RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Philip Britton, pp 1276-1291
Liability for building damage caused by construction
operations: the common law in evolution
Philip Britton
Centre of Construction Law and Dispute Resolution
King’s College London
United Kingdom
Email: [email protected]
‘Perhaps only lawyers can understand how such a simple issue such as this
[liability for property damage caused by construction], through the process of law,
comes to be governed by a mass of convoluted and irreconcilable rules; surely
only the bravest amongst them would attempt to explain it to the average citizen.’
1
YONG PUNG HOW, CHIEF JUSTICE OF SINGAPORE
‘The development of the common law should be rational and coherent. It should
not distort its principles and create anomalies merely as an expedient to fill a
gap…’ LORD HOFFMANN2
Abstract:
When construction operations cause damage to a neighbour’s buildings or structures, on
what basis (if any) do they give rise to civil liability, on whom and under what
conditions? The paper considers ‘the right of support’ which a landowner may enjoy in
relation to a neighbour and the remedies for its infringement. The law of England &
Wales interprets this right relatively narrowly, but other jurisdictions whose law derives
from English law have recently become more generous – as a result, harder on the
owner of the land whose construction causes damage, as well as on the project team
involved. The paper concentrates on principles deriving from caselaw.
Keywords:
Construction, buildings and structures, support, damage, tort, liability
1 Introduction
There are many ways in which construction operations on Plot A may impact negatively
on Plot B alongside. Some of these may be inevitable, temporary and cause little or no
damage or loss, like noise and dust while the work is ongoing; but some are more
serious and potentially permanent. What if excavation or demolition on Plot A causes
buildings or other structures on Plot B to need repair, or even to collapse entirely? This
significant – and expensive – scenario is the focus of this paper, which places us in the
realm of the law of tort, the functional equivalent of ‘the law of delict’ in legal systems
of the civil law tradition, like Scotland or South Africa. This is for the simple reason
1
Xpress Print n 52 [37]. Yong was Chief Justice from 1990 to 2006; a law student in Cambridge at the same time
as Lee Kuan Yew and his wife, he had a distinguished career in banking and the public service before becoming
a judge in 1989.
2
Hunter v Canary Wharf Ltd, Hunter v London Docklands Development Corporation [1997] AC 655 (HL) 707.
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that in our scenario there is unlikely to be a contract between the party whose buildings
or structures have been damaged and any other party potentially responsible; if there is,
it is more unlikely still that it contains any provisions relevant to liability for that
damage.
Anyone who has only slight familiarity with the English version of the law of tort will
know Donoghue v Stevenson.3 This is the case – arising in Scotland – which in May
1932 led a majority of the Law Lords, our highest court of appeal in civil cases, to
transform and generalise the law of negligence, in English as well as Scots law. In the
context of a claim by the ultimate consumer of a soft drink against the manufacturer for
damages for personal injury, the judges took a fresh look at legal principle.
Starting from the list of factual categories accepted by caselaw, where one party already
owed a duty to another not to cause harm, the judges argued that these specific
categories must logically be examples of a more general idea. This they then articulated
as a broad (though not universal) principle of civil liability for fault. Following Lord
Atkin’s language in Donoghue, the threshold conditions for this liability became famous
as ‘the neighbour principle’.4 A duty of care would now arise when A ought reasonably
to foresee – according to the court – that if he or she failed to take reasonable care, harm
of a reasonably foreseeable type could be caused to the claimant B,5 classed in law as
A’s neighbour. Liability would follow if A’s negligent actions (or, sometimes, failure
to act) led to B suffering the form(s) of harm against which it was A’s duty to guard.
Applying these simple but powerful ideas, it may seem obvious that construction
operations on Plot A which cause damage to buildings or structures on Plot B should
give rise to liability in the party responsible, at least if negligently undertaken. What
better example of the reasonable foreseeability of harm – in this case, property damage
– to B, a neighbour in fact, as well as in law?
But the law, like life, is seldom as straightforward as we might hope or expect: and
negligence, in 2009 as in 1932, is not the whole of the law of tort. This paper therefore
explores – and aims to explain, though not necessarily to justify – how liability at
common law for property damage caused by construction operations obeys principles
which have only a tangential relationship with the ‘big ideas’ of negligence. As will
become clear, courts across the common law world have in the last two decades been
feeling their way towards new approaches to these issues: it is an area of (judicial)
‘work in progress’.
3
Donoghue v Stevenson [1932] AC 562 (HL Sc). The case came to London on appeal from the Court of Session
(Second Division) in Edinburgh on a preliminary point: even if the claimant (‘pursuer’) could prove all the facts
she was alleging, would she still be bound to lose the action?
4
The key passage from Lord Atkin’s speech n 3 580: ‘You must take reasonable care to avoid acts or omissions
which you can reasonably foresee would be likely to injure my neighbour. Who, then, in law is my neighbour?
The answer seems to be – persons who are so closely and directly affected by my act that I ought reasonably to
have them in contemplation as being so affected when I am directing my mind to the acts or omissions which are
called in question’.
5
In relation to English law, the paper uses ‘claimant’, the current term for the party initiating a civil action, even
for the past when ‘plaintiff’ would have been used. ‘Plaintiff’ is used where appropriate in relation to other
jurisdictions. A, B, M and other abbreviations for possible parties refer equally to individuals and legal entities.
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2 Damage to land, buildings and structures: English law
2.1 Rights and remedies
The most common function of the law of tort is compensatory, looking to the past: to
shift a loss (financial or other), by awarding a successful claimant damages against a
legally responsible defendant for a wrong that has occurred. In our scenario, where the
claimant’s buildings and structures have already been affected, damages will principally
be for either (a) the drop in capital value caused by the damage; or (b) the cost of repair
(‘reinstatement’, as the law calls it) of the buildings, structures and land, back to the
condition they were in before the tort occurred – which could involve demolition and
rebuilding, if damage has made the building structurally unsound. The claimant may
also claim for consequential economic losses (business interruption, loss of rental
income etc); and for the building’s contents, if damaged or destroyed at the same time.
In such an after-the-event context, our claimant B must show that the defendant A has
infringed his or her rights; and that the decrease in value or need for repair, plus any
other losses claimed, falls on B but derives causally from A’s conduct. When
excavation starts on Plot A close to its boundary and the walls of B’s building alongside
immediately start to show cracks, this cause-and-effect relationship may not be hard to
show, at least to the required civil standard of proof of ‘the balance of probabilities’. It
will still need documenting to the court’s satisfaction and evaluating in money terms:
this normally means instructing a building surveyor as a future expert witness. The
surveyor will, as well as giving a view about the cause and implications of the damage,
usually propose a costed scheme for reinstatement as the main part of the claim; but
may also be asked to put a figure on the difference between the building’s pre-damage
and post-damage market (or rental) value.
The next-door owner or tenant A is usually the first defendant, but B may choose also to
sue those working on A’s behalf on the project, for whom A may be legally responsible
but who may be liable in their own right: usually M, A’s main contractor, but possibly
also consultants C1 etc and specialist sub-contractors S1 etc. If B fails to name these
further parties as second, third etc defendants, and if they are worth suing, A may bring
some or all of them into the litigation as extra parties under Part 20 of the Civil
Procedure Rules (CPR) (‘Counterclaims and Other Additional Claims’).6 A will be
hoping to assert three possible rights against these extra parties, if the case gets to court:
1 To be indemnified by one or more of them, if B succeeds in a claim against A –
depending on the terms of A’s contractual relationship, if any, with each and its
possible allocation of this specific risk;7 and/or
2 To have one or more of them make a contribution towards A’s liability, if also
liable to B in tort for the same damage;8 and
6
For the current text of the CPR (SI 1998/3132, as heavily amended), see <www.hmcourts-service.gov.uk>, also
Waller (2009).
7
On English standard forms of contract for construction and their treatment of ‘neighbour risk’, see Britton
(2006) 499-500.
8
Under the Civil Liability (Contribution) Act 1978: according to s 2, the contribution owed by another party
towards A’s liability – ‘such as may be found by the court to be just and equitable having regard to the extent of
that person's responsibility for the damage in question’ – could range between zero and a complete indemnity.
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3 To have one or more of them, if judged liable, pay an appropriate share of those
costs payable to B at the end of the case which A would otherwise have to
shoulder alone.
Even after liability is established, there may be significant disagreement between the
parties about what lawyers and judges call remoteness of damage (what types of loss are
reasonably foreseeable as flowing from A’s conduct?);9 and quantum (what is the
correct amount in money of the damages which should be payable?). Specifically, the
parties may disagree about:
• the causal relationship between the construction work and all or part of the
damage now asserted
• whether repair is the right measure of damages, rather than loss of capital value
(or vice versa)10
• the appropriate scale of the repair work proposed and its cost
• the point in time at which the damages should be assessed.11
Any of these possible issues may be enough to bring at least one expert into the frame
on the defence side, unless the court’s exercise of its active case management powers
under the CPR leads to appointment of a single joint expert.12 For a good example of
the multi-party and multi-issue nature of such disputes, see the Singapore Afro-Asia
case, discussed below.13
The law of tort, in our scenario, may provide the owner or tenant of Plot B with after-
the-event compensation; but may also offer effective prevention, backed with the
impressive sanctions of contempt of court. B does not have to wait until damage has
already occurred: provided a real risk to his rights in his land from planned construction
on Plot A alongside can be identified in advance and a court or judge mobilized in time,
a prohibitory (negative) injunction may be available to prevent the work which might
lead to this infringement – against all the same parties as might be defendants in a claim
for damages.
In practice, an injunction is far rarer than a claim for damages after the event; but the
two are not clear-cut alternatives, since a claim for damages could be combined with an
9
The burden lies on the defendant/s A and others to show that any category of harm claimed is too remote –
seldom a live issue for property damage caused by construction nearby. For a claim based on an ‘escape’ under
Rylands v Fletcher where remoteness (and hence reasonable foreseeability) was key, see Cambridge Water Co v
Eastern Counties Leather plc [1994] 2 AC 264 (HL).
10
On the choice between loss of value and reinstatement as a measure of damages, see Dodd Properties Ltd v
Canterbury City Council [1980] 1 WLR 433 (CA), relied on by Judith Prakash J in Afro-Asia n 63. Donaldson
LJ said 456H: ‘If he [B] reasonably intends to sell the property in its damaged state, clearly the diminution in
capital value is the true measure of damage. If he reasonably intends to continue to occupy it and to repair the
damage, clearly the cost of repairs is the true measure. And there may be in-between situations’.
11
In Dodd v Canterbury n 10 the Court of Appeal held that the relevant date for assessing the cost of repairs is the
date when the repairs might first reasonably have been undertaken – often much later than the date the cause of
action arose; so increases in construction costs are at the loser’s risk. In the case, it was reasonable for the
claimant to wait for a clear outcome on liability – part of which hinged on the outcome of a trial.
12
Part 35 of the CPR n 6 attempts to facilitate appointment of a single joint expert in civil litigation: see the
commentary in Waller (2009). In the specialist Technology and Construction Court, where cases involving
liability arising out of construction are often heard, the TCC Guide (2nd ed, 2005, revised 2007) accepts at
[13.4.1] that a single joint expert is not usually appropriate for the principal liability issues in a large case, or
where considerable sums have already been sent on an expert in the pre-action stage. For the TCC Guide, see
<www.hmcourts-service.gov.uk>, also Waller (2009).
13
Afro-Asia: n 63.
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injunction to prohibit further work, if the court were convinced that further invasions of
B’s rights were likely, or if the present infringement was a continuing one. However,
the court is traditionally reluctant to put itself in a position where it could be called on to
supervise construction work, so it would be unusual for it to grant a mandatory
injunction, requiring affirmative action by A or his construction team.14
2.2 Legal categories
Seen with twenty-first century eyes, it may seem obvious that an owner or occupier of
land should be protected by law against activities on neighbouring plots which cause
damage to his/her land, or to the buildings and structures on it: but English law at
present goes only part-way down this road. Historically, damage to buildings and
structures is treated in English law as damage to the land itself (more accurately, as an
infringement of B’s enjoyment of his or her rights in the land). The remedies the courts
developed fit in a pigeonhole labelled private nuisance – one of the branches of the law
of tort, along with trespass to land, whose role is to support and protect private rights
deriving from the law of real property.15 So there is a ‘property test’, but this is
relatively easy to satisfy: B, as potential claimant, has to enjoy (or claim the right to)
exclusive possession of Plot B.16 In English law, freehold ownership or a tenancy
clearly meets this requirement, but B will also qualify if s/he has an informal ‘family’
interest in the land (eg by contributing towards the purchase or rental of a home), and
even if s/he has only de facto occupation as a trespasser.17
Almost a century ahead of the twentieth-century generalisation of the law of negligence,
English law therefore had principles which could impose liability for property damage
caused by construction. There are two categories of land-related rights to bear in mind;
both are protected by actions for damages and, at the limit, by injunctions too:
1 A basic bundle of rights which every affected owner or occupier of land enjoys:
protection for the physical integrity and enjoyment of his/her land, including
limited protection against damage caused by activities on neighbouring land;
14
For an example of a mandatory injunction preventing construction work, but in the context of trespass to land
rather than private nuisance (‘remove your scaffolding and materials from my land’), see John Trenberth v
National Westminster Bank Ltd (1980) 253 EG 152 (Ch). The plaintiff B in Afro-Asia n 63 requested an
injunction to force M1 to remove temporary support from B’s building, but this too was technically a remedy for
trespass; it was linked to the wider claim for damages, in which B claimed the cost of a less unsightly and more
permanent form of structural support.
15
The paper does not discuss the violation of public rights (eg public rights of way, registered commons etc) by
construction, nor the law of public nuisance – but on relying on public nuisance to claim compensation for
economic loss caused by nearby construction, see Westminster City Council v Ocean Leisure Ltd [2004] EWCA
Civ 970, [2004] BLR 393; nor does it consider forms of protection of neighbours against construction operations
via public law, eg against excessive noise via the intervention of local authorities.
16
According to the majority in Hunter n 2, as a result (a) a mere licensee (eg a lodger, or family member with no
beneficial interest) does not have a right to claim in private nuisance; (b) any damages awarded are divided
equally between all qualifying occupiers of a single property unit; and (c) if B is a tenant, his landlord L may
have a separate claim against A etc for the loss in value of his reversion, though the terms of the lease may allow
L to claim this directly from B, leaving it to B to get reimbursed from A etc if he can.
17
The principle that land law protects even a squatter – a trespasser with exclusive possession of the land – (except
against someone who can show a better title) derives from Asher v Whitlock (1865) LR 1 QB 1 (QB).
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2 A’s neighbour in Plot B may enjoy additional rights, deriving from a specific,
ongoing land law relationship between his/her land and Plot A, the construction
site.18
Unlike the post-Donoghue law of negligence, with its ‘duty of care’ threshold test and
fault as central, private nuisance in English law19 imposes what lawyers and judges call
strict liability. For a claim for damages in this branch of the law of tort, all B has to
prove is the fact of damage to his buildings or structures caused by A’s operations, as
long as this infringes a legally protected right. So B does not need affirmatively to
prove fault, nor does A escape liability by showing that s/he took all reasonable care in
commissioning, planning or executing the construction operations which have now
infringed B’s rights by causing damage to his land.20
The quotation from Lord Hoffmann at the head of this paper reflects the majority view
in Hunter v Canary Wharf21 that these distinctions between the property torts and
negligence are meaningful functional ones, which ought not to be blurred. In practice,
however, claimants complaining of damage from construction, as in Hunter itself and
Afro-Asia below,22 often go for a ‘belt-and-braces’ approach; so they frame their legal
actions at the same time in nuisance, negligence and (for good measure)
undifferentiated ‘breach of duty’. Doing so risks at worst adverse consequences in
costs, if not every head of claim is successful.
2.3 Rights enjoyed by every owner or occupier
By the middle of the nineteenth century, long before our present statutory systems
regulating land use and the process of building were introduced, two distinct versions of
potential liability relevant to construction were already established in English caselaw:
1 Where materials or substances ‘escape’ from A’s construction site and cause
damage to B’s land, buildings or structures (the principle in Rylands v
Fletcher,23 with special rules for the escape of fire) [for space reasons alone,
beyond the scope of the present paper]; and
18
Party walls, though outside the scope of this paper, are a special example of this category, familiar to building
surveyors. See Louis v Sadiq 59 ConLR 127 (CA): a nuisance was committed by works which failed to comply
with the statutory procedures, and the right to damages was unaffected by the statutory party wall scheme.
19
But not in Scots law: see n 23.
20
Lord Simonds in Read v J Lyons & Co Ltd [1947] AC 156 (HL) 183: ‘… if a man commits a legal nuisance it is
no answer to his injured neighbour that he took the utmost care not to commit it.’ However, in Afro-Asia n 63
Judith Prakash J regarded the separate liability of all defendants other than A as fault-based.
21
Hence the view of the Lords in Hunter n 2 that to claim damages for personal injury, even when caused by
construction operations on nearby land, requires an action framed in negligence, rather than nuisance, as this is
not an infringement of land rights; and (for the same reason) that harassment by repetitive phone calls does not
properly fit within the tort of private nuisance.
22
Afro-Asia: n 63.
23
Rylands v Fletcher (1868) LR 3 HL 330 (HL), approving Blackburn J speaking for the Exchequer Chamber
(1866) LR 1 Ex 265, 279: ‘… the person who for his own purposes brings on to his own lands and collects and
keeps there anything likely to do mischief if it escapes, must keep it in at his peril, and, if he does not do so, is
prima facie answerable for all the damage which is the natural consequence of its escape’. In Transco plc v
Stockport MBC [2003] UKHL 61, [2004] 2 AC 1, the House of Lords refused to follow the majority of the High
Court of Australia in Burnie Port Authority v General Jones Pty Ltd (1994) 179 CLR 520, who held the rule
‘absorbed’ into the law of negligence; in RHM Bakeries v Strathclyde Regional Council 1985 SLT 214 (HL Sc),
on appeal from the Court of Session, the Lords agreed that fault must be asserted in claiming damages in
nuisance in Scots law, though see also n 74.
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2 Where activity on A’s land (usually excavation) itself causes damage by
diminishing the support for B’s land, structures or buildings alongside.
Point 2 is best illustrated by Dalton v Angus,24 where the owners of a factory (B)
claimed damages against their next-door neighbour (A) and his main contractor (M);
B’s building had collapsed after M demolished A’s own house and started to excavate.
After a jury trial in Newcastle in 1876 and three hearings before intermediate courts, the
case reached the House of Lords in 1879. The case was thought to raise such difficult
questions of principle that the procedure adopted in the Lords was unusual, if not
unique: the five Law Lords asked for a second sequence of hearings of the final appeal,
seven extra judges of lower rank being present to give their views, before giving
judgment themselves in 1881.
The starting-point, agreed by all the Law Lords, was that every piece of land has a
‘natural right of support’ from its neighbours, protected by the law of tort via private
nuisance.25 As Lord Blackburn put it:
… the owner of land has a right to support from the adjoining soil; not a right to
have the adjoining soil remain in its natural state (which right, if it existed,
would be infringed as soon as any excavation was made in it); but a right to
have the benefit of support, which is infringed as soon as, and not till, damage
is sustained in consequence of the withdrawal of that support.26
‘Natural’ in this context is a significant part of the definition: the protection attaches to
every piece of land, universally and permanently, without needing to be proved or to be
related back to some past land transaction, real or fictitious. So when a piece of land is
sub-divided, the new owner of Part B will acquire this right immediately against the
owner of Part A (and vice versa): such natural rights ‘require no age to ripen them’.27
However, the scope of this right is limited to damage to B’s land itself (‘earth to earth’,
so to speak): buildings or structures are not as such protected, even though for almost all
other purposes the law treats them as an integral part of the land. This was a setback for
the claimant in Dalton v Angus itself; though not in the end fatal, as the next section
explains.
2.4 Plot-specific additional land law rights?
Having defined narrowly the scope of the ‘natural right of support’ in Dalton v Angus,28
the Law Lords went on to accept that the presence of the factory on the boundary of B’s
land could be protected by an easement of support owed by A alongside. An easement
24
Charles Dalton v Henry Angus & Co (1880-81) LR 6 App Cas 740 (HL).
25
In Xpress Print n 52 [52], Yong Pung How CJ describes actions based on withdrawal of support as ‘equivalent
or akin to an action under the tort of nuisance’, which leaves some questions of classification unanswered.
26
Dalton v Angus n 24 808.
27
Field J – one of the additional judges – in Dalton v Angus n 24 752. If Plots A and B have been in common
ownership and Plot B already has buildings on it, the landowner retaining Plot A and selling Plot B would be
obliged – unless the parties agree lesser or greater obligations – to respect the scope of the right of support in
fact enjoyed by Plot B at the moment of its separation from Plot A. The subdivision of the land and transfer to a
new owner of one plot could transform a de facto ‘quasi-easement’ into the implied grant of a ‘real’ easement by
the seller of Plot A in favour of Plot B, under the principle in Wheeldon v Burrows (1879) 12 Ch D 31 (CA), or
under s 62(1) Law of Property Act 1925: see Gray & Gray (2005) §§8.128-8.167. If the facts were reversed, the
scope for an implied reservation of an easement in favour of land retained by a seller would be much narrower,
since this in effect ‘derogates from the grant’ of the plot sold.
28
Dalton v Angus: n 24.
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is one example of a land law ‘incumbrance’,29 in this case benefitting the land with the
factory on it (Plot B) and burdening the land alongside (Plot A).30 The basic idea is of a
reciprocal right and obligation, linking two pieces of land together, the equivalent of
the civil law ‘servitude’; the best-known example is a right of way which Plot B may
enjoy across Plot A.31 This is called a positive easement, since it gives B the right to do
something actually on A’s land (walk or drive across it); an easement is termed negative
where it prevents A doing something on his own land, in order not to interfere with a
right enjoyed by B. An easement protecting B against damage caused by construction
operations on A’s land is therefore negative in this sense.
If between freeholders, such incumbrances are unaffected by changes in the identity of
the owner of either plot: it is ‘the owner for the time being of Plot A’ who is bound and
‘the owner for the time being of Plot B’ who can enforce the easement. This is an idea
of immense economic and practical significance – but startling to anyone more familiar
with the limited scope for such arrangements via contract. Under English caselaw,
contractual provisions can neither impose obligations nor confer enforceable benefits on
as yet unidentified future parties. Because easements may last indefinitely,32 the courts
are anxious lest they over-inhibit future development, so are usually reluctant to add
new types of easement to those already accepted as such.33 Here, though, the House of
Lords recognised that a duty of support owed by one landowner to a neighbour can
properly qualify as a possible easement.
An incumbrance may start life deriving from an arms-length contract; but even one
beginning in this way will be more properly viewed through land law spectacles, once
the original parties are no longer on the scene.34 In Dalton v Angus35 there had been no
formal transaction, let alone a contract, between A and B, nor (so far as known) between
any of their predecessors in title. B therefore argued – his only option – that an
easement of support for the factory had come into existence by prescription (the
passage of time). Under the pragmatic doctrine of ‘lost modern grant’, resting on a pure
fiction, if the owner of Plot B acts as if he already has the benefit of an easement as
against Plot A for at least twenty years, and if all the other conditions for the creation of
29
Under the definition in s 205(1)(ix) Law of Property Act 1925, easements are also ‘incorporeal hereditaments’,
like profits.
30
This gives further terminology (avoided in the main text): the land benefitting (Plot B) is the dominant tenement
and the land burdened (Plot A) the servient tenement.
31
For an illustration of the closeness of the Scots law of servitudes to the English law of easements, see Moncrieff
v Jamieson [2007] UKHL 42, [2007] 1 WLR 2620 (HL Sc): right to park implied from ownership of other land.
32
An easement can be modified, or discharged entirely, by agreement between A and B, owners for the time being
of the two plots; under current English law, there are no grounds on which an existing easement can be
challenged before a court or tribunal, though the Law Commission (2008) is considering introducing such a
possibility, along lines familiar from restrictive covenants under the Law of Property Act 1925 s 84 (as
amended) and – less well known – the Housing Act 1985 s 610: see Lawntown Ltd v Camenzuli [2007] EWCA
Civ 949.
33
See Lord Denning MR in Phipps v Pears [1965] 1 QB 76 (CA) for a classic statement of this reluctance, in this
case to invent a new ‘easement of protection from the weather’ – but the case also illustrates the courts’
willingness to enforce identical restrictions on the burdened land, as long as the parties (or their predecessors in
title) have created them expressly by covenant. Phipps v Pears has been distinguished in ‘right to support’
situations by Rees v Skerrett n 76.
34
One of the conditions for acquiring an easement by prescription is that it could have been acquired by grant: ie
there must be a party who had the power in law to grant it expressly and a party who could lawfully acquire its
benefit. On this see Housden v Conservators of Wimbledon & Putney Commons [2008] EWCA Civ 200, [2008]
1 WLR 1172 (interpretation of statutory powers of alleged ‘grantor’).
35
Dalton v Angus: n 24.
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an easement are satisfied,36 the court will hold that (a) the owner of Plot A must at some
point in the past actually have granted the owner of Plot B the easement in question; but
(b) documentary proof of this grant must have been lost.37
These tests the court accepted B had satisfied, since the factory had in fact been built
twenty-seven years before work on the neighbouring land caused its collapse and the
litigation. As a result, though, B would have enjoyed no legal protection for his factory
until the end of the last day of the prescription period, seven years or so before. Lord
Penzance, who alone among the Law Lords would have preferred B to have acquired a
right of support the day the new factory was built, spelt out the consequence:
… at any time within twenty years after [a new house] is built the owner of the
adjacent soil may with perfect legality dig that soil away, and allow his
neighbour's house, if supported by it, to fall in ruins to the ground.38
That any judge should find such an outcome acceptable, on technical land law grounds,
may strike us as bizarre and even shocking; the more so since the Law Lords quoted
approvingly a Latin maxim already in wide use: ‘sic utere tuo ut alienum non laedas’
(‘use your own property in such a way as not to injure another [or his property]’).39 If
applied literally, as a tort law basis for the legal relations between neighbours, this could
have short-circuited all talk about easements and prescription – as it has more recently
in other common law jurisdictions40 – and would have added a clear moral dimension to
the legal rules. In the case itself, the judges did not have to confront B’s vulnerability
while the prescription period ran, since he fulfilled the tests for already having acquired
an easement; its breach had also been shown. B therefore got his award of damages,
jointly against both A and M.
A argued that any liability should rest only on M, who after all actually did the work
which caused the damage. Lord Blackburn firmly rebuffed this idea:
… a person employing a contractor to do work is not liable for the negligence
of that contractor or his servants. On the other hand, a person causing
something to be done, the doing of which casts on him a duty, cannot escape
from the responsibility attaching on him of seeing that duty performed by
delegating it to a contractor. He may bargain with the contractor that he shall
36
The common law rules for the creation of easements remain strongly influenced by successive editions of Gale
on Easements. In Gale’s first edition (1839), the author admitted: ‘Upon some points indeed there is no
authority at all in English law’ – hence his reliance on Roman law ideas, shared with Scots and South African
law. The key conditions are usually summarised in the Latin ‘nec vi, nec clam, nec precario’ (neither by force,
nor secretly, nor by permission). Dalton v Angus n 24 discusses the original Roman law, as well as applying the
tests to the construction of a new building on a neighbour’s land, where there will normally be no question of
either force or permission; but with a right of way, the issue of permission may be crucial, as in Odey v Barber
[2006] EWHC 3109 (Ch), [2008] Ch 175. As to secrecy, Lord Coleridge in Dalton v Angus said 801: ‘Where,
as in the present case, a private dwelling-house is pulled down and a building of an entirely different character,
such as a coach or carriage factory, with a large and massive brick pillar and chimney stack, is erected instead of
it, the adjoining proprietor must have imputed to him knowledge that a new and enlarged easement of support
(whatever may be its extent) is going to be acquired against him, unless he interrupts or prevents it’. In practice,
A will usually have no means of interrupting or preventing it except via negotiation with B, backed by the threat
that A may otherwise remove the support his own land represents during the prescription period.
37
This fiction is so strong evidentially that ‘a court is even obliged to disregard clear evidence that no interest was
ever granted in favour of the dominant land’: Law Commission (2008) [4.171].
38
Lord Penzance in Dalton v Angus n 24 804. Yong Pung How CJ points out in Xpress Print n 52 [22] that, since
all judges agreed that an easement had been acquired, this statement is technically obiter.
39
The maxim derives from the Roman jurist Ulpian (c160-228AD), whose writings in turn constitute almost a
third of Justinian’s Digest.
40
See n 44 and 45.
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perform the duty and stipulate for an indemnity from him if it is not performed,
but he cannot thereby relieve himself from liability to those injured by the
failure to perform it…41
So this is an example of that exceptional situation where a party may be liable not just
for its employees (‘master and servant’, as it was once called) but also for the acts of an
‘independent contractor’, commissioned to carry out a project or provide a service. It is
therefore a specially extended version of ‘vicarious liability’ (where one person is liable
for torts committed by another). If A’s operations in fact constitute an invasion of B’s
rights next door, he will therefore not diminish or avoid his own liability if he shows (as
he did in Dalton v Angus) that he engaged a competent building contractor, M, on
whom he imposed obligations to protect B’s buildings.42 As a result, B’s rights against
A are unaffected by A’s contractual arrangements with members of his project team,
whatever they are; nor does B have to show that A has himself been negligent.43 The
way in which A’s liability is defined is good news for B, if M is not worth suing
(though M may be separately liable to B); but less good for A, who will shoulder
liability alone (unless insured) if M is insolvent, when any indemnity M owes him in
contract may also be worthless.
3 Rights of support: Singapore finds a new path
3.1 Background
As we have seen, English law developed a pathway leading to liability for damage to
buildings and structures, doing it via the law of real property. However, fear of
subverting this area of the law has made English law hesitant to impose liability except
where an easement of support can be spelt out; so what in Victorian times started as an
special category of liability had by the twentieth century come to seem an odd legal
dead-end.
Judges in Singapore have followed the lead of other common law courts in North
America44 and New Zealand45 in diverging from English law – in the process pulling
this aspect of the law of private nuisance away from its land law roots and replanting it
slightly closer to the law of negligence.46 Encouragement for these post-colonial
initiatives may have come from the law of prescription, which (as we have seen) can
recognise as easements enduring factual situations which have no accompanying formal
41
Dalton v Angus n 24 829.
42
Neill LJ in Alcock v Wraith 59 BLR 16 (CA) discusses the rule that a party – in our case, a construction
employer – is not usually liable for the acts of an independent contractor, though may be so where the
defendant’s builder withdraws support from a neighbour’s land and where construction can be labelled an ‘extra-
hazardous’ activity. At least in Singapore, it seems from Xpress Print (main text to n 59) as if the duty of
support for a neighbour’s land is always non-delegable.
43
Beyond our own scenario, A may even be responsible for activities by trespassers or for the impact of the forces
of nature on his land, if these cause damage to Plot B alongside: see Sedleigh-Denfield v O’Callaghan [1940]
AC 880 (HL) and Leakey v National Trust for Places of Historic Interest or Natural Beauty [1980] QB 485
(CA), applied in a right of support context by Rees v Skerrett n 76. Here liability is not ‘strict’, since the
reasonableness of A’s conduct is one of the factors relevant to determining his liability.
44
Eg Wilton v Hansen [1969] 4 DLR (3d) 167 (Manitoba CA) – alternative basis in negligence for B’s claim,
based on ‘sic utere …’, in parallel with one for interference with right of support gained by prescription; Walker
v Strosnider 67 W Va 39 (W Virginia CA) – B could claim in negligence even where there was no easement.
45
Eg Bognuda v Upton & Shearer Ltd [1972] NZLR 741 (NZCA) – B had no possibility of acquiring easement of
support by prescription, but A could still be liable in negligence for construction work causing damage.
46
For a further example of this process of divergence, see n 23.
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transaction or record at all. However, the scope for this is significantly narrower in
many jurisdictions than in England & Wales, whose law tolerates a wide range of ‘off-
register’ interests in land.47 In her pioneering Principles of Singapore Land Law (1994),
Tan Sook Yee reported that two of the three routes which in English law allow an
easement to be created by prescription are unavailable in Singapore.48 As for the third –
the ‘lost modern grant’ doctrine relied on in Dalton v Angus49 – she argued that it
certainly did not apply in relation to registered land in Singapore under the Torrens-
based Land Titles Act, nor to the 999-year State leases common in that jurisdiction; and
perhaps not at all.50 In such a context, to depend exclusively on thinking derived from
the law of easements would lead to principles of liability offering neighbours even less
protection for their buildings and structures than English law does.
Well aware of this danger, the Singapore Court of Appeal felt able to break free of the
narrow English perspective of Dalton v Angus51 in the Xpress Print case.52 The judges
were also influenced by the socio-economic realities of their own city-state: extreme
population density, immense pressure on all available land, regular redevelopment of
commercial property, a high value placed on orderly co-existence. As a result of this
judicial rethink, liability in Singapore for damage to buildings or structures caused by
construction operations next door now falls within a wider duty of support owed by A,
the owner of the neighbouring land. So for B to gain a remedy no longer depends on his
showing that a specific easement protecting the building or structure now damaged has
already come into existence, by prescription or otherwise.
3.2 Escaping land law thinking: Xpress Print
In 1997 Xpress Print (B), owners of an eight-storey building in Kallang completed in
1996,53 found that the driveway to their building had cracked; the ground between it and
their boundary was subsiding; and their water supply had been severed by earth
movements. The reason seemed obvious: the owners of the neighbouring plot of land
Monocrafts (A) had engaged contractors (M) to develop their own site and M had
started excavation work.54 B started legal action against both A and M for damages for
negligence, nuisance and interference with a right of support.
By the time the case got to court, M had been wound up, so B was the only defendant, at
first instance in the High Court and on appeal. The court was impatient with the idea of
relying on easements as the main legal technique for protecting buildings and structures
on land from damage by construction; but it had to bear in mind the complexity of two
local land law systems (registered and unregistered), it being clear that the ‘lost modern
grant’ doctrine was still alive and well in Singapore, though only in relation to
unregistered land.55 The court did not want to deprive landowners of this form of
47
‘Overriding interests’ is the key category, as defined by eg Schedule 3, Land Registration Act 2002, updating s
70(1) Land Registration Act 1925.
48
Including under the heavily criticised Prescription Act 1832, 2 & 3 Will 4 c 71.
49
Dalton v Angus: n 24.
50
Tan (1994) 416-418; see now Lim Hong Seng n 55, discussed in Xpress Print n 52.
51
Dalton v Angus: n 24.
52
Xpress Print Pte Ltd v Monocrafts Pte Ltd [2000] 3 SLR 545 (CA Singapore).
53
As a result, B’s building and roadway were too new to have gained an easement by prescription, even if this
were legally possible.
54
The excavation was halted twice when B asked the building control authorities to intervene: they imposed ‘stop
work orders’, but further excavation and damage still occurred.
55
Lim Hong Seng v East Coast Medicare Centre Pte Ltd [1995] 2 SLR 685 (High Ct Singapore).
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protection and therefore did not wish to move entirely to a fault-based regime by
reclassifying all such claims as in the law of negligence.56
So it opted for a middle way: newly completed buildings and structures on land
immediately enjoy the ‘natural’ right of support from neighbours which land as such
already does. As Yong Pung How CJ said, giving the Court of Appeal’s judgment:
Once the primacy of the principle [‘sic utere tuo …’] forbidding landowners to
use their property to the injury of others is accepted, we think there is scant
justification for the 20-year gestation period for a right of support in respect of a
building.57
This was already the established position in South Africa (Hall, 1973), deriving from
the same Latin maxim newly prominent in Singapore. In South African law this is
rightly seen as outside the main body of the law of servitudes, since protection for
buildings and structures does not need to be gained by express grant or reservation, or
by prescription.58
In Xpress Print, this gave our claimant B the protection he was seeking, requiring him
only to prove – which he had already done – that A’s use of his land had in fact
diminished support for B’s own land, structures or buildings, causing damage (and
possible consequential losses – quantum remained to be assessed). The Singapore court
went on to confirm, just as Lord Blackburn said in Dalton v Angus itself,59 that this duty
remains personally on A, who cannot evade liability merely by employing an
independent contractor.
When B now constructs a new building in Singapore, this may still start the prescription
period running, after twenty years giving him an easement protecting his building
against A next door withdrawing support. But the scope and importance of this doctrine
have diminished almost to zero, applying as it does only to land not yet within the land
title regime.60 Even in this exceptional situation, the Court of Appeal’s approach means
that, while the prescription period is running, B cannot find himself in the precarious
position outlined by Lord Penzance above:61
… the proposition that a landowner may excavate his land with impunity,
sending his neighbour’s building and everything in it crashing to the ground, is
a proposition inimical to a society which respects each citizen’s property rights,
and we cannot assent to it.62
3.3 Applying the new rules: Afro-Asia63
Not long after Xpress Print, Judith Prakash J in the Singapore High Court had to decide
an action for damages brought by Afro-Asia (B), the owner of a commercial building in
56
The judgment in Xpress Print n 52 concludes at [53]: ‘… there is a strong case for liability [of A] in negligence,
independent of any interference with the right of support’; this is arguably obiter.
57
Xpress Print: n 52 [49].
58
Hall (1973) 105, citing Johannesburg Board of Executors Ltd v Victoria Building Co Ltd 1 OR 43.
59
Quoted as main text to n 38.
60
Lim Hong Seng: n 55.
61
Quoted as main text to n 38.
62
Xpress Print n 52 [37].
63
Afro-Asia Shipping Co (Pte) Ltd v Da Zhong Investment Pte Ltd [2003] SGHC 286, [2004] 2 SLR 117
(Singapore High Ct).
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the Singapore CBD (seven storeys, with a four-storey annex).64 It is a classic of the
genre, illustrating the full range of parties and issues, as well as the new Singapore law
on liability for building damage in action.
The owners of the six-storey building next to B’s block, Da Zhong (A), decided to
demolish and replace it with twenty storeys, occupying both the existing plot and the
one beyond. Providentially for B, preparation for the redevelopment included a three-
day photographic ‘before’ survey of B’s building, commissioned by a member of A’s
group of companies – important evidence in court later on. The new building required
deeper foundations than the existing; during its construction, cracks appeared in parts of
B’s own building and there was water seepage, evidence of subsidence and concern
about the whole building’s stability; some rental units could no longer be let at all and
some of the tenants who stayed negotiated a rent reduction. At B’s insistence, members
of A’s project team did some emergency repairs, including temporary external structural
support.
Once construction was complete, B was unconvinced that these repairs were adequate
for the long term, so started legal action against five defendants: A, M1 (demolition
contractor for the old building), M2 (main contractor for the new building) and specialist
piling sub-contractors S1 and S2 (two different piling companies, at different stages in
the redevelopment) – no surprise, then, that the hearing took more than 30 days in court,
with three expert witnesses and a judgment running to more than 50 pages.
The action was based on breach of duty, negligence and nuisance; both liability and
quantum were in issue. A accepted that it owed a duty of support in relation to B’s
building, in line with Xpress Print; the judge held from the survey and the expert
evidence that B’s building was in a sound and stable condition before construction
started and that A’s project had withdrawn that support, including by failing to ensure
that damage already caused was not aggravated by further work. Reviewing the repairs
already undertaken, the judge agreed that more needed to be done to get the building
back into its state before the construction started: A would have been inescapably
responsible in law for all these costs of reinstatement, if B was not already committed to
selling the building.65 The planned sale made it unreasonable to award reinstatement
costs; instead, the loss in market value caused by the damage, measured at the date of
the court’s judgment, was the right approach.66 A’s liability covered some even damage
occurring after it had leased the site to another entity, and applied although other
defendants, which were members of its project team, might be liable in their own right –
though B of course could recover its loss only once over. A was however not liable for
any damage caused by M2, since A had not employed M2 (the building having been
transferred onwards by then).
As for those other defendants – the final set of issues – the judge held that each would
be liable to B only if shown to have negligently caused some or all of the damage B’s
building suffered: their liability was fault-based, not strict like A’s.67 [There is no
64
B’s building was completed in the 1950s, so could potentially have gained an easement of protection by
prescription against withdrawal of support for it by A’s land alongside; but in the light of Xpress Print n 52 and
A’s admissions this was not a live issue.
65
This was the court-approved outcome of a dispute between groups of shareholders in B.
66
Here the judge applied Dodd v Canterbury n 10 and 11.
67
Afro-Asia n 63 [100].
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Philip Britton, pp 1276-1291
discussion at all in Dalton v Angus68 about the basis on which M was also liable
alongside A.] Accordingly, S2 was absolved from all liability, since it came on the
scene late in the game and had not been shown to have contributed to the damage. By
contrast, M1, M2 and S1 each bore individual responsibility for parts of the damage
which had led to the building’s loss in value; the share owed by M1 and S1 to that extent
reduced A’s global primary liability, but placed the risk of their insolvency on A (and
not B, who could collect the totality of the damages from A, except for those owed by
M2). B’s consequential losses (diminution of rental income), to the extent accepted by
the judge, were apportioned between the different defendants according to the particular
damage which affected each individual unit in B’s building, its source and date.69
4 Conclusions
Readers who have persisted this far will be inclined to agree with Chief Justice Yong at
the head of the paper: English law is over-complex and seems to have lost sight of
rational justifications for imposing (or refusing) liability for damage to land, structures
or buildings caused by construction operations on a neighbour’s land. By contrast, the
Singapore gloss on Dalton v Angus70 has principle and simplicity on its side. Note that,
though this new approach significantly widens the protection for B’s buildings and
structures on land, it does so by retaining – and extending – a principle of strict liability
on A for such damage; and it reaffirms the nineteenth century doctrine that A does not
discharge his duty to provide continuing support to B’s land etc by engaging a
competent independent contractor to undertake construction operations, if damage then
results.
This discussion leads to several further questions:
1 From a classificatory point of view, is it still necessary and desirable to treat
disputes between neighbours about damage to land, structures and buildings as
deserving specific solutions of their own, outside the ambit of ‘the neighbour
principle’ and imposing strict liability, as well as an extended version of
vicarious liability? As we have seen, members of A’s project team may have
their own separate liability to B, which in the Singapore view of things depends
on their being shown to be negligent in the ordinary way.
2 How do codified legal systems of the civil law tradition deal with the issues
raised in the paper?
3 What impact does – or should – insurance (construction-related or other) have
on the loss-shifting and -spreading function of the law of tort in our area?
4 What is (or should be) the impact of statutory regimes deriving from public law
– eg building control, environmental protection or compensation for ‘public
works’ – on questions of civil liability for construction?
5 More fundamentally, what does justice (and, in the wider European context,
respect for the fundamental rights of respect for one’s home and of peaceful
68
Dalton v Angus: n 24.
69
An editorial note in the law report suggests that the case then went to the Court of Appeal, but this seems not to
have been pursued. The costs position of S2 and M2 was considered at a separate hearing before Judith Prakash
J: Afro-Asia Shipping Co (Pte) Ltd v Da Zhong Investment Pte Ltd (No 2) [2004] SGHC 105, [2004] 3 SLR 274.
70
Dalton v Angus: n 24.
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enjoyment of one’s possessions)71 require in relation to the liability of developer
and construction parties to neighbours?
Answers must be for a longer paper – perhaps another conference. Meanwhile, in
March 2008 the permanent statutory law reform body for England & Wales, the Law
Commission, launched a Consultation Paper which reviews – among other topics – the
rules on the creation of easements by prescription (Law Commission, 2008). Agreeing
that we have ‘a disorderly and uncertain body of laws’,72 the Law Commission already
favours simplifying the law on prescription in relation to easements.73 More radically, it
asks whether it should still be possible to acquire an easement by prescription at all (or
some categories of easement, specifically negative ones like a right of support).74
Thus England & Wales could join New Zealand and (in most situations) Singapore and
the other Torrens-title jurisdictions in dispensing with the doctrine of lost modern grant
which saved the claim in Dalton v Angus.75 This would dismantle – though only for the
future – the main platform which provides legal protection for neighbours’ buildings
and structures in English law. In return, would the ‘natural rights’ of landowners be
widened, Singapore-style, to include immediate protection for new buildings and
structures on the land, via an extended law of tort? This is not on the Law
Commission’s initial shopping-list for new legislation, but might make it into its final
report (perhaps including a draft Bill), due in late summer or autumn 2010. The judges
might step in meanwhile, building on those isolated English cases which talk of duties
of care in negligence and have applied these ideas to impose fault liability on one
neighbour for property damage to another, beyond the crude individualism which still
underlies aspects of land law.76 But would Lord Hoffmann think this ‘merely … an
expedient to fill a gap’?77 The story is clearly not yet over.
Acknowledgements
Thanks go to my colleagues at King’s College London, for encouraging and enabling
me to participate in COBRA 2009; and to my former colleagues at the National
University of Singapore Dr Anne Magdaline Netto, Anita Teo-Russell and Mohan
Pillay, for energetically facilitating encounters with Singapore law and lawyers.
71
‘Home’: the Convention for the Protection of Human Rights and Fundamental Freedoms (the European Human
Rights Convention), article 8; and ‘peaceful enjoyment of possessions’: the Protocol to the Convention agreed at
Paris on 20th March 1952 (the First Protocol to the European Human Rights Convention), article 1. The
Convention has been ratified by all 47 member-states of the Council of Europe, from the Azores to Vladivostok;
the First Protocol has been signed by all but not yet ratified by Monaco or Switzerland <www.coe.int>, viewed
15/06/09.
72
AWB Simpson, A History of the Land Law, Oxford, Clarendon Press (2nd edition 1986) 269.
73
If prescription is retained, even if only for a limited class of easements, the tests would be simplified and
restated, no longer relating back to a fictional grant by the owner of the servient tenement.
74
Once the Title Conditions (Scotland) Act 2003 came into force, no new negative servitudes could be created ins
Scots law; existing negative servitudes were transformed into negative real burdens: Coulsfield & McQueen
(General Editors), Gloag & Henderson: The Law of Scotland, Edinburgh, Thomson/W Green (12th edition
2007) [35.34]. Like South Africa, Scots law appears to have a general principle that A is liable in delict for
deliberate activities on his land which cause damage to buildings or structures on B’s neighbouring land, at least
if culpa can be shown: Kennedy v Glenbelle Ltd 1996 SLT 1186 (Ct Sess, 1st Div), following RHM n 23.
75
Dalton v Angus: n 24.
76
Eg Bradburn v Lindsay [1983] 2 All ER 408 (Ch) and Rees v Skerrett [2001] EWCA Civ 1760, [2001] 1 WLR
1541.
77
n 2.
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References
Britton, Philip (2006), ‘Construction and Neighbour Risk in English Law’ [2006]
International Construction Law Review 479
Gray, Kevin and Gray, Susan Francis (2005), Elements of Land Law (Oxford, OUP, 4th
ed, 2005)
Hall, CG (1973), Servitudes (Cape Town-Wynberg-Johannesburg, Juta, 3rd ed, 1973)
Law Commission (England & Wales) (2008), Easements, Covenants and Profits à
Prendre (Consultation Paper 186, 2008), <www.lawcom.gov.uk>, viewed 29/04/09
Tan Sook Yee (1994), Principles of Singapore Land Law (Singapore, Butterworths
Asia, 1994)
Waller, Rt Hon Lord Justice (2009), Editor-in-Chief, Civil Procedure (‘The White
Book’), (London, Sweet & Maxwell, 2009 edition)
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Robert Kroese, Frits Meijer and Henk Visscher, pp 1292-1304
European Directive for tendering architectural services; a too
strict interpretation by Dutch Local Authorities?
Robert Kroese¹, Frits Meijer¹ and Henk Visscher¹
1
OTB Research Institute for Housing, Urban and Mobility Studies,
Delft University of Technology, P.O. Box 5030, 2600 GA Delft,
The Netherlands
Email: [email protected]; [email protected]; [email protected]
Abstract:
When the value of services exceeds €206.000, local governmental bodies in European
Union (EU) countries have to call for tenders in accordance with the EU directive
2004/18/EC, which specifies procedures for such contracts.
Recently, well known Dutch architecture firms expressed their dissatisfaction with the
way local authorities in The Netherlands manage such European tenders. The firms
claim that local authorities are too strict in their interpretation of the directive.
According to them, the requirements regarding economic and financial standing and
technical and professional ability (articles 47 and 48 of the directive) are set too high.
The emphasis lays more on a high financial turnover than on quality. The architects also
claim that the procedures to prove eligibility are too extensive.
The result is that start-up and smaller firms are excluded because they cannot meet the
requirements. The Chief Government Architect of The Netherlands recently
commissioned independent research on this matter.
This paper presents the results from the first stage of the research, which was based on
data from the website ted.europa.eu, where tenders are officially published. Tenders
which were submitted from 2006 to 2008 were analyzed with respect to requirements on
annual financial turnover and design portfolios. The manner in which several other EU
countries manage the process also formed part of the research.
Results from the first stage suggest that the arguments of the architects are generally
valid. Requirements are generally high compared to the scope of the projects. In
addition other EU countries appear less strict in their interpretation of the directive.
The main recommendation from the first stage of research is that the office of the Chief
Government Architect acts as an advisory board to local authorities.
Keywords:
Architecture, tenders, architectural services, European Union, European Directive
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1 Introduction
When the value of works, supplies and services exceeds €206.000, local governmental
bodies in European Union (EU) countries have to call for tenders in accordance with
Directive 2004/18/EC. This directive specifies procedures for such contracts. An
important purpose of the directive is to open up the European market for works,
supplies and services and to give suitable businesses throughout the European Union
equal opportunity to submit tenders.
Recently, a number of well known Dutch architectural firm and architects expressed
their dissatisfaction with these procedures in various national newspapers and specialist
journals. During the European procedure for the selection of an architect for the new
town hall of the municipality of Westland, 7 out of 12 selected architects decided to
withdraw from the selection process. The client demanded 3D sketches, models and an
elaborated calculation of building costs. The firms stated that the expenses needed to
provide these demands were too high. There were other reports of problems with
European tenders for the design of public buildings. In these reports architects claim
that the requirements regarding economic and financial standing and technical and
professional ability are set too high. The emphasis lays more on a high financial
turnover than on quality. The architects also claim that the procedures to prove
eligibility are too expensive. Young and starting architects are not able to participate in
these tenders, because they cannot meet the requirements. The strict interpretation in the
Netherlands does not meet the before stated basic purpose of the European directive.
As a result, architects fear that only big and experienced architectural firms will be
awarded with contracts for public buildings. This goes against the purpose of the
directive and will ultimately lead to a declining architectural climate, they claim.
The reports caught the attention of the office of Chief Government Architect1. In order
to get an objective point of view the CGA asked the OTB Research Institute for
Housing, Urban and Mobility Studies to do research on this subject.
2 Research Framework
The research was divided in four different subjects: The most applicable parts of the
European directive were examined, four discussion meetings with interested
professionals were attended, and the handling of the directive in three other EU
countries was studied, with the help of attending meetings with experts from those
countries and desktop research.
1
The Chief Government Architect (CGA) advises the Dutch government on architectural policy and government
housing, is a member of the Board of Government Advisors and holds a central coordinating position with respect to
the preparation and implementation of the national government architecture policy. The appointment of the CGA is
subject to nomination by the Director-General of the Rijksgebouwendienst (Rgd), with a specified term of office (up
to 5 years). He or she is appointed and dismissed by Royal Decree. The current CGA is mrs. Liesbeth van der Pol and
she was appointed August 15th, 2008.
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Finally, we looked at the facts and figures of European tenders for architectural services
in 2006, 2007 and 2008, emphasizing on the demands on annual turnover and building
references. We also looked at the type of architecture firms that were awarded with
contracts. As a database for the facts and figures we used the internet archive of the
Supplement of the Official Journal of the European Union.
3 The Directive and restricted procedure
3.1 The Directive
As stated before, when the value of services exceeds € 206.000, local governmental
bodies in European Union (EU) countries have to call for tenders in accordance with the
EU directive. ‘Directive 2004/18/EC Of The European Parliament And Of The Council
of 31 March 2004 on the coordination of procedures for the award of public works
contracts, public supply contracts and public service contracts2’ specifies the procedures
and regulations which local government bodies who want to select an architect have to
respect. The articles of the directive which we regard as the most important for our
research on awarding architectural services are discussed below. We did not approach
the study of the directive from a judicial point of view.
Article 2 on the principles of awarding contracts states that ‘Contracting authorities
shall treat economic operators equally and non-discriminatorily and shall act in a
transparent way’. Particularly, the directive requires that the announcement of new
assignments and the awarding of contracts are made public. Furthermore, it appoints the
exact periods in which the stages of the procedure have to be rounded off.
To make sure only suited companies express interest the directive gives examples on
how to proof eligibility. Suggestions on how to proof eligibility on the economic and
financial standing and the technical and/or professional ability are to be found in
Articles 47 and 48 of the directive.
Article 47, paragraph 1 states that ‘Proof of the economic operator's economic and
financial standing may, as a general rule, be furnished by one or more of the following
references:
(a) appropriate statements from banks or, where appropriate, evidence of relevant
professional risk indemnity insurance;
(b) the presentation of balance-sheets or extracts from the balance-sheets, where
publication of the balance-sheet is required under the law of the country in which the
economic operator is established;
(c) a statement of the undertaking's overall turnover and, where appropriate, of turnover
in the area covered by the contract for a maximum of the last three financial years
available, depending on the date on which the undertaking was set up or the economic
operator started trading, as far as the information on these turnovers is available’.
2
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2004:134:0114:0240:EN:PDF, viewed 03/07/2009
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One (or more) reference could be sufficient, but in The Netherlands, clients tend to
interpret this article by demanding a high minimum annual turnover, but sometimes also
a bank guarantee, risk insurance and/or proof of solvency.
Article 48, paragraph 2, states that ‘Evidence of the economic operators' technical
abilities may be furnished by one or more of the following means according to the
nature, quantity or importance, and use of the works, supplies or services: a list of the
works carried out over the past five years, accompanied by certificates of satisfactory
execution for the most important works’ or ‘a list of the principal deliveries effected or
the main services provided in the past three years, with the sums, dates and recipients,
whether public or private, involved.’ Other suggestions to proof technical abilities are
e.g. providing a list of technicians, a list of technical facilities of the company, the
educational and professional qualifications of the service provider or contractor, annual
manpower and number of staff.
It is important to note that article 48, paragraph 2, does not prescribe the nature of the
references or whether these references need to be similar to the new commission. But
architects in The Netherlands claim clients often ask to present proof of similar
buildings from their portfolio. This is limiting their access to new projects and
expanding their portfolio.
3.2 Restricted Procedure
In The Netherlands, the most used procedure for awarding architectural services
contracts is the so called Restricted Procedure. The Restricted Procedure is a two-stage
process which allows contracting authorities to draw up a short-list of interested parties
by undertaking a selection/pre-qualification stage, prior to the issue of invitation to
tender documents3.
Selection of suppliers to be invited to tender should be based on a statement of good
economic and financial standing and technical or professional ability. The selection
criteria must be published in the original contract notice and must be relevant and
proportionate to the procurement in question. Selection criteria should be as published
in the EU advertisement or set out in the tender – demonstrable fairness in selection is
paramount. Offers send in by at least five participants must be evaluated according to
the criteria set out in advertisement or tender documents. The offer which is
economically most advantageous (this includes costs and design quality) is awarded
with the contract.
4 Discussion meetings
In order to get a view on the experiences and views on the subject from architects,
former CGA’s, city architects and consultants, the office of the Chief Government
Architect arranged separate meetings with these professionals. The most important
observations are described below.
3
http://www.buy4wales.co.uk/PRP/phase2/procurementaboveojeuthreshold/restrictedprocedure.html, viewed
22/06/2009
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In the meeting with architects, the specific problems with the procedures were
discussed. First of all, it is often not worthwhile to show interest, because architectural
firms cannot meet the minimal required annual turnover. Also, the portfolio of realized
works does not contain a building similar to the new commission, which is often one of
the requirements. The role of consultants was also discussed. Consultancy firms are
suited to guide clients through the process, based on their knowledge and experience
with the procedures. But architects think they lack specific knowledge of architecture
and the architectural practice. According to them, consultants tend to make the
procedures more complicated than they need to be.
The members of the committee which, based on objective point scoring criteria, has to
decide to which architect firm the contract should be awarded to, often lack professional
expertise on architecture to make a good assessment of the contenders and their
proposals. Furthermore, the architects attending the meeting argued that architecture is
not really suited to be judged with the use of ‘semi’ objective point scoring systems. A
case study on the selection of an architect for the new town hall of the city of Deventer
seems to support this argument (Volker, 2008).
In several occasions, architects were not sure if clients have a clear definition of the
assignment for the new building. Moreover, sometimes the architects at the meeting
were not sure if the client was selecting an architect or a design.
Signing up for the first stage of the selection process is time consuming, because
documents to proof eligibility are not standardized and need to be send to the client. In
the next stage, submitting a tender can be expensive and time consuming too, because
sometimes clients ask for elaborated sketches and models. In many occasions the
financial compensation for these expenses is not sufficient or even lacking and there is
off course no guarantee of an awarded contract. But one architect stated that this is part
of the game and should not be complained about.
Based on their own research (Atelier Kempe Thill, 2008) on European tenders in The
Netherlands and other European countries, an attending architectural firm suggested the
founding of an independent Procurement Authority, which would combine business
services and cultural knowledge. This national Procurement Authority would be given
the task of organising and supervising all European tenders.
The basic foundation for the problems, the architects claim, lays in risk avoiding
behaviour. Other studies confirm this (Volker, 2008) Projects are funded with public
financing, and local authorities want to make sure the architectural firm they select is
qualified for the job. Local authorities, assisted by consultancy firms assume a big
architecture firm which has already designed three schools for instance will be most
suited to design another school. Architects on the other hand claim that their specific
expertise enables them to design a wide range of building types, which makes them
qualified for any new design contract.
Meetings with former CGA’s and city architects provided similar views. Especially the
role of consultancy firms was emphasized and disapproved. The idea of establishing a
Procurement Authority was not recommended by them. They recommend instead
altering the role of the office of the Chief Government Architect to act more as an
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advisory board on European tenders for local governments and public law bodies. The
established authority of the office of the CGA makes it very suited for this task.
In the meeting with consultants, they stated not to recognise the claims made by
architects. Consultants are aware of the lack of knowledge local authorities have with
European tenders. Local authorities have small budgets and sometimes big ambitions.
Therefore, they seek to work with a big and experienced architectural firm. One of the
most important things in putting out a contract notice, the consultants agreed on, is to
formulate a clear and compact assignment. They admitted this is one of the tasks for
consultants at the start of the process.
It is the experience of consultants that a lack of knowledge in selection committees does
not necessarily lead to buildings of lower quality. The task of an expert in a committee
should be to make sure the rest of the committee ask themselves the right questions to
be able to make a good assessment of the proposals. To make the procedures smoother,
the consultants recommend developing a leaner procedure, but also to collect ‘best
practises’, and learn from them.
5 Other EU countries
All member state of the European Union have to respect the same European directive,
so it is interesting to give a broad outline of the handling of the directive and the
involvement of government and other institutions. For this research, we looked at
Belgium (Flanders), France and Germany.
5.1 Flanders
Since 1998, Flanders, the Dutch speaking region of Belgium, has installed a national
Flemish Government Architect (FGA), similar to the Dutch Chief Government
Architect. The office of the FGA can provide assistance to commissioners and has
knowledge on a wide range of subjects regarding architecture, infrastructure and spatial
planning. For projects on a national scale or of great importance, consulting the FGA is
obligatory.
The FGA has tools to promote architectural quality and help young architects become
acquainted with (local) government as clients. There is also a bi-annual award (‘Prijs
Bouwheer’) for an ‘excellent client’. One of the most important tools the office of the
FGA is the so-called Open Tender. This procedure can be described as following4: The
Open Tender is one of the tools the FGA uses when he is looking for architectural
quality for projects for the Flemish Government and local authorities. Besides having an
exemplary principal, the correct choice of a developer for every project is of critical
importance. The Open Tender is a selection procedure based on the principal of an
architectural competition and the procedure is in accordance with the regulations
covering governmental commissions and European competition rules. The Open Tender
comprises a selection (made by the FGA) and shortlist of architects and architectural
4
http://english.vlaamsbouwmeester.be/opentender/introduction.aspx, viewed 22/06/2009
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teams for different tasks in the areas of architecture, town planning and landscape
architecture.
5.2 France
The MIQCP is a governmental body which was founded in 1977. On their website5,
they describe their aim as following: ‘Created in 1977 to give expression to a strongly
held government policy, MIQCP has continued to promote quality in the public
construction sector. Whether it is new works, rehabilitations or edifices requiring
maintenance, this sector encompasses buildings, infrastructures and public spaces under
the responsibility of the State or local authorities. Architectural quality covers a wide
range of town planning, aesthetic, functional, technical and economic requirements. It is
essential that a public amenity meets the expectations of all those who will be using it
and expresses a certain sense of continuity. In this respect, the amenity is symbolic of
the values held by the society for which it is created.
To meet its assigned objectives, MIQCP has adopted a policy that associates reflective
thinking, advice, assistance, direct actions and recommendations. The Mission also
participates in discussions on how to harmonize practices to ensure that they comply
with European directives concerning project consultant operations. It carries out
comparative studies on the institutional context and the methods used to attribute public
architecture contracts in the different European countries’.
A delegation from the office of the CGA went to France for a meeting with members of
MIQCP. The MIQCP told the delegation they recognise the problems with European
tenders as stated by the architects in The Netherlands. In France, there has been
legislation on procurement since the 1970’s. By law, at least one third of the members
of the committee, which has to advise the client on a suited architectural firm, must be
architects. In 2006, legislation on procurement was altered to assure access to
procedures for young architects and smaller architectural firms.
5.3 Germany
For this research, the office of the CGA arranged a meeting with an architect and expert
on European tenders from Germany. This expert is also president of the board of an
‘Architektenkammer’. These are regional architects associations which look after the
interests of architects. Because of the federal structure of Germany, each ‘Bundesland’
has an Architektenkammer, a total of 16. The ‘Länderkammern’ are united in the
national ‘Bundes Architektenkammer6’. German legislation makes a distinction between
general service providers and free occupations. In Germany, an architect is a free
occupation. This makes it possible to create specific regulations for the procurement of
services, including architectural services. In the procedures there is emphasis on the
quality of participants. The regulations make sure that smaller firms and starting
architects need to be seriously considered for a contract.
5
http://www.archi.fr/MIQCP/rubrique.php3?id_rubrique=17, viewed 23/06/2009
6
http://www.bak.de/site/498/default.aspx, viewed 03/07/2009
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However, in contest procedures within European regulations, more and more emphasis
is placed on objective criteria such as annual turnover, number of employees and
realized works. Therefore, the opportunities for young architects and smaller firms are
declining. The Minister who is responsible for tender legislation acknowledged this in
2008 and said that requirements to enter a contest must be set to a minimum and related
to the framework of new assignments.
5.4 Conclusion
Although the existence of governmental bodies and organisations of professionals does
not guarantee perfect tender procedures, it is apparent that these three countries have a
more institutional approach then The Netherlands when it comes to supporting the
quality of architecture, assist local governmental bodies with the procedures and look
after the interests of architects.
6 Facts & Figures
6.1 Research method
To find out if the facts and figures support the claims architects have made, we looked
at European tenders for architectural services in The Netherlands which were published
in 2006, 2007 and 2008. The emphasis was put on the demands on annual turnover and
building references. We also looked at the type of architecture firms that were awarded
with contracts. As a database we used the internet archive of the Supplement of the
Official Journal of the European Union, to be found on the website http://ted.europa.eu.
In order to find the right tenders we used the following search criteria:
• country: NL
• contract: service contract
• ‘contract notice’, or;
• ‘contract award’
• CPV code 71*: Architectural, construction, engineering and inspection services
(CPV stands for Common Procurement Vocabulary and is obligatory to specify)
• Publication date: between 1-01-2006 and 6-10-2008 (our report was due 01-12-
2008)
We only searched for contract notices and awarded contracts on (public) buildings; we
did not look into contract notices and awarded contracts for services architectural firms
also can provide. It is possible that not all notices and awards were found. Sometimes,
local authorities forget to send in a notice of a new contract, or the wrong CPV code
was used. Notices and awards are then beyond the search. But based on the broad range
of contract types, building types and sizes and consultancy firms we found, the data is
representative of all contracts in 2006-2008. We have no indication there is a bias in the
contract notices and awarded contracts we registered.
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6.2 General outcome
In total we found 204 contract notices, which we specified into clients, building type
and size and if the procedure was done with the assistance of consultants. The totals are
presented in the tables below.
Table 1. European tenders in The Netherlands, 2006-2008
(Source: http:/./ted.europa.eu)
year Number of Number of Number of
published published published
notices competitions awarded
contracts
2006 65 1 31
2007 73 2 54
2008* 66 4 26
total 204 7 111
*until 08/10/2008
Data on the types of clients and building types is combined in the next table.
Table 2. Contract notices specific to clients and building type
(Source: http:/./ted.europa.eu)
client Total 2006-2008 building type Total 2006-2008
municipalities 105 educational 82
education 39 governmental 45
foundation 13 multifunctional* 27
Government Building Service 10 cultural 13
Housing association 9 sports 12
other 9 other 10
province 6 health care 9
Health care 6 research 4
developer 5 infrastructure 2
ministry 2 total 204
total 204
*these are buildings that could be a combination of dwellings, a healthcare centre, a school etc.
The numbers show a variety of clients, but it is clear that local governments commission
the most contract notices. We also found a variety of building types. Educational
buildings are most prominent, followed by governmental and multifunctional buildings.
We found that 68% of the procedures were done with the help of consultants.
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6.3 Requirements on economic and financial standing
One important aspect of European tenders we looked into is the ways clients requested
interested parties to proof their economic and financial standing. Usually clients ask for
a certain annual turnover, sometimes more specifically the annual turnover in design
services for the building type that is the new assignment. As a case we examined the
turnover demands for contracts for educational buildings. These are more or less similar
in nature and therefore easier to compare. If we set the annual turnover demand next to
the surface area of the building, we did not find a distinct pattern, annual turnover
requirements vary quite a bit. For instance, we found two nearly identical contracts for
school buildings, both having a surface area of 5000 m2. One client required an annual
turnover of € 1.200.000, the other € 500.000. Some other examples are shown in table 3.
Table 3. Some examples on annual turnover demands, educational buildings, 2006-2008
(Source: http:/./ted.europa.eu)
client consultant building type surface area turnover demand turnover
(m2) (€) demand
€/m2
Municipality of BBN Multipurpose 2600 1.000.000 385
Amsterdam school*
Municipality of ICS School 2600 300.000 115
Tubbergen Adviseurs
Willibrord W.Wissink School 3510 350.000 100
foundation Advies
Municipality of ICS School 4300 800.000 186
Bolsward Adviseurs
Christian school ICS School 4500 750.000 167
community of Adviseurs
Groningen
Municipality op Not Multipurpose 4565 1.200.000 263
Scheemda applicable school
* Type of school building that can also accommodate a healthcare centre, a community centre or day-care
centre or a combination of these types
6.4 Requirements on technical abilities
Another important aspect of the European tenders we looked into is the ways clients
asked interested parties to proof their technical abilities. Usually this must be proven by
sending a list of completed buildings of the last three or five years, which need to be
more or less similar to the new assignment. Not al the projects listed on the EU
database had information on required references. But the information we found on
required building references suggest that many times architectural firms can only enter
if they have designed buildings similar to the new assignment. Table 4 shows the
numbers we found on demands on references. Of the 32 notices we found with
information on reference demands, 21 of them demanded similar buildings in the
portfolio of interested firms. Sometimes it is also required that references have a
minimum surface area or minimum building cost.
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Table 4. Reference demands, all building types, 2006-2008
(Source: http:/./ted.europa.eu)
year Total Number of Number of Number of notices Number of notices
number notices with notices with with information on with information
of information on information on minimum required on minimum
contract reference demands for surface area required building
notices demands similar costs
references
2006 65 32 21 13 6
2007 73 19 13 6 5
2008* 30 30 15 11 7
*until 08/10/2008
6.5 Awarded contracts
The database also gave some insight in which architectural firms were awarded with
contracts in 2006-2008. Although it is obligatory to send a notice to the EU of an
awarded contract, this was not always send. This means the numbers on awarded
contracts are not complete. However, the numbers we did find indicate that mostly
larger and better known Dutch architectural firms were awarded with contracts in 2006-
2008. We also found only three foreign architectural firms.
Table 5. Characteristics of architectural firms awarded with contracts
(Source: http:/./ted.europa.eu)
Year Number of published Number of different Unknown which Average number of
awarded contracts architectural firms firm was awarded employees
awarded with contracts
2006 31 25 6 40
2007 54 45 9 40
2008* 26 23 3 32
Total 111 74 18 39
*until 08/10/2008
Summary of outcomes:
• 61 of the 74 different firms we found have more than 10 employees, these firms
are regarded in The Netherlands as medium sized or larger firms
• Average number of employees is 39
• In general larger and noted firms are awarded with contracts
• Assumption: starting firms are small firms; contracts were in 2006-2008 not
awarded to smaller firms (< 1-10 employees)
• Based on the numbers we found, we cannot conclude that the same firms always
win
• Three firms specialize in designing schools and sports facilities and were
awarded with four or more contracts for these types of buildings.
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7 Conclusions and recommendations
The content and principles of the European Directive are clear. When the value of
services exceeds € 206.000, local governmental bodies in European Union (EU)
countries have to call for tenders in accordance with the EU directive. Interested parties
should be treated equally and the procedures must be proportional and transparent. It
also gives suggestions on how interested parties can proof eligibility by sending
information on financial standing and technical ability. But the directive leaves room to
emphasize the selection process on quality instead of objective requirements.
Architects and other professionals do not regard the directive as the main reason for the
problems in The Netherlands; the problem is the strict interpretation by clients and
consultants, because of risk avoiding behaviour. Demands on portfolio and annual
turnover are mostly set high, in that way excluding smaller firms and starting architects.
This goes against the principal of the European directive. The procedures are made
more complicated than needed and as a consequence are time and money consuming.
Entering a European procedure has become problematic.
Three surrounding countries have institutions and governmental bodies which support
architects and architectural quality and give advice on European tenders. However, this
does not guarantee perfect European procedures. The facts and figures we found support
the claims architects made. Demands on annual turnover vary quite a bit, but are set
high. The data we were able to retrieve suggest that it is indeed necessary to have one or
more buildings in the portfolio similar to the new assignment to successfully enter a
new procedure.
OTB Research Institute for Housing, Urban and Mobility Studies concludes and
recommends the following:
• The problems architects report are real; they are visible in the facts and figures
of European tenders in The Netherlands in 2006-2008;
• Because of the strict interpretation of the European directive in The Netherlands,
the purpose of the directive for an equal market for all suitable architectural
firms is not met;
• It is possible to emphasize more on qualitative criteria in European tender
procedures instead of semi-objective criteria; the European directive is
interpretable towards this goal. But Dutch clients seem reluctant to do so;
• Local government has a lack of knowledge and therefore focuses on legal issues
and semi-objective criteria, making procedures more complex than needed;
• The Dutch government could be more supportive of the interests of special
service providers such as architects (similar to Germany, Flanders and France),
through developing new policies or legislation on European procurement;
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• A new active role for the office of the Chief Government Architect could be
researched further on; In the future, the office of the CGA could act as a central
advisory board where local authorities can turn to;
• In the end, we think young and starting architects will still have a smaller chance
of getting contracts for public buildings, because local authorities will continue
to seek experience and routine.
8 References
Volker, L., Lauche, K. and John L Heintz and Hans de Jonge, (2008), ‘Deciding about
design quality: design perception during a European tendering procedure, Design
Studies, Vol 29 (2008), pp 387-409.
Kempe, A., Thill, O. (2008), Towards a New Culture of Public Contract Procurement
Procedures - European Tendering of Architectural Services in the Netherlands,
http://www.atelierkempethill.com/0077_en.pdf, viewed 02/07/2009
Mastenbroek, B., (2008), ‘Autoriteit nodig voor architecten’, NRC Handelsblad
28/08/2008,
http://www.nrc.nl/opinie/article1965283.ece/Autoriteit_nodig_voor_architecten,
viewed: 03/07/2009.
Kroese, R., Meijer, F. and Visscher, H. (2008), De toepassing van Europese
aanbestedingsregels bij architectenselecties, OTB Research Institute for Housing, Urban
and Mobility Studies, Delft
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Asanga Gunawansa, pp 1305-1327
Pure economic loss relating to construction defects - a
comparative analysis of four common law jurisdictions
Asanga Gunawansa1
1
Department of Building, School of Design and Environment, National University of
Singapore, 4 Architecture Drive, S117566, Singapore
Email: [email protected]
Abstract
The problem of whether pure economic loss should or should not be compensated has
been a legal conundrum for many common law jurisdictions. The aim of this paper is to
provide a comparative analysis of the state of law on pure economic loss resulting from
construction defects in four common law jurisdictions, namely, England, USA (State of
California), Australia and Singapore. The paper will show that whilst the English and
American courts have regularly found pure economic loss problematic and have had the
tendency to reject claims based on the belief that such losses are more difficult to foresee
than ordinary losses, or that they would open the flood gates for a series of derivative
claims, the courts in Australia and Singapore have taken a different path, showing their
willingness to test each case on the merits so as to allow themselves to do justice in
individual cases. This paper argues in favour of the liberal approach taken by the
Australian and Singapore courts, primarily on the basis that, in claims for pure economic
loss, although there is no physical injury to person or property of the victim, the very fact
that an economic loss is caused to the victim as a result of the tortfeasor’s action should
be actionable in law.
Keywords: Pure Economic Loss, Construction Defects, Common Law, Negligence, Tort
I. Introduction
Most construction projects are complex and involve a multitude of parties with diverse
interests. Not all relationships and interests of these parties are connected through and
protected by way of contracts. For example, in a traditional contract procurement model,
there is no contractual relationship between an architect or an engineer appointed by the
client and the contractor who constructs the project. However, the actions of such an
architect and/or the engineer in connection with the project will definitely have an impact
on the performance of the contractor. Likewise, a contractor who builds a project or an
architect who designs a project may not have any contractual relationship with a
subsequent owner or user of a project, except in the case of express and implied
undertakings or warranties. Irrespective of the fact that there may not be any relevant
contractual relationships between the parties who are directly or indirectly involved in a
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construction project, the possibility that physical injury (to person or property) or
economic harm may be caused to one or more of them as a result of negligent action of
another cannot be ruled out. Construction defects are a particularly pronounced example
of this possibility. As a result, construction projects usually provide a healthy breeding
ground for disputes.
A popular and an easily acceptable theory of law is that, for every wrong done there
should be a remedy. The very development of equity in common law supports this theory.
As Lord Chancellor Cottenham observed in Wallworth v. Holt1:
“It is the duty of this court to adopt its practice and course of proceedings to the
existing state of society and not, by a strict adherence to form and rule, under
different circumstances, to decline to administer justice and enforce rights for
which there is no other remedy… If it were necessary to go much further than it
is, in opposition to some sanctioned opinions, in order to open the doors of this
court to those who could not obtain it (justice) elsewhere, I should not shrink from
the responsibility of doing so."
However, in reality, it has not been possible for the legal systems to find remedies for
each and every wrong. One specific area particularly relevant to construction projects is
“pure economic loss”. On grounds such as public policy and the “floodgates” argument,
which are briefly discussed later, courts in common law jurisdictions have consistently
struggled to find a satisfactory and common response to tort claims for pure economic
loss. As a result, there has been a division of opinion with courts in some jurisdictions
taking a restrictive approach and the others a liberal approach.
The paper will briefly trace the manner in which claims for pure economic loss have been
considered by the English Courts and courts in three other common law jurisdictions,
USA (State of California)., Australia and Singapore, presenting a comparative analysis of
the current state of the law. Further, this paper will support the argument that courts
should adopt a liberal approach in treating tort claims for pure economic loss, with the
ultimate aim being to provide remedies to those who have suffered losses, including
economic losses, due to the negligent acts of others, subject to the established tests
applied in common law jurisdictions to determine liability.
2. What is Pure Economic Loss?
Those who are not legally trained may find the term “economic loss” misleading, as
usually, the remedy for all successful tort claims is damages, which results in a monetary
award when the physical harm suffered is translated into monetary terms, the universally
acceptable measure of loss. Such a loss should not be mistaken as a purely economic loss.
A pure economic loss is one that is not consequent upon personal injury or physical
damage to property belonging to the victim. In the case of RSP Architects & Engineers v.
1
4 Myl. & C. 619; 41 Eng. Rep. 238.
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Ocean Front Pte Ltd2, the term “economic loss” was defined by LP Thean JA of the
Court of Appeal of Singapore as, “by the term ‘economic loss’ we mean only mere
economic loss not consequent on any injury to persons or damage to property.”3 In other
words, losses that are not accompanied by physical damages to property or personal
injury fall under the category of pure economic loss.
However, it should be pointed out that sometimes, the division of losses into two
categories, pure economic and others (physical damages to property or personal injury),
is not always clear cut. Trying to justify why one category would be compensated and the
other not is even more complex. For example, in Spartan Steel and Alloys Ltd v. Martin
& Co. Ltd 4, the claim was based on a power failure which disrupted the work in
plaintiff’s stainless steel factory, which caused physical damage to the factory’s furnaces
and metal. The plaintiffs also lost profit on the damaged metal and the metal that was not
melted during the time the electricity was off. The Court of Appeal delivered a majority
judgment (Edmund-Davies LJ dissenting), that the plaintiffs could only recover the
damages to their furnaces, the metal they had to discard and the profit lost on the
discarded metal. It was held that plaintiffs could not recover the profits lost due to the
factory not being operational for 15 hours. The main reasoning for this was that while the
damage to the metal was considered a "physical damage" and the lost profits on the metal
was "directly consequential" upon it, the profits lost due to the blackout was considered
as constituting a "pure economic loss"5. In his dissent, Edmund-Davies J. found that the
loss was both direct and foreseeable consequence of the defendant's negligence and
should therefore be recovered. Thus, in his dissenting opinion, Edmund-Davies J. did not
see any logical basis for the division of the losses into two categories in Spartan Steel.
3. Pure Economic Loss in England
3.1. The applicable tests
Since the English courts considered the liability of a manufacturer towards an end-user
with whom the former did not have a contractual relationship in the case of Donoghue v.
Stevenson6 way back in 1932, the English law of negligence has seen many
developments. The other common law jurisdictions have keenly followed these
developments, sometimes differing, but mostly, faithfully following and adopting them.
One area in which the courts in common law jurisdictions such as Australia and
Singapore have decided to take a more liberal approach compared to the English courts is
pure economic loss7.
2
[1996] 1 SLR 113.
3
[1996] 1 SLR 113, at 125.
4
[1973] 1 QB 27.
5
The effect of the above judgment was that it outlined that there are two types of economic loss, namely, (1) economic
loss consequential on physical damage and (2) "pure" economic loss. Only the first is in principle recoverable.
6
1932 SC (HL) 31.
7
The courts in other common law jurisdictions such as Canada and New Zealand have also not followed the English
Courts on pure economic loss.
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One of the key aspects of the tort of negligence is the scope it offers for the recovery of
pure economic loss. However, traditionally, all common law jurisdictions adopted a
restrictive approach towards claims for recovery of pure economic loss because of two
main reasons. Firstly, because courts were afraid that allowing claims of such nature
would open up floodgates for such claims. Secondly, the belief that economic loss fall
within scope of contracts and, therefore, allowing claims of such losses may undermine
contract law. In England, the courts only permitted the recovery of pure economic loss in
tort, in very limited situations. For example, the decision of Hedley Byrne v. Heller8
recognised the possibility of recovery of pure economic loss where a negligent
misrepresentation had been made by bankers regarding the financial standing of a
company, which was later found out to be inaccurate, notwithstanding the fact that there
was no contractual obligation on the part of the bank to give the reference9.
The cases that followed established that, where a "special relationship" or proximity
between the parties is established where one party is holding itself out as an expert in that
particular field and that the other party relies upon that expertise to its detriment, the
former would be liable for losses caused, even though they may be categorized as purely
economic, thus establishing an exception to the restrictive approach. For example, in
Junior Brooks v. The Veitchi Co. Ltd10, a case involving a nominated sub-contractor, who
was sued by the plaintiffs for the cost of replacing a defective floor, the issue was
whether the defendants who had negligently laid a defective floor but had not caused any
injury to person or other property belonging to the plaintiff were liable for the costs of
replacing the defective floor. The House of Lords, by a majority, held that they were
liable even in the absence of any contractual relationship, as there was a requisite degree
of proximity between the defendants and the plaintiffs by virtue of a number of factors
including the defendant’s knowledge of the plaintiff’s requirements, the plaintiff’s
reliance on the defendants’ expertise, the defendant’s knowledge that the plaintiffs relied
on their skills and expertise. The court concluded that the relationship between the parties
were as close as it could be short of actual privity of contract.
In the case of Anns v. London Merton Borough Council11, the House of Lords
unanimously held that a local authority might be liable in negligence for pure economic
losses suffered by long lessees of maisonettes after the authority negligently failed to
discover that the foundations were inadequate. It established a broad test for determining
the existence of a duty of care in the tort of negligence, popularly known as the Anns test
or sometimes retronymically, the two-stage test. Lord Wilberforce who delivered the
judgment with whom the fellow judges concurred laid down the Anns test in following
words:
“Through the trilogy of cases in this House, Donoghue v Stevenson, Hedley
Byrne…and Home Office v Dorset Yacht Co Ltd, the position has now been
reached that in order to establish that a duty of care arises in a particular
8
Headley Byrne & Company Limited v. Heller & partners Limited [1964] AC 465; [1963] 2 All ER 575.
9
The plaintiff in this case was unsuccessful in its action as the bank had issued its statement subject to a disclaimer of
liability.
10
1982 Sc (HL) 244; 1982 SLT 492.
11
[1978] AC 728.
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situation, it is not necessary to bring the facts of that situation within those of
previous situations in which a duty of care has been held to exist. Rather the
question has to be approached in two stages. First one has to ask whether, as
between the alleged wrongdoer and the person who has suffered damage there is
a sufficient relationship of proximity or neighbourhood such that, in the
reasonable contemplation of the former, carelessness on his part may be likely to
cause damage to the latter, in which case a prima facie duty of care arises.
Secondly, if the first question is answered affirmatively, it is necessary to consider
whether there are any considerations which ought to negative, or to reduce or
limit the scope of the duty or the class of person to whom it is owed or the
damages to which a breach of it may give rise.”
Thus, Anns reduced the circumstances under which Hedley Bryne recognised the
availability of pure economic loss in torts to a mere example of a situation in which a
plaintiff may be successful, and established a two stage test that could be applied in cases
of tort in determining whether a duty of care existed. The test requires first a “sufficient
relationship of proximity based upon foreseeability”, and secondly, considerations of
reasons why there should not be a duty of care. In other words, where there was
foreseeability and proximity there should be a duty of care unless there was a policy
reason for holding that no duty existed.
In the years that followed, the English courts backed away from Anns. In 1990, in Caparo
Industries plc v Dickman12, the House of Lords regarded the Anns test as too wide and
held that even where there is foreseeability and proximity the court may decide that there
should not be a duty of care, because it would not be fair, just or reasonable to impose
one. In Caparo, the loss claimed was economic and was based on a negligent statement
made by the company accountants in published accounts. The House of Lords held that
while it is foreseeable that investors may use published accounts to make investment
decisions, the accountants who produced them would not be liable for losses as a result of
the accounts being wrong, as there is not sufficient proximity between the accountants
and, effectively, anyone at all who may rely upon them. The House of Lords developed
the following three limbed formula to be applied to determine whether a duty of care
existed:
- Was the loss to the claimant foreseeable?
- Was there sufficient proximity between the parties?
- Is it fair, just and reasonable to impose a duty of care?
The last limb above brought in the concept of policy in which the courts have to balance
the needs of an injured claimant against that of opening the “floodgates” and creating an
indeterminate liability. Disagreeing with the approach taken in Anns, Lord Bridge in
Caparo quoted with approval Brennan J in the Australian case of Sutherland Shire
Council v Heyman13:
12
[1990] 2 AC 605.
13
[1985] 60 ALR 1, at 43-44.
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“it is preferable in my view that the law should develop novel categories of
negligence incrementally and by analogy with established categories, rather than
by a massive extension of a prima facie duty of care restrained only by
‘considerations which ought negative, or reduce or limit the scope of the duty or
the class of persons to whom it is owed.”
In the case of Henderson v. Merrett Syndicates Ltd14, the court widened the approach in
Hedley Byrne on proximity. The "special relationship" or proximity between the parties
which was held to exist where one party holds itself out as an expert in that particular
field and the other party relies upon that expertise to its detriment was thus stretched to
include situations in which the defendant voluntarily assumes responsibility for the
economic interests of a plaintiff and where the defendant knows or ought to know that his
skills or expertise will be relied upon by the plaintiff.
In White v. Jones15, the issue was whether a solicitor who had carelessly failed to
ammend the will of his client, with the effect that the client died before the intended
beneficiaries were indicated on it, was liable in an action in negligence brought by the
beneficiaries. Here the House of Lords decided, by a bare majority, that they could
recover, in spite of the fact that generally a solicitor owes no duty of care to anyone
except his client. Thus, White v. Jones clearly departed from the previous practice of
insisting on a "special relationship" or proximity between the parties which exist where
one party holds itself out as an expert in that particular field and the other party relies
upon that expertise. Further, it cannot also be said that the basis of the decision in White
v. Jones was the voluntary assumption of responsibility which formed the basis in
Henderson v. Merrett. Apart from the rather trite principle that courts will find ways to do
the right thing in a particular case, it is difficult to point out what specific principle has
been applied in White v. Jones by the court in arriving at its conclusion.
In Customs and Excise Commissioners v Barclays Bank plc16, a recent case in which the
issue of pure economic loss was considered, an important question raised was whether a
bank, notified by a third party of a freezing injunction granted to the third party against
one of the bank’s customers, affecting an account held by the customer with the bank,
owes a duty to the third party to take reasonable care to comply with the terms of the
injunction. The House of Lords unanimously disapproved the Court of Appeal's decision,
that "assumption of responsibility" was indistinct and subsumed into the law of
negligence. Their Lordships held that, because the bank was required by law to comply
with the freezing order, there could not be said to have arisen any assumption of
responsibility on Hedley Byrne grounds. Applying the Caparo test, it was held that, in the
circumstances, it was not fair, just and reasonable to impose liability on the bank. The
bank was therefore not required to reimburse Customs and Excise for the dissipated
money.
14
[1995] 2AC 145.
15
[1995] 2 AC 207 (HL).
16
[2007] 1 AC 171.
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The examination of the above cases show that whilst it is easy to accept that pure
economic losses should be treated differently from claims based on physical harm or
damage to property, the specific boundaries for this distinction have not been clearly
established in England. Further, the concepts such as “voluntary assumption of
responsibility” and what is “fair, just and reasonable” give little indication of why
recovery should not be allowed for pure economic losses (Giliker, 2001).
3.2. Pure economic loss relating to construction defects and the fear of incursion in to
the domain of contracts
As far as pure economic losses based on construction defects were concerned, the
application of the above tests to determine liability was finally put to rest with the
decisions given in the landmark cases of D & F Estates v. Church Commissioners for
England & Others17 and Murphy v. Brentwood District Council18. In D&F Estates, the
Church Commissioners owned a block of flats built by a firm of contractors (the third
defendants) who had sub-contracted the plastering work. Fifteen years after construction
the plaintiffs, the lessees and occupiers of a flat in the block, found that plaster in their
flat was loose and brought in an action in tort for the cost of remedial work. The action in
tort instead of contract was filed as there was no direct contractual relationship between
the plaintiffs and the sub-contractors. The Court of Appeal found that the main contractor
had employed a competent sub-contractor and thus there was no duty of care owed to the
plaintiffs. Further, the court found that the cost of replacing the defective plaster was a
pure economic loss and therefore not recoverable in tort. When the matter went up in
appeal before the House of Lords, it was held that damages were not recoverable in tort
in respect of the defect in the product itself; as such claims lay only in contract. Their
lordships added that damages were recoverable in tort only where a defective product
caused damage or injury other than to the defective product itself. Thus, in the absence of
a contractual duty or a special relationship of proximity, it was held that a builder owes
no duty of care in tort in respect of the quality of his work.
In Murphy, the plaintiff had purchased a house from the local council and the house
developed several defects including cracks which appeared in the internal walls. The
evidence produced in the trial showed that the damages had occurred as the result of the
design of a concrete raft being defective and unsuitable for the site. It was argued on
behalf of the plaintiff that the council had negligently relied on consulting engineers who
had approved the design of the raft as suitable. The House of Lords concluded that if the
only complaint was with respect to the physical integrity of the acquired structure, and
not to damage to other property, the property owner's loss is properly characterized as
purely economic as the loss is the diminution in the value of the building. Their
Lordships reasoned that once the danger is detected, the risk of further damage is
removed.19 They added that, if such losses were to be treated as physical damage, a duty
of care would arise as a matter of course on the basis of reasonable foreseeability alone.
17
D&F EstatesLimited & Others v. The Church Commissioners for England and Others [1989] AC 177; 41 BLR 12.
18
[1990] 2 All ER 908; [1991] 1 A.C. 398.
19
Where the defect poses a risk to persons or property on immediately adjacent lands or the highway, damages may be
recoverable according to the duty principles applicable to physical damage. 19 This is an exception left open by the
House of Lords. Murphy v Brentwood [1991] 1 AC 398 at 475.
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The overall effect of that would tantamount to implying into the law of tort a
transmissible warranty of quality, in circumstances where no payment was made for the
warranty. To do so would be too great an extension of the duty of care, and an
unjustifiable incursion into the domain of contract law.20
Thus in Murphy, the House of Lords found, based on public policy, that there was no
course of action in tort. In the words of Lord Oliver:
“The affliction of physical injury to person or property of another universally
requires to be justified. The causing of economic loss does not. If it is to be
categorized as wrongful it is necessary to find some factor beyond the mere
occurrence of the loss and the fact that its occurrence could be foreseen.”21
Further, the House of Lords held that pure economic loss may be recoverable against a
party who owes the loser a relevant contractual duty. “But it is not recoverable in tort in
the absence of a special relationship of proximity imposing on the tortfeasor a duty of
care to safeguard the plaintiff from economic loss.”22
It is also useful to note that in Murphy, the argument, that imposition of negligence-based
liabilities for pure economic losses relating to construction defects would be wider than
the obligations imposed by the legislature found favour with their Lordships. In
particular, it was noted that the Defective Premises Act 1972, which requires those who
take on work in connection with the provision of a dwelling to do that work in a
workmanlike or professional manner only obliges them to provide proper materials, so
that as regards the work taken on, the dwelling will be fit for habitation. It does not
impose a duty on them to provide building works that are defective free.23
Thus, as Barlow (2001) points out, the cases of D & F Estates and Murphy have placed
an almost insurmountable obstacle when seeking to recover, in negligence, the cost of
repairing defects in their buildings from the contractors and sub-contractors whose
negligent acts or omissions had caused the defects. Further, it should be pointed out that
cases such as Murphy leave several complex and unanswered questions. To give an
example, the determination that damage to property it self cannot be recovered in tort as
that would tantamount to implying into the law of tort a transmissible warranty of quality,
in circumstances where no payment was made for the warranty, will leave many innocent
victims of building defects without any remedy against the party who had been directly
responsible for the defect.
There is also uncertainty in the distinction between what should be considered “other
property” as damages to other property is recoverable according to the decisions in
Murphy and D & F Estates. As most construction works involves structures comprising
20
[1989] AC 177 at 206.
21
Murphy v. Brentwood District Council [1991] 1 A.C. 398 at 487.
22
Lord Bridge in Murphy v. Brentwood District Council [1991] 1 A.C. 398 at 475.
23
In Thompson v Clive Alexander & Partners [1992]59 BLR 81, the scope of the Act was further limited when the
court held that it is not sufficient for claimants to complain of bad or unprofessional work, they had to prove the place
was uninhabitable.
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of distinct units and products, the question is whether the costs relating to removal and
restoration of a defect free unit in a structure as a result of having to replace a defective
unit could be considered “other property” and therefore recoverable from the party
responsible for the defect. No clear answer has been found for this issue from the above
cases.
Another question that could be raised is that, since it is accepted that contractors and
construction industry professionals such as Architects and Engineers have a duty to take
reasonable care in the design, construction and approval of buildings to avoid injury to
persons and other property, what is the basis of that duty being treated as non-existent
once the danger is detected by the plaintiff. This determination in Murphy leads to the
contradiction that if someone is injured due to a construction defect, liability attaches to
that injury, but if the defect is discovered just in time to avoid the injury, no liability
attaches, irrespective of the fact that some one other than the party responsible for the
defect has to pay to remedy the defect.
3.3. Developments after Murphy
As explained above the apparent effect of Murphy is that liabilities for defective
workmanship in construction projects would be confined to the law of contract, except in
circumstances in which the defective work has resulted in physical injury to person or
physical damage to other property. Initially, the effect of such confinement was expected
to protect the contractors from being sued for defective workmanship by those with
whom they had not entered into any contractual relationship. However, the English law
has since evolved, enabling third parties to sue the contractors for defective workmanship
under “collateral warranty”. A collateral warranty gives a third party rights collateral to
rights in an existing contract entered into by two separate parties. Provided that such
warranties are issued in favour of third parties, it is not now possible for a third party who
has an interest in a construction project to sue the contractor or any other service provider
for the construction project for construction defects for which they are responsible.
As Lord Millett said in the case of Alfred McAlpine Construction Limited v. Panatown
Limited24, a leading authority on collateral warranty:
"I agree with the Court of Appeal that the [collateral warranty] was primarily
designed to cater for subsequent purchasers. This is also the view expressed by
Mr. Duncan Wallace Q.C. in "Third Party Damages: No Legal Black Hole?"
(1999) 115 L.Q.R. 394 and is confirmed by an article by Mr. David Lewis in
(1997) 13 Const. L.J. 305. He notes that the widespread use of collateral
warranties … derives from the change in the law of tort which occurred in 1990
when the House decided Murphy v. Brentwood District Council…and departed
from Anns v. Merton London Borough Council"
Another development in English law came about following the decision in St. Martin's
Property Corporation Ltd. v. Sir Robert McAlpine Ltd.25. In this case, an exception to the
24
[2001] 1 AC 518 (HL).
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English law rule that a person cannot recover substantial damages for breach of contract
where he himself has suffered no loss, which was recognised in Dunlop v. Lambert26 in
1839, was extended to construction contracts by the House of Lords. This exception
being that, in contracts for carriage of goods, where it was contemplated that one party
would transfer property in the goods to another after the contract was entered into, he
could recover damages on behalf of the new owner if the goods were lost or damaged.
The decision in St Martins case was followed later in Darlington Borough Council v.
Wiltshier Northern Ltd27, and in Alfred McAlpine Construction Limited v. Panatown
Limited28. This development dramatically changed English law of contracts relating to
construction as it enabled a party to a contract who has suffered no loss to sue and
recover substantial damages on behalf of a third party, based on presumed intentions of
the parties to the original construction contract.
The Contracts (Rights of Third Parties) Act which came in to existence in 1999 now
provides that a third party would have a right to enforce a contract where the contract
expressly states that the third party is to be able to do so. It applies to all contracts entered
into after 11 May 2000.
4. Pure Economic Loss in the US
4.1. Restrictive Approach
The approach of the U.S. courts is very similar to that of the English courts when dealing
with claims for pure economic loss. The U.S. position could be easily summed with the
following quote from the judgment in the case of Aas v. Superior Court29 concerning
claim for damages resulting from negligent constructing of a residence, where the
California Supreme Court held that the plaintiff was not entitled to recover in tort for the
costs of repairing and replacing a defective products:
“[a]ny construction defect can diminish the value of a house. But the difference
between price paid and value received, and deviations from standards of quality
that have not resulted in property damage or personal injury, are primarily the
domain of contract and warranty law or the law of fraud, rather than of
negligence. In actions for negligence, a manufacturer’s liability is limited to
damages for physical injuries; no recovery is allowed for economic loss alone.”
The court held further that “(i)n actions for negligence, a manufacturer’s liability is
limited to damages for physical injuries; no recovery is allowed for economic loss
alone.” In other words, under Aas, the “economic loss rule” precluded recovery for
25
[1994] 1 A.C. 85.
26
[1839] 6 Cl. & F. 600.
27
[1995] 1 W.L.R. 68.
28
[2001] 1 AC 518 (HL).
29
24 Cal.4th 627 (2000), at 636.
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damages such as “the difference between price paid and value received, and deviations
from standards of quality that have not resulted in property damage or personal injury.”
In another case, Carrau v. Marvin Lumber and Cedar Company30, windows installed in a
luxury home had been treated with an ineffective preservative, with the result that they
were subject to premature rotting within 3-4 years after completion of the house. As a
result their were leaks and some minor damage to wallpapers, sheet rock and stucco. The
plaintiff determined that all of the windows needed to be replaced. It was undisputed that
replacement of the windows would also necessitate the performance of other work, such
as removal and restoration of landscaping. Plaintiff obtained bids in the range of
$450,000 to replace the windows and perform the related remedial work. However, the
defendant refused to pay, although it did furnish the replacement windows. When the
plaintiff eventually sold the residence, it was agreed with the buyer that $426,000 will be
credited to cover the costs of installing the replacement windows. Subsequently, the
plaintiff instituted legal action against the defendant for breach of warranty and strict
product liability.
The court rejected the cause of action based on warranty as it was time barred. On the
product liability claim, the court held that a plaintiff homeowner could not recover for
defective windows against the manufacturer of their windows under a theory of strict
liability in tort. The Court found, extending the holding of Aas, that the plaintiff could
only recover in strict liability for the resultant damage from the defective windows and
not for the defective windows themselves. The court broadly characterized Aas as
holding that “a plaintiff is not entitled to recover in tort for the costs of repairing and
replacing a defective product; recovery for those costs is available only under contract
or breach of warranty law.” The court also held that the plaintiff could not recover
damages for diminution in value of the residence due to defective windows. In this
regard, the court stated “[W]hen the value of the home was diminished by the use of
Marvin’s products, [the plaintiff] lost an economic benefit. He is not entitled to recover
that benefit on a theory of products liability.”
Thus, Carrau appears to hold that no recovery is allowed for the costs of repairing
collateral damage necessarily caused in repairing the defects, and suggests that the
recovery of the costs of getting to the defects is also barred, at least in the absence of
significant resulting damage actually caused by the construction defect. A key weakness
Carrau is that under the above rationale, it promotes a multiplicity of sequential lawsuit
every time resultant damage occurs, because a plaintiff is not entitled to recover for the
defective conditions.
4.2. Statutory Relief for Homeowners in California
The legislature’s response to the precedence created by Aas was the enactment of a
statute, the Senate Bill 800, commonly known as the “Right to Repair Act31, which
became effective January 1, 2003. It established a mandatory process prior to the filing of
30
(2001) 93 Cal.App.4th 281.
31
Title 7, Part 2 of Division 2 of the California Civil Code.
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certain types of construction defect claims. It applies whenever there are defects alleged
by a “homeowner”32 in new residential construction, subject to standards. It is clear that
the legislative intent of this law is to afford both Homeowners and homebuilders the
opportunity for quick and fair resolution of claims relating to construction defects.
The Act provides that any construction defect action against a builder, subcontractor,
product manufacturer, or design professional groups (builders) will be governed by the
standards set forth in it on new home construction. It defines construction defects
according to standards of how a home and its components should function. These
functional standards have different time limitations from the completion of the home to
bring a claim for defect depending on the category. If the homeowner notifies the builder
of a possible defect after the categorical imposed statute of limitation the defendant has
an absolute defense and no duty to repair. Further, if a homeowner fails to file a written
claim with builder in advance of filing a petition, the law provides for a legal bar to the
action. Subject to these limitations, the Act provides a sound platform for victims of
defectively constructed homes to file their claims and get the construction defects
remedied, irrespective of the absence of any contractual relationship with the party
responsible for the defect.
As additional protection for the homeowners, the Act also requires the builders to provide
homeowners with a minimum one-year express warranty covering the “fit and finish” of
cabinets, mirrors, flooring, interior and exterior walls, countertops, paint finishes and
trim. The bill also permits builders to exceed the warranty standards and provide
homeowners with other more extensive warranties, subject to builder choice.
In addition to protecting the interests of a homeowner against construction defects, the
Act also sets forth certain positive guards available to the builders. These cover:
- unforeseen acts of nature in excess of the design criteria anticipated by the
applicable building codes;
- homeowner’s unreasonable failure to minimize or prevent damages;
- homeowner’s, or his/her agent’s or employee’s, failure to follow recommended
or commonly accepted maintenance obligations;
- defects caused by alterations, ordinary wear and tear, misuse, abuse, or neglect;
- defects barred by the statute of limitations;
- defects subject to a valid release; and
- the extent that defendant’s repair was successful in correcting the defects.
4.3. The Status after the Right to Repair Act
32
A “Homeowner” includes the owners, whether original or subsequent, of a single-family home or attached dwelling
and homeowners associations. It does not apply to commercial buildings.
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In the recent case of Greystone Homes, Inc. v. Midtec, Inc.33, the California Court of
Appeal ruled on two issues that had not been previously addressed under the Right to
Repair Act, namely:
- whether a builder may recover for economic loss caused by a product
manufacturer’s violation of the Act through a claim for equitable indemnity
against that manufacturer; and
- whether that builder may bring a direct action for negligence against the
manufacturer to recover its economic losses.
The plaintiff in this case (Greystone) was a builder (not a homeowner) of a housing
project. It sued the manufacturer of a defective product (Midtec) after having incurred
expenses to repair plumbing related defects in the project. Midtec filed a motion for
summary judgment arguing inter alia that the Right to Repair Act only permits a
homeowner (and not a builder) to bring an action pursuant to the Act and, since the Act
does not apply, under Aas, the economic loss rule precluded Greystone from recovering
additional damages for the cost to replace fittings that had not failed or caused property
damage.
Concerning the first issue, the court concluded that a builder may bring an action for
equitable indemnity to recover economic loss as a result of a manufacturer’s violation of
the Act. The court explained that in an action for equitable indemnity under California
law, both the builder and the manufacturer may be liable for construction defects that
cause physical damage or property damage, so long as there is some basis for tort liability
against the proposed indemnitor. The court held that the Act imposes such liability and
specifically provides that product manufacturers shall be liable to homeowners “to the
extent that the manufacturer caused, in whole or in part, a violation of the Act’s standards
as the result of negligence or a breach of contract.” Thus, the court concluded that a
homeowner may recover economic losses from a manufacturer for a violation of the
Act’s standards that is caused by the manufacturer’s negligence or breach of contract. In
the circumstances, the court concluded that Greystone’s derivative equitable indemnity
claim was permissible because it was based on Midtec’s joint legal obligation with
Greystone to the homeowners (and not Greystone’s direct liability to Midtec).
Concerning the second issue, the court ruled Greystone could not pursue an action
directly against Midtec for negligence per se based on the alleged violation of the Act.
The court explained that the Act does not contain any provision authorizing a direct
action by a builder against an entity of any kind. Further, as Greystone did not fall into
the class of persons that the Act was intended to protect, and as Greystone and Midtec did
not share a “special relationship” to place them within a narrow exception to the
economic loss rule, the court concluded that Greystone may not recover its economic
losses from Midtec in a claim of negligence per se.
33
168 Cal.App.4th 1194 (Cal. Ct. App. 2008).
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5. Pure Economic Loss in Australia
5.1. Liberal Approach
In 1995 the High Court of Australia clearly departed from the restrictive approach taken
by the English Courts with regard to pure economic law, in the case of Bryan v
Maloney34. The High Court imposed a duty of care on a builder in respect of the
diminution in the value of a house due to inadequate foundations that caused cracks and
other defects a defect, which caused a pure economic loss to the owner. The court found
that there was sufficient proximity between the parties, despite the fact that the owner
(plaintiff) was a subsequent purchaser who had no contractual relationship with the
builder. The court could see little distinction between the position of a first owner and
that of a subsequent owner, when considering the question of proximity with the builder.
Distancing it self from the English approach, the High Court of Australia noted the
following:
"One cannot but be conscious of the fact that the conclusion that Mr Bryan is
liable in damages to Mrs Maloney in the present case is contrary to the views
expressed by the members of the House of Lords in D & F Estates Limited -V-
Church Commissioners and Murphy... Their Lordships' view ... seems to us,
however; to have rested upon a narrow view of the scope of the modem law of
negligence and a more rigid compartmentalisation of contract and tort that is
acceptable under the law of this country".
In Bryan v. Maloney, the existence of a contract between a builder and the original owner
gave rise to a relationship of proximity between them that extended to cover the type of
loss suffered.35 An analogy could therefore be drawn between this relationship and the
relationship between a builder and a subsequent purchaser. This relationship was
similarly characterised by an assumption of responsibility and reliance, which was
considered to flow from the fact that ‘ordinarily’ the builder of a house undertakes the
responsibility of erecting a structure on the basis that its footings are adequate to support
it for the period during which it is likely that there will be one or more subsequent
owners; and a subsequent owner will have no greater but often less opportunity to inspect
and test the house than the first owner. Further, being unskilled in building matters and
inexperienced in the niceties of real property investment, it was likely that, if the
inadequacy has not become manifest, for a subsequent owner to assume that the house
has been competently built.36
The two considerations based on which the courts have been traditionally reluctant to
recognise a duty of care in cases of pure economic loss were held to be inapplicable in
Bryan v. Maloney. As the builder owed the first owner a duty to take reasonable care in
constructing the building so as to avoid pure economic loss, it was held that there could
34
(1995) 182 CLR 609; [1995] Aust Torts Reports 62,092 (81-320)]
35
Bryan (1995) 182 CLR 609, 622–4 (Mason CJ, Deane and Gaudron JJ), 662–3 (Toohey J).
36
Ibid, 627–8 (Mason CJ, Gaudron and Deane JJ), 663 (Toohey J).
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be no inconsistency between the extension of that duty to subsequent purchasers and the
builder’s legitimate pursuit of their own financial interests.37 Further, Toohey J opined
that restricting recovery only to an original owner might lead to ‘sham’ first sales with
the purpose of insulating builders from liability.38
Bryan v Maloney also held that builders of both residential and commercial buildings can
be sued for economic loss arising from defective work, not just by the person who
contracted with them to construct the building, but also those who buy the property at a
later date, even though they have probably never met or had any form of contact with the
builder. On its facts, this case widened the scope of damage for pure economic loss to
embrace defects which are both structural and latent. Thus, an affected owner can bring
an action under Bryan v Maloney at any time within 6 years after the defect becomes
apparent.
As Hayano (1996) points out, the tort law applicable in Australia for construction defects,
as defined by Bryan v. Maloney, presents a broader liability for contractors and
construction professionals than was previously thought to exist. It raises the possibility of
unlimited terms of liability and extends the duty to non-contractual parties (Wallace,
1997). Furthermore, as Hodge (2001) points out, it has the effect of stripping the
protection that once was afforded to contractors and construction professionals by a
properly constructed agreement.
5.2. Statutory Protection for Homeowners
In some Australian States, the legislative bodies have taken the initiative to introduce
statutory provisions to protect the homeowners against construction defects. These
initiatives have strengthened the liberal approach taken by the courts. For example, in
New South Wales, the Home Building Act39 has since May 1997 given the extension of
liability of builders to remedy construction defects in connection with residential building
work, irrespective of contractual undertakings, statutory force40. In addition to the
statutory protection against building defects, the Act also provides that warranties on
workmanship and quality of materials supplied will be implied into every building
contract41. This Act does not however apply to commercial buildings.
In December 2002 the New South Wales Government announced the creation of the
Office of Home Building. One of the functions of the proposed office will be to provide
an inspector to conduct an investigation upon receipt of notice of a dispute concerning
residential building work. Currently, provisions have been made under the Office of Fair
Trading for filing complaints on defective building works, provided that the building is
less than 7 yrs old and the builder fails to respond to efforts to resolve a dispute about the
alleged defects in the building work. Such complaints are mediated by the Fair Trading
37
Ibid, 182 CLR 609, 626–7 (Mason CJ, Deane and Gaudron JJ).
38
Ibid 663.
39
Act 147 of 1989
40
Section 48.
41
Section 18.
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staff and can lead to a building inspector visiting the property and deciding whether the
builder is responsible for defective work. This can then lead to agreement by the builder
to make repairs or to the Fair Trading building inspector issuing a rectification order to
the builder42.
5.3. Current Status in Australia
Recently, in Woolcock Street Investments Pty Ltd v CDG Pty Ltd43, the High Court of
Australia refused to extend the liability for pure economic losses to defects in commercial
premises. In this case, the Court of Appeal had previously considered that the
vulnerability of those who acquired commercial premises was considerably less than that
of residential purchasers44.
Majority of the High Court confirmed that no duty of care was owed, and that ‘[n]either
the principles applied in Bryan, nor those principles as developed in subsequent cases’
supported Woolcock’s claim45. In Bryan, the duty of care to avoid economic loss owed to
the subsequent purchaser depended upon the anterior step of concluding that the builder
owed the first owner a duty of care to avoid loss of that kind46. Therefore, the case
required an equation of the builder’s responsibilities to the first owner with those owed to
the subsequent owner, where assumption of responsibility and reliance were
characteristics of the ‘ordinary’ relationship with both parties47.
One of the key reasons for the above conclusion was that, on the facts presented in
Woolcock’s case, there was no reliance by the original owner on the respondents and no
corresponding assumption of responsibility48. This was because the trustee company
undertaking the development for the original owner had asserted control over the
investigations performed for the purpose of constructing the foundations, and thus unlike
in Bryan, this was not a case where the owner had entrusted the premises’ construction to
the building professional. Thus, it was concluded that, as there was no duty of care owed
by the respondents to the original owner, there could not be a corresponding duty of care
owed to the appellant as subsequent owner.
The Court of Appeal’s finding that commercial owners were less vulnerable than
residential owners found favour with the High Court. Defining vulnerability as a
claimant’s ‘inability to protect itself from the consequences of a defendant’s want of
reasonable care, either entirely or at least in a way which would cast the consequences of
loss on the defendant’49, the High Court held that the information before them did not
show that Woolcock was in this way vulnerable to the economic consequences of the
respondents’ negligence50. Further, the court asserted that there was no evidence that
42
See: http://www.fairtrading.nsw.gov.au for further information.
43
(2004) 216 CLR 515
44
Woolcock Street Investments Pty Ltd v CDG Pty Ltd [2002] Aust Torts Reports ¶81-660,
45
Woolcock (2004) 216 CLR 515, 534 (Gleeson CJ, Gummow, Hayne and Heydon JJ).
46
Bryan (1995), 526–7 (Gleeson CJ, Gummow, Hayne and Heydon JJ).
47
Bryan (1995) 182 CLR 609, 624–7 (Mason CJ, Deane and Gaudron JJ).
48
Woolcock (2004) 216 CLR 515, 532 (Gleeson CJ, Gummow, Hayne and Heydon JJ).
49
Ibid 530 (Gleeson CJ, Gummow, Hayne and Heydon JJ)
50
Ibid 533 (Gleeson CJ, Gummow, Hayne and Heydon JJ).
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Woolcock could not have protected itself from the risk. As measures of protection that
could have been taken, the court suggested warranties and pre-purchase inspections51.
The above case is important as it provides some restriction on the application of Bryan v
Maloney. It therefore provides an opportunity to re-examine the rationale and policy
behind current jurisprudence governing builders' liability for pure economic loss in
Australia. It should be said that, although the Australian courts have adopted a more
liberal approach than their English counterparts, a clear formula that can be applied in
connection with all cases of pure economic loss has not been developed so far by the
Australian courts. The closest the Australian courts have come in doing this was in
Woolcock, when McHugh J (one of the judges who gave the majority opinion) went on to
reiterate that the principles he had enunciated in the previous decision in Perre v.
Apand52should be considered in determining whether a duty exists in “all” cases of
liability for pure economic loss. He stated:
“The principles concerned with reasonable foreseeability of loss, indeterminacy
of liability, autonomy of the individual, vulnerability to risk and the defendant’s
knowledge and its magnitude are, I think, relevant in determining whether a duty
exists in all cases of liability for pure economic loss. In particular cases, other
policies and principles may guide and even determine the outcome. But I do not
think that a duty can be held to exist in any case of pure economic loss without
considering the effect of these general principles.”
In a commercial world in which all kinds of protection is available including insurance
and warranties against commercial risks, another question that arises from Woolcock is
that, to what extent is the distinction between commercial and residential properties fair
when it concerns pure economic losses arising out of construction defects. If a purchaser
of a residence is a multi millionaire, with ample expertise and resources at his disposal to
cover any risks, would the court have arrived at a different conclusion, remains
unanswered.
6. Pure Economic Loss in Singapore
6.1. Two-stage Test
This is an area of law in which the Singapore courts have also chosen to depart from the
principles espoused by the English courts. Under Singapore law, it is possible for a
claimant to recover financial loss arising from someone’s negligence if the financial loss
resulted from physical injury or damage to the claimant's person or property. However, if
the financial loss is not a consequence of physical injury or damage to the claimant's
person or property, thus a pure economic loss, then the traditional approach has been to
deny recovery of compensation unless there are further factors which make it appropriate
to allow recovery.
51
Ibid 523, 533 (Gleeson CJ, Gummow, Hayne and Heydon JJ).
52
(1999) 198 CLR 180.
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Until recently the law in Singapore relation to recovery of compensation for pure
economic loss was substantially contained in two cases concerned with construction
projects, decided in the 1990s. In RSP Architects Planners & Engineers v Ocean Front
Pte Ltd (Ocean Front)53, a management corporation (homeowners' association) sued the
developers of a condominium project which the members of the management corporation
had purchased, for compensation arising out of faulty construction of common property.
The court had to decide whether the management corporation had the capacity to
maintain a claim against the developers and recover the cost of remedying the defects.
The cost incurred in the remedial work was considered a pure economic loss.
In answering the above question, having considered several cases from other common
law jurisdictions, the Singapore Court of Appeal concluded that there is no single rule or
set of rules for determining whether a duty of care to prevent pure economic loss arises in
a particular circumstance, or indeed the scope of that duty, and whether such a scope
includes a duty of care to avoid pure economic loss. Thus, all the relevant factors have to
be considered so as to determine the proximity of the claimant and the respondent. This
would, in turn, inform the court as to whether the respondent owed the claimant a duty of
care and whether the scope of that duty included a duty to avoid pure economic loss.
Having considered the relevant factors, the court noted inter alia that the management
corporation was an entity conceived and created by the developers who built and
developed the condominium, including the common property, and undertook the
obligations to construct it in a good, workmanlike manner, and thus were solely
responsible for such construction. Further, after completion of the condominium, the
management corporation, as successors of the developers, took over the control,
management and administration of the common property, and thus had obligations to
maintain the common property. The performance of these obligations was dependent on
the developers having exercised reasonable care in the construction of the common
property. The developers obviously knew or ought to have known that if they were
negligent in their construction of the common property, the resulting defects would have
to be made good by the management corporation.
Warren Khoo, J who delivered the judgment held that:
"Short of actual privity, the relationship between the management corporation
and the developer was as akin to contract as any relationship could possibly be.
As pointed out earlier, the developer of a condominium knows that the
management corporation will come into existence from the moment he conceives
of a plan to develop it. He also knows that the management corporation will take
over the control management and maintenance of the common property, and that
if the common property is not properly constructed and handed over to the
management corporation in that state, the management corporation will have to
incur cost to rectify the defects. Thus, the entity to which the duty is owed as well
as the nature and extent of loss that is likely to be sustained by that entity are well
known to the developer...”
53
[1996] 1 SLR 113
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In the circumstances, the court concluded that there was sufficient proximity between the
management corporation and the developers which gave rise to a duty on the part of the
developers to avoid pure economic loss for the management corporation. Further, the
court concluded that were no policy considerations which militated against the view that
the developers owed the management corporation a duty to avoid pure economic loss.
The second Singapore case mentioned above, RSP Architects Planners & Engineers v
MCST Plan No. 1075 (“Eastern Lagoon”)54, concerned a dispute in which a management
corporation sued the architects of a condominium for the costs of rectifying defectively
designed walls, contending that the architects owed the management corporation a duty
of care. The Singapore Court of Appeal was asked to question similar to that raised in the
Ocean Front case, namely, whether an architect (as opposed to a developer) owed the
management corporation a duty of care to avoid pure economic loss. In answering the
question in the affirmative, the court emphasized that the close relationship between the
parties, and the assumption of responsibility by the Architect and the known reliance by
the claimant, supported the view that a duty of care existed.
Thus, in the above two cases, the Singapore Court of Appeal used a “two-stage process”
to consider, firstly whether there is sufficient degree of proximity to give rise to a duty of
care and next, if such degree of proximity was found, whether there is any material factor
or policy which precludes such duty from arising, considering whether pure economic
loss was recoverable in tort. It is interesting to note that, although this two-stage process
is similar to the ‘two-stage test’ in the English case, Anns, In the Eastern Lagoon case, the
Singapore Court of Appeal rejected the process adopted by the English courts.
As can be seen from the case of Sunrise Crane55 and TV Media Pte Ltd v. Andrea De
Cruz56, although the Singapore courts adopted a two-stage test to determine cases
concerning pure economic losses, when it concerns cases involving physical damage, the
Singapore courts until recently continued to adopt the three-part test established in the
English case, Caparo, namely, foreseeability, proximity and fairness, justice and
reasonableness.
6.2. Limited application of Ocean Front
After the decision by the Singapore Court of Appeal, some may have thought that
floodgates had been opened for cases claiming economic loss. However, this was not to
be, due to the judgments given by the Singapore Court of Appeal in a subsequent case,
Man B&W Diesel S E Asia Pte Ltd & anor v. PT Bumi International Tankers & anor57.
In this case which involved a claim based on pure economic loss suffered as a
consequence of defects in a ship engine, the Court of Appeal held that there was no
54
[1999] 2 SLR 449
55
[2004] 4 SLR 715
56
[2004} 3 SLR 543
57
[2004] 2 SLR 300.
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contract between PT Bumi, the ship owner and the defendants who had supplied the
ship’s engine as PT Bumi’s contract was only with MSE, the ship building company, who
was not a party to the action. The Court of Appeal held that neither manufacturer nor
supplier of the engine owed a duty of care to PT Bumi. In reaching its decision, the Court
attached importance special circumstances in PT Bumi, i.e., the limited recourse that PT
Bumi had been content to accept under its contract with the shipbuilder. The court said
that the correct approach was not to ask whether there was any justification for depriving
PT Bumi of a remedy or whether the contract had deprived PT Bumi of its right to sue the
sub-contractors, but whether there were any compelling reasons to extend the law and
afford a separate remedy to PT Bumi. Further, the court added that it was not for the
court to help a party, after the event, to improve his commercial bargain.
The Court of Appeal also cautioned against extending the decision of Ocean Front to
new situations, particularly to a scenario which was essentially contractual. It also
highlighted that Ocean Front and cases such as Bryan v Maloney were primarily
concerned with economic losses suffered on account of damage to real property. It was
unnecessary to indicate whether the duty of care should be extended to a claim for
economic losses in respect of chattels.
6.3. Single test
In the recent Court of Appeal decision of Spandeck Engineering (S) Pte Ltd v Defence
Science Technology Agency58, the dispute was between a builder and a certifier in which
the former had sued the latter for negligent certification. This case is important as it laid
down an important common law principle regulating the duty of care in the tort of
negligence. It brought about legal certainty to this area of the law, at least in Singapore.
The court in this case was asked to decide on two principal issues.
- whether the test to determine the existence of a duty of care in a negligence
case depended on the nature of the loss suffered by the victim, namely, pure
economic loss on the one hand and physical damage, personal injury and
death on the other hand; and
- whether a certifier of payment certificates owed a duty of care to the
beneficiary of the payment certificates to ensure that the beneficiary does not
suffer pure economic loss resulting from an under-certification of the amount
due under the payment certificate.
Having reviewed the law on duty of care, the court determined that rather than having
different tests for physical losses and pure economic losses, it was preferable to have a
single test in order to determine the imposition of a duty of care in all claims arising out
of negligence. The court concluded that it was necessary to consider foreseeability of
damage as part of the single test because it was a threshold question that has to be
satisfied in any event in tort actions. Thus the court commented:
58
[2007] SGCA 37
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“In our view, a coherent and workable test can be fashioned out of the basic two-
stage test premised on proximity and policy considerations, if its application is
preceded by a preliminary requirement of factual foreseeability. We would add
that this test is to be applied incrementally, in the sense that when applying the
test in each stage, it would be desirable to refer to decided cases in analogous
situations to see how the courts have reached their conclusions in terms of
proximity and/or policy.”59
The court added that, if the answer to the question is negative, then there was no
necessity to proceed further with the case. However, if the answer is positive, the court
held that the single test that should be applied in determining whether the defendant is
liable to the plaintiff in any tort action (both, physical damage claims and pure economic
claims) has two parts:
1. Existence of a duty of care towards the defendant.
In connection with this part the court held that there should be sufficient legal proximity
between the plaintiff and defendant for a duty of care to arise. Proximity includes
physical, circumstantial as well as causal proximity. The court commented that, assuming
a positive answer to the threshold question of factual foreseeability and the first stage of
the single test (legal proximity test), a prima facie duty of care arises.
2. Policy Considerations
If the first part of the test is satisfied, policy considerations should then be applied to the
factual matrix to determine whether or not to negate this duty. Relevant policy
considerations would include the presence of a contractual matrix which has clearly
defined the rights and liabilities of the parties, and the relative bargaining position of the
parties60. In this regard, in deciding on a claim based on negligence where the
relationship of the parties is also connected by a contract, the court placed importance on
the commercial outcome of the claim by stating effectively that if the parties have already
regulated their rights and responsibilities by the contract, the claimant should not be
allowed to avoid the contractual limitations put on his claim by having a go in a claim
under negligence. Therefore, the court concluded that it would have to examine the
contractual matrix closely before deciding whether it would be in the interest of the
commerce at large to send a signal that contractual arrangements can be side-stepped by a
claim under negligence61. The Court also held that the two stages of the single test are to
be approached with reference to the facts of decided cases, although the absence of such
cases is not an absolute bar against the finding of duty.
Having developed the single test, the court considered the issue of the certifier’s liability.
The court concluded that although the case passed the threshold test of foreseeability, the
fact that the relevant building contract provided a dispute resolution mechanism for the
contractor to resolve disputes between the contractor and the employer through
59
Paragraph 73 of the judgment.
60
Paragraph 83 of the judgment.
61
See paragraph 83.
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arbitration was an important point in the whole factual matrix of the situation. The Court
concluded that the requirement of proximity was not satisfied since the certifier could not
be regarded as having assumed responsibility towards the contractor as the latter was free
to claim the amounts under-certified by arbitration proceedings, as was stipulated in the
contract62.
7. Conclusion
This paper has argued that the restrictive approach taken by the English and US courts
concerning claims for pure economic loss is unwarranted and unjustified, especially,
given that like in any other tort case, pure economic loss results in a loss suffered by an
unsuspecting innocent party due to some tortuous act of another. Thus, as concluded by
the Australian and Singapore courts, there is no justification for allowing a tortfeasor to
go free due to the fear that entertaining such legal actions might open the flood gates for
some frivolous actions. Such excuses for denying claims by victims of construction
defects for pure economic losses seems unjust and fails any rigorous and testable logic. A
case by case approach in which each case is considered on its merit as the Australian
courts do could be recommended as a better approach.
One significant weakness of the preference by some jurisdictions to entertain cases
relating to pure economic loss in connection with construction defects only under
contractual remedies is that, the victim of the contractual breach may be often left under
compensated. This is because due to the precedence created in judgments such as
Hadley v. Baxendale63, courts might take the view that damages such as business losses
due to closure of operations during repair works to correct the construction defects might
be considered as too far afield from those reasonably in the contemplation of the
contracting parties at the time of the construction64. In other words if the victim of a
construction defect sues the party responsible for the defect for contractual breach, the
recoverability of consequential damages would hinge on whether the harm incurred was
foreseeable to the defendant builder. Such limitations may not be imposed if legal actions
are allowed under tort.
Even in the Australian and Singapore jurisdictions, it cannot be said that the doubts
concerning the division between compensable claims of pure economic loss and non
compensable claims of pure economic loss have been satisfactorily cleared. For example,
as pointed out in this paper, in Australia, the distinction drawn between commercial
properties and residential properties is not based on any sound legal reasoning. In
Singapore, although the courts have now developed a single test, the room left for
application of policy consideration in deciding the compensability of a claim is likely to
attract issues such as how can tort law strike a balance between no compensation and too
62
See the discussion in Chan and Gunawansa, Asia Pacific Construction Law Casebook 2007, Chapter 6.
63
9 Ex. 341, 156 Eng. Rep. 1458 (Ex. Ct. 1854).
64
In Hadley v. Baxendale the court concluded that the maker of a defective mill shaft was not responsible for the mill's
lost revenues while it was shut down awaiting delivery of a new mill.
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much compensation; and how should the legal systems resist the feared flood of claims,
which leaves some uncertainty over the current status of the law applicable to pure
economic loss.
References
Barlow, M. J. (2001), Pure Economic Loss for Defective Buildings After Henderson v.
Merrett Syndicates: When is a Bilding Contract not an Ordinary Building Contract?,
Society of Construction Law, UK.
Chan, P. and Gunawansa, A. (2008), Asia Pacific Construction Case Law Book,
LexisNexis.
Christian, W. (2002), The Three-Stage Test Abandoned in Australia or Not? 118 LQR
214.)
Craver, T. (2005), Beyond Bryan: Builders’ Liability and Pure Economic Loss, [2005]
MULR 8
Dari-Mattiacci, G. and Schäfer, H. (2005), The core of pure economic loss, International
Review of Law and Economics, Volume 27, Issue 1, pp 8-28.
Giliker, P (2005), Revisiting pure economic loss: lessons to be learnt from the Supreme
Court of Canada?, Legal Studies, Volume 25 Issue 1, Pages 49 - 71
Hayano, L (1996), "Property Damage or Economic Loss?" 11 Tort Law Review 177
Hodge, J.A.M. (2000), Constructing a Liability: Bryan v Maloney, Torts Australia, Vol. 7
No. 1 (March 2000)
Partlett, D. F. (2007), Defective Structures and Economic Loss in the United States: Law
and Policy, Emerging Issues in Tort Law, Neyers, J., ed., Hart Publications.
Perry, R. (2004), Relational Economic Loss: An Integrated Economic Justification for the
Exclusionary Rule, 56 Rutgers Law Review, 711-789.
Schäfer, H. (2002), Liability of Experts and the Boundary between Tort and Contract.
Theoretical Inquiries in Law 3, 453-473.
Siew, L. O. (1996), Defects in Property Causing Pure Economic Loss: The Resurrection
of Junior Books and Anns, Singapore Journal of Legal Studies, pp. 257–266.
Wallace, I (1997), "Bryan v Maloney Revisited in Victoria" 1997) 3 Tort Law Review
154.
Wallace, I. (1997), “The Murphy Saga in Australia: Bryan in Difficulties”, LQR, Vol.
113, P. 355.
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Frits Meijer and Henk Visscher, pp 1328-1338
Measuring the evolution of online handling of building
permits in Europe
Frits Meijer1 & Henk Visscher1
1
Delft, University of Technology
OTB Research Institute for Housing, Urban and Mobility Studies
The Netherlands
Email:, [email protected]; [email protected]
Abstract:
Electronic customer related services of governments have expanded enormously. In
many regulatory domains the use of ICT services has become common property. This
applies also to the field of building regulations. Main theme of this paper is the
possibility to apply online for a building permit. The developments in 18 European
countries are being analyzed, with a focus on the Netherlands. The article addresses
Dutch and European policies towards online public services in general and towards the
electronic handling of building /permit applications in particular. We trace the main
trends of eEurope policy with regard to the online availability of public services and
analyze the progress European countries have made with the availability of online
application facilities for building permission. The paper goes into the way progress is
being measured and monitored in Europe. Although progress has certainly been made,
we cast doubts on the accuracy of the results of the measurements.
Keywords:
Building Control, e government, building permit procedures, Europe
1 Introduction
There are many definitions of the concept of e-government. In this paper the official EU
definition is used: “the use of information and communication technologies in public
administrations – combined with organisational change and new skills – to improve
public services and democratic processes and to strengthen support to public policies”
(Empirica, 2006). During the last decade information technology has been the eye
catching new ingredient in the relation between citizens and their governments. For
several years, European governments have been seeking to provide full online access to
government services. The European Union has developed community policy to further
develop e-government. The exact reasons behind the policies differ slightly from
country to country. In general the key reasons behind e-government have been the wish
to increase the efficiency of government operations, to strengthen democracy, to
enhance transparency, and to provide better and more versatile services to citizens and
businesses (e.g. Flak, 2005).
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The overall policy of countries and the European Union is to bring their services on line.
This paper focuses on the service ‘the application of a building permit’. Why are
European countries bringing their building permit procedure on line? What progress is
being made in this field and how is this progress being measured? We initially started to
research the online applications of building permits in 2003. This paper considers the 15
European countries that where EU-member at that time; Norway, Iceland and
Switzerland are also included. The research results are based on information derived
from our previous and ongoing European research projects on building regulatory
systems,(e.g. Meijer, F. & Visscher, H. 1998 and 2006; Meijer, F., Visscher H. &
Sheridan, L., 2002; Sheridan, L., Visscher H. & Meijer, F. 2003).
This paper analyses the state of the art in Europe with regard to online facilities for
applying for a building permit. It addresses in Section 2 Dutch and European policies
towards online services in general and towards building permits in particular. In section
3 the question is answered how the evolution towards the online handling of building
permit applications is being measured. Section 4 compares the availability of online
application facilities for building permits in Europe, tracing developments and offering
comments in the process. Section 5 places these evolution and measurements in their
perspective by looking closer at the situation in specific countries. The paper ends with
discussion and conclusions in section 6.
2 Public services online: e-government
Developments with regard to e-government policies are illustrated in this section by the
policies of European Union and the Netherlands.
2.1 European Union
Initial key documents were the eEurope 2002 Action Plan, which was further
strengthened by the eEurope 2005 Action Plan (Commission of the European
Communities, 2002a and b). The overall objective of eEurope was to bring Europe
online as soon as possible. According to the European Commission e-government could
lead to improvements in customer satisfaction, improvements in the service level (e.g. a
seamless and customized service, more flexibility of access in terms of time and channel
options, and greater transparency both for customers and governments), greater
efficiency, improved quality and supply of information and reductions in costs and
process times. It may also reduce obstacles to the internal market and enhance mobility
across Europe (European Commission 2003). By 2005, Europe should have modern
online public services and a dynamic e-business environment. The Action Plan
comprised several (interlinked) tools for attaining the targets: legislation, good practices
and demonstration projects. Policy measures should be monitored and steered by
eEurope benchmarking. A list of twenty basic public services was drawn up for the
fifteen ‘original’ member states plus Norway, Iceland and Switzerland. The indicators
covered different domains. The European Commission issued in 2006 the new i2010 e-
Government Action Plan. One of the key elements is e-government: by bringing the
governmental services online the gap should be closed between the administration and
the citizens and businesses.
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2.2 The Netherlands
For several years now the ICT policy of the Dutch government has been geared to
promoting and incorporating information and communication technology in public
services, the idea being to improve accessibility and speed. This, in turn, would cut
down the paperwork and the administrative costs. Since the mid-1990s a lot of
experience has been gained in ICT applications thanks to numerous pilot projects in
many municipalities. The aim of the Electronic Government Action Plan (Boxtel van,
1999) was to target the deployment of ICT in such a way that it should give a
momentous boost to the quality and service (customer focus), efficiency (cost savings)
and effectiveness (reaching the target group) of public services. Three explicit themes
were named: good electronic accessibility, improved public services, and better
management of internal government operations. The introduction of digital services
should ‘fill up’ the main pitfalls of public services: too supply-driven, too restricted
opening times and too long processing times. The government identified many areas
where ICT could be used to improve public services, not least permits and subsidies,
and information (Boxtel van, 1999). With ICT it would no longer matter where or when
people choose to ‘do businesses’. The Action Plan stated that the (one- and two-way)
services offered by the government should be so interesting that they prod people into
action at home or via public terminals. The Action Plan proposed that at least 25% of
public services be administered electronically by the end of 2002. This target was later
raised to 35% for 2003, 55% for 2006 (Remkes, 2003) and 65% for 2007 (Graaf de,
2003). While higher targets were being consistently set over the years, extra objectives
were being formulated at the same time. For example, an extra objective in the
‘Contract for the Future’ policy paper (Boxtel van, 2000) was that all Dutch
municipalities should have a website by the end of 2002. In 2003 the Alternative
Government Action Plan (Graaf de, 2003) re-affirmed the existing policy and
introduced the additional objective of a 25% reduction in administrative costs for
private citizens and businesses by 2006, compared with levels in 2002. The nationwide
ICT agenda (Brinkhorst, De Graaf & Van der Laan), which appeared in 2004, clearly
pursues targets and objectives on a European as well as a national scale: twenty specific
public services should be fully interactive by 2005. More recent policy documents do
not set ‘firm’ targets anymore. The ICT agenda 2008-2011 (Heemskerk, 2008) gives an
oversight of all governmental ICT-activities and states that the Netherlands is one of the
ICT frontrunners. The aim is to further expand this position by a better use of the
available facilities.
3 Measuring progress of e-government:
Although the policy goals are set on a national level, the effects can be best measured
on a local level. In most countries municipalities offer the most direct services to
businesses and citizens.
To measure how well governments are progressing up the e-government ladder usually
a stage model framework is used. In the first stage there is a simple web presence where
information can be obtained. In the final stage full online case handling is possible. In
most cases e-government is assessed through an index or benchmark that results in a
certain score. With these indexes the scores for a services can be compared with another
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service, progress can be measured, various services in different countries can be
compared, etc. A number of models has been developed and many studies have been
carried out using this kind of framework to measure the progress in e-government (e.g.
Flak et al, 2005; Baum & Dimaio, 2000: Ronaghan, 2002; Andersen & Henriksen,
2006; Layne & Lee, 2001; Reddick, 2004).
3.1 European Union
To benchmark the progress within the EU, the 20 public services mentioned in section
2.2 are being measured from 2001 on. Of these services 12 are directed at citizens (e.g.
income taxes and car registration) and the other 8 are specific directed at businesses
(e.g. VAT and public procurement). The survey initially covered the then 15 EU
members plus Norway and Iceland. Switzerland joined the survey for the 2nd
measurement and the new member states were taken into account from the 5th
measurement in 2005 on. A five-stage framework – very similar to the Dutch system -
has been defined to measure and compare the results (CGE&Y, 2003):
0: No – relevant – publicly accessible website (score: 0-24%).
1: The information for starting a procedure is available on-line (score 25-49%).
2: One-way interaction: paper forms can be downloaded (score 50-74%).
3: Two-way interaction: electronic intake is possible (score: 75%-99%).
4: The website enables full electronic case handling; no other formal procedure is
necessary (score: 100%).
The online availability (or ‘sophistication’) is determined by the extent to which a
service can be provided electronically. The policy indicator for measuring progress that
was originally ‘percentage available online’ (eEurope 2002) has since been changed by
the EU to the ‘number fully available on-line’ from the 2nd measurement on (eEurope
2005). In the case of the eEurope 2005 indicator, ‘not fully’ and ‘fully’ available online
were added to this framework. In the seventh measurement the existing framework
again was extended to include a fifth level of sophistication built around pro-activity
and personalization. Thus in 2007 besides the indicators ‘fully available online” an
online sophistication indicator was measured (Capgemini, 2005, 2006, 2007).
The benchmarking scores show that the overall average of sophistication of the twenty
public services has evolved from 45% in 2001 (17 countries) to 76% in 2007 (31
countries). Or in other words a growth from a ‘one way interaction’ level to a level that
is between ‘two way interaction’ and ‘fully transactional’. The overall score of 76% is
the average of all the surveyed countries. Austria is the leader of the ranking (with a
score of almost 100%), with Slovenia and Malta on the second place with an equal score
of 96%. Most of the ‘older’ Member states score a little above average, while a majority
of the ‘new’ Member states have a score that is below average.
On the basis of the ‘fully available online’ indicator, the 2002 measurement resulted in
an average score of 36% for the twenty public services. Since then, the ‘fully available
online’ development of public services in the fifteen Member states has improved to a
score of 68% in 2007. For the current 27 Member states the ‘fully available on line’
score is 59%. The country ranking is strongly correlated with the ranking of the
sophistication scores. The range of scores however is bigger, which is most likely an
illustration of the fact that it is more complex to achieve the full online status than to
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reach a high sophistication score (Capgemini, 2007). A higher score on the
sophistication scale can be accomplished by taking gradual steps. A service is
considered to be fully available online if it reaches sophistication above stage 3.
There is a considerable gap in the performances for businesses and citizens. Almost
three quarters of services for businesses are fully available online against half for citizen
services (Capgemini, 2007). Although progress has been made the goal that all twenty
services should be fully available online in 2005 was not reached.
3.2 The Netherlands
In the Netherlands progress is yearly being measured (from 2000 on) in the
“government.nl.monitor”. A continuous and a yearly monitor are available. The
continuous monitor gives monthly a ranking of the scores. The yearly monitor is
publishes as a book volume. Every year services may be skipped and new ones may be
introduced. In the 2007 monitor 26 municipal services where included (22 for citizens
and 12 for enterprises. In total some 100 services are part of the monitor. A 5 stage
model has been established to measure the service:
0: no information is available.
1: information is available on the website.
2: forms can be downloaded.
3: forms can be filled in and uploaded to the government agency.
4: full case handling is possible.
For every service a maximum reachable stage level is established.
The monitoring results show progressive results. In mid-1996 only 5% of all
municipalities (30 in absolute terms) had a website; in 1999 this figure had risen to
30%, and at the start of 2003 almost all municipalities were accessible online (Remkes,
2003). The government’s aim to manage 25% of public services electronically by the
end of 2002 had already been achieved by the end of 2001. In 2003 almost one third of
all public services were accessible online to private citizens and businesses alike
(Remkes 2003). The most recent monitoring results show that in 2007 67% of all
governmental services are available on websites and can be handled on line
(http://advies.overheid.nl/monitor/). So the target that was set in 2003 on 65% has been
reached.
4 Progress of online building permit applications in Europe
For the service ‘application for a building permission’ a five-stage framework has been
defined to measure and compare the results (CGE&Y, 2003):
1. No – relevant – publicly accessible website (score: 0-24%).
2. The information for starting a procedure is available on-line (score 25-49%).
3. One-way interaction: paper forms can be downloaded (score 50-74%).
4. Two-way interaction: electronic intake is possible (score: 75%-99%).
5. The website enables full electronic case handling; no other formal procedure is
necessary (score: 100%).
Table 1 shows the scores for building permit procedures in the period 2001-2007. Please
note that the percentages have been copied from a bar chart and that we only have taken
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the countries into account that were member of the EU in 2001, plus Switzerland,
Norway and Iceland.
Table 1 Scores for the public service ‘building permit procedures’
(Source: CGE&Y, 2003, 2004, Capgemini, 2005, 2006, 2007)
Country 2007 2006 2004 2003 2002 2001
Austria 100 75 52 50 35 18
United Kingdom 100 100 52 23 24 12
France 75 75 75 75 53 50
Norway 75 100 75 50 57 50
Denmark 67 52 52 51 50 39
Italy 52 52 17 5 5 2
Netherlands 52 50 58 50 30 13
Belgium 50 52 52 37 38 32
Portugal 50 25 25 26 27 26
Germany 50 52 31 12 8 7
Luxembourg 50 50 18 11 10 7
Ireland 45 58 48 100 100 88
Switzerland 44 40 52 49 43 -
Sweden 48 65 45 45 43 32
Finland 43 50 50 28 36 20
Iceland 38 35 30 8 11 -
Spain 33 23 15 6 5 1
Greece 18 50 50 28 27 51
The countries in Table 1 are arranged in order of ‘sophistication’ in 2007. In general one
should expect for every country a gradual development through the years in the
direction of more sophistication. This is indeed the case for Austria, the United
Kingdom (with both a 100% score) and Denmark, Portugal, Iceland and Spain. In
France, Belgium, Germany and Luxembourg progress seems to stagnate in recent years.
Which could be explained by the fact that progress is getting more difficult in the latter
stages of sophistication. The scores for the other eight countries fluctuate yearly and
indicate a decline of the online sophistication. Norway and Ireland are especially
remarkable in this respect because they had a score of 100% in the past, but somehow
managed to loose the lead. These fluctuations in the scores raise questions. What does a
100% score mean; How can the fluctuations be explained; does the score reflects the
actual use by applicants of the online possibilities?
5 The meaning and accuracy of the sophistication scores
In order to get answers to these questions and to get a better grip on the meaning of the
scores we take a closer look at a small number of countries:
• Netherlands: how realistic is the benchmark score of 52%?
• Austria and the United Kingdom: idem ditto and what does a 100% score mean in
reality?
• Ireland: what is the explanation for the fluctuations in the scores?
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5.1 The Netherlands
Building Regulations (technical requirements and building permit procedures) in the
Netherlands are nationwide uniform. Municipalities are responsible for building control
and the issuing of building permits. Since some years it is possible to access building
control departments online. The websites provide or refer to information on all aspects
of the application procedure. Through a question-and-answer procedure it can be
determined which permit is required. Application and other forms can be downloaded
and printed. It is also possible in most municipalities to track the progress of the
application and to make an electronic appointment with building control inspectors. Full
electronic case handling is still not possible, but the actual implementation is merely a
question of time. How this actual situation relates to the Dutch score in the European
benchmark studies is questionable (see table 1). The lion’s share of the Dutch
municipalities did (in 2007) operate already on level 3. A score of 75% instead of 52%
seems to be a better reflection of the actual situation at that time.
The Dutch government is going to introduce in 2010 the ‘environmental permit’. This
permit combines and replaces some 25 regulations and permits concerning the physical
surrounding that are currently in force (e.g. building permit, demolition permit, and
environmental permit). In stead of a range of permits that sometimes are necessary, one
permit suffices in the near future. In 2010 one ‘digital office window’ will be introduced
where the environmental is permit can be handled online. Municipalities can make use
of the central server organization.
5.2 Austria
Austria is a federal republic which consists of nine provinces. Until 2008 there where no
uniform Building Regulations in Austria. The past decennia regularly attempts have
been undertaken to establish one set of model Building Regulations for the whole
country. In 2008 the efforts finally paid off. A news harmonized set of technical
requirements was introduced. Since then four out of nine Austrian provinces have
already taken over the new building regulations (Mikulits, 2008). Harmonization of the
building control procedures however where were excluded. Online building permit
application is in essence a procedural service. This means that there are still 9 different
procedures in the nine provinces. Our current research project shows (based on the
situation in Vienna and Styria) that information and paper forms can be downloaded. A
recent visit to the websites of various Austrian cities confirms this. So the application of
building permission in Austria at this moment operates on level 3 of the European
measurement framework. The 100% score in the 2007-benchmark seems far too high.
5.3 United Kingdom
There is not one set of building regulations that covers the whole UK. England &
Wales, Scotland, and Northern Ireland each have their own – albeit similar – systems of
rules and regulations. Every constituent country has established its own procedure. So
the first question that should be answered is what does the EU benchmark figure for
‘the’ UK relates too?
5.3.1 England and Wales (and Northern Ireland)
In England & Wales planning and building regulations are nationwide uniform.
Applicants can choose between Local Authority Building Control or Approved
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Inspectors to check their building plans. Within Northern Ireland building control is
entirely administered and enforced by local authority district councils. Since the early
2000’s the effort was aimed to further digitize the planning permission and building
permit process. Again, government policy is the driving force: all local authorities were
expected to e-enable their services by 2005. The planning portal was ready first. The
submit-a-plan-website, where applications for a building permit can be submitted, was
launched in 2003. The English system seems very similar to the proposed digital server
concept in the Netherlands. According the summit-a-plan website all local authorities in
England, Wales and Northern Ireland are now listed for making electronic building
control applications. A 100% score for England and Wales (and Northern Ireland)
seems to be in order. That does not mean that all building permits in England and Wales
are being processed electronically. Our current research project shows (information
from the end of 2008) that at that time roughly half of the councils had signed up to take
electronic applications. It was estimated that only a relatively small fraction of all
building permits was issued online.
5.3.2 Scotland
In May 2005 a new building regulatory system has come into force in Scotland. In the
new system ‘verifiers’ (= local authorities) are responsible to carry out building control.
In the future it could be possible that private parties could also play a role as verifier
Suitably qualified design professionals can become approved ‘certifiers’ of structural
design and approved ‘certifiers’ of construction. The verifier is not allowed to check
work done by a certifier. Full electronic handling of permits is possible in Scotland.
However our current research shows that the percentage of construction plans that are
handled electronically is low.
All in all it is fair to say that the 100% score for the UK is justified. Electronic handling
is in principle possible. However the actual number of permits that is actually process
completely online is far from 100%.
5.4 Ireland
Although Ireland has nationwide building regulations based on a Building Control Act,
the Irish system differs slightly from other European building control. Ireland applies a
system of planning permission, commencement notices and fire safety certificates.
Goals have been defined for online access to planning application and development
control processes, including commencement notices. In 2004 online inquiry facilities
were available for planning permission in 60% of the major local authorities (Hanafin,
2004). At this moment it is possible to apply for certain planning applications online in
the major local authorities. Similar developments are taking place in commencement
notices and fire safety certificates. It is possible to download forms and information on a
large scale. In some municipalities it is also possible to track the (planning) procedure.
A full-scale intake, case handling, decision and delivery of a standard procedure to
obtain a fire safety certificate via the web is not possible. The 2007 score seems to
reflect the actual situation. It is however unclear where the 100% scores for 2002 and
2003 are based upon (Table 1).
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6 Discussion and conclusions
There are many potential advantages of the online handling of building permits. Positive
cost and time effects and a further streamlining of procedures can be expected. The
system eliminates sending layers of papers and it is available around the clock. The
heaps of paper in municipalities’ archives can largely be replaced by one electronic
archive. Progress of applications can be tracked online. Building inspectors will be able
to take electronic plans and documents out on-site. Drawings can be viewed on screen
and redline comments can be made. A nationwide uniform building control system (as
is the case in the UK and Norway and the Netherlands) is an important additional factor
to facilitate the introduction of online building permit procedure. The same rules apply
everywhere (e.g. technical requirements) and the building control authorities work along
the same procedures. This enables the development of a central web server where local
building control offices can register.
A reliable measurement tool is indispensable to compare progress in Europe with regard
to the online availability of building permits. It is however essential to be crystal-clear
what exactly is measured and how it is measured. There are differences in the building
control systems of European countries. In some countries the planning permit is an
essential instrument and a ‘building permit’ is not being issued. In order to understand
the possibilities and impossibilities of electronic handling of building permits one has to
have an elementary notice of the building regulatory system in a country. The first step
is to define exactly what service is being measured. Furthermore it should be defined
precisely what a score for a country exactly means. As building permits are often
granted at municipal level, the question arises how the scores should be interpreted.
What score does a country get where half of the municipalities operate on level 3 en the
other half on level 4? Besides that percentages suggest accuracy and exactness, but do
they reflect the actual situation? A closer look at four countries has casts some doubts
on the actual value of the European benchmark scores. Furthermore it has put a 100%
score in its right perspective. A ‘staged benchmark framework’ is certainly useful to
show online progress on a general certain level. Important questions remain
unanswered.
The main problem is that this European measurement tool does not give information
about the use by the target groups and can not be related to the other main goals of e-
government. As in the Netherlands from the start of the European benchmark on hardly
any information was gathered about functionality (is anyone using the services?) and
content of the websites (is the quality adequate?). To asses progress in a ‘sensible’ way
important questions should be addressed as are the services actually adopted by the
people/businesses they are aimed at and are the goals (in terms of less time costs, etc.)
actually realized. As stated the European benchmark was until recent years aimed at
surveying if there is a website available for the relevant service and if yes what
possibilities are offered for its use. In the 2007 EU measurement a pilot was executed to
measure user centricity. Besides that information has been gathered on a yearly base
(since 2005) about e-government usage by individuals and businesses. These data
showed that around 30% of all individuals in the 27 Member States have used the
internet in 2007 for interaction with public authorities. For businesses the comparable
figure is 65% (Eurostat-a and Eurostat-b, 2008). Interaction is defined as “having used
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the internet for obtaining information, or downloading forms, or filling in web-forms, or
full electronic case handling”. It stays unknown what percentage of a service is actually
handled via the internet and if the intended goals are realized.
Although all European countries work on the introduction of online permit handling,
progress is slow. Drawback of the current monitoring system is that information is
missing if the intended goals are being reached. Important subjects for future research
will be the fine-tuning of the assessment method by which progress can be compared
and a nearer analysis of the actual contents and practical effects of the online building
permit services.
7 References
Andersen, K. & Henriksen H., 2006, E-government maturity models: extension of the
Layne and Lee model, in Government Information Quarterly, volume 23, Issue 2,
pp. 236-248, Elsevier Inc. .
Baum, C. & Di Maio, A., Gartner’s Four Phases of E-Government Model, Gartner
Group Report No. COM-12-6173, 2000.
Boxtel R. van (Minister for Major Cities and Integration Policy), 1999,
Actieprogramma Elektronische Overheid, Parliamentary Paper 1998-1999, 26387,
no.1, House of Representatives, The Hague, December.
Boxtel, R. van (Minister for Major Cities and Integration Policy), 2000, Contract voor
de Toekomst; een visie op de elektronische relatie overheid-burger, The Hague,
May.
Brinkhorst, L., De Graaf, Th. and Van der Laan, M. (Minister of Economic Affairs,
Minister for Government Reform & Kingdom Relations, State Secretary for
Education, Culture and Science), 2004, De Rijksbrede ICT-agenda, House of
Representatives, Session 2003-2004, 26 643, no. 47, The Hague, February.
CGE&Y (Capgemini Ernst & Young), 2003, Overall report October 2001 – October
2002 Online availability of public services: How does Europe progress? Brussels,
January.
CGE&Y (Capgemini Ernst & Young), 2004, Online availability of public services: How
is Europe progressing? Brussels, January.
Capgemini, 2005, Online availability of public services: How is Europe progressing?
Brussels, March.
Capgemini, 2006, Online Availability of Public Services: How Is Europe Progressing?
Brussels. June.
Capgemini, 2007, The user challenge; benchmarking the supply of online public
services, 7th Measurement, Brussels, September.
Commission of the European Communities, 2002a, eEurope 2002 Benchmarking
Report, Brussels, February.
Commission of the European Communities, 2002b, eEurope 2005 an information
society for all, Brussels, May.
Commission of the European Communities, 2006, i2010 eGovernment Action Plan -
Accelerating eGovernment in Europe for the Benefit of All, Brussels, April.
Empirica, 2006, Benchmarking in a policy perspective (report no.4 Public Services),
Bonn and Brussels, October.
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Eurostat, 2008a, E-government usage by individuals: percentage of individuals aged 16
to 74 using the Internet for interaction with public authorities, Brussels, January.
Eurostat, 2008b, E-government usage by enterprises: percentage of enterprises which
use the Internet for interaction with public authorities, Brussels, January.
Flak, L., Olsen, D. & Wolcott, P., 2005, Local E-government in Norway; current status
and emerging issues; in: Scandinavian Journal of Information systems, 17(2):41-48
Graaf, Th. de (Minister for Government Reform and Kingdom Relations), 2003,
Actieprogramma Andere Overheid, House of Representatives, Parliamentary Papers
II, 29362, no.1, The Hague, December.
Hanafin M. (Minister of State for the Information Society), 2004, New Connections a
strategy to realize the potential of the information society, 2nd Progress Report,
Dublin, April.
Heemskerk, F. (Secretary of State of Ministry of Economic Affairs) , 2008, ICT-agenda
2008-2011; central position of the user in the digital services society, The Hague
June.
Layne, K. and Lee, J. W., “Developing Fully Functional E-Government: A Four Stage
Model,” Government Information Quarterly, (18, 2), 2001,pp. 122-136.
Meijer, F. & Visscher, H., 1998, Deregulation of building controls: a comparison of
Dutch and other European systems, In: Environment and Planning B: Planning and
Design, vol. 25, p. 617-629, Pion, London.
Meijer, F. & Visscher, H., 2006, Deregulation and privatisation of European building-
control systems?, In: Environment and Planning B: Planning and Design, volume
33, pages 491-501, Pion, London.
Meijer, F., Visscher, H. & Sheridan L., 2002, Building regulations in Europe part 1, A
comparison of the systems of building control in eight European Countries, Delft
University Press.
Mikulits, R, 2008, Performance-Based Building Regulations – the two-tier approach in
the new Austrian Building Codes, COBRA Research Conference, Dublin,
September.
Reddick, C. G., “A Two-Stage Model of E-Government Growth: Theories and
Empirical Evidence for U.S. Cities,” Government Information Quarterly, (21),
2004, pp. 51-64
Remkes, J. (Minister of the Interior and Kingdom Relations), 2003, Elektronische
Overheid eind/voortgangsrapportage 2002, The Hague, April.
Ronaghan, S., 2002, Benchmarking E-government: a global perspective; assessing the
progress of the UN Member States (UN Division for Public Economics and Public
Administration & American Society for Public Administration), May, New York.
Sheridan, L., Visscher, H. & Meijer, F., 2003, Building regulations in Europe part 2, A
comparison of technical requirements in eight European Countries, Delft University
Press.
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
João Branco Pedro, Frits Meijer and Henk Visscher, pp 1339-1355
Comparison of tasks and responsibilities in the building
control systems of European Union countries
João Branco Pedro1&2, Frits Meijer1 and Henk Visscher1
1
OTB Research Institute for Housing, Urban and Mobility Studies,
Delft University of Technology, Jaffalaan 9, 2628 BX Delft,
The Netherlands
2
LNEC – National Laboratory for Civil Engineering
Av. do Brasil 101, 1700-066 Lisbon
Portugal
Email: [email protected]; [email protected]; [email protected]
Abstract:
Building regulations set minimum requirements for safe, healthy, energy-efficient and
accessible buildings. To guarantee that these requirements are applied, a building
control system is indispensable. The trend towards a common market for construction
products and services justifies gaining better insight into the building control systems in
the European Union. This paper presents a comparison of the tasks and responsibilities
of public and private parties in the building control systems of the 27 European Union
countries. To gather the necessary information, a questionnaire on building regulatory
systems was distributed to national experts in each country, and the major legal
documents were reviewed. The information was organized in thematic tables that
contain all the countries. The themes are as follows: regulatory framework, application,
plan approval, site inspection, completion and supervision. The main conclusion is that
the building control systems of EU countries have many similarities. Public parties set
the regulatory framework, check planning demands, issue building permits, conduct
final inspections, grant completion certificates and supervise the system. The main
difference concerns the involvement of private parties in checking technical
requirements and in site inspections. Three basic types of building control systems were
identified: public building control, mixed building control and dual building control.
The majority of the countries have mixed systems. Although several variations were
found among the mixed systems, the most common situation is for public parties to
check the technical requirements and private parties to be involved in site inspections.
Additional uniformity among building control systems would help to support a single
market for services in the construction industry, in which architects, developers and
builders are no longer limited to working within national markets.
Keywords:
Building control system, Comparative study, European Union.
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1 Introduction
In every European country, there is a building regulatory system encompassing the
building regulations and the building control system. Building regulations set minimum
quality requirements to ensure that buildings are safe, healthy, energy-efficient and
accessible to everyone who lives and works in and around them. Building control aims
to guarantee the application and enforcement of these minimum requirements.
The general characteristics of the building control system in European countries are
similar. Designs must be prepared and submitted to an authority that approves its
compliance with zoning demands and building regulations. During construction, site
inspections guarantee that the structure is built according to design and that it complies
with the building regulations. Once construction is complete, a final check is conducted
and a completion certificate is issued.
There are many differences between countries regarding procedural aspects of building
control, including the following: simplified procedures, categories of construction
works included in each type, possibility of phasing, submission requirements, frequency
and moment of site inspections, criteria for determining the value of fees and time limits
of the procedure. However, the most prominent structural difference concerns the
division of tasks and responsibilities between public and private parties. Differences can
be explained by the presence of diverse legal and administrative frameworks, socio-
economic conditions and cultural traditions. It is beyond the scope of this research to
explore the reasons why these differences exist.
The purpose of this paper is to compare the tasks and responsibilities assigned to public
and private parties that enforce the building control systems in the European Union
countries. The three research questions addressed are as follows: What are the main
differences and similarities between EU countries regarding the tasks and
responsibilities of enforcement actors? What are the main types of building control
systems? What lessons can be learned from the various building control systems?
The following section justifies the importance of carrying out comparative research on
building control systems. Section 3 explains the research methodology and Section 4
presents the results of the comparative analysis. Section 5 describes the main types of
building control systems.
2 Trends of change in building control systems
Studying the tasks and responsibilities in the building control systems of EU countries is
important for several reasons (CEBC, 2006; DCLG, 2008):
1. The EU has developed a single market, thereby ensuring the freedom of
movement of people, goods, services and capital. Developments towards the
harmonisation of national regulations have enabled construction products to be
traded freely across the European Economic Area. Nonetheless, differences
among the building control systems of EU countries continue to represent a
barrier to the freedom of movement of services.
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2. The present trend towards a common market for construction products and
services is likely to increase cross-border activities in the construction industry.
Designers, applicants and builders will have to deal with the different building
control systems of the EU countries.
3. The building control system is changing. Building control was originally
performed by building authorities, but there is currently a trend towards the
gradual privatization of building control. The tasks assigned to private parties
vary by country.
4. The growing need for housing in some countries justifies continuing or
increasing the construction of new buildings. The goal of improving the
maintenance condition and the energy efficiency of the existing housing stock is
intended to stimulate rehabilitation activity. To face these demands an adequate,
efficient and effective building control system is required to operate today and to
develop into the future.
Recent international comparative research on building control is quite scarce. Within
this field, the OTB Research Institute for Housing, Urban and Mobility Studies
conducted a comparative study of building regulations and systems of building control
in eight European countries (Meijer et al., 2002). The study showed a broad variety of
organizational models for building control systems, with private parties playing an
important role. The Consortium of European Building Control (CEBC) conducted a
study on the building control systems in Europe (Mikulits, 2006). Information about 21
European countries was collected and analysed. The main conclusion was that there
were fewer differences among the building control systems in the responding countries
than had been expected. In nearly all countries private control elements were found at
least as a means of delegating tasks to independent private experts. More recently, OTB
conducted an analysis of the consequences of private sector involvement in building
regulatory enforcement (van der Heijden, 2009). To support the analysis, the regulatory
enforcement regimes of eight case studies in Australia and Canada were compared. One
of the results was the identification of five types of building regulatory enforcement
regimes.
3 Methodology
The research presented in this paper was conducted as part of a European comparative
research project currently underway at OTB (Meijer and Visscher, 2008). The project
aims to describe and compare the building regulation system in 34 European countries.
The main subjects addressed are as follows: the organization and formulation of
technical building regulations, the tasks and responsibilities of actors involved in
building control, the technical and administrative aspects of the building permit
procedure and the quality demands imposed on building control bodies.
The development of the research project was divided into two phases. In the first phase,
the aim was to describe the building regulation system. National experts in each country
received questionnaires about their building regulatory systems. Based on information
obtained from the questionnaire and the analysis of major legal documents, a
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monograph was written for each country. In the second phase of the project, the aim
was to compare the building regulation systems of the European countries in order to
identify trends and developments.
This paper presents results from the second phase of the research project. The focus is
on the tasks and responsibilities of actors involved in building control. The basis of the
analysis is restricted to the 27 countries of the European Union. Due to the federal
structures of Austria, Germany and Belgium, analyses of each of these countries focuses
on a single province or region. With regard to the United Kingdom, information was
collected for England and Wales.
The comparison of building control systems is divided into the following parts:
regulatory framework, application, plan approval, site inspection, completion and
supervision.
The actors who intervene in the building control systems are divided into public parties
and private parties. Public parties are the central, regional and local authorities,
including their departments and agencies that relate to construction. Private parties
(individuals or corporate bodies) were classified as follows:
1. The applicant starts the project and manages its implementation.
2. The designer develops the design submitted with the application for a building
permit.
3. The design auditor checks the compliance of the design with the building
regulations.
4. The builder builds the construction work under a contract with the applicant.
5. The building surveyor is authorized to conduct site inspections.
6. The approved inspector is authorized to perform private building control, which
includes checking the compliance of the design with the building regulations and
site inspections.
The conclusions presented in this paper are not definitive, as the necessary information
has not yet been gathered and validated for all countries. This paper focuses only on the
construction works that follow a regular building-permit procedure. The categories of
construction works that require building permits varies by country. Specific aspects of
simplified procedures (e.g. building notice and simple procedure) are not included in the
analysis.
4 Comparative analysis
4.1 Regulatory framework
In all EU countries, building regulations and the rules for their enforcement are set by
the public parties at a central level (Table 1). In some countries, this legislation can be
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complemented at the regional and local levels. Due to their particular administrative
divisions, some countries do not follow the general rule. These exceptions are as
follows:
1. In Austria and Germany, central (federal) authorities set a model of building
regulations and enforcement rules that is adapted by regional authorities.
2. In the United Kingdom, different regulatory systems exist in England and
Wales, Northern Ireland and Scotland.
3. In Belgium, the different levels of authority legislate over different
requirements.
In some countries (e.g. England and Wales), responsibility for the enforcement of
building regulations concerning quality demands for private parties is delegated to
private parties. In these countries, public parties outline the criteria, and private parties
are responsible for determining the details.
Table 1 – Which public parties set the building regulations and the rules for their enforcement?
United Kingdom
Czech Republic
Luxembourg
Netherlands
Lithuania
Denmark
Germany
Romania
Slovakia
Slovenia
Hungary
Belgium
Bulgaria
Portugal
Sweden
Finland
Estonia
Austria
Cyprus
Ireland
Greece
Poland
France
Latvia
Malta
Spain
Italy
Central authorities (x) (x) x x x x x x (x) x x x x x x x x x x x x x x (x)
Regional authorities x (x) x x x
Local authorities (x) x x x x x
No information x x x
Although public parties take a leading role in setting the regulatory framework of
building control, most countries have schemes to ensure the participation of private
parties. For example:
1. In Denmark, there is an ongoing dialogue with the parties of the building
industry. Collaboration takes place through a building policy forum and user
panels on specific areas.
2. In the Netherlands, an advisory board discusses future developments in the
building regulatory regime and may give advice to public authorities. All parties
within the building sector are represented in these boards.
3. In England and Wales, public authorities promote the public debate concerning
proposed reforms to the building regulatory regime.
4.2 Application
An application for a building permit may be submitted by the owner of the property, a
person who holds the right of construction on someone else’s property, or a person who
manages the building permit procedure on behalf of the owner.
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The application includes a design of the proposed project. In the majority of the EU
countries, the design must be developed and signed by a qualified designer (Table 2). In
most cases, the design team is coordinated by the architect, and specialists may be
appointed to prepare particular designs.
The qualifications of designers must be documented by registration in the appropriate
professional association. In some countries, the qualifications (education and
experience) required to carry responsibility for a design vary according to the
complexity of the construction work (e.g. more than four floors), type of building (e.g.
listed building) and location of the building (e.g. inside the protection area of a listed
building). The design of small construction works may be exempt from the requirement
to be signed by a qualified designer (as in France).
In some countries (e.g. Denmark, Estonia, Netherlands, Sweden, England and Wales),
there are no demands regarding the qualification of individuals who are responsible for
the design. In these countries, it might be usual or advisable to hire a qualified designer,
although doing so is not mandatory. In Estonia, designs that are not signed by a
qualified designer must be checked by a design auditor. In the Netherlands, building
authorities pay special attention during the process of plan approval for designs that are
not signed by a qualified designer.
In all countries, the designer is responsible for ensuring that the design complies with
planning demands and building regulations.
Table 2 – Who is responsible for the design?
United Kingdom
Czech Republic
Luxembourg
Netherlands
Lithuania
Denmark
Germany
Romania
Slovakia
Slovenia
Hungary
Belgium
Bulgaria
Portugal
Sweden
Finland
Estonia
Austria
Cyprus
Ireland
Greece
Poland
France
Latvia
Malta
Spain
Italy
Qualified designer x x x x x x x x x x x x x x x x x x x
Anyone x x (x) x x x
No information x x x
4.3 Plan approval
In the plan approval process, the applicant submits the building permit application with
the information necessary to demonstrate compliance with planning demands and
technical requirements. The competent building authority scrutinises the application and
consults other authorities, if the applicant has not already done so. A design auditor may
conduct an audit to provide a substantiated opinion regarding the extent to which the
design conforms to technical requirements. If opinions from other authorities and design
auditors are favourable, and if the competent building authority is satisfied, a building
permit is granted.
In all the EU countries, public parties check design compliance with the planning
demands (Table 3). In most of the countries, planning demands are checked by a
department of the local authority in charge of enforcing building and planning
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regulations. In some countries, there are separate departments for planning and building
issues. The following are exceptions to this rule:
1. The central planning authority is responsible for enforcing building and planning
regulations (e.g. Malta).
2. A regional building authority provides advice to local authorities that do not
have complete permitting autonomy (e.g. Belgium).
3. The local or regional office of the central planning authority enforces the
planning instruments (e.g. Cyprus, smaller municipalities of France, Poland,
Slovenia).
Table 3 – Which public parties check planning demands of building permit applications?
United Kingdom
Czech Republic
Luxembourg
Netherlands
Lithuania
Denmark
Germany
Romania
Slovakia
Slovenia
Hungary
Belgium
Bulgaria
Portugal
Sweden
Finland
Estonia
Austria
Cyprus
Ireland
Greece
Poland
France
Latvia
Malta
Spain
Italy
Central authorities x x x x
Regional authorities x x
Local authorities x x x x x x x x x x x x x x x x x x x x x x
No information x x
Public parties, particularly local authorities, are also responsible for checking the
technical requirements of designs in most of the EU countries (Table 4). Private parties
may be involved in or responsible for checking the technical requirements in one fourth
of the EU countries. In addition to the countries in which the building authority checks
the technical requirements, the following distributions of tasks and responsibilities
between public and private parties were found:
1. The building authority and the professional association of designers check the
technical requirements (e.g. Spain).
2. The building authority may appoint a design auditor to check the design on their
behalf (e.g. Germany) or may require the applicant to have the design checked
by a design auditor (e.g. Finland, Latvia).
3. The applicant must appoint a design auditor for certain categories of
construction works, with the remaining categories checked only by the building
authority (e.g. Bulgaria).
4. The applicant may voluntarily have the design checked by a design auditor, and
the building authority can choose either to re-check the design or to accept the
declaration of the auditor (e.g. Latvia).
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5. The applicant may choose between having the design checked by the building
authority or by an approved inspector, excluding re-checks by the building
authority (e.g. England and Wales).
6. The applicant must appoint a design auditor (e.g. Romania).
7. The applicant must appoint a design auditor for certain categories of
construction works, and the remaining works are not checked (e.g. France,
Slovenia).
8. The building authority checks only the preliminary design (e.g. Portugal).
9. Plan approval does not include checking the technical requirements (e.g.
Sweden).
For some requirements (e.g. energy and indoor air quality), there may be specific
control systems that are separate from those used during the general procedure for
approving plans. Auditors may be appointed to check either the complete design or
some part of it (e.g. gas installations, energy and indoor air quality).
When the technical requirements are not checked in their entirety (as in Portugal and in
the case of some categories of construction works in France, Slovenia and Sweden), the
designer’s declaration of compliance constitutes sufficient guarantee for the building
authorities. In France, an audit of the design may be necessary for insurance purposes.
Table 4 – Who checks the technical requirements of a building permit application?
United Kingdom
Czech Republic
Luxembourg
Netherlands
Lithuania
Denmark
Germany
Romania
Slovakia
Slovenia
Hungary
Belgium
Bulgaria
Portugal
Sweden
Finland
Estonia
Austria
Cyprus
Ireland
Greece
Poland
France
Latvia
Malta
Spain
Italy
Building authority x x x x x x x (x) (x) (x) x x x x (x) x x x x x (x) x x (x)
Professional association x
Design auditor (x) (x) (x) (x) (x) x (x)
Approved inspector (x)
Not checked (x) (x) (x) x
Depending on the type of building and its location, approvals from authorities other than
the one issuing the building permit may be required. The authorities that are consulted
fall into four main groups, according to their tasks: authorities that manage the listed
buildings, collective facilities or environmental heritage and their protection areas;
authorities that supervise the use of certain types of buildings; authorities that provide
urban services; and authorities that guarantee health and safety.
In some countries, the necessary approvals are requested by the building authorities
(Table 5). In other countries, the applicant must request the approvals directly and
submit them either along with the building permit application or before the start of
construction. Building authorities usually offer some support to the applicant by
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providing a service through which most approvals can be requested at the same time. In
some countries (e.g. Italy, Portugal), the applicant may choose to collect the approvals
in advance and submit them along with the application.
Table 5 – Who requests approvals from other authorities?
United Kingdom
Czech Republic
Luxembourg
Netherlands
Lithuania
Denmark
Germany
Romania
Slovakia
Slovenia
Hungary
Belgium
Bulgaria
Portugal
Sweden
Finland
Estonia
Austria
Cyprus
Ireland
Greece
Poland
France
Latvia
Malta
Spain
Italy
Building authority x x x x x x x x x
Applicant x x (x) x (x) x x
No information x x x x x x x x x x
In all EU countries, the building permit, or an equivalent document, is granted by public
parties, usually the local authorities (Table 6). Only in England and Wales, where the
procedure is operated by approved inspectors, may construction begin without a
building permit issued by the public parties. However in England and Wales planning
permits granted by the planning authority are mandatory and the local building authority
can reject a plan certificate that has been issued by the approved inspector.
Table 6 – Who grants the building permit or equivalent document?
United Kingdom
Czech Republic
Luxembourg
Netherlands
Lithuania
Denmark
Germany
Romania
Slovakia
Slovenia
Hungary
Belgium
Bulgaria
Portugal
Sweden
Finland
Estonia
Austria
Cyprus
Ireland
Greece
Poland
France
Latvia
Malta
Spain
Italy
Building authority x x x x x x x x x x x x x x x x x x x x x x x x x x (x)
Approved inspector (x)
Other parties can object to a proposed construction work in all EU countries. The
objections must be presented before the building permit has been granted. Only in
France are objections presented within 2 months after the day on which the notice that
the building permit has been granted is displayed on the property in question. To make
the application for a building permit public, the building authority, applicant (or both)
must usually take one or more of the following actions:
1. Display a site notice on or near the property to which the application relates.
2. Post an advertisement in the press or on an Internet site.
3. Send notification in writing to neighbours and other affected parties.
4.4 Site inspections
The applicant, the builder or both are responsible for ensuring that the construction
work complies with the approved design and the building regulations. To control the
construction work, site inspections are conducted by public or private parties (or a
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combination). If there are indications that no building permit has been issued for a part
of the construction work or that construction is in violation of the building permit,
construction work is stopped.
In approximately half of the EU countries, public parties are involved in some way in
site inspections. Private parties may be involved in site inspections in almost all EU
countries (Table 7). The degree to which public and private parties are involved in site
inspections varies significantly. The following distributions of tasks and responsibilities
between public and private parties were identified:
1. The building authority conducts site inspections (e.g. Hungary, Ireland, the
Netherlands, Slovakia).
2. The building authority is responsible for site inspections but may appoint a
building surveyor to conduct them on their behalf (e.g. Germany).
3. The building authority may conduct site inspections or delegate them to a private
party, such as the applicant, the builder, the designer or a building surveyor (e.g.
Finland, Sweden).
4. The building authority and a building surveyor (appointed by the applicant)
conduct site inspections (e.g. Bulgaria, Czech Republic, Italia, Lithuania, Malta,
Poland, Spain).
5. A building surveyor appointed by the applicant conducts site inspections, with
the building authority participating as well for some categories of construction
works as well (e.g. Lithuania).
6. A building surveyor appointed by the applicant conducts site inspections (e.g.
Belgium, Cyprus, Romania, Slovenia).
7. A building surveyor appointed by the applicant carries out site inspections of
some categories of construction works, and the remaining categories are exempt
from control (e.g. Estonia, France).
8. The applicant may choose between having site inspections carried out by the
building authority or by an approved inspector (e.g. England and Wales).
9. Site inspections are not mandatory, but no final site inspection by the building
authority is required if the construction work has been checked by a building
surveyor and the designer (e.g. Portugal).
Like Germany, other countries allow building authorities to appoint building surveyors
to conduct site inspections on their behalf. Unlike the situation in Germany, however,
this arrangement has no statutory status. For some requirements (e.g. energy and indoor
air quality), there may be specific control systems other than those used during general
site inspections.
Almost all countries require the designation of a public or a private party to be
responsible for site inspections. Estonia, France and Portugal are the only exceptions. In
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France, however, most applicants voluntarily submit their construction works to
comprehensive schemes of private building control that include site inspections, as
building control involves lower premiums for the mandatory decennial insurance.
In some countries (e.g. Italy, Romania), the designer may also be the building surveyor,
while other countries require site inspections by the designer for all construction works
(e.g. Slovenia) or for particular categories (e.g. Bulgaria, Latvia).
Table 7 – Who conducts site inspections (if required)?
United Kingdom
Czech Republic
Luxembourg
Netherlands
Lithuania
Denmark
Germany
Romania
Slovakia
Slovenia
Hungary
Belgium
Bulgaria
Portugal
Sweden
Finland
Estonia
Austria
Cyprus
Ireland
Greece
Poland
France
Latvia
Malta
Spain
Italy
Building authority (x) x x (x) x x x x x (x) x x x x x x (x) (x)
Building surveyor (x) x (x) x x (x) (x) (x) (x) (x) x (x) x (x) x x (x) x x x (x)
Approved inspector (x)
Designer (x) (x) (x) (x) x
Builder (x) (x) (x) (x)
Applicant (x)
No mandatory inspection (x) (x) (x)
No information x
Although private parties assume an important role in site inspections, public parties
have the legal power to stop a construction work in all EU countries (Table 8). In a few
countries (e.g. Bulgaria, Italy, Latvia), the building surveyor or designer also has the
same power.
Table 8 – Who has the power to stop a construction work?
United Kingdom
Czech Republic
Luxembourg
Netherlands
Lithuania
Denmark
Germany
Romania
Slovakia
Slovenia
Hungary
Belgium
Bulgaria
Portugal
Sweden
Finland
Estonia
Austria
Cyprus
Ireland
Greece
Poland
France
Latvia
Malta
Spain
Italy
Building authority x x x x x x x x x x x x x x x x x x x x x x x
Building surveyor x x x
Designer x
No information x x x x
4.5 Completion
Once the construction work is finished, the building authorities are notified. A final site
inspection is usually conducted by the building authorities and other authorities. If
problems are found, the building authorities specify the corrective measures to be
undertaken. If satisfied with the final site inspection, the building authorities issue or
approve a document that certifies that the construction was completed successfully (i.e.
a completion certificate) or can be used for the intended purpose (i.e. a use permit). In
some countries, the building authorities rely on declarations by the private parties that
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conducted the building work or the site inspections, and they do not perform a final site
inspection.
According to the information that has been gathered to date, public parties conduct final
site inspections for all types of buildings in the majority of the EU countries (Table 9).
In almost all the remaining countries, the final site inspection is required only for certain
types of buildings, usually those that are open to the public. In Poland, Portugal and
Sweden, public parties do not conduct a final site inspection if they are satisfied with the
documentation that attests to the fulfilment of the obligations of construction control
and if they find no cause to intervene. Even if final site inspections are not mandatory,
public parties can always choose to do so.
Table 9 – Who conducts the final inspection (if required)?
United Kingdom
Czech Republic
Luxembourg
Netherlands
Lithuania
Denmark
Germany
Romania
Slovakia
Slovenia
Hungary
Belgium
Bulgaria
Portugal
Sweden
Finland
Estonia
Austria
Cyprus
Ireland
Greece
Poland
France
Latvia
Malta
Spain
Italy
Building authority (x) x x x x x (x) x (x) x (x) x x
Not required (x) (x) (x) (x) x x x
No information x x x x x x x x x x x
Approximately two thirds of EU countries require for all types of buildings completion
certificates or use permits granted or approved by the public parties (Table 10). In
almost all of the remaining countries, such documents are required only for certain types
of buildings, including:
1. all buildings except small buildings (e.g. single-family houses, holiday homes,
garages, carports, greenhouses) in Denmark;
2. buildings open to the public and very high buildings in France;
3. buildings with which the public interest is concerned (e.g. hotels, hospitals,
theatres, shopping centres) in Belgium and the Netherlands.
An exceptional case emerges in countries in which the completion certificate is not
required but the applicant can request it from the builder (e.g. Ireland) or the building
authority (e.g. England and Wales when the applicant opts for public building control).
Table 10 – Who issues the completion certificate /use permit/approval (if required)?
United Kingdom
Czech Republic
Luxembourg
Netherlands
Lithuania
Denmark
Germany
Romania
Slovakia
Slovenia
Hungary
Belgium
Bulgaria
Portugal
Sweden
Finland
Estonia
Austria
Cyprus
Ireland
Greece
Poland
France
Latvia
Malta
Spain
Italy
Building authority (x) (x) x x x (x) x x (x) x x x x x x x x (x) x x x x x x x (x)
Approved inspector (x)
Not required (x) (x) (x) (x) (x) (x) (x)
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When required, the completion certificate or use permit is usually issued by public
parties. Exceptions occur in England and Wales, for situations in which applicants have
opted for private building control; in such cases, the approved inspector issues the
completion certificate and informs the local authority, who has a specified period within
which to reject it. In Poland, some buildings require a use permit, while the rest require
the submission of a completion notification and other documentation to the building
authority, which has a specified period within which to raise objections.
4.6 Supervision
Supervision involves overseeing and auditing entities that carry out plan approval and
site inspection. In all EU countries, public parties perform the supervision of the
building control system. These public parties are central or regional governmental
bodies. When local authorities are not involved in the control of construction works,
they usually supervise the performance of private parties as well.
Table 11 – Who performs supervision of regulatory system?
United Kingdom
Czech Republic
Luxembourg
Netherlands
Lithuania
Denmark
Germany
Romania
Slovakia
Slovenia
Hungary
Belgium
Bulgaria
Portugal
Sweden
Finland
Estonia
Austria
Cyprus
Ireland
Greece
Poland
France
Latvia
Malta
Spain
Italy
Central authority x x x x x x x x x x x x x x x x x
Regional authority x x x
Local authority x x x x
No information x x x x x x x x x
5 Conclusion and discussion
What are the main differences and similarities between EU countries regarding the
tasks and responsibilities of enforcement actors?
In EU countries, public parties set the regulatory framework, check planning demands,
issue building permits, conduct final inspections, grant completion certificates and
supervise the system. The main difference between countries concerns the parties
responsible for verifying the technical requirements of the design during plan approval
and for conducting site inspections during construction.
The involvement of public and private parties in checking the extent to which building
designs comply with technical requirements can be classified into four main patterns
(Table 12): the designs are checked by public parties, public parties may delegate
responsibility for checking to private parties, applicants may choose between having
their designs checked by public or by private parties, designs are checked by private
parties. In some situations, the technical requirements of the design are not checked.
Public parties play a dominant role in checking the technical requirements of the design.
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Table 12 – Who checks the requirements of the design during plan approval?
Austria, Belgium, Bulgaria (some types), Cyprus, Czech Republic, Denmark, Estonia, France (some types), Greece,
Public Hungary, Ireland, Italy, Lithuania, Luxembourg, Malta, Poland, Portugal (preliminary design), the Netherlands, Slovakia,
Spain
Public may delegate
Finland, Germany, Latvia
to private
Applicant may choose
between public and Latvia, England and Wales
private
Private Bulgaria (some type), France (some types), Romania, Slovenia (some types)
Not checked France (some types), Portugal (detailed design), Slovenia (some types), Sweden
With regard to site inspections, the involvement of public and private parties can be
classified into five main types (Table 13): Site inspections are conducted by public
parties, public parties may delegate responsibility for site inspections to private parties,
applicants may choose between having their sites inspected by public or by private
parties, site inspections are conducted by public and private parties, site inspections are
conducted by private parties. In some situations, there are no mandatory site
inspections. Private parties play a dominant role in site inspections.
Table 13 – Who conducts site inspections?
Public Bulgaria (some types), Hungary, Ireland, the Netherlands, Slovakia
Public may delegate
Germany, Luxembourg
to private
Applicant may choose
between public and Finland, Sweden, England and Wales
private
Public and private Austria, Bulgaria (some types), Czech Republic, Italy, Latvia (some types), Lithuania (some types), Malta, Poland, Spain
Belgium, Cyprus, Denmark, Estonia (some types), France (some types), Latvia (some types), Lithuania (some types),
Private
Romania, Slovenia
Not checked Estonia (some types), France (some types), Portugal
What are the main types of building control systems in the EU countries?
With regard to private and public responsibilities in plan approval and site inspections,
three basic types of building control were identified (Table 14):
1. Public building control: Public authorities are responsible for plan approval and
site inspection (e.g. Hungary, Ireland, the Netherlands, Slovakia).
2. Mixed building control: Public authorities and private parties share
responsibilities for plan approval and site inspection.
3. Dual building control: The applicant can choose to have plan approval and site
inspection conducted by public or by private parties (e.g. England and Wales).
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A number of variations were found within the category of mixed systems:
1. Public parties check the technical requirements, but private parties may be
involved in site inspections (e.g. Austria, Belgium, Cyprus, Czech Republic,
Denmark, Estonia, Italy, Lithuania, Luxembourg, Malta, Poland, Portugal,
Romania, Spain).
2. Private parties may be involved in checking the technical requirements and site
inspections (e.g. Bulgaria, France, Germany, Latvia).
3. Private parties are responsible for both the technical requirements and site
inspections (e.g. Slovenia).
4. Technical requirements are not checked during plan approval, and private parties
may be involved in site inspections (e.g. Sweden).
The first situation is the most common in EU countries. Public parties are still
responsible for plan approval, although they encourage the participation of private
parties in site inspections. In very few countries, it is possible for applicants to choose
between private or public parties. Only in England and Wales is there a complete
system of private building control.
Table 14 – Analysis of the main features of building control
(Pr - private sector, Pu - public sector, Mi – public and private, Du - public our private,
blank - not applicable or information unavailable)
United Kingdom
Czech Republic
Luxembourg
Netherlands
Lithuania
Denmark
Germany
Romania
Slovakia
Slovenia
Hungary
Belgium
Bulgaria
Portugal
Sweden
Finland
Estonia
Austria
Cyprus
Ireland
Greece
Poland
France
Latvia
Malta
Spain
Italy
Regulatory framework Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu
Planning demands Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu
Technical requirements Pu Pu Mi Pu Pu Pu Pu Mi Mi Mi Pu Pu Pu Pu Du Pu Pu Pu Pu Pu Pu Pu Pu Pr Pu Du
Building permit Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu Du
Site inspections Mi Pr Mi Pr Mi Pr Pr Du Pr Mi Pu Pu Mi Mi Mi Mi Mi Pu Mi Pr Pr Pu Pr Mi Du Du
Completion certificate Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu
Supervision Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu Pu
Mixed
Mixed
Mixed
Mixed
Mixed
Mixed
Mixed
Mixed
Mixed
Mixed
Mixed
Mixed
Mixed
Mixed
Mixed
Mixed
Mixed
Mixed
Mixed
Mixed
Mixed
Public
Public
Public
Public
Public
Dual
Type
In general, public parties maintain a dominant role in the building control systems of
EU countries. The role of private parties is generally to support the enforcement of the
system, primarily in tasks that demand technical expertise or intensive survey of
construction works.
What lessons can be learned from the building control systems of the EU countries?
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In an overall analysis, similarities were identified among the building control systems of
EU countries regarding the tasks and responsibilities of enforcement actors. Public
parties maintain a dominant role, and private parties are involved in building control
systems of 23 of the 27 EU countries. The tasks of private parties include checking
technical requirements and conducting site inspections. These results are consistent with
the conclusions of previous studies about the subject, particularly the 2006 CEBC report
(Mikulits).
A closer analysis of plan approval and site inspection shows that the degree of private-
party involvement varies significantly. Further differences are likely to exist in the
quality demands of public and private building-control bodies.
Building upon previous studies (Meijer et al., 2002; van der Heijden, 2009), an
analytical framework was established. The analysis provided a global picture of the
building control systems of the European countries. The results can be useful for
situating the systems of each country within the European panorama, assessing the main
trends and developments and guiding strategic choices on possible improvements in
each country.
A complete analysis of the regulatory systems of the European countries requires further
comparative studies, focusing on the organization and formulation of technical building
regulations, the procedural aspects of building control and the quality demands of public
and private building-control bodies. Furthermore, the analysis of regulatory systems
should proceed with studies about the performance of each type of system in terms of
adequacy, efficiency and effectiveness.
Although many similarities were found among the building control systems of the EU
countries, the differences in the involvement of private parties in building control still
constitute a barrier to the freedom of movement of people and services. Additional
uniformity among building control systems would be beneficial in supporting a single
market for services in the construction industry, in which architects, applicants and
builder are no longer limited to work in national markets.
6 Acknowledgments
Thanks are extended to the national experts of the EU countries that filled in the
questionnaire on building regulations and to Jeroen van der Heijden and Olivia Satin for
their comments on an earlier draft of this paper.
7 References
DCLG, Department for Communities and Local Government (2008), The Future of
Building Control. Consultation. DCLG, West Yorkshire.
van der Heijden, J. (2009), Building regulatory enforcement regimes. Comparative
analysis of private sector involvement in the enforcement of public building regulations.
Delft University Press, Delft.
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João Branco Pedro, Frits Meijer and Henk Visscher, pp 1339-1355
Meijer, F., Visscher, H. and Sheridan L. (2002), Building regulations in Europe, Part I,
A comparison of the systems of building control in eight European Countries. Delft
University Press, Delft.
Meijer, F. and Visscher, H. (2008), Building regulations from an European perspective,
in Proceedings of COBRA 2008 - The construction and building research conference of
the Royal Institution of Chartered Surveyors, RICS, London.
Mikulits, R. (2006), Building Control Systems in Europe. The Consortium of European
Building Control, Ipswich.
- 1355 -
COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Henk Visscher, Erwin Mlecnik and Frits Meijer, pp 1356-1367
The impact of energy performance regulations on systems of
building control
Henk Visscher1, Erwin Mlecnik1, Frits Meijer1
1
Delft, University of Technology,
OTB Research Institute for Housing, Urbamn and Mobility Studies
The Netherlands
Email: [email protected], [email protected], [email protected]
Abstract:
The awareness of climate change influenced by CO2 emissions, but also the
dependency of fossil fuel and the risks of increasing prices all lead to the need of better
energy performances of houses. Therefore the energy performance regulations for
houses will be put on increasing levels during the next decade. Several European
countries are formulating policies aiming at net zero energy or carbon neutral houses in
the years 2015 - 2020. Technical solutions do exist and are already brought into
practise; this concept is called the passive house. In some European countries more and
more examples of passive house projects are realised. However there is quite some
evidence that it will be a big challenge to achieve these performances at a large scale in
the construction practice. Research under recently build houses in the Netherlands
demonstrates that in many cases even the current levels of required performances are
not met, due to mistakes in the design and in the construction processes. In this paper
we argue for the need of innovation in the systems of building control and quality
assurance to support the energy. In stead of a system of control that basically aims for
avoiding large safety failures, a system is needed that guarantees a high level of
certainty of performances. In this paper we describe the possible changes of building
processes due to the introduction of the passive house concept, and the urgency of
reliable quality assurance to adequately reaching the energy ambitions and to assure
other quality issues at the same time. We illustrate this with passive house certification
schemes from some European countries
Keywords:
Building Control, Energy Performance, Quality Assurance, Certification, Passive
Houses.
1 Introduction
Promoting energy efficiency is essential to achieve the Kyoto Protocol. The European
building sector is responsible for about 40% of the total primary energy consumption.
To reduce this share, the European Commission (EC) has introduced the Energy
Performance of Buildings Directive, the EPBD (2002/91/EC). This framework has lead
to energy performance certificates for buildings, in many countries to be introduced in
2007-2009. The EC has also highlighted that future adaptations of the EPBD may be
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extended to include ‘low energy or Passive Houses’ as a requirement, setting a target
date of 2015. For newly built houses the national building regulations prescribe
increasing levels of energy performances. More and more countries, but also regions or
municipalities, formulate ambitions for net zero energy or carbon neutral houses.
For many countries the passive house level is seen as a long term political ambition
level to reduce energy consumption in the building sector (Dyrbol et al., 2008). Many
countries also have industry initiated target settings, supported by the government. E.g.
in France the ‘Grenelle de l’environnement’ specified targets for sustainable
construction. The ‘Code for sustainable Homes’ in the United Kingdom states that by
2016 new dwellings will need to be zero carbon and will have to achieve a similar level
of fabric performance as passive houses. In the Netherlands, a strengthening of the
energy performance level of buildings is proposed to nearly passive by 2015. In the
Flanders Region specific passive house targets have been proposed by the transition
arena ‘sustainable living and building’. (Mlecnik et al., 2008)
Passive houses have to reach a target energy demand for heating less than 15 kilowatt
hour per square meter net heated surface and per year (kWh/m2a) and a total primary
energy demand less than 120 kWh/m2a (PEP, 2008). Some European countries and
regions have introduced long term visions for the year 2015-2020 that include voluntary
passive house certification or in certain circumstance a mandatory passive house
standard. Often a verification of reaching the passive house standard is a condition for
financial benefits.
Formulating ambitions and sharpening regulations is relatively easy to do. Technical
solutions are currently available to realize the passive house standard in building
projects. There is quite some evidence however that the mainstream of building
processes do not lead to the pre-defined quality. Traditionally the municipal
departments of building control in most countries had an important role in assuring that
building plans and construction processes would lead to buildings that meet the
minimum required quality levels. There is a tendency to put more emphasis on the
responsibilities of owners and private parties to ensure quality. This means that the
private parties will have to improve their working process and will have to learn to
handle performance guarantees. Owners will require guarantees from the designers and
building companies for the quality of their property. Certification and accreditation of
parties, processes and products will become more important for building processes in
general.
For the realization of high energy performance standards, a reliable quality assurance
system will be very important. In most countries that have some experiences with
passive houses some form of performance guarantee and associated quality assurance
scheme exists. It is crucially important to study these examples.
This paper continues in section 2 with an elaboration on the trends in regulations and
building control that stress the importance of certification. Section 3 will explain of the
impact of the passive house concept on the building process. In section 4 examples of
passive house certification in some European regions are presented. In section 5 finally
we draw conclusions.
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2 The need for quality assurance
Besides the conditions described in the previous section, the poor performances of the
building industry in the mainstream building projects in combination with a
withdrawing government from building regulations and actual building control is
perhaps the most important reason to develop reliable certification schemes, especially
for passive houses.
2.1 Failures in the Dutch building industry
The cost of failures in the Dutch building industry amounts to more than 10% of
turnover (USP marketing consult, 2007). Total investment costs (including
maintenance) in homes were € 46 billion in 2005, which means annual wastage of € 4.6
billion in this part of the building industry. Vereniging Eigen Huis, a consumer
organization for homeowners, carries out final inspections on many new homes. In 2005
it was reported that construction companies are gradually improving their standards.
The average number of deficiencies in more than 1,400 homes examined at new build
housing areas was 17.5 per home. However, some homes had as many as 71
deficiencies. There are also many problems with aspects of building physics, as revealed
in a study of 78 housing projects by the VROM Inspectorate (Kuindersma et al., 2007).
The researchers observed acute health risks, reduced living comfort and, above all, poor
energy performance. New homes must comply with the EPC (Energy Performance
Coefficient), an important policy instrument for achieving CO2 reduction targets. The
study showed that 25% of the EPC calculations that were part of the building permit
were not correct. The performance of the built homes was studied too, and it was
unsatisfactory in 47% of homes! In order to comply with EPC regulations, a system
whereby heat is recovered from the ventilation system (balanced ventilation) is often
installed. In the past few years, this system has been installed in approximately 400,000
Dutch homes. Problems with the system in the Vathorst area of Amersfoort have
featured regularly in the news (Duijm et al., 2007). An analysis of the problems has
shown that they are not necessarily due to the ventilation system itself, but that poor
quality management throughout the construction chain can lead to an accumulation of
faults.
We suspect that the Dutch situation is not unique. At a meeting of the European
Consortium of Building Control in Riga in 2008, representatives from many countries
reported on problems in the individual countries. Although the problems are very
diverse, it is apparent that in many countries there is a discussion about the organization
of building control in the context of quality problems.
There are major challenges in terms of realizing and maintaining the physical
performance of homes. Requirements will become much more stringent than is
currently the case, particularly with regard to energy conservation, the indoor
environment and integral environmental quality. Quality management and, above all,
quality assurance are becoming more and more important. In the future, responsibility
for these aspects will be increasingly transferred to parties in the building sector.
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2.2 Developments in building regulations and building control
Building regulations are the subject of an ongoing debate between, on the one hand,
those in favor of deregulation and reducing the administrative burden and, on the other
hand, new quality demands that require government intervention. Currently in the
Netherlands, both sides of this debate appear to be gaining in importance. Deregulation,
as well as high targets for energy conservation, structural safety and reliable
government, are high on the politicians’ agenda. The desire for deregulation is leading
to the opinion that greater emphasis should be placed on the responsibility of property
owners, which could lead to less government intervention. However, the existing forms
of quality control for private actors in the Dutch building industry seem to be of quite a
low standard. Accidents occur and physical quality does not appear to be sufficiently
important. As the CO2 and energy targets increase, stronger regulations and accurate
building control become a priority. In the past ten years, it has become increasingly
clear that the quantity and quality of assessments carried out by many municipal
authorities leave something to be desired (VROM Inspectorate, 2007).
In this context we should remember that the client and the parties who engage for the
design and construction stages have primary responsibility for complying with
regulations. When a building permit is granted, this suggests that the plan has been
shown to comply with all the regulations. But this is not the case. In practice, a permit is
granted because, during the checking process, the plan was not found to deviate from
the regulations.
We will now return to the continuing call by politicians for greater deregulation and
easing of the administrative burden. In 1997 we contributed to the building-regulations
project as part of the MDW (Market Forces, Deregulation & Legislative Quality)
programme of the Ministry of Economic Affairs. The purpose of our research was to
formulate deregulation proposals on the basis of examples from other European
countries (Visscher, 1997). Notably, in those countries, many private-sector parties are
involved in assessment and inspection. We have studied (Visscher, 2000) how the
responsibility for these tasks could be transferred to the private sector in the Netherlands
too, primarily through the certification instrument. The Ministry of Housing, Spatial
Planning and the Environment (VROM) also took up this idea. Since the end of the
1990s, it has been developing a process certificate for assessing building plans against
the requirements of the Building Decree.
The current cabinet is aiming to reduce the administrative burden by 25%. Again, the
field of building regulation is seen to have a great deal of potential in this regard. The
Ministry of Economic Affairs and the Ministry of VROM appointed the Construction
Sector Fundamental Review Committee (Commissie Fundamentele Verkenning Bouw)
chaired by Sybilla Dekker, the former Minister for VROM, to draw up proposals for the
far-reaching simplification of building regulations. The committee recommended the
abolition of preventive assessment of building plans by local authorities. The client
should be responsible for complying with the regulations and should also ensure that
sufficient checks are in place. It can engage a certified body to do this, but there may be
alternatives. The role of the municipal authorities will shift towards that of process
auditing, i.e. supervising the checks. The question is then: how this can be
operationalised?
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In many countries there are problems with a lack of compliance with building
regulations, and this often serves as a stimulus for reviewing and improving the system
of building control. The considerable pressure to deregulate in the Netherlands has
parallels in other countries. There is a clear trend towards increasing the role of private
parties. In many countries, the role of local authorities in carrying out assessments and
implementation inspections has virtually disappeared.
Therefore it is interesting to study innovative ways in which quality is guaranteed by
private parties. The certification of passive houses is a field that requires building actors
to transform the usual building process into a performance based approach and to learn
by doing. In the next section we illustrate how the building process can be impacted
when the client requires a passive house.
3 Innovative building process for passive houses
Building passive houses is still no daily practice for many designers, building
contractors and installers. Due to the lack of experience of designers and contractors to
build to the much more demanding requirements of the passive house, there is
potentially a high risk of the house claiming to be a passive house having higher energy
demand than predicted by the passive house standard. Therefore it is advisable that,
when a consumer wants to purchase a passive house, some form of quality assurance is
provided. This can start with a contractual agreement of a building team to deliver a
passive house according to the previously described specific measurable criteria.
Certification of the project or product will offer more certainty for the consumer.
Alternatively, or in addition, requiring experience guarantees of the architect, the
building contractor and the installer may help to make sure that the consumer involves
self-educated parties and finally gets the energy efficient and comfortable house which
he/she had in mind. Performance based contracting is being initiated for passive houses
and low energy buildings and these experimental processes provide first insights in
shifts from means contracting to performance contracting. For the commissioning of
passive house buildings the preferred award procedures are the performance-based
bidding procedures; open or restricted calls for tenders, the design contest, the
negotiated procedure with or without publication and the competitive dialogue.
An essential element in the performance assurance is the calculation of energy
performance, usually already in a first design phase, either using EPBD related software
or specific passive house software. The so called PHPP software, developed by the
German Passivhaus Institut Darmstadt (2008) was specifically designed to design and
certify passive houses and has the advantage that its consistency has been verified on
hundreds of passive houses. For passive houses, verification, minimum at the final
design stage, is required according to PHPP, and later, a practical performance test on
site to check the air tightness of the building envelope. This has implications on the
whole building process, as illustrated in Figure 1.
In most cases the building designer does not have the knowledge of the PHPP tools. A
passive house energy consultant is usually assigned to the project. The energy
consultant will provide passive house design advice, PHPP calculations and
recommendation for products and technologies specification. The PHPP calculation is
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based on a large number of building and installation characteristics. Key elements for
information gathering are thermal and solar characteristics of building components and
factors influencing heating and primary energy demand and indoor climate
requirements. PHPP also checks minimum ventilation requirements, dimensioning of
heat production and the risk of overheating.
Figure 1. Implications for the building process
In the building permit stage, EPBD requirements in most countries require to report a
specific official energy performance, i.e. a building energy rating (sometimes combined
with an indoor climate rating). E.g. in Belgium, a specific EPB software has to be used
to produce E levels and advisory reports for buildings requiring a building permit. These
are produced by an accredited EPB reporter who is registered in a regional database of
assessors. Many of these reporters are not very familiar with the details of the passive
house concept.
When a passive house is built, the building owner or the certificate provider (architect,
contractor) usually commissions an air tightness test (undertaken by an independent
testing company). The building should achieve required air-tightness level as for the
passive house standard. This test is usually performed when the building is wind and
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weather proof, and repeated on delivery of the building. Thermographic imaging is
recommended in combination with the air tightness test, for indicating areas where
thermal bridging or air leakage is occurring.
When building a passive house the required on-site practices and know-how to achieve
high air-tightness, proper installation of insulation, windows, heat-recovery ventilation
system, etc. are much more rigorous than typical on-site EPB related construction
practices. Lack of equipment and know-how is sometimes perceived as a bottleneck.
Therefore some countries are involved in developing specialized training for passive
house contractors and project managers. Some education initiatives are associated with
specific master degrees.
One can note that one the level of product and system energy performance additional
certificates can be introduced. E.g. for passive house building systems and specific
passive house technologies like triple glazing, high efficiency windows and doors, high
efficiency heat recovery systems, and so on, specific certificates are provided in
Germany by a list of experts. These certificates specify comfort (e.g. also acoustical
quality) and energy related parameters of the product or system and thus complement
information from more standard types of certificates.
When tests and final calculations are completed, the building owner can apply to an
independent party, for a passive house project certificate. Many countries and regions
have a range of financial stimuli for energy efficient investments in buildings, e.g.
subsidies, tax reductions, attractive loans, etc. Typically for passive houses, a number of
conditions have to be met to receive the benefits. In some cases a ‘passive house
certificate’ by an independent expert is required to obtain the benefits. Certification
usually means that these conditions have to be verified by a non-involved independent
expert. The expert issues a verification based on standardized quality assurance
procedures to a demanding party, usually the architect or the contractor, in some cases
the owner. The receiving party perceives this ‘certificate’ as a guarantee of conformity.
Note that, if the client or inhabitant receives the certificate indirectly from the architect
or contractor, the client’s perception could include that a certain energy or
environmental performance is guaranteed.
It should be noted that the use of the passive house concept usually also has
implications after delivery of the building. E.g. many home owners are not familiar with
the types of technologies and controls commonly used in passive houses. Special care
needs to be taken by the contractor to ensure that the services provided are correctly
specified, installed and commissioned and that the occupier is provided sufficient
information to ensure correct operation and occupant satisfaction.
4 Passive house certification in some European regions
There are exemples of Passive House certification in several European regions. Here we
present the situation in Germany, Flanders in Belgium and Austria.
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4.1 Germany
In Germany the passive house standard has seen a broad introduction in the mid
nineties. Nowadays more than 6000 passive houses exist in Germany, also non
residential buildings and renovations. In some cities like Frankfurt, Leipzig, Kreis
Lippe, the passive house standard is required for the construction of buildings that
belong to the municipality. Main economic driver for the construction of passive houses
in Germany is the provision of a beneficial loan for the construction of low energy and
passive houses by the German state bank KfW.
A certification system for passive houses and passive house suitable components was
introduced in Germany in 1997 by the Passive House Institute Darmstadt. The
certificate ‘quality proofed passive house’ confirms the ‘as built’ design of a building in
accordance with the Passive House Planning Package. This so called PHPP software,
issued by Passivhaus Institut Darmstadt (2008) is basically an excel software tool used
for verification of the passive house standard. The limit values for passive houses
according to PHPP are validated. It is assessed if the values for total energy demand,
total primary energy and air tightness fulfil the passive house requirements (Elswijk et
al. 2008, Beedel et al., 2007). PHPP was developed independently from German
building legislation. The advantage is that calculation procedures and boundary
conditions are not influenced by political considerations and special interests of
stakeholders and fast integration of new research results is possible. These qualities are
the reason that PHPP is a highly-estimated tool in Germany. Furthermore the official
German building energy performance calculation procedure is included within PHPP to
avoid extra work for planners. However, existing German norms (e.g. DIN EN 12831
for heat load calculations) are currently perceived as a barrier for certification. The
Passive House Institute Darmstadt and selected partners now also provide certificates to
companies for passive house technologies (glazing, frames, heat recovery systems,
building systems, etc.). Certification of products facilitates finding and comparison
regarding energetic qualities. In future the Passive House Institute also plans to certify
building actors. A certificate for, and a listing of, passive house planners will make it
easy to find a planner with substantiated knowledge regarding passive houses.
4.2 Belgium, Flanders Region
In Belgium the passive house standard was introduced in 2002 by the non profit
organization Passiefhuis-Platform. First project certificates were delivered in 2005,
based on verification of calculations, using translation and climate adaptation of the
German PHPP software as a basis. Special grants for passive house are given on a
regional level and these are different in the Flemish, Walloon and Brussels Region. The
cities of Turnhout, Bilzen and Mechelen also provide extra grants for passive houses. A
federal tax reduction is offered for passive houses and a lowering of real estate tax is
foreseen (Mlecnik, 2008). For most buildings requiring a building permit, official
EPBD requirements are set for the energy performance and indoor climate at the same
time. These requirements are different in the Flemish, Walloon and Brussels Region. In
the Flemish Region the standard is called EPB and the reporting of is undertaken by
trained reporters using required EPB software. In the Brussels and Walloon Region
similar energy performance laws are under construction. The EPB software will serve as
a basis for the production of building energy certificates. Problems arising with the use
of this software for the evaluation of passive houses have been reported to the Flemish
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Energy Agency. A good coupling of the passive house concept with the EPB is still to
be obtained and requires a substantial research effort. PHPP is used by passive house
specialists and currently not accepted as an EPB calculation. Both calculations have to
be performed. Certification based on PHPP calculation is currently performed by
Passiefhuis-Platform vzw in the Flanders Region (alternatively by Plate-forme Maison
Passive asbl) on a voluntary basis. The PHPP software serves as a basis. Federal tax
reduction for passive houses refers to the necessity of demonstrating a passive house
quality assurance form, provided by independent experts. The quality assurance form is
currently granted based on verification of PHPP calculations and results of a building
pressurization test to determine air tightness. In future, the quality assurance procedure
will be extended to include summer comfort and air quality.
4.3 Austria
In Austria the passive house standard is highly popular. In connection to the national
policy the Programme of the Austrian Government for the period between 2007-2010 is
to be cited, where the Austrian government mentions and defines the passive house
standard for the first time. The Austrian pioneer federal state is Vorarlberg, where the
federal government constituted at the beginning of 2007, that for new buildings of
public housing associations passive house standard is obligatory. In 2008 the city of
Wels signed a declaration to build all future municipal buildings in the passive house
standard. In Austria nine different housing grant schemes exist, so verification can be
different in different regions. The certification of passive houses in Austria basically
happens by means of the Passive House Planning Package and/or the Austrian
methodology according the guideline no. 6 of the Austrian Institute of Construction
(OIB), when it comes to housing grants. Since 2005 the Austrian Federal Ministry of
Agriculture, Forestry, Environment and Water Management supports the dissemination
and implementation of minimum criteria concerning the energy performance and the
ecological quality of new built residential buildings within its klima:aktiv haus program.
Within the klima:aktiv haus programme criteria for so-called klima:aktiv passive houses
were defined. They must be heat –bridges-free and airtight, their heat energy demand
and their total primary energy demand must be verified by the PHPP, they must be
equipped with energy efficient ventilation systems with heat recovery and water saving
fittings. Further they must not be built of HFCH or PVC containing building materials
and they must fulfill requirements concerning summer suitability. Some differences
occur between the Austrian OIB methodology and PHPP, especially concerning surface
definition. Very optimistic default values for internal heat gains and shading of the OIB
methodology have been criticized, while PHPP shows good validation.
5 Conclusions
Quality assurance of passive houses, and associated technologies, has its origin in the
verification and prediction of a restricted energy demand. Passive house project
certification is not focused on issues like stability, safety, or more general
environmental performance. Guaranteeing an energy performance is a new issue in
building processes, requiring a shift in general thinking from means contracting to
performance contracting. The urgency of the energy issue requires a swift
implementation of (energy) performance contracting in the construction sector. In this
paper passive house certification is regarded as an innovation in building processes to
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provide better building quality in general. Related to the introduction of passive house
certification schemes the issue was raised how such initiatives can also upgrade
knowledge in the construction sector.
Different European countries show a different embedding phase and related market
penetration of passive houses and quality assurance of passive houses. Some countries
like the UK, Ireland and the Netherlands are still starting up initiatives, while others like
Germany, Austria, Switzerland, Belgium, France, and so on, provide a framework for
grants and/or tax reductions and associated quality control procedures. In Western
Europe the passive house standard is still a voluntary standard, while regions in Central
Europe are already developing initiatives to include the passive house standard as a
legal instrument and/or obligation for new constructions. Existing voluntary
certification initiatives are different in different countries. Some harmonization between
the different national initiatives might be interesting. Especially countries with no
certification can already duplicate the most successful initiatives. Early adaptor
countries have developed financial aid for passive houses, as well as a performance
oriented quality approach for the design and construction process of passive houses.
Control of quality of the design process, the construction process and the post
construction inspection and testing of passive houses is considered as an essential
feature, before stimulating the dissemination of information considering best practice
demonstration projects.
Since the implementation of the European Directive 2002/91/EC and since the
introduction of project related energy performance requirements and e.g. the passive
house concept, problems about guaranteeing (energy) performances and information
flow among building partners and quality control have become more significant. The
EPBD and the passive house certification are being used to improve product and
process modeling in commissioning for existing and new buildings as they are
accompanied by a process of certification. EPBD calculation procedures are in many
countries still not adapted to specific passive house technologies. This means that in
many countries for passive house projects both PHPP and EPBD calculations have to be
performed. The cost of an extra certification next to the legal energy performance
certificate is considered to be a bottleneck.
As part of the process of demonstrating compliance with required energy performance,
assessment of the energy performance of design of new dwellings is becoming
mandatory in many countries and regions. For most buildings with a building permit,
requirements are set for the energy performance as a consequence of the implementation
of the EPBD, but also aspects of indoor climate and ecological criteria are sometimes
introduced at the same time. It is generally perceived that a good energy requirement
does not necessarily bring thermal comfort and good indoor air. Especially summer
comfort can be a critical issue to be included in passive house certification as well as the
proper working of balanced ventilation systems. In many cases the existing structures
for energy performance evaluation, developed in the framework of the EPBD, are not
sufficient to guarantee the quality and definition of the passive house.
PHPP software is mostly used as a basis for certification of passive houses. Its main
advantage compared to other design and evaluation tools is that is has been specifically
created as a design and certification tool for passive houses and that it regularly takes up
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new research results in its calculation procedures. Certification of passive houses
usually also includes an air tightness test. In some cases, also the functioning of
technical systems and its effect on indoor climate is directly, or indirectly through
evaluation by PHPP, considered. Some countries express the need to include, besides
the PHPP calculations, comfort criteria (e.g. Belgium) or health criteria (e.g. UK,
Austria). A differentiation in standard including low energy definitions, like in the
Klimahaus CasaClima programme, can contribute to success of widespread
certification.
In most advanced countries educational programmes for specific target groups were
introduced, accompanying the introduction of certification systems. Experiences in
Germany, Austria, Switzerland, Belgium and Italy illustrate that quality assurance of
passive houses is necessarily related to the provision of passive house education
initiatives. New fields like non-residential buildings and renovations require for the
further development of more specific quality assurance procedures. It is not clear if the
strict passive house definition can or should be maintained, especially since it is
sometimes difficult to achieve for small houses or renovations. Also, PHPP calculation
procedures in themselves are often not sufficient to evaluate the design of, for example,
technical systems in office and school buildings.
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European Overview. In Proceedings of PLEA 2008, 25th conference on Passive and
Low Energy Architecture, Dublin, 22-24th October, paper 106.
Passivhaus Institut Darmstadt, 2007, PHPP 2007 (Passivhaus Projektierungs-Paket),
software for the evaluation of passive houses, www.passiv.de.
PEP, 2008, Promotion of European Passive Houses, Intelligent Energy Europe SAVE
project EIE/04/030/S07.39990, [Online], Available:
http://www.europeanpassivehouses.org
Schmit Y., Troi A., Pichler, G., Sparber, W., 2007, KlimaHaus CasaClima – a regional
energy certification system stimulates low energy architecture, In Proceedings of
PLEA2007 - The 24th Conference on Passive and Low Energy Architecture,
Singapore, 22-24 November 2007.
USP Marketing Consult, 2007, Faalkosten in de bouw.
Visscher, H.J., Meijer, F.M., 2007, Certification of building control in the Netherlands,
Building Research Journal, volume 55 – 1/2.
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Joachim Wafula, Kennedy Aduda and Alfred Talukhaba, pp 1368-1379
Energy efficiency in buildings and building regulations and
control in local authorities in South Africa
Joachim Wafula1, Kennedy Aduda1 and Alfred Talukhaba1
1
School of Construction Economics and Management,
University of the Witwatersrand, Johannesburg. P.O. Box 20, wits. 2050, South Africa
E mail: [email protected];
[email protected]; [email protected]
Abstract:
South African local authorities are mandated to enforce building regulations established
by the National Government. In addition, new building plans must be approved by
building control departments of local authorities before implementation. This provides
an important opportunity for these local authorities to intervene and either encourage or
prescribe regulations and standards for an energy efficiency policy in the built
environment. This paper investigates the possible role of the local authorities in building
regulations and control as an effective strategy for energy efficiency and green house
gas emissions reduction in the built environment. The paper draws from existing
literature and presents the options in building controls and regulation frameworks
practiced in South Africa. It further compares it with existing practices in other
countries, using existing knowledge to make deductive conclusions. It has been found
that local Authorities have a significant role to play in enforcing of energy efficiency
regulations through their bylaws in areas under their jurisdiction.
In conclusion, a well enforced energy efficiency policy, which is built into the Building
control and approvals regulations framework in the local authorities will make a definite
and effective starting point in achieving the twin goals of reduction in green house gas
emissions and ensuring energy security. Additionally local authorities centered
approach is idealized as the key towards increasing levels of awareness and knowledge
in energy efficiency and green building principles among developers, professionals and
practitioners in the built environment.
Keywords
Regulations, policy, energy efficiency, local authorities, buildings
1 Introduction
In the quest for stability in electricity supply and eventual energy security, South Africa
needs to emphasise energy/electricity demand reduction via energy efficiency and real-
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time energy scheduling apart from increasing the supply sources. The case for energy
efficiency appears to be the cheapest and this is well espoused by the following
comments:
“These ‘negawatts’ (contributed by energy efficiency) have been every bit as
valuable in economic terms as the ‘produced watts’ of energy they replaced.
With today’s energy prices, a negawatt of energy savings costs about half of
what it costs to produce the same amount of energy. The cheapest, most
competitive, cleanest and most secure form of energy thus remains saved
energy.” (Piebalgs, 2008)1
Bennet (2001), du Toit (2006) and Reinink (2007) demonstrated that developing
national regulations and standards for building’s energy efficiency and/or sustainable
buildings is critical in achieving greater energy efficiency and provides a great potential
towards reduction in green house gas (GHG) emissions, apart from being a sound
investment. South Africa’s national building regulations and building standards act (act
no 103 of 1977)2 is administered by local authorities and is the enabling legislation for
the national building regulations (Holden 2004, du Toit 2006). This act details the
process of enforcing the national building regulations by local authorities. As a result,
all new building plans must be approved by the ‘building control and approval’
departments in the local authorities before implementation. This provides an important
opportunity for the local authorities to intervene by insisting on mandatory or voluntary
regulations for energy efficiency in their building control and approval process. This
concept is further aided by the fact that the local authorities are permitted to make by-
laws within their areas of jurisdiction. As such the introduction of energy efficiency by-
laws by the local authorities could be used to effect regulations for retrofits and new
developments in these areas.
It is encouraging to note that these regulations are affordable as shown by UNEP (2008)
and WGBC (2009), and that ‘available commercial technologies’ make it possible to
halve energy consumption in both new and old buildings without significant
investments. These could be done at least cost by incorporating measures like improved
ventilation and insulation, increased use of natural lighting, the use of energy efficiency
appliances and lighting alongside the use of renewable energy sources in the building
control and approvals regulations. It is on this basis that it is argued that a well enforced
‘energy efficiency policy’ for buildings, which is anchored in the building control and
approvals regulations of the various local authorities in South Africa would make a
definite and an effective starting point in achieving the goals of reduction in GHG
emissions, improved health of people who currently experience poor indoor quality
through the use of biomass and increased energy security as well as achieving economic
and financial benefits for developers.
1
Andris P, (2008), European Commissioner for energy, Available at http://eceee.org/why_energy_efficiency.
Accessed on 2009/03/25
2
National Building Regulations and Building Standards Act 103 of 1977. Available at http://www.capetown.gov.za.
Accessed on 2009/06/10
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2 Methodology
The paper focused on literature review on the use of regulatory and control mechanisms
as a policy strategy towards achieving greater energy efficiency in buildings with the
local authorities’ department of building control and approvals process as the enforcing
agent. A general scenario on the regulatory framework in the world was presented
followed by specific situation studies/cases in South Africa. Discussions were then
presented on this and appropriate conclusions and recommendations made. It must be
acknowledged that this area is relatively new in South Africa and much is yet to be
published. As a result much of comparative literature was mostly ex-post evaluations
where available, and summaries of assessments of cases in other countries were
presented. This paper was therefore limited by scope because of its over-reliance on
literature review. It should be pointed out that this forms a preliminary stage of an
ongoing research and a field based study is scheduled later this year.
3 Building regulations, local authorities and energy efficiency
regulations in buildings
Several instruments or options are available for the promotion of energy efficiency in
buildings. Van Egmond (2001), OECD (2003), Kuijsters (2004) and Reinink (2007)
separately affirm these options as regulatory, fiscal, economic, or communications
instruments. These instruments may take the form of direct regulatory instruments,
indirect regulation or information instruments (refer Figure 3-1). It is worth noting that
the choice of these instruments by governments is determined by the level of success
that is achievable when applied. This is however variant on the socio-economic and
political context of the locality. It is noted as an example that implementation of the
building codes have reduced energy consumption of new dwellings in the USA by about
30% whereas the Chinese government have established an energy consumption target in
buildings which is 65% less than the current practice in existing buildings, this is via
an ‘energy consumption standard’ for the construction sector whose compliance is
encouraged by tax and fees rebate system for low energy buildings to encourage their
construction (UNEP, 2007). On the other hand energy regulations in buildings in
Netherlands have reduced the consumption rates by 15% on its introduction in 1995 and
later by 27% on tightening of requirements (Ecofys, 2004). Other countries where the
introduction of energy regulations have been successful are Denmark where the act to
promote energy and water savings in buildings (DEA, 1996)3 is in use and India where
the energy conservation act was enacted in 20014 .
In South Africa, regulations governing energy efficiency in buildings is still at an
infancy stage. It is mainly covered under the electricity regulation act5 that stipulates
that the regulator shall take into account the energy efficiency measures undertaken by
3
Danish Energy Authority (DEA) 1996, Act to promote energy and water savings in buildings, no. 485 of
12 June 1996, legislative document
4
Government of India, 2001, Energy Conservation Act, 2001, September 2001
5
Republic of South Africa, 2009, Electricity Regulation Act, 2006 Notice 139 of 2009, Government
Printers, Pretoria.
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Joachim Wafula, Kennedy Aduda and Alfred Talukhaba, pp 1368-1379
the client while deciding on tariff structure and the Electricity regulations for
compulsory norms and standards for reticulation services6.
Policy instruments in promotion of energy efficiency
• Aims at stimulating energy efficiency in new and existing buildings
Regulatory Framework Indirect Regulation Information Instruments
1. Technology based 1. Energy Taxes 1. Mandatory labelling
standards for design of
buildings(SANS204, 2. Tradable permit schemes 2. Voluntary labelling
SANS10400)
3. Capital subsidy programme 3. Energy audit programmes
2. Performance based
standards for design of 4. Tax credit schemes
buildings or renovations or
obligatory commitments by 5. Premium loan schemes
utility companies
Figure 3.1 Instruments for energy efficiency implementation in buildings; Adapted from
OECD, 2003)
It is expected that these regulations would stimulate increased drive towards energy
efficiency. In addition, it should be noted that the draft standard for energy efficiency in
buildings was unveiled in 2008 and if adopted as the national standards would
contribute greatly to energy efficiency in buildings. These are SANS 2047 Parts 1, 2 and
3, Edition 1.
The newly published building standard is expected to eventually legislate on insulation
levels, solar water heaters and energy-efficient lighting and will be prescriptive. At the
initial phase, it will apply only to new buildings (Standards South, 2008). At the same
time in 2007, the SABS 0400 (the Building Code) is in the process of being rewritten to
be SANS 10400 to take into account the energy efficiency standards of existing
buildings (Reynolds, 2007 and du Toit, 2007).
SANS 204 focuses on new buildings, it specifies the general requirements for design
and operation of energy efficient buildings with both natural and artificial
6
Republic of South Africa, 2008, Electricity regulations for compulsory norms and standards for
reticulation services, Government Printer, Pretoria.
7
Standards South Africa (2008) SANS 204-1:2008 Edition 1, Pretoria, South Africa.
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Joachim Wafula, Kennedy Aduda and Alfred Talukhaba, pp 1368-1379
environmental control and subsystems. The key issues in SANS204 are as follows
(Standards South Africa, 2008):
i. Maximum energy demand and maximum annual consumption are mentioned in
accordance to the 31 number of classifications of occupancies of buildings and
prevailing climatic conditions in the standard.
ii. The standard state for building envelope design is outlined.
iii. Energy rating for equipments and appliances fitted in new buildings is required
to comply with requirements of SANS 10400-O
iv. Purpose driven planned maintenance of the mechanical/electrical components, is
advised to be in line with broader economic and energy efficiency agenda.
Enforcement by Central or Local government department/agency charged with
reviewing designs and performing post construction inspections is the most common
situation in the world (Building Research Establishment, 2008). In South Africa, it is
envisaged that the implementation of SANS 204 will fall under the docket of local
authorities. It is however noted that it will take considerable time for South Africa to
effectively start applying energy efficiency requirements in building regulations. Holden
(2004) approximates this to take a minimum of five years.
At the moment, it is clear that local authorities are ill equipped in implementing and
enacting local building regulations due to legal and technical incapacity (du Toit 2007).
As a result it is envisaged that the problem be sorted out by rewriting their bylaws with
energy efficient regulations such as limiting the quantity of energy consumption in
buildings through setting maximum energy/m2 caps and making the same to be part of
the building applications and approval regulations. In the absence of local regulatory
powers, cities can consider developing local guidelines or standards. For uniformity and
acceptability, these should ideally be based on existing standards and norms and best
practices from similar jurisdictions.
The approval process for new buildings or alterations as prescribed by the National
Building Regulations and Building Standards Act 103 of 1977 and effected by the local
authorities revolves around Administrative matters, protection of property and public
health, safety and convenience for the users and occupiers of the buildings. During
submission for approvals, key items required are as follows (City of Johannesburg,
undated):
i. Completed application form, signed by the owner of the property or his/her
authorised representative (proof of authorisation is required)
ii. A copy of the registered title deed
iii. A copy of the approved Site Development Plan is also needed, if this is required
in terms of the zoning regulations that apply to the stand.
iv. A separate form also needs to be completed by a professional engineer or
technologist registered with the Engineering Council of South Africa when
structural work such as reinforced concrete floor and roof slabs, special
reinforced foundations, and so forth are part of the proposed building.
v. Different certificates or designs need to be submitted depending on the technical
aspects of the plan. You should consult an architect or engineer in this regard.
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Joachim Wafula, Kennedy Aduda and Alfred Talukhaba, pp 1368-1379
vi. In the case of non-residential developments (for example, offices, factories,
shops, institutional buildings and so on), a zoning certificate with a copy of the
most recent Amendment Scheme is to be furnished.
There is no requirement for energy efficiency codes certification to deal with envelop
energy issues, HVAC systems and lighting & hot water systems in the building.
3.1 Compliance to Energy Codes
In a departure from the established norm, the Building Research Establishment (2008)
proposes that compliance with mandatory minimum energy performance requirements
for buildings should be confirmed by formally certified private assessors and paid for by
the building owners. It is further suggested that the process be audited by the authority
under which the code is issued (Building Research Establishment, 2008). Thus the
following enforcement model is idealized by RICS (refer Figure 3-2). In South Africa
however, the local authorities have a well established buildings control and regulations
framework and structure and there is a deliberate intention by government to retain and
create employment at local levels. Therefore it is proposed that the enforcement and the
certification be done by these local authorities (refer Figure 3-3)
Local Authorities (LA)
Include JMM, EMM, TMM, NMM, and CTM among others
ACCREDITATION TO CCA BY LA
Certified Compliance Assessors
(CCA) Building Owners
FEES TO CCA /Developers
-These are private energy service
companies/providers
ASSESSMENTS
Building Compliant to the minimum
Energy requirements
Figure 3-2: RICS compliance enforcement model, Source: Building Research
Establishment, 2008
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Joachim Wafula, Kennedy Aduda and Alfred Talukhaba, pp 1368-1379
Building Owners /Developers
Local Authorities (LA) Pay fees to LA for energy compliance
Provides assessment to certification
assessment
services via buildings control &
regulation department
Building Compliant to the
minimum Energy
requirements
Results from Accreditation by LA
Figure 3-3: Proposed compliance enforcement for the Local Authorities in South Africa,
Author’s construction
As indicated earlier in this paper, local authorities are mandated to enforce building
regulations within their areas of jurisdiction, as per the Act (103 of 1977). Some cities
have explored this possibility by developing local energy efficiency building
regulations, but have since abandoned this process given that building regulations are
established nationally in order to promote uniformity within a vast sector. However, the
City of Potchefstroom has shown interesting local initiative whereby they have made
the SAEDES8( South African Energy and Demand Efficiency Standard) standards
guidelines mandatory for all new municipal buildings, and where commercial building
applications must go through an environmental impact assessment process; the local
authority has had to introduce the SAEDES standards as a condition for the
development.
4 Worldwide Scenarios
Around the world, building controls and regulations with regards to energy efficiency
are evolving and are being implemented via both voluntary and mandatory standards or
may entail a mixed approach (refer Figure 4-1).
8
Department of Energy and Minerals (DME) 1998, SAEDES guideline: Energy and demand efficiency standard for
existing and new commercial buildings, Pretoria.
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Joachim Wafula, Kennedy Aduda and Alfred Talukhaba, pp 1368-1379
Figure 4-1. Status of energy building standards around the world. (Source: Busch 2000)
In the Scandinavia, there is a general norm of using national building codes and
standards, which regulate physical, thermal and electrical requirements of building
components, service systems, indoor conditions, health and safety standards, operation
and maintenance procedures and energy calculation methods (UNEP 2007b). A number
of building codes currently include energy performance standards, limiting the amount
of energy that buildings can consume. The building codes in Scandinavia are enforced
by the various building development control agencies in the respective countries.
It is reported that currently there is the renewable energy & energy efficiency
partnership (REEP) project aimed at promoting the concepts of low-energy buildings in
China, the results will be incorporated in proposed new legislation regarding low-energy
buildings by Chinese government in order to ensure that appropriate policies and
building codes are implemented to encourage and deliver the required reduction in
energy consumption (UNEP, 2007). Indeed, implementation of elements of these codes
are to be piloted by the four major municipality cities of Beijing, Shanghai, Tianjin and
Chongqing and other economically developed big cities such as Shenzhen (Ling et al,
2007).
The European Union often uses directives for regulating various environmental themes
whose implementing agents are various government departments in the respective
member states. In most cases this falls in the ambit of local authorities in the respective
countries. The directive on the energy performance of buildings was enacted in January
2003 and its main elements are specified as follows (UNEP 2007b):
i. Minimum energy performance requirements, for new buildings and for major
renovation of existing buildings larger than 1000m2;
ii. Energy performance certificates to be made available when buildings are
constructed sold or rented out;
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Joachim Wafula, Kennedy Aduda and Alfred Talukhaba, pp 1368-1379
iii. The year 2010 is the reference year after which the rules will be extended to
apply to all buildings and renovations(at the moment buildings below 1000 m2
are not covered)
5 Conclusions and Recommendations
From the foregoing literature, it is evident that several developing countries have
already enacted legislation on energy efficiency in buildings. However, only a few
evaluations or studies are available to show the best way to apply this legislation to
achieve energy efficiency goals in buildings. Due to late entry into energy efficiency
practice, most developing countries lack quantitative data and are mainly reliant on data
from the developed nations; this poses a contextual problem taken that their
programmes may not be applicable to the prevailing local condition. This can be seen in
the case for South Africa which has had to borrow quite heavily from the Nordic
countries and Australia in formulating its energy efficiency codes in buildings
(Reynolds, 2007).
Developed countries find solace in the fact that increasing energy prices will continue to
be the catalytic driver for improved energy efficiency policies in developing countries.
In South Africa, the main electricity utility company ‘Eskom’ successfully lobbied to
raise tariffs by nearly 32% and intends to seek further increment in the near future
(Engineering News, 2008). As a result it is expected that the South African government
will in response empower the local authorities as the electricity distributing agencies to
incorporate energy efficiency measures in their building control processes and bylaws,
besides engaging in training of the built environment practitioners and advocacy to the
general citizenry. It should be emphasized that the success of the Building Regulations
is highly dependent on compliance by the construction industry hence the need for
Local Authorities to invest in continuous training and advocacy of Building Control
Officers and Built Environment Professionals on the energy efficiency regulations and
their application.
It is also expected that energy security considerations and rapidly rising energy demand
like the one which contributed to unstable electricity supply in South Africa during the
years 2006 to 2008 will whip the local government and energy utilities companies into
action for energy efficiency efforts. This is already evidenced in the enactment and
amendments to the two electricity acts in South Africa viz-a-viz the electricity
regulation act and the Electricity regulations for compulsory norms and standards for
reticulation services which were mentioned earlier.
In terms of the mode of policy implementation, south Africa can borrow a leaf from
developing countries such as Malaysia, Brazil, Morocco and partly Thailand which first
introduced voluntary energy efficiency standards for buildings then progressively made
them mandatory (UNEP, 2007). It should also be noted that although best practices and
experiences can be shared and regional cooperation is useful, building code
specifications cannot be uniform for all parts of a country due to climatic and other
peculiar differences. This further fosters the idea of local authorities as the ideal enactor
and enforcer for energy efficiency codes in buildings.
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Joachim Wafula, Kennedy Aduda and Alfred Talukhaba, pp 1368-1379
This paper has demonstrated the effectiveness and success of regulatory and control
mechanisms like energy efficiency building codes when enforced by the local
authorities. It is therefore not only natural, but a matter of necessity for South Africa to
use the local authorities as the enforcing agents for energy efficiency codes in buildings.
This is made easier by the fact that in South Africa, the local authorities are considered
the most important party in service delivery (Republic of South Africa, 1995). It is
noted that in South Africa, energy efficiency policies are in various government
agencies and departments (these are Department of Energy, Department of Minerals,
ESKOM, NERCSA, Department of Public Works, Roads and Transport), the policy
implementation details is therefore a challenge. For the building sector, it is
recommended that the local authorities should take the initiative and follow the lead
provided by the city of Potchefstroom and effect energy efficiency regulations through
their building control and approvals regulations processes and systems.
While implementing the energy efficiency building regulations through their building
regulations and control mechanism, local authorities should make appropriate education
and outreach programmes to raise awareness of the developers on the
economic/financial benefits of energy efficient buildings, and demonstrating options for
retrofitting of existing buildings as well as the design and construction of new ones.
It is acknowledged that research gaps exist in several areas of energy efficiency in
buildings in South Africa, an example is the lack of costs estimation data for energy-
efficient buildings. Similarly, there is no efficient market guidance for energy-efficient
buildings. This causes low sensitivity to energy-efficient buildings issues in the design,
construction and maintenance of buildings. Research and studies in these areas will
enhance learning and help make improvements in program designs for energy-
efficiency in buildings in future.
6 Acknowledgement
The authors acknowledge financial support for the study from the South African
National Energy Research institute (SANERI).
7 References
Bennett, K.F. 2001, Energy efficiency in Africa for sustainable development: A South
African perspective, UNESCO Workshop on sustainable development, Nairobi
Building Research Establishment 2008, an building codes deliver energy efficiency?
Defining a best practice approach. A report for the Royal Institution of Chartered
Surveyors, RICS, London, United Kingdom.
City of Johannesburg, Development planning-Building control. Available at
http://www.joburg.org.za/content/view/553/9/
Department of Energy and Minerals (DME) 1998, SAEDES guideline: Energy and demand
efficiency standard for existing and new commercial buildings, Pretoria.
Derringer, J. Iyer, M. and Yu Jo Huang, Y. J. 2004. Transferred just on paper? Why
Doesn’t the Reality of Transferring /Adapting Energy efficiency codes and Standards
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Joachim Wafula, Kennedy Aduda and Alfred Talukhaba, pp 1368-1379
Come Close to the Potential? Proc. 2000 ACEE Summer study on Energy Efficiency in
Buildings, Pacific Grove, CA, August 2004.
Du Toit E, (2007), How to Implement Renewable Energy and Energy Efficiency Options.
Sustainable energy Africa, Westlake.
Holden, RM 2004, Towards Energy Efficient Building Regulations – The City of
Johannesburg’s Building Bylaws Review Process, City of Johannesburg, Johannesburg.
Eberhard, A (2004), Electricity reform in South Africa is at a critical juncture, business day
South Africa, 29 July 2004. Available from: http://cesp.stanford.edu/news/321/ on
2009/05/20
Ecofys (2004), Evaluatie van het klimaatbeleid in the gebouwde omgeving 1995-2002,
prepared for department of housing, spatial planning and environment. Available from:
www.ecofys.nl/nl/publicaties/documents/samenvattingrapport 20040623.pdf on
2009/04/22
Engineering News, Nersa publishes municipal electricity tariff increase details, 8th July
2008. Available at http://www.engineeringnews.co.za/article. Accessed on 31 July
2009
Kuijsters, A 2004, ‘Environmental response of the Chilean building sector: Efforts and
Constraints towards environmental building practices in the Santiago Metropolitan
Region’, MSc Thesis, Eindhoven University of Technology. Available from:
http://www.tue.nl/bib on 2009/05/08.
Liang Jing, Li Baizhan,Wu Yong, Yao Runming 2007. An investigation of the existing
situation and trends in building energy efficiency management in China. Energy and
buildings, Elsevier Science, Beijing.
Organisation for Economic Co-operation and Development (OECD) 2003, Environmentally
sustainable buildings: Challenges and policies, Paris, OECD. Available from:
http://www.oecd.org/publications/pol_brief on 2009/04/15
Organisation for Economic Co-operation and Development (OECD) 1989, Economic
Instruments for environmental protection. Paris, OECD.
Parsons, SA 2004, International building energy standards (codes): Their relevance for the
proposed SA national energy efficiency standard SANS 0204, unpublished document,
CSIR, Pretoria.
Reinink, MW 2007, ‘Towards an effective energy labelling programme for commercial
buildings: A Comparative evaluation of the green buildings for Africa programme in
relation to international experience’, MSc Thesis, University of the Witwatersrand.
Republic of South Africa (1995) White paper on transformation of the public service,
Notice No. 1954 OF 1994, Government Printer
Reynolds, L K 2007, The South African Energy Efficiency Standards For Buildings, at
http://www.cpcut.ac.za on 2009/05/20
UNEP (2008), The Kyoto Protocol, The CDM, and the Building and Construction Sector,
Nairobi, Kenya.
UNEP (2007), Assessment of Policy Instruments For Reducing Greenhouse Gas Emissions
From Buildings, Central European University, Budapest.
United Nations Environment Programme, 2007b. Buildings and climate change; status,
challenges and opportunities. Nairobi.
Van Egmond- de Wilde de Ligny, ELC 2001, Technology policies in developing Countries.
Lecture Notes course ON470, Eindhoven University of Technology, Eindhoven.
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Joachim Wafula, Kennedy Aduda and Alfred Talukhaba, pp 1368-1379
World Green Building Council, Boosting the green house effect – CDM Reform Key to
Climate-Friendly Building and construction sector, at http://worldgbc.org/home/107 on
2009/04/01
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Mauro Chilante, pp 1380-1388
"Professional liability, knowledge and enforcement of the seismic laws in
Italy (the case of S. Giuliano di Puglia)"
Mauro Chilante
Construction Technologies Institute,
National Research Council,
L’Aquila, P.le Collemaggio, n.1
Italy
Email: [email protected]
1 Introduction
The collapse of the school of S. Giuliano di Puglia, caused by the earthquake occurred on 31st of
October 2002, killed 27 kids and a teacher.
Different people were all absolved to the first and all sentenced to the second judgment: some
technicians (who drafted the project, also appointed as “site engineer”; the surveyor responsible of the
technical office of Municipality; the owners of the companies that made the work; the technician who
granted the “fitness for habitation”) and one political figure (the Mayor, who authorized to re-enter the
structure). Clearly each technical figure has partial responsibilities, but if collected and joint with the
Major's one, they all concurred to the collapse of the School in the earthquake.
This case, and specifically the second instance sentence, is one of the not very frequent situations in
which a professional is rightly sentenced because of his negligence. That because of a strange
reluctance of the Bench to judge severely that kind of people. The first instance sentence is a clear
example of this reluctance. Moreover the Professional Council is much more indulgent with their
associated and very rarely goes as far as expelling someone.
But about professional liability the SC and some Courts are marking out an even more clear road. With
this work I will try to point out that road.
2 The general pre-conditions to identify the core of the concept of liability
In terms of liability, we first need to specify that technicians (over all engineers and architects) in Italy
can be subject to a double professional “judgment” of merit: one by Professional Council they belong
to; the other by the Ordinary Bench.
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According to law, professional associations have disciplinary power, some co-ordination and control
duties and they can handle professional registers, which one can enter, after educational qualification,
by paying an annual fee. However, if a public employee you cannot practice private activity1.
We can distinguish three kinds of legal responsibility: contractual, civil and criminal. Each one presents
specific and complex issues. Therefore, before approaching the case in point, it will be necessary to
briefly describe the most important profiles of these responsibilities.
2.1 Contractual liability
In general, referring to contractual liability, construction planners (of a part of the work, or of some of
the overall activities) will answer in court for manufacturing, because of construction defects (duty of
result)2 or because of negligence (duty to observe the due care and attention)3 only with reference to
their own actions or to the actions of their helpers. Technicians, therefore, in relation to the activities of
their helpers, will answer only for errors in projects evaluation or about their activity, and in the case
they are supposed to know and to inspect their helpers' work, because of their skills.
The case of joint liability, as in the meaning just explained, and following the general principles of
obligations, involves then that each responsible could be called to pay the full damage, independently
from their grade and the type of (joint) liability4.
2.2 The “non contractual” liability
This type of liability occurs always in the civil law and is based on the famous roman precept
“neminem laedere” (don’t be bad to anyone).
Referring to the case here proposed, this hypothesis can mainly concern the work of the technician
responsible to check the “fitness for habitation”, consisting in the expression of a technical opinion.
That liability can exist toward both the third party and the (client) purchaser of the work.
The Article 2043 of the Civil Code provides that “any intentional or culpable (negligent) act that causes
a wrong damage to other else binds who committed the fact to compensate damage”.
1
The disciplinary power of the Professional Council of engineers or architects (art.5, n.4, law n. 1359/1923) concerns not only abuses and
omissions repression committed by members in practicing the profession but also concerns acts and violations connected to the practice
of any activity as expression of the particular technical knowledge certified by educational qualifications. The consequence is that toward
public employed this power can be legally exercised also in case of violations of deontological rules, concerning activities connected with
the professional “status” and committed in the work circle (Supreme Court Sentence, civil sections united, n.8239/1993).
2
Art. 1176, second paragraph, civil code.
3
Art. 1229 civil code.
4
Cfr. Cass., n. 488, January 28, 1985, in “Riv. Giur. dell’edilizia”, 1985, I, 458: about joint and several liability of the contractor and the
“site engineer” : construction of a wall with unsuitable materials, applying methods not conformable with a job properly done .
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In the past this rule was considered as the cornerstone principle for civil liability. All the other
successive rules were considered as exceptions of it and classified within the culpable liability. During
the years, in consideration of the various articles of Civil Code, the attitude of scholars and courts have
changed. Still, professional civil liability continue to have, as cornerstone rule, that Article composed
by two elements: the unlawful act (conduct, causality and event) and the psychological element,
intention or negligence.
To sum up, that rule outlines a legal paradigm, with a complex structure, qualified by the atypicalness
of the civil offence and uninterested in determining the subjective criterion to ascribe liability. That
because all the civil rules about offensive acts are inspired to the principle of equivalence between
malice and negligence in relation to the outcomes of the detrimental fact.
This system of atypicalness (in antithesis with the typicalness of the criminal offences) allows to
sanction any behavior determining an unjust damage, without having an indispensable
predetermination by law of all cases and all legal assets to defend.
The identification of the unlawful act is focused on the notion of unjust damage. It will be found when
comparing the interest of the victim in obtaining a compensation for damage and the interest of injurer
in committing the dangerous activity, without taking over the economic risk of a compensation for the
damages to third parties. That comparison must be done considering not only the interests in confliction
but also the interest of community to repress and discourage some kind of behaviors. Anyway, that is a
flowing situation in permanent evolution.
We’ll take into consideration causality and psychological element speaking about criminal offence.
That because, in the dominant opinion, those elements are the same concept, which is applied,
univocally, to both branches of legal system.
In conclusion, as example, professionals partially and individually assigned to prepare a project and/or
to be appointed as the “site engineer” of a work, will be responsible only for their own negligence. The
onus of proof of all the elements is completely up to the victim5.
It is possible, anyway, to apply the principle of representation to oneself of other’s people wrong
activities, hypothetically considering a real case, also when one of the professional perfomances is the
antecedent and the needed assumption for the work of other technicians: that is the case, if it is possible
to highlight the wrong (ex Art. 1176, second paragraph, civil code), of a multi-subjective liability6.
In terms of liability we need to add that law makes no distinction in relation to the different nature
(public or private) of the client. Civil liability must be evaluated referring to the behavior of the
5
With reference to the team work, Jurisprudence believes that each sharing has to answer only for his own behavior , and has to trust in
an honest other’s people behavior. But not when the subject pictures to himself or should picture to himself the other’s people wrong or
dangerous behavior. Or when, because of his hierarchical status, he must watch and control or he must coordinate and be active to prevent
or to rectify the errors. These principles were elaborated referring to the medical and surgical activity and in time were extended to each
other similar activity.
6
Cass., n. 2204, 1989, May 13th, in “Rep. Foro It.”, 1989, item “Responsabilità civile”, n. 155; Cass., sez. III, 1996, Dicember 10th, n.
10987, in “Rep. Foro It.”, 1996, item “Responsabilità civile” n. 205; Cass., sez. 111, 1997, July 2th, n. 5944, in “Giust. Civ.”, 1997 I,
3049; Cass., sez. III, 1996 January 19th, n. 418, in “Rep. Foro It.”, 1996, item “Responsabilità civile” n. 203.
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professional and to the object of the commission7.
2.3 Criminal liability
The “principle of typicalness” of criminal offence is a direct appendix of the legality principle. In
accordance with it, no one can be punished but under a law just came into force before the fact
(Constitution, art. 25, second paragraph; art.1 and 199 Penal Code).
“Typicalness” of criminal offence – in relation to the peremptory legal provision – means that the law
must determine in advance all the constitutive elements of the legal paradigm. Generally the precept
contained in the penal law is an order often expressed as a prohibition.
From this point of view we can distinguish various kind of crimes.
Another important difference between civil and penal offence is represented by the psychological
element: for the civil law the kind is not relevant, for the penal one, instead, is effective the general rule
to punish the negligent act only if expressly foreseen.
In substance the penal offence is composed by two elements: the “etiological” connection and the
psychological element considered as negligence.
In the case of someone concretely accused of a crime, the Italian legislator has had a different behavior
in comparison with other countries. He sanctioned the possibility to punish only the fact, detrimental or
dangerous, on which depends the crime committed by acts or omissions (the latters just when
someone's duty was to act).
For the penal code approved in 1930 and actually in force, the mean of “etiological” connection had a
naturalistic sense (“conditio sine qua non” theory or “causality equivalence” theory). Today we have a
different theory: the model is the subsumption under scientific laws.
Basically, is first necessary consider a law as based upon generalizations (standard behaviors, standard
situations, standard consequences), then to exam if the single historical behavior, or historical situation
or sequence can be integrated in the general scheme previously obtained8.
In terms of negligent crimes, the investigation about the “etiological” connection needs something
more: the event must be a concrete expression of the risk that the violated law aimed to prevent9.
7
Cass., 1993, April 23th, n. 4921, in “Corr. Giur.”, 1993, 1201.
8
Fiandaca, G., 1988, “Causalità (rapporto di)”, in “Digesto disc. pen.”, Vol. II, Utet, p. 123. In other terms, the Judge had to verify if
probably the behavior of the person who acted is a necessary condition to cause the event.
9
Fiandaca, G., Musco, E., 1985, “Diritto penale”. Parte generale, Bologna, Zanichelli, p. 300; Trimarchi, P., 1967, “Causalità e danno”,
Milano, Ed. Riuniti, p. 65 ss.; Corte d’App. Milano, 1980, January 28th, in “Riv. It. di Dir. e Proc. Pen.”, 1983, 1559).
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The transition from the “strict liability” to the “personal liability” consists in including the
psychological element between the other constituent elements. If we want to prove liability, the simple
existence of causality connection is not sufficient. In accordance with those other elements the
dangerous event will be related to the will of the perpetrator of crime. That because they knew that the
event should be consequence of their voluntary action (malice), or because they could have avoided the
behavior held in that occasion (negligence).
3 The case in point
The S. Giuliano di Puglia school structure were conceived in 1957, ended in 1960 and tested in 1965;
then in 1959 an extension project was set up, which was eventually realized in 1967 and tested in 1970.
The nature of the various structures was very different. The first building lot had foundations and
vertical walls in mortar masonry and heap of calcareous stones, with thickness of about 0,6 m. at
ground level and of 0,5 m. at first floor and with ceiling composed by cementitious elements. The
second lot had brick walls with a thickness of about 0,4 m. and ferroconcrete (reinforced concrete)
architraves on the windows (maternal school); ferroconcrete and lateritious plugs were used in the gym.
In 1988 some works to complete the gym were carried out, in order to accomplish extraordinary
maintenance, to remove obstacles for the disabled, to complete extensions, reinforcements, adaptations
and renovations concerning the displacement of the entrance and consequently of the stairs. As a result,
a portion of the ferroconcrete body bolster of the ceiling was cut, with the residual part of it (without
any anchorage) laying upon a brick pillar with no foundations.
At last, between 1999 and 2002 was realized the additional storey on the elementary school which,
substantially, was the core of the trial.
Two month after releasing the fitness for habitation certificate, at 11.32 a.m. on the 31st of October
2002, the school was destroyed by a seism of 5.4 of Richter magnitude and of intensity between the
seventh and ninth grade of Mercalli scale.
The first instance trial
The Court of Larino discharged, with full acquittal, all the accused from the crimes of negligent
disaster/negligent collapse of building, culpable homicide, grievous harm and other smaller crimes,
with the expressed formula “because the fact don’t exist”.
That because was considered not adequately proved the causality, even if:
1. The contractor of the first lot:
a. violated the ban to use round stones and not broken (BUT for the Court their presence was
scanty);
b. violated the legis artis having set up a protrusion of about 10 cm. over the foundation in one of
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the bearing wall (BUT the experts appointed by the Court didn't consider that as important to
characterize causality);
c. used mortars of medium-low and not high quality (BUT that was considered to be a common
habit);
d. didn't join the walls with horizontal rows of bricks or with continuous strips of concrete.
2. Concerning the works done in the sixties some anomalies were already pointed out (the cut of the
body bolster);
3. Concerning the additional storey built in 2002:
e. The ordinary laws of 1971 and 1996 about constructions were violated. Those laws provides for
some rules and important technical-administrative acts as:
i. The draft of a feasible project;
ii. The notification before the beginning of the works to be done, with
iii The delivery of both project and calculations with the illustrative report about materials;
iv. The final report after the end of the works;
v. The static test;
vi. Criminal penalties for anyone who allows the use before the static test;
vii. Technical rules to calculate, perform and test the ferroconcrete structures and metallic structures;
BUT the Court decided that those laws could exclusively concern the ferroconcrete structures,
considering the ferroconcrete elements already realized in the additional storey “non essential” for its
static condition and ignoring the case law considering these rules applicable to each one ferroconcrete
element existing in a building, because of the very relevance of it as a functional element.
There wasn’t any enforcement of seismic laws issued in:
a. 1974: the Court believed this law as non-binding and consequently not enforceable. That
because the lack of the list of the declared seismic areas (first committed to the Public Works Ministry
and then, in 1998, to the Regions, but under criteria fixed by Government). The list was introduced
only in 2003, granting the new classification proposed by scientists since 1998. Really, in 1998, the
President of the Italian Council of Ministers identified, with an Ordinance (directive), the territories of
the towns under high risk. That list included S. Giuliano as a town with a medium-high risk
(predictable intensity: IX° grade of Mercalli scale). BUT the Court considered that that list was issued
only in order to permit contributions and fiscal facilities, oriented at the adoption of anti-seismic
criteria already foreseen by law.
b. 1975: this law foreseen that each school must have “conditions of static safety, protection
against weather, fires, earthquakes, (…)”. BUT, in Court opinion, it could have been applied only to
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schools placed in towns already declared as seismic. And that was not the case of S. Giuliano.
c. Nevertheless the Court acknowledged various transgressions to the 1987 law, concerning
masonry constructions:
i. Non-control of the old structures and non-consolidation of the outside walls;
ii. Non-testing of the structure static condition;
iii. Transgression of another law dated 1994: non-drafting of the technical documents (preliminary
project, final and executive).
Notwithstanding the verified negligent behaviors, the Court considered “insufficient, contradictory and
uncertain” the prove of causality between behaviors and event. Substantially considering that the
school should have collapsed in every case and that only one technical prescription could have had an “
high level of probability” to prevent it: to have built it on the grounds of seismic criteria. BUT that was
impossible because seismic law wouldn’t include that town.
The experts (assessors) also pointed out that the walls of the first lot were prone to the splitting
phenomenon. BUT the Court asserted that this structural lack would have been etiologically linked to
the collapse only if could be proved that it happened because of the action of vertical waves (P waves),
which are less dangerous, and not because of the horizontal waves (S waves). Not even the testimony
of the two survivors teachers was sufficient to make the causality clear .
The Court was oriented toward the discharge also because of another element. The INGV
identified a “site effect” caused by the presence of clayey ground under a part of the building. This fact
amplified of about two grades of Mercalli scale the intensity of the seism. The court deduced from it
that the amplification was practically the only cause of the collapse.
The appeal and the second instance trial
Before to evaluate causality, the Court examined each negligent behaviour in violation of laws or rules
of diligence, prudence and skillfulness:
1. The first lot builder: he violated the laws of the art conforming to local uses. The structure, after
forty years from the construction, was certainly vulnerable with a medium-low vulnerability (33%)
according to an analysis of GNDT-CNR dated 1996 (before the construction of the additional storey).
But was certainly exposed to the splitting phenomenon having no links between the bearing walls.
Anyway it resisted the “restructuring” of 1998 (the displacement of the entrance and the cut of a ceiling
body bolster to place the new stairs). It also resisted, for five month and more, the very heavy load of
the additional storey. There were no cracks caused by the tremors happened during the preceding days.
All that, in the opinion of the Court, points out that the building, without the load of the additional
storey, shouldn’t probably collapse.
2. The Mayor, the planner, the site engineer, the surveyor of Municipality also responsible of
administrative acts (proceedings), the building company and the sub contractor: they are substantially
jointly responsible for the violations under previous point 3., in their dual and different nature of
controllers and under control. In fact, without the illustrative report of the project, without the structural
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feasible plan containing the calculation of the ferroconcrete, without the load proof, they shouldn’t
have proceeded the construction. There wasn’t any test for the two ground floors, one laying on the
other between first and second floor, with no calculation about resistance and the evident unbalancing
of the structure (only partially raised). And it’s necessary to add the faulty linkage of the upper floor
with the ferroconcrete stringcourse. Furthermore is important the non-respect of the ordinary law of
1987 which force anyone who want to add a storey to a masonry building to reinforce it, also
controlling materials degradation, and to apply some procedures and technical acts during the works.
3. While, speaking about violations of seismic laws, there weren’t direct violations of the law n.
64/74 because the town’s classification wasn’t operating yet. Nevertheless, in 1998, after the Umbria
and Marche earthquake, a financial law was enacted (n.449/97) and, consequently, the O.P.C.M. n.
2788/98. According to those acts, in the wait for the new seismic classification occurred in 2003, tax
incentives were granted to adequate private or public structures to seismic action. In particular the
Ordinance publicised the list of the towns whose territories were considered to have high seismic risk.
In this list the town of S. Giuliano was present and, consequently, from that moment the town, even
though not yet classified, was therefore qualified as a town with a high seismic risk. So the “model
agent” who was in charge to plan/approve/perform a building work in a town qualified with high
seismic risk should have applied, from that moment, the common rules of diligence, prudence and
experience in constructions. As a result the Court identify this one as a violation afferent art.43 of Penal
Code and, in the strict sense, as negligence. Furthermore the concepts of “seismic risk” and “seismic
classification” are certainly different, not including, the first, an evaluation of event probability, but
certainly including riskness (or “shockness”). As the SC case law reports risk is nothing more than
hazard and this is nothing more than probability (and not simple possibility) that a particular event
would occur. So, being riskness the ground of seismic classification, even if this one isn’t still realized,
it’s just enough to found the probability and, then, the predictability of a seism (even if only under the
aspect of dies certus an, sed incertus quando). Direct Consequence of it is the duty (liability)
(considering diligence, prudence and skilfullness) to adopt each appropriate and necessary anti-seismic
precautionary measures. But moreover, the SC10, referring to a built collapsed in 1980 because of the
Irpinia’s earthquake, which was placed in a town not yet classified as seismic and not even qualified as
having risk of seism, considered that the builder and the site engineer were criminally liable if the
building was designed and/or realized without observing the technical laws of “good building” and the
rules commonly adopted. By the lack of the right behaviour the construction was characterized by an
abnormal fragility; if an earthquake would have occurred and would have happened to destroy it, they
couldn’t advance the earthquake unpredictability as an excuse. The earthquake is considered, in fact, an
exceptional event but something which could happen and which must be taken into consideration when
practicing a technical profession.
In that sense the additional storey built in the S. Giuliano’s school and the violation of the common
rules turned it to be a construction characterized by abnormal fragility. And who was involved in the
construction should have considered that possibility in practicing their professional activity. The
common rules of safeguard should have been respected by people involved, leaving out of
consideration the seismic problem, and (considering diligence, prudence and skillfulness) every
appropriate and indispensable protective seismic measure should have been adopted .
10
Cass., Sentence n. 17492, 1998, November 16th.
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4. Causality: the Court contested the first grade Judge determination about the existence of
causality. Substantially the critic consists in having asked to the assessors (experts) two misleading and
exceeding (or excessive) questions. Two hypothetical questions grounded on the claim of hypothetical
answers completely abstract with regard to the strict reality of the trial. With the first question was
asked if it was possible to conjecture the collapse of a construction built in accordance with the rules of
the art, included the seismic one, occurring the earthquake. The assessors (experts) answered that there
were no certainties about the possible collapse of that hypothetical build. With the second the Judge
asked if it was possible to prognosticate the collapse of a construction built in accordance with the rules
of the art but without observing the seismic rules. Assessors answered that “the probability of a
collapse would be lower”, with a percentage of 50%. From this two abstract answers, resulting from
two abstract questions, the Judge derived doubts about causality. It’s evident that the method used by
the judge is misleading because, firstly, he didn't take the circumstances into consideration and ask
hypothetical questions; secondly, having received conjectures and hypothetical answers (i.e.
abstractions), tout court he applies them to the real case deriving from them definitive solutions. All
that without considering if the negligent or criminal behavior is suitable to amount the crime in the real
case. That because by removing the event mentally, it shouldn’t be happened or it should be happened
in a following period or having a lower damaging intensity: in that case causality should be clearly
assessed.
4 Conclusion
The Court condemned all the accused from two to about six years of reclusion and sent the sentence to
the Tribunal of Rome to verify if there were any co-responsibility of Italian State (Ministers and/or
civil servant) for the delay in approving the S. Giuliano seismic classification.
It should be possible to try to draw a moral from both political and technical aspects of this story and
sentences, but science leaves these things out of the door. Let me do only an observation: juridical
scientists, judges, courts found their science on interpretation of the laws and of the facts. And juridical
scientists, judges, courts are personified by men and women. But men and women are not perfect
machines.
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
David Goodwin and Mick Strack, pp 1389-1400
Between the Lines: the spirit behind land agreements
David Goodwin1 and Mick Strack1
1
School of Surveying,
University of Otago, Dunedin, 9054,
New Zealand
Email: [email protected]; [email protected]
Abstract:
Land agreements negotiated between British authorities and indigenous groups were
part and parcel of colonial expansion. Although current interpretations of the historical
agreements which formed the basis for European settlement and rights in land
acknowledge that a variety of forms of evidence (written, numerical, verbal and
pictorial) are admissible in law, and generally recognise that the spirit of an agreement
is paramount, special difficulties (principally those of culture and language) are
associated with getting to the heart of such agreements. Typically, the written words of
legal texts have been scrutinised minutely, but forms of evidence other than the written
words have been neglected. This paper compares the unwritten evidence for treaties and
concessions in three countries, namely Canada, New Zealand and Zimbabwe. Examples
include wampum belts in Canada, and surviving verbal synopses of written documents,
for example explanations by missionary translators, which were often couched in
figurative or metaphorical language and, at the time, may have carried considerable
weight. Despite agreements being negotiated verbally, the official version is generally
the written document with appended signatures or written marks. From an indigenous
point of view, the verbal agreement often carries greater weight, especially when
ratified by some form of cultural protocol, for example smoking a pipe of peace. Failure
to recognise such verbal covenants and protocols has at times led to misunderstandings
about the spirit of land agreements. The paper concludes that legal processes today not
only need to be cognisant of written law but should also pay greater attention to
unwritten forms of evidence. In particular, imagery resorted to at the time of negotiation
has proved itself pithy, well suited to capturing the essence of negotiating points, and
capable of providing enduring mental images that should rightly be drawn on to colour
legal interpretation today.
Keywords:
Treaties, land tenure, legal evidence, aboriginal title.
1 Introduction
Land agreements negotiated between British authorities and indigenous groups were
part and parcel of colonial expansion, and formed the basis for European settlement and
rights in land. Although current interpretations of these agreements acknowledge that a
variety of forms of evidence are admissible in law, and generally recognise that the
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spirit of an agreement is paramount, special difficulties are associated with getting to the
heart of historical agreements. Typically, written documents have been scrutinised
minutely, but forms of evidence other than the written words have sometimes been
neglected. This other evidence includes records of debates, discussions and promises
offered prior to signing. These were often couched in figurative or metaphorical
language, which often carried considerable weight in swaying opinion. However,
despite a person’s word being paramount from an indigenous point of view, especially
when ratified by some form of cultural protocol such as smoking a pipe of peace, the
official version of an agreement today is generally the written document with appended
signatures or written marks.
This paper examines and compares the discussions leading to the treaties and
concessions and the agreements made between colonial authorities and indigenous
groups in three countries, namely Canada, New Zealand and Zimbabwe.
2 Canadian Treaties
British sovereignty was asserted over the lands and the people of Canada by the Royal
Proclamation of 1763 but the possession of the lands of the Indians was not ceded and
no lands could be purchased other than through the Crown. There is nothing especially
remarkable about that: Sovereignty over territory (imperium) is quite different from
proprietorship of lands (dominium). However, the explicit statement of that fact
reinforces the necessity for the Crown thereafter to negotiate, and record by treaty, the
cession of lands from the Indians to the Crown. The negotiation of such treaties must
therefore be put under the spotlight to determine what was agreed upon and what was
ceded.
A series of treaties were negotiated and signed as part of the inexorable westward
expansion of colonial control and settlement of the interior prairie lands of central
Canada. Most of these treaties were similar in their official wording although they were
signed under different circumstances. Treaty 7, signed in 1877 in southern Alberta, is
used here as a representative example of Canadian treaties. The Crown’s sovereign
authority over the prairie land was under threat because there was no actual presence of
any Canadian authority in southern Alberta until the first arrival of the North West
Mounted Police (NWMP) in 1873. The treaty commissioners were keen to establish the
treaties over the prairie provinces to make their sovereignty claims apparent on the
ground:
The Aboriginal intent was to extend the hand of friendship to the imperial
Crown and to protect the Aboriginal way of life and livelihood. To the
Crown’s consciousness, such protection brought the Aboriginal nations and
their lands within the jurisdiction of the United Kingdom. The imperial
Crown needed the treaties to justify its jurisdiction in North America to
other nations (Henderson, 1997:75).
The indigenous peoples of southern Alberta include the Siksika, Stoney, Peigan, Sarcee
and Blood bands. They came together as the Blackfoot Confederation, under a well
respected chief, Crowfoot, who had developed a close and trusting relationship with
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David Goodwin and Mick Strack, pp 1389-1400
Colonel Macleod of the NWMP. On this basis Crowfoot was able to call together the
various bands to negotiate land sharing and access agreements with the treaty
commissioners. The historical records indicate that the preliminary discussions to the
treaty were almost exclusively concerned with what the chiefs and individuals of the
nation would receive by accepting the treaty. There is “no evidence to indicate that the
issue of ceding or surrendering the land was ever raised by the commissioners in the
discussions” (Treaty 7 Elders, 1997:255) and it appears that the treaty was never read
out in full (Treaty 7 Elders 1997:258). Local missionaries likely knew about the
Blackfoot resistance to land surrender issues, and they probably sent warnings to the
commissioners about the potential for disagreement. This may be why the land
surrender was never raised for discussion and was only written into the treaty after the
discussions and negotiations. Furthermore “First Nations would not consider making a
treaty unless their way of life was protected and preserved. This meant the continuing
use of their lands and natural resources.” (RCAP 1996:174 Volume 1)
The treaty commissioners, in their discussions with the Indians, were at pains to
emphasise the expectation that the continuity of the Blackfoot way of life – their
occupation, hunting and access to all their lands – would be assured (Morris, 1880:268).
However, the written treaty presented to them included an agreement to “cede, release,
surrender, and yield up to the Government of Canada for Her Majesty the Queen and
her successors forever, all their rights, titles and privileges whatsoever to (their) lands
…” (Treaty 7 text).
The continuing conflict about the legal effect of the treaty, therefore, is whether the
written words of the treaty, validated by signatures and recorded in the historical written
records of the Crown, take precedence over the oral agreement represented by
negotiations and discussions, validated by the protocol of smoking the sacred pipe, and
recalled in the oral histories of the indigenous people. Formal agreements of many kinds
were often also recorded in Wampum belts that reinforced the stories and recorded the
treaties with the Crown. For example, Borrows interpreting a treaty wampum belt, tells
us that:
… the bed of this agreement is white, which is to represent the purity of the
agreement, and that people were to live together in peace and friendship and
respect, and this motif of peace, friendship and respect is repeated in ….
three white rows separating the two purple rows indicating that people can
live together, they can create a shared space in the territories they found
themselves in, in peace and friendship and respect. At the same time, there
are these two purple rows that separate the white rows, that are to indicate
that the British Crown would go down their river of life in their ship of State
dealing with their own affairs and our people would go down the river of
life in our canoe controlling our affairs (Borrows, 2006).
In contrast with this symbolism:
marks on a printed sheet of paper had about as much significance for many
aboriginal peoples as the colours and patterns of a treaty belt had for many
English. The treaty was neither the written memorial nor the belt but the
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agreement reached by the parties during the oral exchanges (Slattery,
2000:208).
The language used in this cultural meeting place is therefore of great significance to
understanding the relative positions of both parties. The Crown commissioners regularly
resorted to the language of fraternity. It is the language of the self-assured civilized man
wishing to get agreement to its position by bolstering the status of the illiterate native
(who, nevertheless, has all that which the Crown seeks). The Queen is portrayed as a
benevolent mother figure for the Indians,1 and the settlers as their brothers. “Colonial
officials participated in ceremonial exchanges and adopted the language of kinship to
describe the relationships this confirmed, but it subsequently became evident that their
view of what took place at these meetings differed profoundly from the Aboriginal
understanding of events” (RCAP 1996:646 Volume 1).
On the Indian side, the figurative language employed illustrated their world view and
regularly made reference to nature: the soil, rivers flowing, and the sun shining.
At the signing of the treaty at Blackfoot Crossing, Red Crow pulled out the
grass and gave it to the White officials and informed them that they will
share the grass of the earth with them. Then he took some dirt from the earth
and informed them that they could not share this part of the earth and what
was underneath it, because it was put there by the Creator for the Indians’
benefit and use (Treaty 7 Elders, 1997:114).
There was no mention made to sell land; or to sell what is underneath the
land; or to sell the mountains, trees, lakes, rivers, and rocks. And we didn’t
say to sell the animals that travel on the land – the ones that we eat – or the
birds that fly, or the fish that swim. The Old People didn’t get asked to sell
these things. They were told “the Queen will be like your mother, and she
will take care of you until the Sun stops shining, the mountains disappear,
the rivers stop flowing, and the grass stops growing” (Calf Robe, 1979:21) .
From the Blackfoot perspective, the ‘magnificent gift’ (Friesen, 1999) to the Crown and
the settlers was the opening up of their traditional hunting lands to some form of open
access. They were not alienating their land forever in a way that would exclude them
from it. They were saying the Europeans could come onto the land, to use it for their
purposes, and the Indians would retain access to it for their purposes; in effect, “we can
all share this land”.2 It is obvious that the Blackfoot people could not have been aware
of the incompatibility of uses and the western requirement for private property and
exclusive ownership; sharing was not what land-hungry settlers wanted.
2.1 Treaty Protocol
Different cultural and legal traditions create different views about what gives an
agreement validity. The Europeans placed total emphasis on the written text that had to
be duly authorised by signatures. The pomp and ceremony was an important adjunct to
1
Text of Treaty 7: “Her Indian people may know and feel assured of what allowance they are to count upon and
receive from Her Majesty's bounty and benevolence.”
2
See Treaty 7 Elders, 1997:90 and also Taylor, 1999:43,
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the signature, hence there was a good deal of formality attached to the process. This
included dressing up (and the presence of the NWMP assisted in this colourful display
of formality) and making speeches. In actual fact, Indian signatures were not collected
on Treaty 7, but a name was recorded and an X mark was inserted. Usually the Indian
signatory did not even write the X, but was merely asked to touch the pen – a rather
remote enactment of a signature! Dempsey (1972:105) relates the story that Crowfoot in
his apprehension of being swindled by the treaty commissioners reached for the pen but
did not actually make contact with it.
The Treaty commissioners were prepared to add aboriginal ceremonies to their own to
recognise that these were reciprocal bargains, and to this end they were comfortable
indulging in the pipe ceremonies and allowing for Blackfoot celebrations. It is doubtful,
however, if they understood the significance of an agreement made in the presence of
the pipe, from an aboriginal point of view: “The Indians have utmost and absolute belief
in the sacredness of the pipe. In the presence of the pipe, only the truth must be used and
any commitment made in its presence must be kept” (RCAP, 1996:64-5).3 In other
words, for the Blackfoot, the pipe has intense spiritual and moral force, and it validated
the oral agreement as the true interpretation of the treaty.
The treaty negotiations were conducted alongside the ceremony of the pipe, but it is
likely that the Treaty commissioners saw these aboriginal ceremonies and protocol as
merely heathen entertainment (Taylor, 1999:18).
The Treaty 7 elders remembered smoking the pipe to bless and solemnize a
treaty that was to enable them to live in peace and harmony. By smoking the
pipe of friendship they did not need to know all the details (some of which
were subsequently used against them) of the treaty. Once the pipe had been
smoked they believed that they would be ‘taken care of’ and that their lives
would be enriched by the government’s ‘magnificent gifts’ and ‘sweet
promises’ (Treaty 7 Elders, 1997:324-5).
The agreement to the written treaty was compromised by failures in treaty settlement
protocol on the part of all parties. The agreement to the content of the oral discussions
was similarly compromised by the misunderstanding of the significance of the pipe
ceremony. The treaty therefore, cannot be viewed as a meeting of the minds.
3 Zimbabwean treaties and concessions
Nineteenth century treaties and concessions in Zimbabwe have to be viewed in the light
of the Matabele war which, by 1894, established conquest as the method of acquiring
territory rather than treaty-making. However, earlier agreements still warrant scrutiny
since grievances surrounding their signing continue to this day, in particular over verbal
assurances given at the time.4 The first recorded treaty over Zimbabwean soil, signed by
Mzilikazi with the Boers in 1853, was primarily a right of way over Matabele territory.
This was followed by the Tati and the Shashi concessions (Warhurst, 1973:56,63).
Thereafter, apart from a minor concession in 1871, no further concessions or treaties
3
And see also Price, 1999:111, Williams, 1997:47-48 and Treaty 7 Elders, 1997:68.
4
For example, see (Magaisa, 2008).
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were granted until 1888, when Lobengula signed both the Moffat treaty and the Rudd
concession. By the Moffat treaty, he agreed not to give away any part of his territories
without the sanction of Britain. Lobengula’s motives are a matter of conjecture but what
is certain is that, as with the prior treaties, no land rights were conveyed.
The written terms of the Rudd concession are straightforward – it was a mining lease
signed by three representatives of a mining company, for an initial sum then a fixed
monthly amount. A missionary, the Reverend Helm, was present during the negotiations
to ensure they were fair and in the interests of the natives, and he signed as a witness
and to certify that the document had been fully interpreted and explained. In any case,
there would have been little need to lie about the Rudd concession, which may have
been “the thin end of the wedge” for the British but which, in itself, did not give away
much and, in particular, conveyed no rights in land (other than in a negative sense of
agreeing not to grant land without the permission of the grantees). It is the verbal
assurances made at around the time of the concession that have since given rise to
grievance, and it is here that figurative language first plays a significant part in
conveying exact shades of meaning. It should be noted that Thompson, as interpreter,
held the view that “All discussion with natives on grave matters was in my time carried
on more or less in metaphor, a style carrying much weight when skilfully used”
(Rouillard, 1977:128).
Thompson confined himself to metaphorical terms that he believed would be best
understood by the Matabele, which meant sticking mainly to guns and cattle. Thompson
likens Lobengula’s dominion to a dish of milk that is attracting flies (a reference to
other countries interested in securing mineral rights in the country) and explains that
what is sought is not land, only the right to dig for gold.
I likened his country to a cow and said, “King, the cow is yours. If she dies
the skin is yours, if she calves the calf is yours. I only want the milk.” The
Matebili regarded milk as only fit for children, and not food for men
(Rouillard, 1977:188).
Thompson explained what was meant by the sole right to mine gold by pointing out that
it was inadvisable to have two bulls in one herd of cows, which one induna5 agreed was
simply asking for the pair of them to fight rather than looking after the cows.6
Furthermore, in order to allay fears, Thompson made the point that no one gives
somebody an assegai7 if he expects to be attacked afterwards. In other words, if the
whites planned to overthrow the Matabele they would hardly arm them with guns
(Rouillard, 1977:130).
Lobengula signed the concession, but in the following months his fears were played
upon by rival concession-hunters at Bulawayo, who suggested that the king study the
word “land” used in the concession. One of the whites, at a council with 300 indunas,
5
Councillor, advisor, chief e.g. of Lobengula.
6
A similar proverb is found in Swahili: ‘Two bulls do not live in the same cowshed’. Parker, quoted in (Pongweni,
1989:7).
7
The assegai is figurative: one thousand Martini-Henry breech-loading rifles were offered with one hundred thousand
rounds of ball cartridges.
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challenged Thompson to explain the word, to which he cleverly replied by asking the
indunas if they could tell whether a beast is male or female when shown only part of its
hide. When they replied that the rest of its body would need to be seen, Thompson said
that he too, could only interpret the word ‘land’ if shown the context (Rouillard,
1977:176).
3.1 “Ten White Men”
Looking back over a hundred years, one phrase continues to trouble writers; a verbal
promise allegedly made to Lobengula that only ten white men would be working in his
country. However, although it seems that ten men must have been mentioned, it is
unclear just what that occasion was. One account is from the Rev. Helm who, in a letter
to the London Missionary Society dated some five months after the signing of the
concession, writes:
The Grantees ... promised that they would not bring more than 10 white men
to work in his (Lobengula’s) country, that they would not dig anywhere near
towns etc & that they & their people would abide by the laws of his country
& in fact be as his people (Hiller, 1949:227).
This statement might mean that the promise was made by Rudd and his party at the time
the concession was signed (Blake, 1977:47), but Helm’s use of ‘the grantees’ is
ambiguous and could equally well have applied to only two of the grantees at a date
later than the signing of the concession, or even by other members of the mining
company at a still later date.
In the months following the signing of the concession, Lobengula, seeking reassurance,
decided to send two indunas to Britain, bearing two letters. The first letter, authenticated
by Helm, was a declaration of Lobengula’s territorial claims and a request to the Queen
for protection under the Moffat treaty. The second letter, quite possibly a forgery, said
that the indunas were making the journey to confirm on Lobengula’s behalf that there
was a queen, and to ask for someone to be sent by the Queen herself to help with
troublesome concession seekers. The reply, written by Lord Knutsford for the Queen,
seems a veiled attempt to protect future British interests. Couched in figurative language
worthy of Thompson himself, it cautions Lobengula not to put too much power into the
hands of those who come first and exclude others equally deserving: “A King gives a
stranger an ox, not his whole herd of cattle, otherwise what would other strangers eat?”
(Blake, 1977:50).
One last treaty should be mentioned in the Zimbabwean context, namely the Lippert
Concession, obtained from Lobengula in April 1891 on behalf of Lippert, a German
financier (Cherer Smith, 1978:35). Strictly, this was untenable in written or customary
law, for it reneged on the Rudd concession by which Lobengula had contracted not to
grant land without the permission of the grantees,8 and Lobengula also did not really
have the power in custom to grant land rights in Matabeleland (Palmer, 1977:27). The
Lippert concession was probably an attempt to outmanoeuvre Rhodes by securing the
land rights to the country. It granted “The sole and exclusive right, power, and privilege
8
At that stage effectively the British South Africa Company, since its creation on October 29th 1889.
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for the full term of 100 ... years to lay out, grant, or lease ... farms, townships, building
plots and grazing areas; to impose and levy rents, licences and taxes thereon, and to get
in, collect and receive the same for his own benefit; to give and grant Certificates ... for
the occupation of any farms, townships, building plots and grazing areas” (Palmer,
1977:27). Subsequent confirmation of the concession by John Moffat seemed to be a
case of the end justifying the means, since Moffat firmly believed that “only the
disappearance of their military state could save the Ndebele” (Warhurst, 1973:64).
Although further details of the concession are beyond the scope of this paper, when
Rhodes bought the concession it served to buttress the Rudd concession, whose
weakness was in not giving control over land. Thompson, when asked by Rhodes about
the signing of the Lippert concession, says that, knowing Lobengula’s feelings about
land, he was probably unaware of what he had put his signature to (Rouillard,
1977:189).
To complete the picture of land agreements, a claim by the Matabele community that
their right to the unassigned land in Southern Rhodesia had survived conquest was
summarily dismissed by the Judicial Committee of the Privy Council in favour of the
Crown (Privy Council, 1918:233), then in 1923 Southern Rhodesia was granted
responsible government. Apart from a side-step in which “UDI” was declared,9 this was
the status quo when Zimbabwe was granted independence from Britain in 1980.
4 The Treaty of Waitangi, New Zealand
In three relatively simple articles, the English version of the Treaty of Waitangi is
essentially about sovereignty (ceded to the British Crown), property rights (retained by
Maori for so long as they wished) and citizenship (protected for all people) respectively.
In the Maori language version it is more explicitly about kawanatanga (governing
authority granted to the Crown), rangatiratanga (Maori authority over their own
property and lives) and tikanga (protection of Maori custom) respectively. The conflicts
between these different words and therefore different understandings have been
intensively argued, and they are largely unresolved, except to the extent that there is
general agreement that the focus should be on the principles expressed by the Treaty
rather than the words. It is however acknowledged that it is unlikely that Maori would
have signed the Treaty if they had been required to relinquish their rangatiratanga or
mana (personal and tribal authority). Henry Williams offered his verbal endorsement of
the proposed Treaty, saying that the missionaries fully approved of it, and that it was
“the act of love towards them on the part of the Queen, who desired to secure to them
their property, rights and privileges” (Rogers, 1998:165 & Orange, 1987:45).
It is further generally acknowledged that, while the Maori chiefs at Waitangi on the 6th
of February may have been party to some discussions about the content of the Treaty, it
is more than likely that the Crown representatives, sent around the country “like
travelling quacks, selling some cure-all elixir”, were more concerned with gathering
additional signatures on copies of the Treaty than with explaining its terms and
implications (Moon, 2002:132).
9
The Unilateral Declaration of Independence by the Rhodesian government, in 1965.
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The Colonial Office had long asserted a desire to ensure that Maori understanding was
clear. The instructions to Captain Hobson were explicit, namely that “… the free and
intelligent consent of the natives, expressed according to their established usages
shall be first obtained.”10 As it turned out, the application of the Treaty by the Crown
relied more on the established usages of English law, and Crown deeds to land regularly
trumped native title.11
So how did Maori envisage the Treaty guarantees and protections? Te Kemara, in the
debate leading up to the signing of the Treaty, complained that the Governor
(representing the Queen) would be “up” and he would be “down low, small, a worm, a
crawler” (Caselberg, 1975:44). He was clearly concerned that Maori signatories risked
losing their mana. As Rogers (1998:170) comments, “All the implications of
sovereignty in its legal sense they may not have understood, but that they were to
become lesser chiefs under the Queen’s authority they could grasp quite well.”
On the other hand, the northern chief, Nopera Panakareao, understood from the Treaty
that “the shadow of the land goes to the Queen, but the substance remains to us … We
now have a helmsman for our canoe”, which seems to suggest an understanding of a
benevolent and guiding Queen who nevertheless was a titular head only. Nopera
Panakareao would not hold that view for long. A scant eight months later, observing the
practical implementation of the Treaty, he is quoted as saying: “The Substance of the
land goes to the Europeans, the shadow only will be our portion” (Ward, 1968:Preface).
There is conflicting evidence about whether Maori understood the implications of
selling land, and the exclusive rights that were subsequently claimed by the settler
owner. Maori certainly recognised the importance of land to their continued ways of
life, and many understood the worthlessness of the items of exchange:
The land will remain for ever to produce food, and after you have cut down
the old trees to build houses, the saplings will continue growing, and in after
years will become larger trees; while the payment I ask for will soon come
to an end. The blankets will wear out, the axes will be broken after cutting
down a few trees, and the iron pots will be cracked by the heat of the fire
(Te Waharoa to Rev. Brown at Matamata 1835 in Caselberg, 1975:29).
The protocols of manaakitanga (host responsibilities) at Waitangi were imperfectly met
by Hobson, and after two days of discussions the invited Maori chiefs were ready to
return to their homes. The signing ceremony was thus completed quickly on 6 February
under the fatherly figure of Hobson and his colourful entourage.12 As each chief signed
the document, they shook hands with Hobson who announced each time ‘He iwi tahi
tatou’ – ‘We are now one people.’ This was perhaps wishful thinking, but arguably is
the basis to suggest that the spirit of the Treaty was one of partnership between equal
peoples.
10
Instructions from the Marquis of Normanby to Captain Hobson, R.N. Downing Street, August 14th 1839.
11
In cases such as R v Symonds (1847) NZPCC 387 and Wi Parata v Bishop of Wellington (1877) 3 NZ Jur. (NS) 72.
12
Orange, 1987:43 “ a gala atmosphere” - tents, flags, uniforms, and theatrical ceremony.
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The meeting at Waitangi between representatives of the Crown and chiefs of the
northern confederation represented the effort made to obtain the free and intelligent
consent of Maori to the Treaty provisions. There is strong evidence that the verbal
discussions there focused on what would be protected for Maori – their rights to and
authority over their lands (Orange, 1987:46). Recent judicial analysis of the effect of
treaties with indigenous people,13 support the view that it is the understandings of the
indigenous signatories that should prevail.
5 Discussion and conclusions
The treaties and land agreements in the three countries discussed above have had
significant adverse effects on historical and current relationships between the Crown
and the indigenous people. An important aspect of the spirit of land agreements was the
attempt to establish trust relationships between the contracting parties around the time
of the treaty proceedings. For example, Lobengula seeks reassurance from Thompson
that his “heart is white towards the Matebili” (Rouillard, 1977:186), the words of Henry
Williams that the Treaty of Waitangi is “the act of love towards (Maori) on the part of
the Queen” carry considerable weight because he has proved trustworthy over a number
of years, and Crowfoot’s trust relationship with Colonel Macleod is instrumental in
enabling negotiations. Misunderstandings and grievances have developed in regard to
the indigenous understanding of the verbal agreements and the Crown’s acceptance and
implementation of the written documents. These grievances have fuelled mistrust
between the parties to the treaties that has betrayed the original trust relationship
asserted by the signatories.
Similarly, in asserting their inherent superiority over the indigenous tribes, the colonial
authorities were expected to model standards of honourable behaviour. In all three
countries, the British Queen is invoked by the Europeans as representing a level of
justice higher than governments.14 The natives often acknowledged the overriding
authority of the Queen and were led to expect that the Europeans would act honourably.
They were often surprised when they did not. For example, “What took Ngai Tahu by
surprise was that … promises were broken, when according to their ‘savage’ code of
behaviour the promises of rangatira like Kemp or Mantell were sacrosanct,” (Evison,
1993:492-3) and Lobengula accuses Thompson of “having two words,” i.e. lying
(Rouillard, 1977:196).
Honourable intentions were expected from these cross cultural agreements, and after the
various cultural protocols were completed, honourable implementation was assumed. In
Canada’s case, indigenous protocols such as the smoking of a sacred pipe were a
significant symbol of honourable intention, while in both New Zealand and Zimbabwe
the formalities of the ceremony enhanced the expectation of the honourable
implementation of the verbal understandings.
Europeans acted as if what was written and signed was of paramount importance, and
they seemed to see no impediment to verbal misrepresentation in order to gain
consensus. The natives, on the other hand, appeared to set most store by the verbal
13
Clearly summarised by the Waitangi Tribunal, 1997:386-388.
14
almost one of ideal justice - even divinely ordained
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discussions and assurances supported by the trust relationship as it had developed.
Verbal assurances and explanations often drew on figurative language, with references
to soil, rivers, grass, mountains, sun, cattle and motherhood. The use of such natural
symbols suggests that these aspects of the natural world were viewed as being more
generically understood and better representing the nature of agreements than the
monocultural legal jargon of the written document.
It is apparent that perceived injustices that still fester today trace back to the verbal
exchanges just as greatly as to the written agreements. Legal and administrative
processes and settlements today are cognisant of the written word and black-letter law,
but they should pay greater attention to ways in which trustworthiness was established
and to unwritten forms of evidence. In particular, the figurative language used at the
time of negotiation has proved itself pithy, well suited to capturing the essence of
negotiating points, and capable of providing enduring mental images that should rightly
be drawn on to colour legal interpretation today.
6 References
Blake, R. (1977). A History of Rhodesia, Eyre Methuen Ltd., London.
Borrows, J. (2006). Seminar at Faculty of Law, University of Otago, Dunedin.
Calf Robe, B. (1979). Siksika: A Blackfoot Legacy, Good Medicine Books, Invermere.
BC.
Caselberg, J., Ed. 1975. Maori is my Name. Historical Maori Writings in Translation,
John McIndoe Ltd., Dunedin.
Cherer Smith, R. ‘The Rennie Tailyour Concession’, Rhodesiana 38 (March, 1978), 35-
48.
Dempsey, H. A. (1972). Crowfoot: Chief of the Blackfoot, Hurtig Publishers,
Edmonton.
Evison, H. C. (1993). Te Wai Pounamu: The Greenstone Island: a History of the
Southern Maori during the European Colonization of New Zealand, Aoraki Press,
Wellington and Christchurch.
Friesen, J. (1999). Magnificent Gifts: The Treaties of Canada with the Indians of the
Northwest 1869-1876. In: Price, R.T. (1999). The Spirit of the Alberta Indian
Treaties, The University of Alberta Press, Edmonton, 203-213.
Henderson, J. S. Y. (1997). "Interpreting Sui Generis Treaties." Alberta Law Review
36(1), 46-96.
Hiller, V. W. (1949). Introduction to ‘The Concession Journey of Charles Dunell Rudd’,
In: C. E. Fripp, & V. Hiller, (1949). Gold and the Gospel in Mashonaland 1888,
Chatto & Windus, London, 149-154.
Magaisa, A.T. (2008) Memo to MDCs: A Story of Doctored ‘agreements’. The
Zimbabwe Independent, http://www.thezimbabweindependent.com/index.php/
opinion/21491-memo-to-mdcs-a-story-of-doctored-agreements Viewed 15/06/2009.
Moon, P. (2002). Te Ara Ki Te Tiriti: The path to the Treaty of Waitangi, David Ling,
Auckland.
Morris, A. (1880). The Treaties of Canada with the Indians (including the negotiations
on which they were based, and other information relating thereto), Coles Publishing
Co., Toronto.
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Orange, C. (1987). The Treaty of Waitangi, Allen & Unwin, Wellington.
Palmer, R. (1977). Land and Racial Domination in Rhodesia, University of California,
Berkely and Los Angeles.
Pongweni, A. J. C. (1989). Figurative language in Shona discourse: A study of the
Analogical Imagination, Mambo Press, Gweru.
Price, R. T., Ed. (1999). The Spirit of the Alberta Indian Treaties. 3rd Ed. The University
of Alberta Press, Edmonton.
Privy Council Judicial Committee, (1918). In re SOUTHERN RHODESIA (AC211).
(July 26th, 1918).
Rogers, L. M. (1998). Te Wiremu: A Biography of Henry Williams, Shoal Bay,
Christchurch.
Rouillard, N., Ed. (1977). Matabele Thompson: An Autobiography, Rhodesiana Reprint
Library - Silver Series, Books of Rhodesia, Bulawayo.
Royal Commission on Aboriginal Peoples RCAP, (1996). Report of the Royal
Commission on Aboriginal Peoples. Volumes 1-5. Minister of Supply and Services
Canada, Canada Communication Group, Ottawa.
Rudd, C. D. (1949). The Concession Journey of Charles Darnell Rudd. In: C. E. Fripp,
& V. Hiller, (1949). Gold and the Gospel in Mashonaland 1888, V.W. Chatto &
Windus, London, 155-228.
Slattery, B. (2000). "Making Sense of Aboriginal and Treaty Rights." The Canadian
Bar Review 79, 196-224.
Taylor, J. L. (1999). Canada's Northwest Indian Policy in the 1870s: Traditional
Premises and Necessary Innovations. In: Price, R.T. (1999). The Spirit of the
Alberta Indian Treaties, University of Alberta Press, Edmonton, 3-8.
Treaty 7 Elders and Tribal Council, W. Hildebrandt, et al., Eds. (1997). The True Spirit
and Original Intent of Treaty 7, McGill-Queen's University Press, Montreal &
Kingston.
Waitangi Tribunal, (1997). Muriwhenua Land Report WAI 45, Waitangi Tribunal,
Wellington.
Ward, I. (1968). The Shadow of the Land: A study of British Policy and Racial Conflict
in New Zealand, 1832-1852, A. R. Shearer, Wellington.
Warhurst, P. R. (1973). ‘Concession-seekers and the Scramble for Matabeleland.’
Rhodesiana 29, 55-64.
Williams, R. A. (1997). Linking Arms Together: American Indian Treaty visions of law
and peace, 1600-1800. Oxford University Press, Inc., New York.
- 1400 -
COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Francis Gäbele and Marc Vanderschueren, pp 1401-1414
The Juridical Security of the Immovable Property in Belgium
Prof. Francis Gäbele and Marc Vanderschueren
General Administration of the Patrimonial Documentation
(Cadastre, Registry and Mortgage Service),
Federal Public Service Finance,
Belgium
Email: [email protected]; [email protected]
Abstract:
The Belgian immovable legal system goes back to the origin of the Kingdom of
Belgium. This system has some flaws that need to be listed and analyzed. The General
Administration of the Patrimonial Documentation (GAPD) which, since the reform of
the Federal Belgian administration, has as assignment to manage all the immovable data
(but also movable data), has focused on that issue.
GAPD (General Administration of the Patrimonial Documentation) develops and
implements its projects, i.e. in respect of legal certainty, in conformity with some
concepts: UNIDENT (identifying immovable in an univocal way); PRECAD (giving a
previous identification); etc.
Besides, GAPD has concluded numerous agreements and partnerships with the major
players of the real estate sector, always with a view to improving the legal certainty,
namely with: the Notaries; the Private Surveyors; the Institute of Estate Agents; the
Belgian National Geographical Institute; the Provinces, the Regions, the Towns, etc.
GAPD has also set up the following processes and projects: the project “Status of Public
Officer for some Surveyors”; the preliminary cadastration; the project KADAU, (study
of the feasibility of the creation of a juridical cadastre in Belgium); the creation of a
databank of the plans of the private surveyors.
Keywords:
Cadastre, Immovable Property, Legal Certainty, Notaries, Surveyors
1. Introduction
The legal certainty in the Kingdom of Belgium was not fundamentally altered since the
creation of that Kingdom. It is then essential to describe its primary legal basis and to
precise its complex administrative structure and this, before addressing the flaws of the
Belgian legal immovable system. The main aim of this paper is to present the answers
that can be given by the GAPD (General Administration of the Patrimonial
Documentation).
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2. The origins of the property laws in Belgium
2.1. The modes of acquiring immovable property and rights in rem in immovable
property
2.1.1
Mode of acquiring is taken to mean any fact or act that, by virtue of the law, gives rise
to a right or causes the transfer of a right.
The modes of acquiring are original or derived.
The original modes are those that give rise to a new right, which did not exist in another
person before.
The derived modes are those that make acquire a right that already exists in another
person, who just transfers this right.
So, the original modes are purely acquisitive, whereas the derived modes are both types
of deeds of transfer and acquisitive deeds.
The interest of this distinction resides in the fact that the nature and the extent of the
right acquired via a derived mode are determined by the nature and the extent of this
right in the person to whom one succeeds. “Nemo plus juris ad alium transferre potest,
quam ipse habet” (Renard, 1979).
2.1.2 Original modes of acquiring: occupation and acquisitive prescription
(usucapion)
Occupation is the mode of acquiring something that does not belong to anyone, by
taking possession of it with the intention of becoming its owner. Historically,
occupation is at the basis of all ownership.
It is important to note that vacant immovables are the property of the State 1. Therefore,
they may not be occupied.
The acquisitive prescription, or usucapion, is the original mode of acquiring property as
a result of prolonged legal possession during a certain time (general rule: 30 years)2 3.
1 Art. 713 interpreted by the preparatory papers of the Belgian Civil Code
2
Art. 2262 of the Belgian Civil Code
3
However, there are specific rules for prescription after 10 or 20 years, in particular with respect to
immovables ut singuli where notably two conditions are required : the existence of a just title (deed of
transfer) and the good faith of the possessor
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The sole ground of the acquisitive prescription is its social interest. The acquisitive
prescription is the technical institution intended for ensuring the certainty of the legal
relations. It dismisses imprecise claims, eliminates the difficulty of giving proof by
exempting the possessor from what is rightly called, as far as ownership is concerned,
the “probatio diabolica”, i.e. proof by way of the existence of the right in its successive
holders. Thus, prescription consolidates legitimate property titles that are inadequate to
constitute evidence and compensates for the lost title. Only in very particular instances,
prescription will lead to unjust consequences: the fact that it establishes is almost
always in conformity with the law (Renard, 1979).
2.1.3. Derived modes of acquiring
There are three derived modes of acquiring:
1° intestate successions, i.e. legal successions;
2° testamentary gifts or wills;
3° agreements or contracts, including i.e. sales and gifts made inter vivos.
2.1.4. Definition and attributes of the right of ownership
Ownership4 is the right to enjoy the use of something and to dispose of it in the most
absolute manner, provided that one does not put it to a use prohibited by the law or the
regulations.
This definition, however, expressly reserves the limitations that the laws or the
regulations may impose on ownership.
2.2 The Mortgage Registry
The law of 16 December 1851, which was amended and completed in particular by the
law of 10 October 1913 and which replaced Title XVIII on Privileges and Mortgages in
the Belgian Civil Code, not only revised this matter; it also organized certain measures
of publicity in respect of rights in rem in immovable property other than privileges and
mortgages.
An administration called Mortgage Registry has been entrusted with organizing this
publicity. At least one Mortgage Registry Office is established in each Juridical
District; the official in charge of the office is the Recorder of Mortgages and the
registers that he keeps are called registers of the Mortgage Registry. However, all these
expressions are inaccurate or at least incomplete; the Recorder of Mortgages not only
provides the publicity of mortgages but also of all the rights in rem in immovable
property (Renard, 1979).
4 Art. 544 of the Belgian Civil Code
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3. The Administrative Structure of Belgium
3.1 The Organization of the State
The Kingdom of Belgium is a country in North-West Europe. Straddling the cultural
boundary between Germanic and Latin Europe, Belgium is home to two main linguistic
groups, the Flemings and the French-speakers, plus a small group of German-speakers.
Belgium’s linguistic diversity and related political and cultural conflicts are reflected in
the political history and a complex system of government.
3.2 The Political Role of the King
In the political field, the King’s function does not entail the exercise of personal
authority. It is by his suggestions, advice, warnings and encouragements that the King
acts towards the political actors. His perspective is one of continuity of duration.
3.3 The Federal Government
The Federal Government performs the Federal Executive Power.
The Government implements the legislation. The Government also participates in the
legislative power, through its right of initiative. The Government can submit bills to the
Parliament and has the right to propose Amendments. A bill that has been approved by
Parliament only becomes law after signature by the Government, i.e. the King and the
competent Minister(s).
3.4 The Regions
Apart from the Federal State, there are three Regions. The names of the three Regional
institutions are borrowed from the names of the territories they represent. So, we refer
to (from North to South) the Flemish Region, the Brussels-Capital Region and the
Walloon Region.
Regions have powers in fields that are connected with their regions or territories in the
broadest meaning of the terms.
So, the Flemish Region, the Brussels-Capital Region and the Walloon Region have
powers relating to the economy, employment, agriculture, water policy, housing, public
works, energy, transport (except Belgian Railways), the environment, town and country
planning, nature conservation, credit, foreign trade, supervision of the provinces,
communes and intercommunal utility companies, etc.
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3.5 The Communities
In addition to the three Regions and the Federal State, there are three Communities.
They are based on the “languages”. So, we talk about the Flemish, French and German-
speaking Communities.
Giving that the Communities are based on the concept of “language” and language is
“dependent on the individual”, a number of other powers are obviously associated with
the Communities. The Community has powers with respect to culture (theatre, libraries,
audiovisual media, etc.), education, protection of youth, social welfare, aid to families,
immigrant assistance services, etc.
4. The Structure of the General Administration of the Patrimonial
Documentation (GAPD) before the reform:
4.1 Cadastre
The Belgian Cadastre was installed by Napoleon during the French occupation of the
Belgian territories. Notwithstanding the will to create a juridical cadastre of the “Land
Book” Type, in fact, as a result of the way in which it has been set up, the Belgian
cadastre is of the “Personal” Type. Registration in the cadastral file and in the cadastral
plans does not ipso facto implies the existence of a “title deed”.
Transfers with respect to the exercise of a right in immovable property are only
registered in the Cadastre on the basis of the “Official” plan. In practice, the percentage
of reliability of the cadastral registrations is very high. Only a small percentage of the
registrations are liable to contain “ancestral” errors or inaccuracies. As a result of the
quality of resurveying and of the authentication of the persons concerned, in numerous
cases, one can say that the Belgian Cadastre has characteristics of a juridical system.
For example, the parts of the territory which have been consolidated or those parts that
have been expropriated have a “Juridical Guarantee” as far as cadastral registration is
concerned.
Contractual transfers of rights in immovable property must be drawn up by a Public
Officer (usually a Notary) so that they can be transcribed at the Mortgage Registry
Offices. Therefore, it is necessary that the immovable covered by the transaction be
identified (in particular at the graphic level) in the most complete manner and without
any uncertainty.
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4.2 Registration
Registration serves as the basis for drawing up the Cadastre, thanks to the information
taken from the registers relating to the deeds transferring and declaring title.
It facilitates the control of the obligations imposed by law on the public officers,
drafters of the authentic deeds.
The registers kept at the Registry constitute a precious source of documentation to
which, subject to certain conditions, the public is given access, namely:
a) subject to certain conditions, copies of the registrations can be issued to private
individuals;
b) proof of the origin of immovable property must be issued to any interested
party5.
The registration formality has a very significant consequence in civil law: it provides
the deeds subjected to it with a legal date6. This is very important because, in principle,
a deed must have a legal date in order to have effect to third parties.
4.3 Mortgage Service
Publicity is made by way of registers. The registers are kept at the Mortgage Registry
Office established in the principal town of the judicial district where the immovable is
situated.
There are two main registers, the register of the transcriptions and the register of the
registrations (privileges and mortgages).
Transcription consists in a copy of the deed, with a margin where Article 3 of the
Belgian Mortgage Law must be mentioned. Registration consists in a copy of a
statement (or summary of the deed containing the essential indications: name, identity
of the parties, detail of the encumbrances that burden the immovable and the
identification of the immovable).
As the transcription and the registration require some time, the legislator created a
register in which the Recorder of Mortgages registers the deeds as soon as they are
submitted to him for publicity.
The Recorder of Mortgages closes this register on a day-by-day basis. He mentions a
brief analysis of the deed to be transcribed or registered.
The Belgian legislator established a personal publicity system based on the name of the
owner. It is the name of the owner of the immovable which constitutes the basis of the
publicity regime. Thus, a sale is recorded on the basis of the name of the buyer who
becomes owner. Likewise, a mortgage is recorded on the basis of the name of the
person who has burdened his immovable.
5 Art. 144 of the Belgian Estate Duty Code
6 Art. 1328 of the Belgian Civil Code
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Obviously, in the personal system, the person who is owner or mortgagor must be
identified exactly.
Moreover, the identification of the last owner of the immovable may not give an exact
picture of the status of the immovable. This is the case in the event of e.g. transfer by
death, legal transfer, encumbrance registered in the name of a previous owner, etc.
In reality, in order to know the exact status of an immovable in the personal system, one
has to establish the chain of transfers from person to person until the date on which all
the rights that may exist on the immovable concerned have lapsed, i.e. during thirty
years
“Publicity does not purge the deed of its defects”, in the sense that, in the personal
system, the publicity does not have any effect on the validity of the deed, nor on the
content of the rights created by this deed.
If, in the personal system, the original seller was not really the owner, the transcription
of the title of the buyer will not validate the sale and the entire following chain of
transfers will remain vitiated and subject to annulment, notwithstanding the Publicity
(Grégoire, 2006).
5. The structure after the Reform
5.1 The reform of the Belgian Ministry of Finance
The “reform of the Belgian Ministry of Finance”, has resulted in the creation of new
organization charts, new structures and new missions.
In replacement of the former Administrations, there are entities and administrations that
regroup the different missions entrusted to the Federal Public Service Finance.
Entity 2 – the General Administration of the Patrimonial Documentation – regroups the
former Cadastre, Registry and Public Property Administrations as well as the Mortgage
Registry Offices, i.e. all the administrative sectors dealing with movable and immovable
patrimonial matters.
The missions thus gathered and consolidated are distributed among 5 administrations:
1. Surveys and Valuations (Cadastre);
2. Legal Certainty (Registry and Mortgages);
3. Patrimonial Services (Acquisition Committees);
4. Non-fiscal Collection (Registry);
5. Collection and Exchange of Information.
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PATRIMONIAL
DOCUMENTATION
FUNCTIONAL PROVISION OF
EXPERTISE AND SERVICES
SUPPORT STRATEGY AND
IMPLEMENTATION
PROGRAM
MANAGEMENT
OFFICE
PATRIMONIAL SURVEYS COLLECTION AND LEGAL NON-FISCAL
SERVICES & EXCHANGE OF CERTAINTY COLLECTION
VALUATIONS INFORMATION
CENTRE SPECIAL CENTRE
VALUATIONS
Figure 1: The organization chart of the Patrimonial Documentation
5.2 Surveys & Valuations (Cadastre)
The administration Surveys & Valuations determines and verifies the different values of
immovables (the cadastral income, the market values in respect of registration duties
and inheritance taxes, the rental value), measures the parcels of land and the
constructions, determines the property boundaries as well as the administrative
boundaries within the framework of the updating of the cadastral plan and the
development of a Geographic Information System (GIS).
5.3 Legal Certainty (Registry and Mortgages)
The administration Legal Certainty collects the registration duties and the inheritance
taxes, which are mainly transferred to the Regions, the mortgage duties, the court fees ...
Through the intermediary of the Mortgage Registry Offices, the administration Legal
Certainty publishes the verified deeds of the public officers and updates its
documentation in the light of these deeds.
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5.4 Patrimonial Services
The administration Patrimonial Services acquires, amicably or through expropriation,
immovables that are useful or absolutely necessary to the realization of the
infrastructures decided on by the public authorities. In its capacity as real estate agent
and at their request, this administration sells the immovables of these authorities. In its
capacity as “Public Notary”, it draws up the authentic deeds relating to the acquisitions
and the sales as well as certain special deeds on behalf of public enterprises.
This administration also manages the private immovable patrimony of the State, either
by renting it out or conceding it, or by putting it up for sale.
6. Legal Certainty of Immovable Property in Belgium
6.1 Authentic deed and intervention of the Surveyor
When a Public Officer authenticates an immovable transaction, the intervention of the
Notary firstly concerns the identification and the origin of the title deeds.
According to the Chamber of Paris Notaries7, the Notary, a Public Officer, a
professional in private practice, is the impartial drafter of the will of the parties; he
makes the whole extent of the obligations they are taking on known to them, draws up
these undertakings clearly and provides them with the authentic character. This
authentic character provides the deed with a legal date, a date that cannot be contested;
the deed has probative force, which makes that the facts stated and established by the
notary cannot be contested; the deed is enforceable as of right by the simple fact that it
is submitted to an enforcement agent.
But still all too often, nothing is guaranteed as far as the surface area, the boundaries of
the parcels, and easements, if any, are concerned.
For instance, in accordance with the custom of the Company of Brussels Notaries8, the
seller does not guarantee the surface area indicated; the description of the immovables
is given by way of information only; the immovables are sold encumbered with all the
easements, even if they are hidden, without recourse against the seller; the mere
reference to a plan included in the specifications can never in itself give rise to an
easement; as regards any disputed joint ownership, the purchaser has to directly agree
with the interested third parties, without intervention of the seller nor recourse against
him.
On the other hand - and the contrary would beat everything! -, it is made clear that the
immovables are sold unencumbered with any debts, privileges and mortgages.
7 www.paris.notaires.fr
8 Article 4 of the general conditions for public sales in Brussels; www.brunot.be
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In this respect, the Royal Federation of Belgian Notaries9 underlines the number of
formalities required when preparing dossiers; we cite in particular the exact
identification of the sellers and the purchasers, their civil status and their capacity; the
examination of the title deeds and the rental situation, as well as the examination of the
town and country planning provisions or the examination of the basic deed where an
immovable forming part of a forced co-ownership is concerned, etc.
7. CASE STUDY: “Path of an agreement on an immovable and on
the price” (path from the compromise of sale to the end of the
mortgage loan)
The actions to be taken concerning the signing of a compromise for the sale of an
immovable10 principally are the following. This compromise is filed with a Notary who
consults the database of the Cadastre (on line) in order to identify the immovable
concerned and in particular the name of the “owner” registered in the cadastral file. On
the basis of this information, the Notary requests a mortgage certificate from the
Recorder of Mortgages of the District in which the immovable is situated in order to
know the encumbrances [mortgage(s), attachment(s)] which burden the immovable.
Concomitantly, he also applies to the Registry office to establish the thirty-year origin
of the immovable in order to give evidence, if necessary, that the seller and his
predecessors, if any, at the very least have owned the immovable in a non-clandestine,
non-equivocal way, without violence and continuously for thirty years.
Next, the original of the authentic deed is presented for the registration formality and
the Notary pays the duties. The Registry office sends the original of the deed back to
the Notary and, on the basis of this deed, the transfer is registered in a computer
program that carries out the transfer in the files of the Cadastre as well as in the files of
the Registry. The Notary sends the deed to the Recorder of Mortgages (in whose
district the immovable is situated) with a view to ensuring its Publicity. The Recorder
of Mortgages analyses the deed: identification of the parties to the deed – normally by
means of the numbers in the National Register of Individuals –, identification of the
immovable and of the legal operation; this deed is scanned (image) and the Repertory of
persons is completed; notes are made in the margin of the deed. Finally, the Recorder
of Mortgages calculates his remuneration and the taxes (mortgage duty and stamp duty),
affixes the stamp on the deed and sends it back to the Notary.
9 Annual report 2003 of the Royal Federation of Belgian Notaries, p. 6, www.notaire.be
10Application of Article 1583 of the Belgian Civil Code: mutual consent to the price and a clearly defined
immovable
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8. The Concepts of GAPD for an Improvement of the Legal Certainty
(Patrimonial Documentation, Activity Report 2005, 2006).
The improvement of the legal certainty is made with some concepts like : identifying
immovable in an univocal way (UNIDENT); giving previous identification (PRECAD);
abolishing the geographical spreading; consolidating date with respect to persons, their
duties; performing all the formalities on the basis of single request; updating the
patrimonial documentation independently of the collection of duties…; increasing the
value of or data…
9. Improvement of the Legal Certainty thanks to the Collaboration of
GAPD with
9.1 The Notaries
The DER.VE (Electronically Recognizable Document - Sale) project is aimed at data
exchange between the administration Legal Certainty and the Royal Federation of
Belgian Notaries. First, the data that must be structured should be determined. At first,
however, only the deeds of pure sale of full ownership of immovables will be
concerned. The formalized agreement will be developed in the e-notaries and Stipad11
Systems. Consequently, the Notary will send an Electronically Recognizable Document
(DER) containing structured data as well as the electronic authenticated copy of the
deed to the competent office. Such a deed will not have to be submitted as a hard copy
for the registration nor the mortgage formality any more.
9.2 The Private Surveyors
The convention is an agreement reached by the surveyors and GAPD. This agreement
is optional and is not in any way obligatory for practising as surveyor.
In this convention, the surveyor undertakes to draw his plans in accordance with
standards that will enable the Administration to make best use of these plans, both from
the juridical and the technical point of view. In return, GAPD undertakes to make
access to part of its documentation easier for him.
9.3 The Professional Institute of Real Estate Agents
The Professional Institute of Real Estate Agents (IPI) and GAPD concluded a
collaboration protocol aimed at i.e. the exchange of patrimonial data.
11 STIPAD: Patrimonial Documentation Integrated Processing System
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This protocol also provides for the collaboration of the real estate agents on the study of
the patrimonial units (unique identifiers of immovable objects) and on the drafting of
structured models of lease agreements and compromises of sale which can be submitted
for registration through the internet.
Eventually, the real estate agents should have access to certain data relating to the
immovables put up for sale in order to be able to include information confirmed by
GAPD in their compromises of sale.
9.4 Partnerships
Other partnership agreements were also concluded between GAPD and the National
Geographical Institute, the Provinces, the Regions, the Towns, etc in order to prevent
redundancy of data and to improve the, in particular juridical, reliability of the data.
10. Improvement of the Legal Certainty with
10.1 The Project of the “Private Surveyors’ Plans” joined to the deeds declaring or
transferring title
10.1.1 Use of the plans by the Administration
The “Cadastre” Administration needs the surveyors’ plans drawn in the framework of
an immovable transaction for updating the cadastral plan. The latter document is the
graphic basis for identifying the immovables.
At the level of the Administration, few plans are transcribed at the Mortgage Registry
Offices. The Registry Administration does not keep the plans. For its needs, the
Cadastre Administration archives copies of the surveyors’ plans. It gets these plans
either via the Registry Administration which provides it with a hard copy (made upon
the registration of the deed) or via the surveyor if the latter entered into an agreement
with the “Cadastre” Administration.
10.1.2 Objective of the Administration
The Administration aims at two objectives:
- optimising the updating of the cadastral plan by using surveyors’ plans drawn in
accordance with certain standards and the format of which allows these plans to
be processed semi-automatedly;
- creating a database of authentic information as regards property delimitation.
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In concrete terms, the Administration proposes to oblige the Notary and the Surveyor to
submit a plan before presenting the deed for the Formality.
These objectives are complementary because, by creating the database of the surveyors’
plans, the Administration sets up the single source of information as regards property
delimitation, on the one hand, and makes sure that it receives all the plans it needs for
its functioning, on the other.
10.2 The Project “Status of Public Officer for some surveyors”
There is also a plan to confer the status of public officer to the surveyors as regards their
missions:
- of boundary marking;
- of drawing and signing plans intended for the recognition of boundaries, a
transfer, the settlement of joint ownership, or for any other report identifying
landed property, and which may be submitted for transcription or for the
registration of a mortgage.
10.3 The Preliminary Cadastration
A new immovable (e.g. a new parcel resulting from a division) used to be registered
after the sale transaction. The aim of the preliminary cadastration is to identify the
immovable univocally before any transaction. Since the immovable has been identified,
all the documents relating to this transaction bear a unique identification, thus
reinforcing the juridical character of the patrimonial documentation.
10.4 The KADAU Project, study of the feasibility of the creation of a Juridical
Cadastre in Belgium (Study up to 2010)
The KADAU project of GAPD provides for a preparatory study of the feasibility of an
authentic cadastre. The evolution of the present Belgian cadastre (a mainly technical
and fiscal cadastre) into an authentic cadastre is of crucial importance to the
performance of the missions of GAPD.
For the citizens, the setting up of an Authentic Cadastre is a guarantee of legal certainty
as regards immovable property.
The study looks into the feasibility by taking technical and functional as well as
juridical parameters into account. The decision on the setting up of a juridical cadastre
will be taken on the basis of the results of the preparatory study, which will run until
2010.
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10.5 Creation of a Databank of the plans of the Private Surveyors
Systematically scanning the surveyors’ plans archived at the Cadastre Administration
was the first phase in creating this authentic source. This database contains about
1,600,000 plans. Now, the next phase is to take care of all the new plans.
In future, the surveyor and/or the citizen who wants to get information as regards
property delimitation can find this information by applying solely to GAPD or by
consulting this database.
11. Conclusion
The different stakeholders of the Belgian immovable system have identified the legal
certainty flaws of that system. The missions assigned by the political power to the
GAPD consists mainly in improving the Belgian immovable system and in suppressing
its redundancies. This tends to implement a legal cadastral system.
12. References
Renard, C. (1979), Principe de Droit et Eléments de Droit immobilier,
Presses Universitaires de Liège, pp 75-79, 84-85, 96-97
Grégoire, M. (2006), Publicité Foncière, Sûretés réelles et Privilèges, Précis de la
Faculté de Droit, Université Libre de Bruxelles, Bruylant, pp 90-95
Patrimonial Documentation, Activity Report 2005, D/2006/8901/1, pp 4-5
Patrimonial Documentation, Activity Report 2006, D/2007/8901/1, pp 7-9
Patrimonial Documentation, Activity Report 2007, D/2008/8901/1, pp 35, 22-23
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Andrew Kelly, pp 1415-1426
Planning at the urban periphery in Australia: issues relating to
private residential back and front yards∗
Andrew H Kelly1
1
Faculty of Law and Institute for Conservation Biology & Law
University of Wollongong, Wollongong, NSW, 2252,
Australia
Email: [email protected]
Abstract:
This narrative focuses on three planning issues affecting the suburban residential
periphery in Sydney, Australia: (i) amenity, (ii) biodiversity conservation and (iii)
bushfire potential. All relate to private front and back yards, which provide key elements
of the residential landscape. Embedded in the paper is the complexity of the planning
system and the subsequent inconsistency between dealing with the three issues.
Considerable attention is paid to local government and its changing legislative terrain. In
particular, several local statutory planning instruments are investigated to illustrate this.
The conclusion calls for further research while stressing more action is warranted within
and outside the planning system in an integrated manner. Two significant matters
comprise community support and regional structures.
Keywords:
Amenity, biodiversity, bushfires, suburbs, yards.
1 Introduction
The garden is a fundamental element of the residential environment, especially in low
density suburbia. In heavily urbanised Australia, front and back yards play a crucial role
for citizens seeking their own private open space experiences. Due to sunny attractive
climes, many houses extend into the garden – both physically and ideologically -
providing a key function in everyday life. The garden is part of the house itself. It is
where family and social activities take place, such as cricket games, barbecues and lazing
under shady eucalypts. Depending on the householder, this may broaden to, inter alia,
built-in playgrounds, vegetable growing and/or planting and maintaining indigenous trees
(Head and Muir, 2007). Whilst recognising the variation of approaches to private open
space, the paper focuses on the potential ecological nature of the garden and the various
conflicts that can arise.
∗
The author is grateful to the Institute for Conservation Biology & Law, University of Wollongong (UoW),
for its kind monetary contribution for attending the COBRA 2009 conference. Dr Kelly also acknowledges
the valuable research assistance carried out by Mr Elliott Weston, LLB undergraduate, UoW, and helpful
suggestions provided by Stuart Little and Barry Millwood.
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Although the above observations apply across all Australian urban landscapes, this paper
focuses on Sydney’s periphery. Australia’s biggest city is surrounded by national parks to
the north and south, the Pacific Ocean to the east and generally undulating lands towards
the Blue Mountains to the west. Apart from (i) the rapid vertical residential expansion in
central Sydney and key suburban hubs, including transport nodes, and (ii) the surge of in-
fill development across all residential areas, apart from the environmentally sensitive,
housing is marching west. A statutory instrument was introduced in mid-July 2006 with
the explicit aim to “co-ordinate the release of land for residential, employment and other
urban development in the North West and South West growth centres of the Sydney
Region”1.
As western Sydney continues to grow, three critical issues demand scrutiny. All relate to
private residential open space:
• enhancing and protecting neighbourhood amenity;
• conserving biodiversity; and
• minimising threats from bushfire.
This paper will address each one below, with particular attention to local government
which is forefront of land use regulation and community involvement. While the third
sphere of government suffers from no formal recognition in the Australian Constitution,
it is nevertheless embedded in Australian governance.
2 The Emergence and Current Situation of Statutory Town Planning
in NSW
The first comprehensive planning legislation in NSW occurred in 1945 with insertion of
Part XIIA into the then Local Government Act 1919 (NSW), which went far beyond
building and subdivision control. The regime enabled the making of statutory planning
scheme ordinances (PSOs), mainly to provide regulatory zoning provisions. Curiously,
although the legislature relied heavily upon UK law (Freestone, 1998), Britain followed a
different pathway soon afterwards in 1947. Australian jurisdictions have since remained
glued to stringent zoning patterns. But due to inadequate resources and limited thinking,
councils were slow to adopt planning as a vital function. Instead, it was the State
Government that drove metropolitan planning through the Cumberland County Planning
Scheme (CCPS) of 1951. This dealt with post-war urban expansion, thereby assisting
development of the “Australian suburban dream” (Alexander, 2000, 102) i.e. detached
houses surrounded by large well-watered lawns alongside almost identical townscapes.
Local PSO-making did not flourish until the late 1960s and 1970s. In many places,
standardised ‘interim’ instruments were handed down by the State Government with the
same emphasis on zoning and standards regardless of geographical location.
In 1980, Part XIIA was replaced by the Environmental Planning and Assessment Act
1979 (NSW) (EPAA). This reflected the emergence of ‘modern environmentalism’,
encouraging forward thinking plan-makers to move beyond land use conflict. In addition,
local communities demanded greater input in plan preparation and implementation
1
State Environmental Planning Policy (Sydney Growth Centres) 2006, cl 2.
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(Roddewig, 1978). Another factor was regional planning, acknowledging that many
issues apply across administrative and arbitrary borderlines. This led to a cascade of
strategic non-statutory instruments. The most current is City of Cities: A Plan for
Sydney’s Future Sydney (more commonly known as the ‘Metropolitan Strategy’)
introduced in 2005 with its various existing and forthcoming sub-strategies. Adjacent to
this is the Growth Centre policy wherein the State Government has promised an ongoing
supply of land for low density homes for Sydney’s West. This reflects a fierce political
push for residential expansion at Sydney’s periphery. Its implementation is currently
taking place via the South-West and North West Growth Centres. The South-West sector
is predicted to contain a capacity for about 110,000 new homes.
In terms of statutory plans, the EPAA introduced a series of statutory ‘environmental
planning instruments’ (EPIs). At the time of writing, these have been reduced to State
Environmental Planning Policies (SEPPs) and Local Environmental Plans (LEPs). SEPPs
deal with matters of state or regional significance. A relevant example is SEPP (Sydney
Regional Growth Centres) 2006, which provides the statutory basis for the two
residential sectors mentioned above. The LEP, however, is the fundamental EPI that local
government prepares and implements. As a result of legislative and policy reforms in
2006, the State Government introduced a standard ‘LEP template’. Each of the 152
councils across NSW must abide by the template in redesigning its own LEP. Only a
handful of ‘templatised’ LEPs have yet been gazetted. By providing standard definitions
of many types of development and laying down formulae for specific zones, the template
offers a comfortable level of uniformity. In some circumstances, however, it might be
argued as a means to erode creativity in local plan making (Kelly and Smith, 2008).
SEPPs and LEPs tend to provide regulatory rather than incentive clauses. Nevertheless,
they can reach far beyond uses such as buildings, reservoirs and mines. Under section 26
EPAA, an EPI make provisions for, inter alia:
(a) protecting, improving or utilising, to the best advantage, the environment,
(b) controlling (whether by the imposing of development standards or otherwise)
development …
(e) protecting or preserving trees or vegetation,
(e1) protecting and conserving native animals and plants, including threatened
species, populations and ecological communities, and their habitats,
(f) controlling any act, matter or thing for or with respect to which provision may
be made under paragraph (a) or (e) …
It is clear that an LEP may regulate front and back yards. For instance, it may require
consent for the removal of one or more specified trees. Alternatively, pursuant to the
LEP, the decision-maker may approve a residential estate subject to certain trees being
retained. A council might even demand that a proposal be redesigned in order to retain
identified vegetation.
There is concern, however, that contemporary detached dwellings in Sydney’s west
suffer from small yards. The modern home is often enormous. Under the 2008 NSW
Housing Code (part of SEPP (Exempt and Development Complying Codes) 2008),
allotments of between 450 and 600 sq metres can accommodate up to 50 per cent
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building coverage (Department of Planning, 2008, 8-12). But this excludes driveways,
verandas, terraces and even swimming pools and spas, leaving little room for back yard
cricket or front yard sub-forests. Furthermore, these types of developments need not
undergo environmental assessment; instead, there is a straightforward ‘tick the box’
approach to obtain permission. This kind of urban sprawl is therefore advancing across
far-flung suburbia. What planning issues might directly spring to mind?
3 Amenity
Protection of amenity is immediately relevant. Notably, its meaning is intangible. It was
described more than four decades ago as the “hardest worked word in planning language”
(Wilcox, 1967, 361), which is still relevant today. Amenity often relates to the visual
aesthetics of a place. Accordingly, in the suburban context, in addition to parklands and
street verges, residential gardens play a crucial role especially via front yards which are
more visible to passers-by. Because it is an extremely subjective concept, it reflects
personal/community preferences and culture. In the broader context, landholders may
prefer to change their neighbourhood landscapes with exotic trees rather than maintain
what might appear as tedious scrub (Kelly, 2006). For instance, assemblages of the
remnant Cumberland Plain Woodland in western Sydney might be regarded as drab, with
land holders planting colourful species such as the South American jacaranda or a variety
of tropical palms. Of course, such temptations are visible across all suburbs. In smaller
gardens, however, they are less likely.
Throughout Sydney, the flat Wianamatta Shale based lands that dominate the western
suburbs are easily seized for residential development. Closer to the coast and bays, the far
steeper Hawkesbury Sandstone landscapes are used for municipal bushy parklands
(Schoer, 1983) and, since the 1980s, well-engineered residential development (Berzens,
1984). Because close location to bushy locations is a symbol of affluence (Sandercock,
1975), more attention is now being paid to integrating private residential land with ‘safe’
indigenous bushland – i.e. away from spiders and prickly plants. In the expanding
Sydney’s west, this leads to shrubs rather than towering trees.
The notion of amenity is embedded in Australian urban planning law. In NSW, the CCPS
required that amenity be taken into account in determining a development proposal2.
Although the provision contained a strong flavour of protecting residential lands from
industrial emissions, a court judgment made it clear that amenity embraced “the
pleasurable appearance of a neighbourhood in the eyes both of residents and passers-
by”3. As the planning system moved onwards, councils directed their energy to “the
protection of local amenity, usually residential amenity” (Harrison, 1988, 27). When the
EPAA was introduced, decision-makers were required to consider “the existing and likely
future amenity of the neighbourhood” when determining a development application4.
This comprised one of 27 matters, which were reduced to five in 1998 deleting the
2
County of Cumberland Planning Scheme, cl 27(e).
3
Vacuum Oil Co Pty Ltd v Ashfield Municipal Council (1956) 21 LGRA 8 at 12, per Sugerman J.
4
Environmental Planning and Assessment Act 1979 (NSW), former s 90(1)(o).
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‘amenity’ reference5. It no longer has any mention in the EPAA at all. The judiciary,
however, has made it clear that the shortened list is not exhaustive6, thereby ensuring
amenity to remain steadfast alongside other express and implicit factors.
Amenity protection can be expressed in individual LEPs. In Campbelltown (Urban Area)
LEP 2002, for instance, which covers a small part of the rapidly developing Sydney’s
south-west sector with a current population of about 150,000 people, there are about 20
explicit references to amenity. The term, however, is again not defined. It is almost
amorphous. The relevant clauses include an overall aim to “maintain and enhance the
amenity of the urban area of the City of Campbelltown”7 in addition to the need for the
decision-maker to hold the opinion that a development proposal is “consistent” with the
stated objects if the zone before consent may be granted8. Such zonal objective provisions
are reasonably strong (Kelly and Smith, 2008). Numerous other clauses relate to a variety
of matters including heritage provisions9, agriculture10, mining11 and a specified area for
urban expansion12. Clearly, amenity is entrenched in the LEP even though the provisions
are sporadic.
Liverpool LEP 2008, which applies to the local government area directly north of
Campbelltown and is part of the South West Growth Centre, confines only a handful of
references to amenity. This instrument is a pioneer that follows the LEP template. But
again, amenity remains undefined. Similar to the Campbelltown LEP, it is addressed in
the main objectives to “maintain suitable and offer a variety of quality lifestyle
opportunities to a diverse population”13. Further examples relate to temporary use of land,
various zonal objectives especially in relation to residential zones14, minimum
subdivisions size15 and foreshore building lines16. Perhaps the most interesting provision
is the optional template clause relating to ‘[p]reservation of trees or vegetation’17 that
requires permission for removal or damage. This item derives from ‘tree preservation
order’ (TPO) provisions from the CCPS18 and many subsequent local instruments.
Indeed, such clauses originate from British planning ordinances (Cullingworth, 1967). As
Liverpool LEP demonstrates, amenity remains a vital component of the statutory
planning jigsaw.
Amenity is a frequently raised issue before the Land and Environment Court of NSW,
especially in merits appeal cases. In many situations, however, it is only one of many
5
Environmental Planning and Assessment Act 1979 (NSW), s 79C(1).
6
Carstens v Pittwater Council [1999] NSWLEC 249 (Unreported, Lloyd J, 11 November 1999).
7
Campbelltown (Urban Area) Local Environmental Plan 2002, cl 2(1)(c).
8
See, for example, Campbelltown (Urban Area) Local Environmental Plan 2002 cll 9(2)(d), 13(2)e), 22(2)(b) &
24(2)(d).
9
Campbelltown (Urban Area) Local Environmental Plan 2002, cl 50(e).
10
Campbelltown (Urban Area) Local Environmental Plan 2002, cl 36(d).
11
Campbelltown (Urban Area) Local Environmental Plan 2002, cl 63(b).
12
See, for example, Campbelltown (Urban Area) Local Environmental Plan 2002, cl 51D(c)(viii).
13
Liverpool Local Environmental Plan 2008, cl 1.2(2)(c).
14
Liverpool Local Environmental Plan 2008, see, for instance, cl 2.3 zones R2 Low Density Residential.
15
Liverpool Local Environmental Plan 2008, cll 4.1(1)(e), 4.1A(1)(e).
16
Liverpool Local Environmental Plan 2008, cl 79(1).
17
Liverpool Local Environmental Plan 2008, cl 59(1).
18
County of Cumberland Planning Scheme, cl 40(1).
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considerations before the Court. In regard to TPOs, judicial actions tend to involve
criminal actions. For instance, in Holroyd CC v Skyton Developments Pty Ltd (2002) 119
LGERA 225 at 229, Cowdroy J emphasised that “breach of a tree preservation order is a
serious offence”. The defendant was found guilty of removing two trees in the western
suburb of Westmead, including a Queensland Fire Wheel twelve metres in height which
was reported as providing “existing amenity” and “colour, shade and screening” (at 227).
The defendant admitted guilt and was fined $A15,000. This and many other judgments
illustrate how amenity is cemented in planning law. It relates directly to the appearance
of suburban gardens.
4 Biodiversity Conservation
Biodiversity is a different concept altogether. It is based on science and represents a far
more recent phenomenon. As will be seen, it is complex but in a different way. The
National Strategy for the Conservation of Australia’s Biological Diversity defines it as
“the variety of all life forms – the different plants, animals and microorganisms, the genes
they contain and the ecosystems of which they form part of” (Commonwealth of
Australia, 1996, 1). Accordingly, it embraces the drab and the fetid that exist well beyond
the amenity spectrum.
Whilst the precise origins of the term are arguable (Adam, 2009), Jeffery (1997, 4-5)
refers to a “snappy abbreviation” composed by the co-director of the 1986 American
‘National Forum for BioDiversity’ who recognised references to ‘Biological Diversity’ in
earlier scientific papers. The term has since become far more fashionable, often found in
tourist brochures and newspaper articles. In a recent weekly gardening column from the
Sydney Morning Herald, the author warns readers that because Australia has “one of the
worst records for loss of biodiversity” our “[g]ardeners can be of great help to native
birds and animals by cultivating indigenous plants to provide green corridors”
(Maddocks, 2009, 25). The essence is no different to Beatley’s (2000) academic paper on
retaining biodiversity in American backyards, even in small gardens. All this reflects the
fact that biodiversity conservation need not be restricted to the pristine. On the other
hand, massively manicured and minimised suburban gardens might be more of a museum
than a working green environment.
Biodiversity conservation in Australia is crucial for regional, national and global
purposes. Its international dimension is incorporated in the Convention on Biological
Diversity, signed by many countries, including Australia, at the 1992 Rio Earth Summit.
Australia’s worldwide bio-magnitude rests on its ‘megadiverse’ nature. It is
“geographically more isolated” than other with rich biodiversity and the “only one …
predominantly in the temperate region” (New, 2000, 23). Possingham (2008) adds that a
huge number of Australian species are endemic. Yet conservation biologists, policy-
makers and environmental lawyers must consider well beyond listed species to other
aspects, such as ecological assemblages. As Adam warns (2009, 19), “the ‘big picture’
approach is not being adopted and attention and resources are still on listed species”. It is
here where the complexity intensifies. Specifying where the boundary of an ecological
community exists is scarcely easy.
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All spheres of government in Australia are involved in biodiversity conservation law and
policy. Strategic documents have been designed at each level, including local government
(Australian Local Government Association and Biological Diversity Advisory Council,
1999). Furthermore, many councils have prepared voluntary biodiversity policies, which
rely on sufficient monetary resources, political backing and staff expertise. They do not
carry statutory force but instead may offer incentives such as free or subsidised seedlings
and specialist advice. Such programs are very different from regulatory control, with
documents providing useful education material for local citizens. For example, Penrith
City at the western rim of Sydney has produced its own strategy. It contains, inter alia,
information for the community explaining the meaning of biodiversity, potential for
public involvement in its conservation, a table of aims and outcomes, and a list of local
vegetation communities. The document appears to be directed towards educating the
community with delightful photographs and helpful explanations (Penrith City Council,
n.d.). In contrast, Liverpool City offers a far more scientific approach with tables,
technical information and a series of sub-issues such as suggested strategies, proposed
actions, recommended policies (eg conservation targets, corridors and connectivity), tools
and resources plus detailed maps (Liverpool City Council and Ecological Australia,
2003). Environmental consultants have performed a substantial role here. Despite the
difference between the manuscripts, both reflect a commitment to biodiversity
conservation. Some councils do not even possess such policies. Notably, both Penrith and
Liverpool draw attention to the Cumberland Plain Woodland, a listed threatened
ecological community under the Threatened Species Conservation Act 1995 (NSW)
(TSCA). Upon European settlement, this ecological community covered over 120,000
hectares. It has since been decimated to less than ten per cent. There is no doubt that
some of these communities can be found on private land, including small but important
patches in residential yards. What advantages might the planning system present here?
The TSCA piggybacks on the EPAA by demanding special requirements if a proposal is
to have significant impact on a listed threatened species (eg koala), population (eg little
penguins at Manly Cove) or ecological community (eg Cumberland Plain Woodland). All
development applications must undergo the ‘seven part test’ to determine the effect of a
proposal; if it is decided that the impact is significant, a ‘species impact statement’ must
accompany the application19. This might relate to, for example, a residential subdivision
in a bushy acreage in Sydney’s west or erection of a building where a listed ecological
community exists. Assessment is mostly carried out by councils or consultants on their
behalf. Even if it is decided that the environmental impact will be ecologically
devastating, approval is still possible. The end result will be informed habitat destruction.
As noted by Riddell (2005, 446), “the balance is skewed strongly in favour of
development and economic growth”.
All this highlights the need for strategic planning rather than ad hoc decisions. The
growth centres offer minimum hope without detailed green sub-regional plans. In relation
to LEPs, Campbelltown (Urban Area) LEP 2002, for example, contains only one
19
Environmental Planning and Assessment Act 1979 (NSW), ss 5A & 78A(8)(b).
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reference to biodiversity which relates to a particular release area, stating one of the
objectives as to:
“conserve and enhance the biodiversity of the Precinct through the management of
areas of conservation significance and riparian corridors and the retention of
remnant vegetation native vegetation within residential and business zones”20.
Another objective relates to “creat[ing] compact urban centres”21, adding an element of
competition between the stated factors. The objective of the overall LEP referring to
“biological listings, remnant native vegetation and associated buffers”22 suffers from the
same weakness.
Liverpool includes only one reference to biodiversity, ensuring that a proposal on land
recognised as “high biodiversity significance” cannot fall within the list of ‘exempt
developments’ which enable proposals to escape the development control process23.
Otherwise, clauses for nature conservation relate to certain zones such as the ‘large lot
residential’ zone, and the modern TPO-derived provision on ‘preservation of trees and
vegetation’24. As noted earlier, Liverpool LEP adheres to the LEP template. The TPO
provisions confuse both amenity enhancement and biodiversity protection (Kelly, 2006).
More clarity is needed.
5 Bushfires
The third issue is bushfire. Unlike the other subjects, it can involve loss of human life and
property. It therefore attracts more public attention than, say, disturbance of a fragment of
Cumberland Plain Woodland and its replacement by non-native species in a neighbour’s
front yard. Memory of the sheer impact of bushfires in Victoria in February 2009 with the
death of 173 people lingers in the Australian psyche. Although it severely directly
affected rural townships, its proximity to Melbourne must have caused considerable
discomfort amongst many peri-suburban dwellers. In other cities, bushfires have actually
reached the suburbs. In 1967, bushfires came extremely close to Hobart’s CBD
destroying about 1300 houses and many lives (McAneney, Chen and Pitman, 2009). In
1994, bushfires unexpectedly leapt across a valley in southern Sydney to destroy homes
with one person dying from heat and smoke as she attempted to reach the swimming pool
in her back yard (Cockerill, 1994). Further bushfires occurred in a relatively new
southern suburb in 2001/2002. In 2003, Canberra received the tragic shock of bushfire
with four tragic deaths and loss of 530 houses (Odger, Ryan and Wells, 2003). In addition
to these were the ferocious ‘Ash Wednesday’ fires in Victoria and South Australia in
1983. This short list excludes many other fire disasters since colonisation.
As stressed by Gillen (2005), Sydney is especially prone to bushfire. It enjoys a
subtropical climate with “summer temperatures frequently reaching the high 30s
centigrade and bringing low humidity and warm conditions” (at 466). He goes further to
20
Campbelltown (Urban Area) Local Environmental Plan 2002, cl 51D (b)(i).
21
Campbelltown (Urban Area) Local Environmental Plan 2002, cl 51D(c)(ii).
22
Campbelltown (Urban Area) Local Environmental Plan 2002, cl 2(2)(e).
23
Liverpool Local Environmental Plan 2008, cl 3.3(2)(g).
24
Liverpool Local Environmental Plan 2008, cll 5.9 & 7.6.
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observe that Sydney “is located in the zone of highest bushfire frequency in Australia” (at
466). This automatically leads to concerns about the urban periphery (McAneney, Chen
and Pitman, 2009). Various commentators (see Gillen 2005; Little 2003; Troy 1999)
highlight the spate of low density housing across potentially fire prone areas.
Bushfires are unpredictable. Any idea that they can be prevented altogether makes little
sense unless we accept landscapes of concrete. Australian bushland “is designed by
nature to burn” (Cunningham, 2003, 26). One approach involves mitigation, including
cooperation with community members (Marton and Phillips, 2005) or at least raising
their awareness of potential catastrophe. Guidance on how to plan ahead is crucial. This
leads to the need to consider strong and clear messages for householders. For example,
residents may be warned against inappropriate exotic or native plant trees and shrubs,
such as vegetation that deposits heavy amounts of dead or decaying debris. Landholders
may also need to check if their roof gutters become dangerously full of flammable leaf
litter.
The 2001-2002 bushfires spurred major legislative change. The Rural Fires Act 1997
(NSW) (RFA) underwent alteration with not only a “streamlined process for the
environmental impact assessment of bushfire hazard reduction works (e.g. prescribed
burning)” but also the “creation of a Bush fire Environment Assessment Code” (Little,
2003, 29). Furthermore, the EPAA was amended to, inter alia, ensure that consent
authorities must receive endorsement from the Rural Fires Service before approving
subdivision for residential or rural residential uses25. This relates to the need to utilise the
planning system to strategically help minimise the advent of fire damage.
In some outer wealthy established suburbs, especially to the north and south of Sydney,
insufficient consideration was once given to the potential impact of bushfire in planning
design. There are communities with, for example, one road access. Properties may be
located on ridge tops above steep sideslopes and close proximity to bushland. This is
where bushfire hazard reduction is cardinal for safety purposes. But as Little (2003)
contends, more attention must be paid to the planning system in order to circumvent such
problems. For example, siting principles can be improved. Greater setbacks that separate
housing from bushland can be effective. Inclusion of perimeter roads can be valuable.
Documents have been prepared to assist better planning on the ground (Little, 2003),
such as Planning For Bushfire Protection, a guideline prescribed by both the EPAA and
the RFA Regulation.
In terms of LEPs, provisions relating to bushfire are common at the urban periphery. This
is the result of firm directions by the State Government. Inclusion of bushfire provisions
is a relatively new ingredient in the complex planning pudding. Campbelltown (Urban
Area) LEP 2002 contains numerous clauses. In various zones, such as Rural Future
Urban, bushfire hazard reduction needs consent; in others, especially special roadway
zones, consent is not required provided it complies with a Bushfire Management Plan
prepared under the RFA26. Another provision states that nothing shall stop the granting of
25
Environmental Planning and Assessment Act 1979 (NSW), s 79AB.
26
Campbelltown (Urban Area) Local Environmental Plan 2002, cll 7-8, 15-18 & 21.
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consent for removal of any tree “for the purpose of creating a fire protection zone to
protect a dwelling house”27. It is plain that human safety overrides amenity here. There is
also a vital clause demanding that a ‘development control plan’ (DCP) – i.e. a non-
statutory plan that adds detail to the LEP – be prepared for ‘urban release land’ to ensure
“amelioration of natural and environmental hazards, including bush fires”28. These
clauses appear to provide a mix of bushfire hazard reduction and preventative planning.
Curiously, the LEP template is sparse regarding references to bushfire. The only clause
that stands out states that “bush fire hazard reduction may be carried our on any land
without consent” (at cl 55). This provision is mandatory, and is found in Liverpool LEP
2008. Other clauses in the Liverpool LEP relate to its overall aims29, complying
development30 and, similar to Campbelltown, the need for a DCP for urban release lands
to address bushfire31. Obviously the NSW Government agreed with Liverpool City
Council to add more provisions to the template. They should be welcomed although they
are scarcely outstanding. Perhaps more attention needs to be given to the forthcoming
DCPs.
Ultimately, the issue leads to ongoing management by the landholder. While planning
may lead the way in a strategic sense, owners of land must take care in choosing plants
for their gardens and maintaining their allotments. If they wish to live at the urban
periphery, reliance on governmental help alone is insufficient. Despite this, detailed plans
backed by sound expertise and regulation can provide far more than reports that gather
dust on government shelves.
6 Conclusion
This paper presents a conundrum. It approaches three very different issues relating to
front and back yards that warrant their own individual approaches. Yet they all must be
integrated in a manner that serves the public interest. The first item, protection of
amenity, deals essentially with neighbourhood appeal. It is strictly a matter of local
concern, involving establishment and maintenance of green charm. In contrast,
biodiversity conservation engages international and national influences translated to
regional and local levels. It can directly compete against protection of amenity. Yet a
council can still encourage landholders to plant pleasant locally indigenous shrubs. The
third issue, protection from bushfire, cannot be underplayed. It attracts strong media
interest and immediate government response, especially when there is loss of human life.
All three factors raise the potential of the planning system in balancing competing
objectives. But priorities may need to be fixed. Adherence to strategic approaches rather
than ad hoc decisions is imperative. Coordination with other innovative tactics, such as
tax subsidies and education campaigns, must take place. Communities must be involved.
This leads to a role for local government that goes beyond command and control.
27
Campbelltown (Urban Area) Local Environmental Plan 2002, cl 30(5)(a).
28
Campbelltown (Urban Area) Local Environmental Plan 2002, cl 42J(2)(f).
29
Liverpool Local Environmental Plan 2008, cl 1.2(2)(i).
30
Liverpool Local Environmental Plan 2008, cl 3.2.
31
Liverpool Local Environmental Plan 2008, cl 6.6(2)(f).
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Many councils are already involved in assisting and training local residents on
appropriate plants for their gardens, including free or subsidised seedlings. Advice on
what should be removed is another feature. In achieving this, councils may, for instance,
hold friendly public forums, courses and workshops, letter drops, club presentations and
excursions. Teaching at local schools and establishing special plots of land to preserve
and introduce preferred native species is more than possible. These mechanisms can
bring together the three key issues raised earlier. Matters such as local floral symbols and
bushfire history are crucial. The advantage here is that it moves away from the notion of
an over-regulatory ‘nanny state’. On occasions, hard decisions must still be made. But a
well informed community will be in a better position to tolerate this. Otherwise, a system
in the hands of developers will flourish. Of course, the problem of limited local
government funding cannot be ignored.
A further need is to reinforce regional planning. This is a cental plank of the NSW
Department of Planning (DoP), with its regional strategies and growth centres policy. The
DoP has thankfully moved away from its fixation of LEP-checking in the 1990s. Perhaps
a softer approach to reasonable changes to the LEP template sought by individual
councils would assist further, provided key regional objectives can be met. The DoP itself
continually combats against other agencies that carry their own agendas. The existence of
robust well-articulated regional plans containing a degree of flexibility to deal with
worthwhile political and/or scientific change might lead the way.
The elements of sound regional plans must filter down to suburban front and back yards.
Their designs and management are critical to meet the layers of issues discussed
throughout. A vital link is local government, operating at the environmental coalface with
close community connections. In order to achieve better outcomes, improved financial
resources are essential. Special environmentally-related funding warrants close scrutiny.
Amongst the myriad of factors, improvement of private open space is a core factor in the
environmental pie.
7 References
Adam, P. (2009), ‘Ecological Communities – the Context for Biodiversity Conservation
or a Source of Confusion?’, The Australasian Journal of Natural Resources Law and
Policy, 13(1), pp 7-59.
Alexander, I. (2000), ‘The Post-War City’, In: S. Hamnett and R. Freestone (eds), The
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Commonwealth of Australia. (1996), National Strategy for the Conservation of
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Harrison, P. (1988), ‘Urban Planning and Urban Issues: 1951-72’, Australian Planner, 26
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Jeffery, M. (1997), Biodiversity and Conservation, Routledge, London.
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Planning Law: Zoning Objectives in NSW as a Case Study’, Urban Policy and
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Marton, R. and Phillips, S. (2005), ‘Modernising Policy for Public Value: Learning
Lessons for the Management for Bushfires’, Australian Journal of Public
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McAneney, J., Chen, K. and Pitman A. (2009), ‘100-years of Australian Bushfire
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Development for Detached Housing, the Department, Sydney.
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Morton (eds), Ten Commitments: Reshaping the Lucky Country’s Environment,
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- 1426 -
COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Xiaojing Qin, pp 1427-1437
Political forces and urban land ownership reform in
transitional China
Xiaojing QIN
School of Law
The University of Manchester
Email: [email protected]
Abstract:
This paper critically reviews the evolving concept of urban land ownership and
evaluates the impact of political forces on the changed patterns of land allocation in the
context of both central planning and transitional economic period of China. Its purpose
is to illustrate how the detachment of land ownership provision from its socialist
political symbol contributes to the development of real estate sector and how the
concept of land ownership should be identified in the new era of marketization. China
used to have a system of central planning land ownership under which the potential
yields from land values were suppressed. Comprehensive, yet gradual changes were
initiated since 1979 to erect market-oriented allocation system in the process of
devolving using rights from state ownership, in parallel with the opening up economic
reforms. However gradual institutional changes of the property rights shaped by the
incremental experimentation and reform allowed socialist-shaped land using rights to
continue operating. The ambiguously-delineated policies on propery rights have created
valuable opportunities for all market participants and local governments to capture some
of the state-owned assets to pursue their own economic interests. Consequently, land
assets could not be efficiently distributed with the interference of political power. Two
conclusions will be drawn from this study, firstly, an economic-based notion of land
ownership has evolved naturally with the changed social and economic background,
highlighting the elimination of political forces on defining land value in the new era.
Secondly, the involvement of political power in the land asset distribution will lead to
the market failure and social conflicts. For the development of a healthy real estate
market, these political forces should be attenuated otherwise the potential value of land
resources will be deteoriated.
Key Words:
Central Planning, Market Mechanism, Transitional Economy, Urban Land Ownership
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RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Xiaojing Qin, pp 1427-1437
1. Introduction
This paper critically reviews the evolving concept of urban land ownership and
evaluates the impact of political forces on the changed patterns of land allocation in the
context of both central planning and transitional economic period of China. Its purpose
is to illustrate how the detachment of land ownership provision from its socialist
political symbol contributes to the development of real estate sector and how the
concept of land ownership should be identified in the new era of marketization. Two
stages of reforms are addressed with respect to the endorsement of political power on
land ownership, prior-1978 reform and 1978 onwards.
2. Political Implication of Urban Land Owenship during the Central Planning
Period
China’s land system has generally remained different from those of the western
jurisdictions. Following the dogma of Marxism, China set up a socialist economic
system with state ownership of land resources when the Chinese Communist Party came
into power in 1949 (Liu 1994). The socialist government insisted that the ability to
control land resources was crucial to the security of the newly founded socialist state as
land ownership had been recognized as the only source of all other wealth.
In the urban area, the government exercised monopolistic power over land resources,
which erected state-owned landownership as part of the socialist system. The state
owned all urban land and allocated it to socialeconomic units called danwei for their
own use free of charge for an indefinite period. The state performed a dual role in this
process, both as the economic property owner and as political administrator of land. As
these work units were also state-owned, land use rights and land ownership were
institutionally inseparable. The amounts of land allocated to danwei were determined by
the political connection and political implication in which the social economic
productions were organized. In other words, land resources were allocated to danwei in
accordance with the political ideology of the work units rather than economic efficiency
(Zhu 2002).
According to The Constitution of the People’s Republic of China adopted on December
4, 1982, urban land ownership was vested in the state.1 No organization or individual
1
The Constitution of the People’s Republic of China, adopted at the Fifth Session of the Fifth National People’s
Congress on December 4, 1982, promulgated for implementation by the National People’s Congress on December 4,
1982 and amended for the first time in accordance with “Amendment to the Constitution of the People’s Republic of
China” adopted at the First Session of the Seventh National People’s Congress on April 12, 1988, for the second time
in accordance with “Amendment to the Constitution of the People’s Republic of China” adopted at the First Session
of the Eighth National People’s Congress on March 29, 1993, for the third time in accordance with “Amendment to
the Constitution of the People’s Republic of China” adopted at the Second Session of the Nineth National People’s
Congress on March 15, 1999 and for the fourth time in accordance with “Amendment to the Constitution of the
People’s Republic of China” adopted at the Second Session of the Tenth National People’s Congress on March 14,
2004. Although People’s Republic of China has in practice established state-owned land ownership from the very
beginning of its foundation, explicit constitutional acknowledgement was seen until the enactment of the Constitution
1982.
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Xiaojing Qin, pp 1427-1437
may appropriate, buy, sell or release or unlawfully transfer land in other ways.2 In the
legal dimension, land was entrusted to the state who as the trustee would manage the
asset in the interest of the whole people. In practice, the state was the real owner in the
centralized ownership system, as so-called “the whole people” could not jointly enjoy
land ownership in an alternative way except in the way of state entrustment. As the
constitution banned land transaction, land was not considered as a commodity and had
no commercial value to be reflected in the market (Chan and Kwok 1999). The state has
made it clear through the constitutional announcement that the economic value of land
was not a priority in that time as it sought to maintain the strength of socialism. The
state’s obsession with safeguarding absolute control over land circulation system that
allowed it to maintain its grip on socialist polity left it keen to land ownership and usage
system. The lack of economic channel for the transfer of land use rights and ill-defined
property rights resulted in land-use deficiency and triggered serious social conflicts and
disputes surrounding the allocation of land (Yao 2003).
3. Political Implication of Urban Land Owenship during the Economic Transition
Period
3.1 Initial Stage with Progressive Land Ownership Reform
China’s urban land reform was initially stimulated by the increased demand of land of
foreign investors. Economic liberalization began in late 1970s, with much foreign
investors, especially overseas Chinese being attracted by the unexplored economic
market in China. The concept of public ownership was then changed in response to the
ongoing economic reform to facilitate economic growth. As land was seen as an
important resource to lure investment, granting of land without land using fees or at
substantial low prices was quite frequent during the initial period of the economic
reform. Land has also become one of the major assets of a Chinese partner to invest in
Sino-Foreign Equity Joint Venture. According to the Law of the People’s Republic of
China on Chinese-Foreign Equity Joint Venture,
“…The investment of Chinese joint venturers may include the right to the use of a site provided for
the joint venture during the period of its operation. If the right to the use of the site does not
constitute a part of a Chinese joint venturer's investment, the joint venture shall pay the Chinese
3
Government a fee for its use…..”
The permission of the site use rights as part of the joint venturer’s investment
contribution and the claims of land-use-fees otherwise indicated the emergence of the
commercial value of the land and the increased attempt to remove the political influence
2
The fourth paragraph of Article 10 of the Constitution of the People’s Republic of China, adopted at the Fifth
Session of the Fifth National People’s Congress on December 4, 1982, promulgated for implementation by the
National People’s Congress on December 4, 1982.
3
Article 5 of The Law of The People's Republic of China on Chinese-Foreign Equity Joint-Venture, adopted at the
Second Session of the Fifth National People's Congress on July 1, 1979 and revised in accordance with " Resolution
on Revision of the Law of the People's Republic of China on Chinese-Foreign Joint Venture" made at the Third
Session of the Seventh National People's Congress on April 4, 1990, revised for the second time in accordance with
"Resolution on Revision of the Law of the People's Republic of China on Chinese-Foreign Joint Venture" made at the
Fourth Session of the Nineth National People's Congress on March 15, 2001.
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Xiaojing Qin, pp 1427-1437
from the institution of land (Chan and Kwok 1999). The concept of land use right was
thus created to develop the inherent value of land (Chan and Kwok 1999). The granting
of site use rights was a breakthrough reform compared with the full prohibition of land
leasehold during the command economic period. However land was still not allowed to
be alienated, reflecting the strong social characteristic of political ideology (Li 2000b).
In 1988, Article (iv) of the PRC Constitution was amended to include “the right of land
use could be transferred in accordance with the relevant legislation”.4 The new rule
clarified the recognition of land use rights and legitimized its transfer under the general
requirement of absolute state land ownership. The revised Land Administration Law
thereof set forth more detailed measures in response to the constitutional amendment
(Li 1999). The concept of “Chinese socialist market economy” was firmly established in
the regard of land market (Potter 1991). However more specific and enforceable rules
were not specified under the constitutional and ministerial legal framework, such as the
issue of transferability of huge amounts of allocated land in the market. This issue was
later addressed in the land conveyance regulation promulgated in 1990 (Rydin Rodney
et al. 1990).
In the context of gradual reforms, the problems relating to property rights were
intensified by the remaining characteristics of central planning land system and the
marketization of real estate development (Zhu 2002). In a broad-stroke, the demand for
a wide range of land resources introduced by dynamic economic growth and excessive
inward investment has been discovered, reflected in dramatic increases in the land
values in many coastal cities. Substantial demands for industrial sites and commercial
buildings have brought about explosive growth in building construction. The
state-owned work units, who used to be allocated the land free of charge but suppressed
from gaining profits from it under the central planning structure, seemed to
automatically acquire such rights and were eligible to turn those rights into joint venture
investment. Incentives such as increased land demand and uprising prices have also
been put in place for those state agents to seek the opportunity to claim profit from the
possessed land. Consequently, while those who purchased land from the market need to
pay land using fees for their uses, those who were allocated the land by political
background and political connection prior to the economic reform were not required to
do so and the free acquisition allowed them to quickly organize reconveyance at steep
discounts if they need to (Zhu 2002). With the continuous existence of allocation of
land, the commercial land market was inevitably affected (Zhu 2002). Although land
was no longer identified as the political symbol subject to strict central control, its
political implication continued to emit tremendous influences on the operation of real
estate market.
4
Article 2 of Amendment to the Constitution of the People’s Republic of China, adopted at the First Session of the
Seventh National People’s Congress on April 12, 1988, where it stated that:
The fourth paragraph of Article 10 of the Constitution [1982], which provides that “No organization or
individual may appropriate, buy, sell or let land or otherwise engage in the transfer of land by unlawful means”
shall be amended as: “No organization or individual may appropriate, buy, sell, or otherwise engage in the
transfer of land by unlawful means. The right to the use of land may be transferred according to law”.
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Xiaojing Qin, pp 1427-1437
According to the revised Land Administration Law in 1988, there was no clear
delineation of property rights for those holding allocated land in the era of traditional
central-planning system (Cao and Edwards 2002). The extent to which land using rights
of the local government and danwei agents should be devolved from the full ownership
of the state principal was not clearly established and thus some economic rights over
urban land were falling into the open domain subject to access by danwei land holders
(Zhu 2002). The existing land holders of danwei have in practice become the de facto
controllers of the allocated land, which evolved from the old socialist institution of
using rights (Zhu 2002). In other words, when the former institution of legislation
regulating property rights did not come into force, an informal arrangement in terms of
decentralization of land property have emerged with the economic incentive in place.
During this period, marketization has begun to influence the economic structure with
the surge of real estate development as a new profitable industry (Huang 2004). The
land value was substantially accentuated by the fledging land market and widespread
redevelopment construction, giving rise to the increased private trading between real
estate developers and danwei land holders for the sites they were holding. Tentative and
informal recognition of danwei land holders’ entitlements meant they were not under
the umbrella of legal endorsement of transferability. With the deepening of land reform,
de facto control would be regulated at some points (Zhu 2002). Land holders were
therefore eager to seek all possible opportunities to convert the incomplete property
rights into capital proceeds (Zhu 2002). As a result of selling these rights in haste, land
assets were flowing into over-supplied development market and their value depreciated
(Zhu 2002).
The political ideology of land property rights continued to be reflected in soft budget
constraints derived from the central planning social institution. Soft budget restraints
were the institutional setting based on socialist norms which precluded the risk bearing
from the decision-making process. It remained in the regime of transitional economy
property ownership, within which danwei land-holders exercised de facto control over
land assets but without bearing full legal responsibility as the property rights were not
stipulated by the law (Zhu 2002). As a result, danwei agents could enjoy the profit
returns from their actions but did not have to bear the substantial risks in the case of
business failure. The increased demand stimulated by fledging real estate market, in
parallel with the hasty transactions generated from insecure property rights and also
compounded with the soft budge constraints evolved from the central planning regime,
presented strong incentives for the danwei agents to trade their land use rights in the
free market (Zhu 2002).
Another dominant political factor shaping property rights came from the performance of
government officials. The decentralization of decision making occurred during the era
of political and economic reform to give more incentives to local governments and
State-Owned Enterprises (SOEs) for local development. Local governments also wished
to see more building erected because booming scene looked good for their political
records (Zhang and Sun 2006). Consequently, perverse incentives were put in place for
officials pursuing the promotion to transform land assets into high buildings (Cao and
Edwards 2002). In order to acquire their political assets, local governments preferred to
transfer land using rights through the concealed forms of negotiation, by which they
were able to attract more investment for the real estate development (Zhu 1999). Instead
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RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Xiaojing Qin, pp 1427-1437
more transparent forms of conveyance, such as bidding and auction at market rates were
not admired. The fact of the extensive phase-in of the political influences in real estate
sector continued to be reflected in the erection of political connection network by the
real estate developers. The informal institution of guanxi, or personal connection, which
allowed real estate developers with political connection to acquire illegal benefits from
the forged connection with local government leaders, reinforced the private arrangement
in the process of state land transfer (Cao and Edwards 2002). The role of political
connection was thus highlighted in China’s real estate sector for long, resulting in the
manipulated distortion of the market force (Li 2008).
Political character of land ownership evolved from the previous socialist economic
institution, compounded with political value of land asset externalized in the market
economy for government officials to pursue their own interests, resulted in the
inefficient allocation of land resources and the dramatic distortion of land market. There
was the widespread existence for danwei land holders to relinquish the sites they were
holding for industrial use or real estate development through voluntary transactions with
the potential buyers. If a site was planned for redevelopment, the policy required the
compensation for the sitting tenants, who were quite probably the employees of the
previous danwei units (Liao 1994). The compensation had to recognize the land rights
vested in danwei employees for the sites they were holding by taking into account not
only the building to be demonished, but also the market value of the sites (Liao 1994).
A substantial number of commodity buildings were thus built on the land without
formal leasehold as the property rights prior to conveyance were incomplete (CSSA
1992).
The concerns about the rights on socialist allocated land and its impact on market
distortion continued to be reflected in the spontaneous change of land use from
non-commercial to commercial activities (RGCULUM 1990). The local authorities
acquiesced the illegitimate change of land use with the approval acquired from their
land administration departments who reportedly shared the generated profits
(RGCULUM 1990). The status of market force was undermined when the distribution
of land asset was exposed to the multiple forces of market incentives, rent-seeking
behaviour of danwei land holders and the bargaining position of government
authorities (Zhu 2002).
The arrangement of land allocation through political advantages undermined the market
conditions seeking to maintain equal competition. It seemed that if it was the economic
failure to take land as pure political asset as China had done during the central planning
era, then the permission of access to guanxi-sustained land market seemed to result in
both economic failure and political corruption.
3.2 The Stage with Radical Land Ownership Reform
With the Amendment to 1988 Constitutional Law and the 1988 Land Administration
Law, the main thrust of land regulatory framework was brought by the Interim
Regulation of the People’s Republic of China Concerning Assignment and Transfer of
the Right to the State-owned Land in Urban Areas (Rydin, Rodney et al. 1990). It
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Xiaojing Qin, pp 1427-1437
provides the conceptual foundation and regulatory prerequisites for the implementation
of land development regulations, with which they are to be used (Li 1999).
The more significant implication of this provision is the clearly delineated rights on
allocated land. According to the new rules, the land user of any allocated land had to
make up for the payment of the assignment fees if the reconveyance was intended. This
measure shrugged off the prolonged disparity between land allocated and land
purchased in the same market by treating allocated land retrospectively as being
purchased from the very beginning. The privilege where the allocated land holder was
able to capture windfall wealth from the market by selling the land allocated by the state
has been removed (Tang, Haila et al. 2006).
However the reservation of agreement-based land use right tranfer could still be a
source of corruption if not properly regulated. As the private agreement was still one of
the eligible ways to grant land use rights, political factors still existed in the land market
although to a less extent (Li 1999). According to the unofficial statistics before June
2002, about 95% of all land use rights were granted by bilateral agreements between
local bureau and grantees with only 5% via invitation of tenders or auction (Anonymous
2003). The lack of transparency in granting land use rights has resulted in concealed
transactions between local authorities and real estate developers with the state bearing
the woeful loss of tax revenues.
The land policies have been advanced rapidly, resulting in the gradual elimination of
private agreements in the granting of land use right in terms of construction land. With
the enforcement of the PRC Administration of Urban Real Property Law in 1995, the
danwei and SOEs were required to purchase land-use rights from the state and existing
land users had to pay land using fees for the assignment of land use rights. Free
assignment of land for commercial purpose has drawn an end with the enactment of the
new rule. 5 Revised land administration law also required the land use rights for
commercial, tourism or entertainment purposes or for the construction of luxury
housing shall, upon certain conditions, be granted by auction or invitation of tenders,
otherwise they will be granted by negotiations.6 The rules were further clarified in the
Provisions on the Grant of State-Owned Land Use Rights by Invitation for Bids, Auction
and Price Listing effective on 1st July, 2002.7 The new provision stipulated the land for
commercial purposes, such as private enterprises, commerce, tourism, recreational use
or commodity residential development had to go through the process of invitation of
bids, auction or price listing, with an exclusion of private agreements.8 The same
principle applied if there were two or more parties interested in the same piece of land
for a specific purpose other than those referred to above.9 The regulation did not refer
to the land use for industrial purpose which was generally believed to be still negotiable
5
Law of the People's Republic of China on Administration of the Urban Real Estate, adopted at the Eighth Meeting
of the Standing Committee of the Eighth National People's Congress on July 5, 1994, promulgated by Decree No. 29
of the President of the People's Republic of China on July 5, 1994 and take effective as of January 1, 1995.
6
Ibid.
7
Provisions on the Grant of State-Owned Land Use Rights by Invitation for Bids, Auction and Price Listing, adopted
at the fourth ministerial meeting of the Ministry of Land and Resources on April 3, 2002, promulgated by the
Ministry of Land and Resources on May 9, 2002 and Effective as of July 1, 2002. Guo Tu Zi Yuan Bu Ling [2002]
No. 11.
8
Ibid.
9
Ibid.
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RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Xiaojing Qin, pp 1427-1437
by agreements until 2006 where granting of industrial land was required to go through
the procedure of tenders, auction or listing.10
With the adoption of these rules, the approach of invitation for bids, auction and price
listing has been widely recognized to apply to almost all types of commercial land use
granting. Thus the scope of acquisition by agreements for commercial purpose has been
substantially reduced. The state later strengthened the administration on the
agreement-based assignment by introducing the public notice mechanism.11 Under the
2006 Guidelines, the granting of state-owned land use rights by agreements shall be
required to give public notification, disclose relevant informations such as land location,
land use purpose, granting period, potential leaseholders, etc.12 During the public notice
period which was normally 3 days, if any objection arose with respect to the disclosed
information and such objection was confirmed by government examination, the land
granting process would be terminated.13 Otherwise, if no objection arose or if the
objection was vetoed by the government examination, the parties may proceed with the
land grant contract.14
Although currently the holding of allocated land and granting of land use rights via
bilateral agreements is still an extant norm, the legal prohibition squeezes its operational
space and non-market allocation mechanisms of private agreements are gradually
diminished (Zhu 2002). Meanwhile, while some investors may be able to renegotiate
the terms of the land use contracts to avoid regulatory burdens, it may not always be
possible with the enhancement of transparency in terms of land use rights granting
procedures.
4. Conclusion
Transitional China is a vivid example idenfitying the shifted role of land from the
political asset to the economic property as a way forward.
China’s study indicates the inevitable trend of the evolved land ownership concept from
the political asset to the economic property which reflects deep economic and social
transformation, with profound impact on the establishment of well-organized real estate
market. The separation of ownership and land use rights essentially lays the foundation
for the establishment of the open real estate market in the 1990s in China. The nature of
land as economic assets has been recognized where market forces began to affect land
values in a more explicit way (Zhu 2002).
However the preceding analysis also indicates the devastating effects of introducing
political forces in China’s land market, which are primarily seen in the impact of land
10
Guidelines for Grant of State-owned Leaseholds by Invitation for Tenders, Auction and Listing, promulgated by
the Ministry of Land and Resources on May 31, 2006 and Effective as of August 1, 2006. Guo Tu Zi Fa [2006] No.
114.
11
Provisions on the Agreement-Based Assignment of the Right to Use State-owned Land, adopted by the sixth of the
Ministerial Meeting of the Ministry of Land and Resources on June 5, 2003 and promulgated by the Ministry of Land
and Resources on June 5, 2003 and Effective as of August 1, 2003. Guo Tu Zi Yuan Bu Ling [2003] No. 21.
12
Guidelines for Grant of State-owned Leaseholds by Agreements, promulgated by the Ministry of Land and
Resources on May 31, 2006 and Effective as of August 1, 2006. Guo Tu Zi Fa [2006] No. 114.
13
Ibid.
14
Ibid.
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Xiaojing Qin, pp 1427-1437
transactions through administrative processes, including administrative land allocation,
negotiable agreements with local authorities as well as the introduction of political
connection in operation. The emerging real estate market structured by transitional
economy motivated danwei agents with active market participation, but the problem
surrounding the socialist political character of land led to the inefficient allocation of
land resources, as market instrument was obstructed by political influences exerted
upon land asset.
China has been pushing forward its land policy reform. Although the basic rule of the
state-owned land system will still continue for the forseeable future, it is clear the
system is to change over its using rights to reflect the demand of global market. To
ensure the continuous and healthy development of land market, China still need to push
forward its legal reform for political provisions, in particular, in terms of reduced
political force involvement in market-oriented land allocation.
The Law of The People's Republic of China on Chinese-Foreign Equity
Joint-Venture, adopted by the Second Session of the Fifth National People's
Congress on July 1, 1979 and revised in accordance with " Resolution on
Revision of the Law of the People's Republic of China on Chinese-Foreign Joint
Guidelines for Grant of State-owned Leaseholds by Agreements, promulgated by the
Ministry of Land and Resources on May 31, 2006 and Effective as of August 1, 2006.
Guo Tu Zi Fa [2006] No. 114
Guidelines for Grant of State-owned Leaseholds by Invitation for Tenders, Auction and
Listing, promulgated by the Ministry of Land and Resources on May 31, 2006 and
Effective as of August 1, 2006. Guo Tu Zi Fa [2006] No. 114
Law of the People's Republic of China on Administration of the Urban Real Estate,
adopted at the Eighth Meeting of the Standing Committee of the Eighth National
People's Congress on July 5, 1994, promulgated by Decree No. 29 of the President of
the People's Republic of China on July 5, 1994 and take effective as of January 1, 1995
The Law of The People's Republic of China on Chinese-Foreign Equity Joint-Venture,
adopted at the Second Session of the Fifth National People's Congress on July 1, 1979
and revised in accordance with " Resolution on Revision of the Law of the People's
Republic of China on Chinese-Foreign Joint Venture" made at the Third Session of the
Seventh National People's Congress on April 4, 1990, revised for the second time in
accordance with "Resolution on Revision of the Law of the People's Republic of China
on Chinese-Foreign Joint Venture" made at the Fourth Session of the Nineth National
People's Congress on March 15, 2001
Provisions on the Agreement-Based Assignment of the Right to Use State-owned Land,
adopted by the sixth of the Ministerial Meeting of the Ministry of Land and Resources
on June 5, 2003 and promulgated by the Ministry of Land and Resources on June 5,
2003 and Effective as of August 1, 2003. Guo Tu Zi Yuan Bu Ling [2003] No. 21
Provisions on the Grant of State-Owned Land Use Rights by Invitation for Bids,
Auction and Price Listing, adopted at the fourth ministerial meeting of the Ministry of
Land and Resources on April 3, 2002, promulgated by the Ministry of Land and
Resources on May 9, 2002 and Effective as of July 1, 2002. Guo Tu Zi Yuan Bu Ling
[2002] No. 11
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RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Xiaojing Qin, pp 1427-1437
Anomymous. (2003), 'Opening the System: Granting Land Use Rights by Public
Notices', China Law & Practice, p.1
Cao, J.Albert and Edwards, Victoria. (2002), 'The Beijing Office Market: Its Current
Status and Opportunities for International Development and Investment Financiers',
Briefings in Real Estate Finance, 2(1), p.42
Huang, Y.Q. (2004), 'Housing Markets, Government Behaviors, and Housing Choice: A
Case Study of Three Cities in China ', Environment and Planning A, 36, p.45
Kwok, E. H. Chan and G. (1999), 'Foreign Participation in Housing Development in
Mainland China: Legal Concerns on Property Ownership', Journal of Review of Urban
and Regional Development Studies, 11(3), p.154
Li, Ling Hin. (1999), 'Impact of Land Use Rights Reform on Urban Development in
China', Review of Urban & Regional Development Studies 11(3), p.193
Li, S.M. (2000b), 'Housing Consumption in Urban China: A Comparative Study of
Beijing and Guangzhou', Environment and Planning A, 32, p.1115
Li, Weiye. (2008), Ownership restructuring, political connections, and foreign portfolio
investment in contemporary China, Brown University, United States -- Rhode Island
Liao, K.Y. 'China's Urban Land Market', In: IPA, I. C., Urban Land Use and
Management in China (Special Reports and Appendices), Economic Sciences
Publishing, Beijing
Liu, W.X. 'Study of China's Urban Land Management', In: IPA, I. C., Urban Land Use
and Management in China (Special Reports and Appendices) Economic Sciences
Publishng, Beijing
Potter, Pitman B. (1991), 'China's New Land Development Regulations', The China
Business Review, 18(2), p.12
Rydin, Y., Rodney, W. and Orr, C. (1990), 'Why Do Institutions Invest in Property?'
Journal of Property Finance, 1(2), p.250
Tang, Bo-Sin, Haila, Anne and Wong, Siu-Wai. (2006), 'Housing Intermediary Services
in China: The Rise and Fall of 'Fang Wu Yin Hang'', Journal of Housing and the Built
Environment 21(4), p.337
Yao, Lingzheng. (2003), Research on the Pattern of Public Housing in China, Shanghai
Finance and Economy University Press,
Zhang, Xiaojing and Sun, Tao. (2006), 'China's Current Real Estate Cycle and Potential
Financial Risks', China & World Economy, 14(4), p.2006
Zhu, Jieming. (1999), 'Local Growth Coalition: The Context and Implications of China's
Gradualist Urban Land Reforms', International Journal of Urban and Regional
Research, 23(3), p.534
Zhu, Jieming. (2002), 'Urban Development under Ambiguous Property RIghts: A Case
of China's Transition Economy', International Journal of Urban and Regional Research,
26(1), p.41
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RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Xiaojing Qin, pp 1427-1437
5. References
1. Anonymous. (2003), 'Opening the System: Granting Land Use Rights by Public
Notices', China Law & Practice, p.1.
2. Cao, J. A. and Edwards, V. (2002), 'The Beijing Office Market: Its Current Status
and Opportunities for International Development and Investment Financiers',
Briefings in Real Estate Finance, 2(1), p.42.
3. Chan, E. H. and Kwok, G. (1999), 'Foreign Participation in Housing Development
in Mainland China: Legal Concerns on Property Ownership', Journal of Review of
Urban and Regional Development Studies, 11(3), p.154.
4. CSSA (China Social Science Academy). (1992), 'China's Urban Land Management
System and Its Reform ', China's Social Science, 2, p.63.
5. Huang, Y. Q. (2004), 'Housing Markets, Government Behaviours, and Housing
Choice: A Case Study of Three Cities in China ', Environment and Planning A, 36,
p.45.
6. Li, L. H. (1999), 'Impact of Land Use Rights Reform on Urban Development in
China', Review of Urban & Regional Development Studies, 11(3), p.193.
7. Li, S. M. (2000b), 'Housing Consumption in Urban China: A Comparative Study of
Beijing and Guangzhou', Environment and Planning A, 32, p.1115.
8. Li, W. (2008), Ownership Restructuring, Political Connections, and Foreign
Portfolio Investment in Contemporary China, Brown University, United States --
Rhode Island.
9. Liao, K. Y. (1994), 'China's Urban Land Market', In: IPA, I. C., Urban Land Use
and Management in China (Special Reports and Appendices), Economic Sciences
Publishing, Beijing.
10. Potter, P. B. (1991), 'China's New Land Development Regulations', The China
Business Review, 18(2), p.12.
11. RGCULUM (Research Group on China's Urban Land Use and
Management).(1990), 'Empirical Analysis of Real Estate Leasing Market of Dazala
and Zhongguanchun, Beijing ', Reform, 6, p.134.
12. Rydin, Y., Rodney, W. and Orr, C. (1990), 'Why Do Institutions Invest in
Property?' Journal of Property Finance, 1(2), p.250.
13. Tang, B.-S., Haila, A. and Wong, S.-W. (2006), 'Housing Intermediary Services in
China: The Rise and Fall of 'Fang Wu Yin Hang'', Journal of Housing and the Built
Environment, 21(4), p.337.
14. Yao, L. (2003), Research on the Pattern of Public Housing in China, Shanghai
Finance and Economic University Press.
15. Zhang, X. and Sun, T. (2006), 'China's Current Real Estate Cycle and Potential
Financial Risks', China & World Economy, 14(4), p.2006.
16. Zhu, J. (1999), 'Local Growth Coalition: The Context and Implications of China's
Gradualist Urban Land Reforms', International Journal of Urban and Regional
Research, 23(3), p.534.
17. Zhu, J. (2002), 'Urban Development under Ambiguous Property Rights: A Case of
China's Transition Economy', International Journal of Urban and Regional
Research, 26(1), p.41.
- 1437 -
COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Austin Otegbulu, pp 1763-1777
Legal and economic review of natural resources compensation
valuation practice in Niger delta area of Nigeria
AUSTIN CHIKE OTEGBULU BSC, MSC, FNIVS
DEPARTMENT OF ESTATE MANAGEMENT UNIVERSITY OF LAGOS,
AKOKA, LAGOS - NIGERIA
Email: austinote@ yahoo com
ABSTRACT
The Niger Delta area of Nigeria is rich in mineral oil resources and is the oil producing
region in the country. Under-valuation of natural resources in the area has led to over-
exploitation and wide spread protests and conflicts. Valuation for compensation is statutory
in Nigeria. The legal instruments are Land use act of 1978, oil pipeline act and petroleum
act. Section 29(4C) of Land use act provides that valuation for crops will be as approved by
the appropriate officer (that is, the director of lands at the state or federal level). The
petroleum act of 1990 provides for fair compensation for crops. The provision of the laws
are misconstrued and misapplied by both government officials and oil industry operators. In
addition, the traditional methods of natural resource valuation do not capture their total
economic value and these calls for review of the current methodology. The study is
anchored on robust empirical literature, survey and valuation of two economic trees based
on existing practice and proper interpretation of the law. Questionnaires were also randomly
administered to 168 households in different communities in the study area to determine their
level of satisfaction on the compensation paid to them. 158 (90%) responded and analysis
was carried out using descriptive statistics. The degree of deviation between values arrived
at under existing practice and the value arrived based on total economic value was also
determined. Findings from the studies indicate that current valuation practice results in
under-valuation, over-exploitation of natural resources in the study area.
Key words: compensation valuation, Conflict resolution, economic/ legal review, natural
resource, total economic value.
INTRODUCTION
Natural resources are fundamental to the lives of rural communities in Nigeria and other
parts of sub - Saharan Africa Caring for the environment in these areas in a sustainable
manner is not a luxury but a prime necessity. This arises from the fact that rural economy in
these areas depend heavily on natural capital. This becomes obvious when viewed in the
context of alleviating poverty because environmental degradation primarily affects the poor
in both urban and rural areas. Reversing the downward spiral of the degradation is a key
element of a strategy to reduce poverty in the Niger Delta areas of Nigeria (World Bank
1996, 2006). Part by this strategy should be a valuation system that captures the total
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economic value of natural resources.
Despite the potentially irreversible consequences that natural resource decision making in
Nigeria can have for species, eco-system and resource dependent communities, such
decision generally take into account only a small fraction of the total economic value of
impacted resources. For example when resources (tree or forest) is negatively impacted on
or devastated, only a small portion of the economic value is paid to the owner per tree stand.
The consequence of this resource under-valuation is inadequate incentive for the
management and efficient resource utilization of natural resources. Natural resource
valuation in Nigeria including Niger Delta does not recognize the importance of Non-timber
forest products “NTFPs”. This is in spite of the fact that poor people in the rural
communities rely on NTFPs for food, fiber, herbal medicine and other uses. In order to
address the problem of total economic value, the legal frame - work for the valuation of
natural resource for compensation need to be reviewed in line with the existing
methodologies.
According to Onugu, Iwu, Schopp, czebiniak and Otegbulu (2003), imbalances in the law
and practice of environmental valuation are central to the problem faced by communities
and ecosystem in the Niger Delta. The indigenous value structure reflected by reliance on
NTFPs is not adequately captured by existing valuation and compensation laws and practice
in Nigeria. Recognition of the value of NTFP’s could lead to their increased use as a tool in
social and economic development, as well as the development of a more complete
understanding of the Nigerian environment. It is generally believed that an effective
valuation practice could minimize conflict and civil strife arising from inadequate
compensation for damage wrought to the sources of food, water and livelihoods of
communities throughout the Niger Delta, as well as elsewhere in Nigeria. According to
Obot (2002), the more important and fundamental reason for the over-exploitation of forest
resources is the undervaluation of natural resources. It has to the made clear that the forest is
a complex life form, made up of the people (who live in and depend on the forest) the trees
(that may provide timber) the herbs (that offer a wide range of products including food and
medicines) and the animals including their evolutionary products stretched into the future.
Consequently, there is an absence of a policy and legal framework for assigning full
economic value to individual species based on economic functions and for assessing the
value of damage to natural resources.
This paper aims at critically examining the current legislations and methodologies guiding
natural resource compensation valuation practice in the Niger Delta as it affects capturing
the full economic value of these resources for compensation purpose. This will rely on the
following objectives:
• Examination of the provisions of legislations that affect and guide the practice of
natural resource compensation valuation.
• Appraising existing methodology with respect to their adequacy in advancing the
practice of total economic value.
• Demonstration of the short comings of the existing legislation and practices with
regards to compensation valuation practice.
• Make appropriates recommendation to improve the status quo.
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THE STUDY AREA
The Niger Delta in Nigeria is a densely populated region some times called the oil Rivers
because it was a major producer of Palm oil (Wikipedia 2008). The Niger delta as now
defined by the Nigerian government extends to over 70,000 square kilometers and,
constitutes 7.59 percent of Nigeria Land Mass. Historically and cartographically, it
constitutes of present day Bayelsa, Delta and River State.
Due to the discovery of oil in other states in commercial quantity, the Nigerian government
expanded it to include, Abia state, Akwo Ibom State , Ondo state, Imo state, Edo and Cross
River State
Within Nigeria it is the richest area in terms of natural resources endowment with large oil
gas deposit, extensive forests, good agriculture and abundant fish resources. It is one of the
world’s largest coastland and the largest in Africa (United Nations, 2002). Although, the
Niger Delta region is the richest source of natural resource in Nigeria, the region’s potentials
for sustainable development is increasingly threatened by environmental devastation and
worsening economic conditions. A large area of the mangrove and fresh water swamp
forests has been lost due to oil exploration activities, urbanization, industrialization and
agriculture. In addition, climate change and sea level rise is likely to create important
ecosystem changes along the Nigerian shoreline (Wikipedia 2008, Awosika, French
Nichollen & Ibe 1992). The situation is worsened by high level of poverty in the region.
LITERATURE
NATURAL RESOURCES
Most economies in sub-Saharan Africa depend heavily on their natural capital (natural
resource). About to two thirds of the population live in rural areas and derives its main
income from agriculture (World Bank 2008, 1996).
In Niger Delta and in other parts of Sub-Saharan Africa, deforestation continues and forests
and wood lands are receding by about 3 to 4 million hectares per annum (World Bank
1996).
Poverty is linked to the environment in complex ways, particularly in African economics,
which are based on natural resources. In the Niger Delta region, degradation of those
resources reduces the productivity of the poor who most rely on them and make them even
more susceptible to extreme events (metrological, economic and civil unrest). Poverty
makes recovery from such event even more difficult and contributes to lowering social and
ecological resistance. It has been observed by many authors (Cavendish 2000; Veelded,
Angebon, Sjaastad & Berg 2004) that National income accounts and estimates of rural
households often excludes real income that accrues to households from village commons,
forest or open access to aquatic resources. This can lead to an under-estimation of the use of
local natural resources by the poor.
When the environment is devastated, it could be terrestrial or aquatic. Whichever is the case,
there is need to capture the total value of attributes of the resource that affects the victims’
welfare so that they will be adequately compensated. It is worth noting that, there is more to
be harvested from-forest than trees. Non wood (Timber) forest products (NTFPs) include all
non industrial forest products that are harvested from the trees, shrubs and other plants from
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the forests. This includes latexes and resins, fruits and nuts, spices and oils as well as
countless traditional and modern medicines.
They are also called ‘extractive”, “secondary” and “mino” forest products. In addition
forests play other social, cultural and religious roles. Forest and trees serve as temples,
cultural symbols, social gathering places boundary makers and eco-tourism/recreation.
LEGAL AND ECONOMIC ISSUES IN COMPENSATION VALUATION
Compensation code and valuation is statutory and claims must meet the statutory
requirements if they are to succeed. The events which may give rise to claim, those who
may be entitled to claim, the type of loss, the structure of the claim and the method of
claiming compensation are all prescribed, either by statutes or by regulation (Hayward
2008). A victim of environmental devastation is entitled to reasonable compensation in line
with the total economic value of resource lost including ecological functions. Eligible
claimants are those with interest in the resource or being interested in it. In a wider scope, it
may include anyone who has suffered a direct consequential loss. According to Haywood
(2008), compensation may be calculated by loss or depreciation in value of a resource. It is
the quantum or amount in money terms a claimant whose right or interest is at stake as a
consequence of compulsory acquisition or resource devastation.
Compensation valuation is statutory in nature and in consequence the legal provision
guiding its practice and the accuracy of its interpretation is central to a valuation resulting in
a fair and adequate compensation.
LEGAL FRAMEWORK
The government of Nigeria since the colonial era has produced different laws governing
compensation valuation. The first in this series was the Public Land acquisition ordinance,
(3rd may 1917). This was later modified to the laws of the federation and Lagos of 1958.
This was followed by the land tenure law of 1962. This law operated in the Northern part of
Nigeria. It should be noted that the public land acquisition ordinance was a modification of
the English land classes Act 1845 (Uduehi 1987). Both the public land acquisition laws of
1917 as modified and the land tenure law of 1962 are no more applicable in Nigeria. Other
laws are;
• Public land acquisition (Miscellaneous provisions) decree No 22 of 1976.
• Oil pipeline act Cap 33 of 1996
• The petroleum act, cap 350 of 1990
• Land use Act of 1978.
• The Nigerian constitution (1999) section 44(1)
APPLICATION OF THE LAWS IN ASSESSMENT OF COMPENSATION
These enactments variously provide the bases of assessment of compensation payable to the
expropriated owners as well as spelling out the compensation headings. It is quite inevitable
that one looks through the principles provided by these laws/Decrees to be able to appraise
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the equitability or otherwise of them, as follows:-
The public Lands Acquisition Ordinance Cap. 167 provides for open market value approach
for the Land, (developed or undeveloped) estate, interest or profits.
It also provides for severance & injurious affection to “such other lands by such
acquisition”. The court is to assess according to what it finds to have been the value of such
lands, estate, etc……at the time when notice of intention to acquire was served…”
While this law does not categorically provide for delayed compensation, it makes provision
for “compensation for loss of rents and profits”,….to the owner of such lands and to all
parties entitled to any estate or interest there – in for loss of rents and mesne profits for the
period between the time the Governor-General so entered into possession, and the time
when the consideration due under an agreement has been paid to the persons entitled
thereto.
1. Northern Nig. Land tenure law of 1962
I. Land – nil
II. Structure i.e. Unexhausted improvements…. For the value of the structure before
revocation and the inconvenience caused by the disturbance
2. Decree No. 38 of 1968
The state lands (Compensation) Decree, 1968
i. Land: “…..for an amount equal to the total rent paid by the lessee over the
period between the date of the execution of the lease and the date of payment
of compensation together with interest at the bank rate…………..”.
N.B normally valuation procedure should place value on the unexpired term
of the lease.
ii. Structures: Replacement cost with interest at the bank rate over the period
between the date of execution of the lease and the date of payment of
compensation
ii. Crops: to be based on fair market value
PART B
3. COMPENSATION FOR STATE LAND OR RESUMED LENDS (modifies cap.
45 and Repeals the State Lands Decree No. 38 of 1968)
i. Land resumed: - for an amount equal to the rent paid by the lessee during the
year. In which the land was resumed.
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ii. Building, installation or Improvement thereon:-
Actual cost..... such cost as may be assessed on the basis of the current
method of assessment as prescribed and determined by the appropriate officer
less any depreciation, together with interest at the bank rate during the year
the land was resumed,
Reclamation works: - such cost as may be substantiated by documentary
evidence.
iii. Crops ……..as prescribed and determined by the appropriate officer.
iv. Disputes – Lands tribunal.
4. Public Lands Acquisition. (Miscellaneous provision) Decree No. 33 of 1976 (Repeals
Cap. 167)
Part A
Land
I. Undeveloped: actual cost together with interest at bank rate calculated.
(a) From the date of the purchase of the land up to the date of the notice to acquire the land,
subject to a maximum of ten years, or the existing use value of the land whichever is the
greater; “but in no case shall the amount of compensation payable in respect of land exceed
the maximum amount prescribed in schedule I for the zone in which the land is situated’.
b. Undeveloped but with development or building plan. Reimbursement for expenses
incurred subsequent to the purchases of the land…..in the nature of survey fess, architect’s
fees and fees for approval of the plan by the appropriate town planning authority. This is
generally referred to as abortive expenditure.
(ii) Developed:-
(a) Bare land assessed as in (i) above
(b) Structures: current replacement cost without providing for depreciation
(c) “Any other claim” – as determined to be reasonable by the appropriate officer or the
lands tribunal.
- Option to accept resettlement in lieu of pecuniary compensation.
- Interest on delayed compensation
- Interest at the bank rate, provided that responsibility for the delay is not assignable to
the owner of the estate or interest.
5. The land use Decree 1978
I. Land: — the rent, if any, paid by the occupier during the year in which the right of
occupancy was revoked
II. Buildings: depreciated replacement cost
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III. Installations or Improvements; - as assessed on the basis of the prescribed method of
assessment as determined by the appropriate officer.
IV. Reclamation works: - such costs as substantiated by documentary evidence.
V. Crops: - value as prescribed and determined by the appropriate officer,
VI. Delayed Payment: - for structures only.
VII. Disputes: - Land Use and Allocation Committee.
6. Petroleum Act, Cap 350, 1990
Regulation 17 of the petroleum (Drilling and Production) Regulations (1969) made pursuant
to the petroleum Act, cap. 350 LFN 1990 stipulates “fair aid adequate compensation” for
lands entered into.
As further stated under that regulation, the licensee or lessee cannot be granted license to
enter such lands except he had first paid the compensation.
It is noteworthy that the Land Use Decree at Sect. 29(2) states that compensation on lands
acquired for mining purposes, oil pipelines or for any purpose connected there-with should be
computed under the provisions of the Minerals Act or the Mineral Oils Act or any legislation
replacing the same. (The Petroleum Act now replaces.). This provision is recognition of the
fact that acquisitions for mining purposes cannot just be regarded or dealt with as any .other
acquisition for public purposes?
Table I below is a summary of the provision of the compensation laws discussed and includes
the methods and basis for determination of compensation payable.
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
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TABLE 1: PRINCIPLES OF ASSESSMENT OF COMPENSATION A COMPARATIVE ANALYSIS
Laws /decree Land Structure Crops Interest on Dispute Others/remarks
Delayer payment resolution
Public Land Acquisition Open market value Open market Open market Lost of rents and High cost Severance, injurious
ordinance, cap. 167 LFN and value value profits paid for affection. NB:
Lagos 1958 investment method
adopted
Public Lands Actual cost with Current As Payable Lands tribunal Abortive expenditure
Acquisition(Miscellaneous interest at Bank rate replacement cost determined survey fees, architect
Provisions) Decree No. 33 of from date of by the fees etc. NB: Land &
1976 (Repeals Cap. 167 purchase to date of appropriate improvement must
PART A acquisition (10yes officer be valued separately
max.) or existing
use value
NB Not be exceed
maximum amount
in schedule (as
attached)
Part B Rent paid during Actual cost as As - Lands tribunal Reclamation works
Resumed state land (modifies the year of determined by determined
cap. 45 and repeals Decree 38 of resumption the appropriate by the
1968) officer less appropriate
deprecation officer
State lands (compensation) Total rent paid Replacement Fair market Normal valuation
Decree, 1968 (No. 38 of 1968) between date of cost with interest value procedure should
lease and date of over period place value on
payment of between date of unexpired term of
compensation lease and date of lease
payment of
compensation
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Land tenure law of 1962 “value at the Value at the Disturbance
date of date of
revocation” revocation
Petroleum Act cap. 350 of 1990 Fair and adequate Fair and Fair and State authority
Protected, and
LFN compensation adequate adequate productive trees;
compensation compensation venerated objects
fishing rights
(adequate
compensation
The land uses Decree, No. 6 of Rent, if any, paid Depreciated As On structures only Land use and Reclamation works
1978, cap, 202 of 1990 LFN during year of replacement cost determined Allocation installation
revocation by the committee improvement as
appropriate determined by the
officer appropriate officer
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In reviewing the laws we shall be concerned with only the Land Use Act of 1978 (This is the
principal law governing acquisition is Nigeria), the petroleum Act decree 33 of 1976 and the
Nigerian constitution section 40.
Land use Act No 6 of 1978
Under the Land Use Act (Act No 6 of 1978), compensation for structures will be based on
unexhausted improvement (depreciated replacement cost), while crops will be as directed by
the appropriate officer. Compensation is not paid for land. The claimant is however, entitled
to the rent paid to government on the year of acquisition. If rent is not paid, their will be no
compensation for land. These provisions are in conflict with the provisions of section 44 of
the Nigerian constitution which provides for prompt payment of compensation based on the
proper valuation (Odudu 2005). Structures are based on cost of development less depreciation
and value of land. This situation is bizarre considering the fact that even government
allocations are not free. In some cases you pay above two million naira (N2, 000, 000), and
when it is acquired you set nothing for land except rent if paid. The major operating laws
since 1978 are the land use act No 6 of 1978 and the oil pipe line and petroleum act of 1990.
However, any land acquired prior to 1978 under decree 33 of 1976 which has not been paid
for will still be governed by the same decree (decree 33 of 1976).
METHODOLOGY
The study is based on robust empirical literature and survey of some economic trees of which
two were valued to compare the market value using rates provided by the oil industry
operators to demonstrate the level of variance. Data collected in 2005 by Osimiri (a
supervisee of the author) was also used to demonstrate the level of acceptance of
compensation and also the headings under which compensation was paid in the study area.
Osimiri (2005) distributed 168 questionnaires out of which 158 (90%) responded. The data
was analyzed using descriptive Statistics.
REVIEW OF COMPENSATION VALUATION PRACTICE AND DATA ANALYSIS
As earlier discussed in this paper, provisions of the laws for compensation are either not
designed to capture the total economic value of the resource, or misinterpreted by the
practitioners. There is need to fully understand the attributes of a resource that constitute its
market value, as this is a pre – requisite for fair and adequate compensation. In the valuation
of a forest, we should not concentrate only on timber alone but consideration should also be
given to non timber forest products (NTFPs), which have been defined as those goods,
services and amenities obtained from forested areas that derive their worth independent of the
economic value of merchantable timber in that same area.
Some of these include, mushrooms, medicinal herbs, edible vegetable, ecological and
climatic functions among others (Harshaw 2000, common 2003, Obot 2002, Kasuma 2005,
Otegbulu 2007).
According to Obot (2002) preliminary ethno botanic surveys in Cross river National Park by
Okafor indicates that in the village of Okwangwo, for example a woman spends one day in
the forest and collects on the average ten bundles of Okazi (Gentum Africanum and Gentum
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
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buchholzianum) she sells these at the Cameroon border village of Obonyi at 100 francs Cfa
(N14) per bundle.
When this is multiplied by the average number of days spent (annually) in the collection
exercise and the number of women actively involved and then averaged over the fifty nine
villages within the support zone of the park the export revenue from this will be substantially
higher. Obot (2002) further added other forest revenue sources from the forest which was not
taken into consideration in the studies by Okafor. These include; bush Onion (afrostyrax
lepidophyllus) aja (afzelia bipindesis), bush mango (irunnigia garbonesis) and recinodendron
headollotil (okpasi, in Nigeria and njasan in Cameroon) which are all exported to the
Cameroons; and the value of some 15 seeds, 3 oil seeds, 44 fruits, 13 spices, 25 mushrooms
and 69 medicinal plants; collected and utilized by forest dwelling people, it will be obvious
that okafor’s estimate of $300billion ( as a true value of forests) is conservative on the basis
of the above illustration. It will be proper to look at some of the rates stipulated by the oil
industry operators for compensation.
The documents produced by the oil industry operators have no provision for NTFPs. In spite
of this, the cash crops and economic trees provided for are grossly undervalued.
Table 2: SELECTED SCHEDULE OF COMPENSATION RATES
Source: OPTS rates, 1997.
Bitter leaf N 13 per stand
Mango N 1000 per stand
Pawpaw N 200 per stand
Raffia palm N 320 per stand
Shrine (juju) family N 6000 per unit
Juju; individual N 1200 per unit
Juju; communal N 12,000 – N 20,000 per unit
A review of the above shows that they are grossly undervalued.
Example 1: A mango tree has an average life span of 20 years and produces about 2000 fruits
at N 5 per fruit twice a year which gives N 20, 000 per annum. If we deduct 30% for the cost
and wastage we have a net annual income of N 14, 000 using a yield of 12% and sinking fund
of 3%
Net income: N 14, 000
Yp @ 12% and 3% for 20years
and, tax @ 30% (SF3%) 5.7748
N 80, 847.00
Say N 81, 000 as against N 1000 stipulated.
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Austin Otegbulu, pp 1763-1777
Example 2: (raffia palm)
A raffia palm tree has an average life span of 25years and can earn a net income of N 15, 000
per annum if we assume 30% expenses we have a net income of N 10, 500
Valuation
Net Income N 10, 500
Yp @ 12% for 25years@ (SF3%) 6.2489
N 65, 613
Say N 66,000 compared to the N 320 paid per stand. In addition to the above, there are other
chains of income earning activities connected to raffia palm; the wine tappers earn their
income from it, the vendors earn their income too. The product is also used for the production
of local gin which is very popular in the Niger Delta. Those that brew the gin earn income
from it and those that sell the brewed gin earn their own income from it also.
OWNER
TAPPERS SELLERS BREWERS
FIG 1. Chain of income earners in a Raffia Palm
Table 3: Value Variance
Field Survey: 2005
Economic tree Compensative rate N Market value N Variances N
mango 1000 81,000 80,000
Raffia palm 320 66,000 65,680
LEVEL OF SATISFACTION PRACTICE
according to survey carried out in 2005 by Osimiri on the issue of heads of claim, out of 158
of the respondents 96 (60.76%) were paid for specific losses like crops and economic trees,
while 62 (39.24%) were paid for injurious affection and specific losses.
No payment was made for ecological degradation, health hazards, NTFPs.
120 (75.95%) respondents were unsatisfied with the compensation, 30 (13.99%) were
satisfied with the level of compensation, while 8 (5.06%) were indifferent; these are
presented in table 4 and 5.
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Austin Otegbulu, pp 1763-1777
Table 4: level of acceptance claim
Field Survey: 2005
Frequency Percentage response
Acceptable 120 75.95%
Not acceptable 30 18.99%
indifference 8 5.06%
total 158 100%
Table 5: heads of claim for compensation
Field Survey: 2005
Head of claim frequency Percentage response
Specific losses 96 60.76%
Injurious affection 62 39.24%
Ecological degradation - -
Health hazards - -
NTFPs - -
Total 158 100%
DISCUSSION/CONCLUSION
From the above illustration it is obvious that compensation valuation for natural resources in
the study area does not reflect the true value of the resources which is a major reason for the
agitation and dissatisfaction in the area. Most of the respondents (75%) indicated that the
compensation paid is inadequate and not acceptable. Undervaluation produces short term
views of the worth of natural resources and does much harm to the environment and
humanity. This has also catalyzed the progressive depletion of forest resources and marine
life. The professionals (Estate Surveyors and Valuers) in Nigeria needs to re – appraise their
valuation methodologies. In this regard they should take the lead in the compensation
valuation practice, instead of allowing non – valuation professionals in the oil industry to
produce documents which they rely on for their practice. Decree No 24 of 1975 gives legal
teeth to the professional body (Estate Surveyors and Valuers), and placed the responsibility
for valuation standards and practice on their laps. The status of NTFPs in compensation
valuation must be reviewed. It should also be noted that these resources also have use and
non use values which is globally recognized to be of value. The laws governing valuation for
compensation must be given proper interpretation and should be reviewed where the
provisions are in conflict with payment of adequate compensation. From our survey report,
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Austin Otegbulu, pp 1763-1777
there is evidence that headings under which compensation is paid to claimants are not
comprehensive enough as issues like health hazards and ecological degradation are not
considered in compensation valuation. Dissatisfaction with compensation paid could be a
likely source of conflict in any area including the Niger – Delta.
REFRENCES
Akujuru V.A (2002) evaluation of the Polluted Environment Due to oil Exploration and
exploitation of the Niger Delta. Dept of Estate Management, Rivers State university of
Science and Technology.
Awosika, L.F, French. G.T., Nichollas.R., and Ibe, C.E (1992) The impact of the Sea level
rise on the Coastline of Nigeria. IPPC CZMS Workshop, Venezuela.
Campanalle J.A. (2002) Valuing partial losses in contamination cases in Roddewing R.J.
valuing contaminated property. Appraisal institute
Canadian Forestry Advisory Network (CFAN) (1993) Forestry Issues, Non – wood Forest
Products Canadian International development Agency (CIDA).
Common M. (2003) Monetary Valuation International Society for Ecological Economics.
World Bank
Harshaw H.W(2000) The Economic Valuation of selected Canadian Non Timber resources:
an Examination of Valuation methods and a Review of Results. Paper submitted in partial
fulfillment of the requirement of Doctor of Philosophy in Dept of Forest Resources
Management, The University of British Colombia
Hayward .R (2008) Valuation Principle into Practice, London, Estate Gazette.
Inoni O.E., Omotor D.G., and Adun F.N. (2006). The Effect of Oil Spillage on Crops in Delta
State, Nigeria. Journal of Central European agriculture Volume 7(2006) No1; 41 – 48.
Kusuma I.D. (2005) Economic Valuation of Natural Resource Management; A case study of
the Beruek Dayak in Kelimantan Indonesia.
Cavendish, W. 2000. Empirical regularities in the Poverty – Environment Relationship of
Rural Households: Evidence from Zimbabwe World Development 28(ii): 1979 – 2003.
Obot E. A. (2002) Status of Forest Resource and Environmental Management in Nigeria Eco-
link Journal; 7 – 10 vol 1,Issue 2, September – October 2002.
Odudu W.O (2003). Standard for compensation valuation and claims in both private and
public sectors in Otegbulu A.C. (ed) guidelines and standards for valuation practice, Lagos
Chuzytech resources Ltd
Onugu A, Iwu. M, Schopp D, Czebiniak R, Otegbulu A.C (2003) Towards a Framework for
Improved Natural Resource Decision – Making in The Niger Delta through Enhanced Natural
Resource Valuation practices. Mc Arthur Foundation Funded Project
Osimiri C.J.(2005) Appropriate Natural Resource Compensation as a tool for Conflict
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Austin Otegbulu, pp 1763-1777
Resolution in the oil producing area (Okrika Local Government Area) of Rivers State as case
study. Unpublished Msc thesis in Estate Management, University of Lagos, Nigeria.
Otegbulu A.C. (2007) Capturing the Total Economic values of Environmental Asset as an
Aid to Sustainable Resource use in the in the Niger Delta. 37th Annual Conference of the
Nigeria Institute of Estate Surveyors and Valuers Warri Delta State. 27th May – 18th April,
2007;33-44.
Uduehi G.O (1987) Public Land Acquisition and Compensation Practice in Nigeria. John
West Publications.
Ullibari C.A and Wellman K.F. (1997) Natural Resource Valuation: A Primer on concept and
Techniques, United states Dept. of Energy.
Veelded,P, Angebon A, Sjaastad.E, and Berg G.K (2004). “Counting on the environment;
Forest Income and the rural poor” Environment Dept Paper No 98, World Bank Washinton
D.C.
World Bank (1996) Towards Environmental sustainable Development in Sub Saharan Africa.
A world Bank Agenda. Washington D.C The World Bank.
World Bank (2008) Poverty and The Environment Understanding linkages at the Household
Level. Environment and Development Dept. World Bank Washington D.C
COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Charles Nsibande and Elizabeth Pienaar, pp 1438-1445
The Impact of BEE Legislation on Shareprice
Charles Nsibande1 and Elizabeth Pienaar1
1
School of the Construction Management and Economics,
University of Witwatersrand, Johannesburg,
South Africa
Email: [email protected]; [email protected]
Abstract:
The Republic of South African Government passed legislation, the broad-based Black
Economic Empowerment (BEE) Act No. 53 of 2003, in January 2004 to enforce BEE in
all sectors of the South African economy. There are seven areas of focus where a
company can score points and achieve BEE status or BEE accreditation, namely;
ownership, employment equity, managerial control, skills development, preferential
procurement, enterprise development and socio-economic investment. The main
purpose of the proposed research is to determine if the different types of strategies
employed in the BEE transactions yield different results on shareholder value by
monitoring the impact each strategy has on the share price. The main hypothesis is to
either support or disprove the hypothesis that the different strategies or methods
employed to achieve BEE status will impact differently on share-prices of companies.
From the main hypothesis, several sub-hypotheses can be drawn: firstly, the transfer of
ownership as a means of achieving BEE status has no effect on share-price, that is,
when companies undergo an acquisition or a merger, there should be no impact on the
share-price of the new company; secondly, that employment equity has a positive
impact on share-price; thirdly, managerial control as a means of achieving BEE status
has a positive effect on share-price, that is, companies employing managerial control as
a means to achieving BEE status should impact positively on their share-price; fourthly,
the announcement of skilled employees taking key positions in companies as a means of
achieving BEE status has a positive effect on share-price, that is, companies employing
skills development as a method of achieving BEE status are likely to have a positive
impact on their share-price; fifthly, that preferential procurement as a means of
achieving BEE status can either have a negative or positive impact on share-price
depending on the nature of the vendor providing the service to the company, that is,
when a vendor is in the same industry as the company, positive effects can be expected
on the share-price; sixthly, that companies that choose enterprise development as a
means of achieving BEE status will be negatively impacted on their share-price; and
lastly, companies that choose socio- economic development as a means of achieving
BEE status will be impacted negatively on their share-price.
Keywords:
Black Economic Empowerment (BEE), Scorecard, Strategies, Share-price
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RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Charles Nsibande and Elizabeth Pienaar, pp 1438-1445
1 Introduction
The main purpose of the Republic of South African Government passing BEE
legislation was to enforce BEE in all sectors of the South African economy in trying to
redress the imbalance in the South African economy which is racially biased. The racial
imbalance in the control of the economy is a result of the discrimination and segregation
laws passed by the “old” government which disempowered certain races of the people.
Most of the laws were passed in the 1950’s and 1960’s and included Group Areas Act
and Bantu Education Act as two examples given in this paper. The Group Areas Act of
1950 introduced restrictions for “non-whites” to move around the Republic freely and
also introduced restrictions on “non-whites” to land ownership in certain areas of the
Republic, notably urban areas. This was a great source of economic disempowerment
and resulted in adverse poverty amongst the “non-whites”. The Bantu Education Act of
1953 introduced separate curriculum for different races in the Republic which resulted
in certain races in the population having inferior education and again disempowered as
they could only qualify for unskilled employment. The BEE legislation seeks to address
some of these imbalances through an organised and transparent process.
Since the BEE Act was passed into law in 2004, different industries and sectors of the
economy have drawn different strategies in trying to comply with the Act. From 2004,
there was the introduction of industry charters, whereby different industries in the
economy, including the construction and property industries, introduced means,
strategies and industry targets for member companies to assist them achieve BEE status.
The Government lagged behind in providing direction and clear guidelines on how
companies should go about addressing compliance with the BEE legislation. As a result,
before 2007, each industry in the economy had different targets and means of achieving
BEE status and there were huge inconsistencies across industries. It was not until the
Government, through the Department of Trade and Industry, introduced the BEE Codes
of Conduct on BEE, part of which is the BEE scorecard. The two components of the
scorecard are the generic scorecard and industry specific scorecard which has different
targets for different industries. The BEE scorecard introduced a uniform method of
scoring companies’ performance in achieving BEE status and complying fully with the
BEE Act. The BEE scorecard also allows companies to be assessed and compared
across industries.
2 The Proposed Research
The proposed research will determine if the different classification or types of strategies
employed in the BEE transactions yield different results on shareholder value. In terms
of the Department of Trade and Industry Code of Good Conduct on BEE, there are
seven areas of focus where a company can get score points for BEE participation,
namely; ownership, employment equity, managerial control, skills development,
preferential procurement, enterprise development and socio-economic investment.
2.1 Main Hypothesis
It is expected that the different strategies or methods employed to achieve BEE status
will impact differently on share-price of companies.
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RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Charles Nsibande and Elizabeth Pienaar, pp 1438-1445
HO: Different strategies do not yield significantly different results on shareholder
value for companies embarking on BEE transactions.
HA: Different strategies have different impact on shareholder value for companies
embarking on BEE transactions.
2.2 Sub-hypotheses
The second level of research looks at each strategy or method of achieving BEE status
and investigates what impact that strategy has on the share-price.
2.2.1 Ownership
Smit and Ward (2007) could not find any positive abnormal returns on mergers and
acquisitions on the JSE Securities Exchange that were statistically significant. A KPMG
survey in London found that 53% of mergers and acquisitions destroyed shareholder
value (Brewis, 2000). On the other hand Swaminathan, Murshed and Hulland (2008)
found that value can be created on a merger and acquisition when strategic alignment is
the focus of a consolidation strategy and when a merger of companies with dissimilar
resource configuration is implemented to achieve diversification. Swaminathan et al
stress the importance of strategic emphases alignment in the creation of positive
shareholder value in mergers and acquisition. Copeland and Weston (1988) found that
industrial relatedness was a key antecedent of successful mergers and acquisitions
because mergers between firms in related industries outperformed those among firms in
unrelated industries
Transfer of ownership has no effect on share-price. When companies undergo an
acquisition or a merger, literature indicates that there is no impact on the share-price of
the new company. Literature suggests that companies transferring ownership as a means
of achieving BEE status should have no impact on their share-price.
2.2.2 Employment Equity
Kato, Lemmon, Luo and Schallheim (2005) found that Japanese firms exhibited
abnormal stock returns of about 2% around the announcement of stock options to
executives. Kato et al found evidence that well designed executive compensation
created shareholder value. Sesil, Kraumova, Blasi and Kruse (2002) found that firms in
American new economies that were offering broad based stock options were
outperforming their counterparts who did not offer any stock options to their employees.
Oyster and Schaefer (2004) considered the economic justification of using stock options
as a means of compensation and found that stock options are a good means of retention
strategy as the stock options have a vesting period. These stock options also serve as
means of sorting staff as pessimistic staff tend to leave and optimistic staff tend to
remain in the company.
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RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Charles Nsibande and Elizabeth Pienaar, pp 1438-1445
Employment equity has a positive impact on share-price. Literature suggests that
companies employing employment equity as a means of achieving BEE status should
have a positive impact on their share-price.
2.2.3 Managerial Control
Smith (1990) found overwhelming evidence that the performance of a company after
management buyout increased. Smith found that the operating profit after the
management took control of 58 companies increased. Kaplan (1989) also found
evidence of a gain in company performance after management took control of
companies. Frankfurter and Gunay (1993) derived a model that explained the theory of
the anticipated gains in share-value from management buyouts. Frankfurter et al found
that the gain is a result of the premium management is willing to pay external
shareholders in anticipation of economic gains from the buyout. Himmelberg, Hubbard
and Palia (1999) studied further the impact of managerial ownership and performance
and found reasons for managerial control in companies. Himmelberg et al found no
econometric evidence that managerial control improved or impacted negatively on the
share-price of companies. However, Himmelberg et al found that the performance of the
companies was more stable and had less volatility on the share-price.
Managerial control has a positive effect on share-price. Companies employing
managerial control as a means to achieving BEE status should impact positively on the
share-price.
2.2.4 Skills Development
Khallaf and Skantz (2007) found that the appointment of chief information officers in
98 companies in America added value to the share-price of the companies. Khallaf et al
found that the key driver of the creation of value was based on the educational
qualifications of the appointed individual. The market perceived experienced and
qualified personnel to have the potential to add value to the performance of the
company. Dehning and Stratopoulos (2003) confirmed also that for a firm to have
competitive advantage, the appointed personnel should have managerial and technical
skills. Rockart, Earl and Ross (1996) confirmed that successful innovation in companies
is achieved through skill and managerial experience. Chevalier and Ellison (1999) found
that funds managed by individuals who attended highly reputable undergraduate
institutions have higher excess returns compared to those managed by individuals who
attended less reputable institutions.
Announcement of skilled employees taking key positions in companies has a positive
effect on share-price. Companies employing skills development as a method of
achieving BEE status are likely to have a positive impact on their share-price.
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RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Charles Nsibande and Elizabeth Pienaar, pp 1438-1445
2.2.5 Preferential Procurement
Oh, Gallivan and Kim (2006) identified transactional risks associated with firms
outsourcing services that influence investors' reactions to IT outsourcing
announcements. Oh et al identified the risks as; the size of outsourcing contracts,
difficulties in performance monitoring, asset specificity of IT resources, vendor
capability, and the lack of cultural similarity between client and vendor. Lee and Kim
(1999) found several behaviors that were linked to cultural similarity, which, in turn,
predicted improved outsourcing partnership outcomes, such as information sharing
behavior and the overall quality of communication between firms. Fitzgerald and
Willcocks (1994, page 94) identified "the existence of a cultural fit between the client
and vendor organizations" as one antecedent of IT outsourcing partnership, while other
researchers (Kakabadse, et al, 2003) stressed the importance of recognizing and
managing cultural similarities and dissimilarities in IT outsourcing relationships.
Preferential procurement can either have a negative or positive impact on share-price
depending on the nature of the vendor providing the service to the company. When a
vendor is in the same industry as the company, positive effects can be expected on the
share-price. Literature indicates that companies that have chosen preferential
procurement as a means of achieving BEE status should be negatively impacted on their
share-price.
2.2.6 Enterprise Development
There is very limited literature that has investigated the impact of funding external
enterprises’ development that are not subsidiaries of companies and the impact it should
have on the performance of the companies or share-price.
Funding that is external and that shareholders perceive as no value add to the bottom
line of the organization has no impact on the share-price of corporations. It can be
expected that certain corporations will be impacted negatively by enterprise
development as shareholders may view this as waste and not adding any value to the
business. The companies embarking on external funding would have to show to
shareholders how the company will eventually benefit from such an exercise. A simple
link would be to link the company’s BEE credentials to qualification for Government
tenders which could boost the company’s income in the future.
Companies that choose enterprise development as a means of achieving BEE status will
be negatively impacted on their share-price.
2.2.7 SOCIO-ECONOMIC DEVELOPMENT
There is very little literature that link socio-economic investment to the performance of
a company or its share-price.
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RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Charles Nsibande and Elizabeth Pienaar, pp 1438-1445
Funding external projects that shareholders perceive as no value-add to the bottom line
of the organization have no impact on the share-price of corporations. It can be expected
that certain corporations will be impacted negatively by enterprise development as
shareholders may view this as waste and not adding any value to the business. In a
similar way, the companies embarking on socio-economic funding would have to show
to shareholders how the company will eventually benefit from such an exercise. In a
similar manner, making a simple link between the company’s BEE credentials to
qualifying for Government tenders could boost the company’s income in the future.
Companies that choose socio- economic development as a means of achieving BEE
status will be impacted negatively on their share-price.
3 Conclusion
It is clear from the literature reviewed and the sub-hypotheses that the different
strategies or approaches to BEE transactions will each have a different impact on the
share-price of companies embarking on BEE transactions.
4 Acknowledgements
I am grateful to the second author to this paper, Professor Elizabeth Pienaar, for her
guidance and supervision throughout the research project.
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RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Charles Nsibande and Elizabeth Pienaar, pp 1438-1445
5 References
Brewis J. (2000), ‘Most mergers and acquisition deals fail to add value’, Corporate
Finance, Volume 182, Issue 8.
Chevalier, J. and Ellison, J. (1999), ‘Are some mutual fund managers better than others?
Cross-sectional patterns in behavior and performance’, Journal of Finance, Volume
54, Issue 3, Page 875–899.
Copeland, T.E. and Weston, F.J.(1988), Financial Theory and Corporate Theory, 3rd
edition.
Reading, MA: Edison Wesley.
Dehning, B and Stratopoulos, T. (2002), ‘DuPont analysis of an IT-enabled competitive
advantage’, International Journal of Accounting Information Systems, Volume 3,
page 165–176.
Frankfurter, G.M. and Gunay, E. (1993), ‘Management buyouts and anticipated gains to
shareholders – theory and testing’, International Review of Financial Analysis,
Volume 2, Issue 1, Page 35 -55.
Fitzgerald, G. and Willcocks, L.(1994), ‘Contracts and partnerships in the outsourcing
of IT. In Huff, S.L., Munro, M.C. and DeGross, J.L. (eds.), Proceedings of the
Fifteenth International Conference on Information Systems’.
Atlanta: Association for Information Systems, page 91-98.
Himmelberg, C.P., Hubbard, R.G. and Palia, D. (1999), ‘Understanding the
determinants of managerial ownership and the link between ownership and
performance’, Journal of Financial Economics, Volume 53, Page 353 – 384.
Kakabadse, A. and Kakabadse, N. (2003), ‘Outsourcing best practice: Transformational
and transactional considerations’, Knowledge and Process Management, Volume
10, Issue 1, Page 60-72
Kallaf, A. and Skantz, T.R. (2007) ‘The effects of information technology expertise on
the market value of a firm’, Journal of Information Systems, Volume 21, Number 1,
Page 83 – 105.
Kaplan, S (1989), ‘The effects of management buyouts on operating performance and
value’, Journal of Financial Economics, Volume 24, Issue 2, Page 217 – 254.
Kato, H. K., Lemmon, M., Luo, M. and Schallheim, J (2005), ‘An empirical
examination of the costs and benefits of executive stock options: Evidence from
Japan’, Journal of Financial Economics, Volume 78, Issue 2, Pages 435-461.
Lee, J.N. and Kim, Y.G. (1999), ‘Effects of partnership quality on IS outsourcing
success: Conceptual framework and empirical evidence’, Journal of Management
Information Systems, Volume15, Issue 4, page 29-61.
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RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Charles Nsibande and Elizabeth Pienaar, pp 1438-1445
Oh, W., Gallivan, M. J., and Kim, J.W. (2006), ‘The market's perception of the
transactional risks of information technology outsourcing announcements’, Journal of
Management Information Systems, Volume 22, Number 4, page 271-303.
Oyer, P and Schaefer, S (2004), ‘Why do some firms give stock options to all
employees?: An empirical examination of alternative theories’, Journal of Financial
Economics, Volume 76, Issue 1, Page 99 – 133.
Rockart, M., J., Earl, J. and Ross, J. W (1996), Eight imperatives for the new IT
organization’, Sloan Management Review, Fall, Page 43–56.
Sesil, J.C., Kroumova, M, K., Blasi, J. R. and Kruse, D. L. (2002), ‘Broad based
employee stock options in US “new economy” firms’, British Journal of Industrial
Relations, Volume 40, Issue 2, page 273 – 294.
Smit, C.J.B. and Ward, M.J.D. (2007), ‘The impact of large acquisitions on the share
price and operating financial performance of acquiring companies listed on the JSE’,
Investment Analysts Journal, Number 65, Page 5 – 14.
Smith, A. J. (1990), ‘Corporate ownership structure and performance: the case of
management buyouts’, Journal of Financial Economics, Volume 27, Issue 1, Page
143 – 164.
Scythe, N. C. (1995), ‘Apartheid Legislation in South Africa’, LLM Thesis,
Johannesburg, University of Witwatersrand,
http://en.wikipedia.org/wiki/Apartheid_legislation_in_South_Africa, viewed
19/06/2009.
Swaminathan, V., Murshed, F. and Hullard, J. (2008), ‘Value creation following merger
and acquisition announcements: the role of strategic emphasis alignment’, Journal
of Marketing Research, Volume XLV, Page 33 – 47
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Pierre Oosthuizen and Basie Verster, pp 1446-1461
The role of law and legislation in quantity surveying maturity
Pierre Oosthuizen1 and Basie Verster1
1
Department of Quantity Surveying and Construction Management,
University of the Free State, Bloemfontein, RSA
Email: [email protected]; [email protected]
Abstract:
Proposal: The quantity surveying profession is interlaced within Law and Legislation.
Previous research by the Department of Quantity Surveying and Construction
Management at the University of the Free State showed that law and legislation is a key
dimension indicating quantity surveying maturity. The South African Act 49 of 2000
provides for the establishment of a juristic body known as the South African Council for
the Quantity Surveying Profession (SACQSP) to protect the public and regulate and
improve the quantity surveying profession. During 2008 the Council for the Built
Environment, enacted by Act 43 of 2000, proposed a single juristic body to serve as an
umbrella council for architects, engineers, project- and construction managers, and
quantity surveyors. This proposal was put on hold by the Minister of Public Works on
the 9th of October 2008. This paper investigates the role and necessity of quantity
surveying legislation and the influence thereof on quantity surveying maturity.
Methodology: The South African Quantity Surveying Profession Act 49 of 2000 and
the Council for the Built Environment Act 43 of 2000 is scrutinised. This paper also
tests the proposal of the Council for the Built Environment (CBE) as well as the
response from the SACQSP and other building industry councils. The reasons the
Minister of Public Works decided to put the amendment proposal on hold are also
investigated.
Conclusion: South African legislation plays an integral role in quantity surveying
maturity and the development of the quantity surveying profession. Legislation protects
the South African public in their use of professional quantity surveying services.
Value: Light is shed on the reasoning behind the CBE’s proposed amendments and the
Minister of Public Works’ decisions. The outcomes may assist with the decision
making processes for amendments to current and future legislation.
Practical implications: The SACQSP contributes to the growth and development of the
SA economy by facilitating the production of appropriately qualified quantity
surveyors. The SACQSP also ensures adherence to national and international
recognised codes of practice by the profession. The SACQSP therefore plays an
integral part in the maturity of South African quantity surveyors, the quantity surveying
profession and society.
Key words: Law and Legislation, Quantity Surveying Maturity, Quantity Surveying
Act
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RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Pierre Oosthuizen and Basie Verster, pp 1446-1461
1. Introduction
Not all professions within a specific country are governed by Law and Legislation. The
status of many professions as learned societies relies on the need for the services
required by the market. Discipline and control in respect of ethics and standards are
upheld by established professional bodies such as the Royal Institute for Charted
Surveyors (RICS), International Cost Engineering Council (ICEC) and Charted Institute
of Building (CIOB) (Verster, Hauptfleish and Kotze, 2008).
Hypothetically the South African quantity surveying profession is provident to be
governed by an regulating act i.e. act 49 of 2000. This act aims to ensure standards and
discipline in respect of the profession by means of the Council for the Quantity
Surveying Profession (SACQSP). Furthermore South African quantity surveyors may
obtain membership to the Association of South African Quantity Surveyors (ASAQS)
instituted by the same act. The ASAQS assist their members through a number of
products and services.
The Council for the Built Environment where however of the opinion that the act does
not contribute to transformation and felt that the technical procedures as to how to
implement the transformational issues are not in place (Wortmann, 2008: E-mail
correspondence).
Subsequently the Council for the Build Environment (CBE), the South African Council
for the Quantity Surveying Profession (SACQSP), the proposed alternative from the
CBE and the reaction to the proposal from the SACQSP are being reviewed.
The quantitative study follow the qualitative study. The quantitative study attempts to
identify the importance of the SACQSP to the South African public and South African
Quantity Surveying Profession through a perception questionnaire.
Through previous research by the Department of Quantity Surveying and Construction
Management at the University of the Free State, Law and Legislation has been
identified as one of the dimensions of a matured quantity surveying society since the
quantity surveying profession is governed by law and legislation.
The value of being knowledgeable about the maturity of a society was introduced to the
University of the Free State by the Project Management Group of the Wirtschafts
University of Economics and Business Administration, Vienna (Austria) in 2005. To
appreciate the maturity of a society a maturity model of the society may be compiled to
identify the societies current stand and its strengths and weaknesses. The maturity
model may also be used as a management tool to strategize for future development
(Garies, 2005: 32).
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2. Qualitative Study
2.1 The Council for the Built Environment (CBE)
The CBE was established as a statutory body by Parliament (Act 43 of 2000) to provide
leadership to, and ensure good governance of the professions, while serving as a two-
way channel for co-ordination input, into the structuring and development process,
between the built environment professions and government (SACQSP, 2009a: online).
The Act was passed by Parliament along with the suit of Acts regulating and re-
establishing the six built environment councils for Architects, Engineers, Landscape
Architects, Quantity Surveyors, Project and Construction Managers and Property
Valuers (SACQSP, 2009a: online).
The CBE Act was introduced in order to address certain shortcomings in the built
environment and to enable a climate for ongoing transformation and development of the
professions to take place. In terms of the CBE Act the council is, among others,
responsible for transforming the professions act as a conduit between Government and
the built environment professions, fostering growth of the professions and contributing
to the creation of a dynamic built environment (CBE, 2009: online).
Table 1 illustrates the different statutory councils and their position towards the CBE.
Table 1. Statutory councils for the built environment
(Source: SACQSP, 2009b: online)
South African Council for the
Quantity Surveying Profession
(SACQSP)
South African Council for the
↔
Architecture Profession
(SACAP)
Engineering Council of South
↔
Africa
(ECSA)
South African Council for the
↔ South African Council for the
↔
Built Environment (CBE)
Landscape Architecture
Profession
(SACLAP)
South African Council for the
Project and Construction
Management Profession
(SACPCMP)
↔
South African Council for the
Property Valuation Profession
(SACPVP) ↔
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2.1.1 Functions of the Council for the Built Environment (CBE)
The objectives of the council for the built environment are to:
• Promote and protect the interest of the public in the built environment.
• Promote and maintain a sustainable built environment and natural environment.
• Promote ongoing human resource development in the built environment.
• Facilitate participation by the built environment professions in integrated
development in the context of national goals.
• Promote appropriate standards of health, safety and environmental protection
within the built environment.
• Promote sound governance of the built environment professions.
• Promote liaison in the built environment in the field of training, both in the
Republic of South Africa and elsewhere, and to promote the standards of such
training in the republic.
• Serve as a forum where the representatives of the built environment professions
may discuss the relevant:
o Required qualifications;
o Standards of education;
o Training and competence;
o Promotion of professional status; and
o Legislation impact on the built environment; and
• Ensure the uniform application of norms and guidelines set by the councils for
the professions through the built environment (CBE, 2009: online).
SACQSP SACAP ECSA CBE
SACLAP SACPCMP SACPVP
Public
Department of
Public Works
Figure 1. Illustration of the current South African Built Environment
(Source: Own figure)
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Figure 1 illustrate the positioning of the CBE within the South Africa Built
Environment.
2.2 The South African Council for the Quantity Surveying Profession
(SACQSP)
The South African Quantity Surveying Practice has benefited from a governing
institution in one form or another since 1903 (Norman, 1985: 16).
The Association of South African Quantity Surveyors was formed in 1971 with the
proclamation of Act 36 of 1970. This legislation with subsequent amendments
governed the profession up until the establishment of the SACQSP in terms of the
Quantity Surveying Professions Act (Act 49 of 2000) which was promulgated on 26
November 2000 and came into operation on 26 January 2001 (CBE, 2007).
2.2.1 Functions of the South African Council for the Quantity Surveying Profession
(SACQSP)
The SACQSP performs a variety of functions, such as:
• Setting and auditing of academic standards for processes of registration through
a process of accreditation of quantity surveying programmes at universities and
technicons.
• Setting and auditing of professional development standards through the
provision of guidelines which set out post qualification requirements for
registration in categories of registration.
• Prescribing requirements for Continuing Professional Development and
determining the period which registered persons must apply for renewal of their
registrations.
• Prescribing a Code of Conduct and Code of Practice and enforcing such conduct
through an Investigating Committee and a Disciplinary Tribunal.
• Identification of work of a quantity surveying nature that should be reserved for
registered persons by the CBE, after consultation with the Competition Board.
• Advising the CBE and Minister of Public Works on matters relating to the
quantity surveying profession and cognate matters.
• Recognition of professional associations.
• Publication of a guideline tariff of fees for consulting work, in consultation with
government, the profession and industry (SACQSP(a), 2009: online)
Figure 2 illustrates the abovementioned responsibilities of the various built environment
councils, specifically the SACQSP, towards the stakeholders within the built
environment.
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A B C D E F G H I J
frameworks for A, B, C, D & E
Review of appeals arising from
promote education and training
Review of Built Environment
Demarcate work for different
Coordinate liaison with key
Discipline of Professionals
Validate qualifications and
Professional Development
Accredited Construction
professional categories
Register Professionals
Report to the Minister
statutory stakeholders
Develop Co-ordinate
disciplinary hearings
↔
programs
policy
STAKEHOLDERS
1 Minister of Public Works
2 Department of Public Works
3 Statutory Bodies: CIDB, CETA, CHE, Competitions Commission
4 The Public
5 Professional and Voluntary Associations
6 Education and Training Institutions
Figure 2. Functions of the South African Council for the Quantity Surveying Profession
(Source: SACQSP, 2009b: online)
From figure 2 it is clear that the SACQSP and other statutory councils for the built
environment fulfil a important coordinating function between the built environment and
the Department of Public Works. Figure 2 also shows that the Department of Public
Works is only one of six stakeholders serviced by the SACQSP.
Figure 3 illustrates the positioning of the statutory councils in respect of the
responsibilities towards the built environment and the responsibilities towards the
Minister – and Department of Public Works according to Act 42 of 2000.
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(A) (B) (C) (D) (E) (F) (G) (H)
frameworks for A, B, C, D & E
Review of appeals arising from
promote education and training
Demarcate work for different
Coordinate liaison with key
Discipline of Professionals
Validate qualifications and
Professional Development
Accredited Construction
professional categories
Register Professionals
statutory stakeholders
Develop Co-ordinate
disciplinary hearings
programs
STATUTORY COUNCILS
(I) Review of Built Environment policy
(J) Report .
MINISTER - & DEPARTMENT
OF PUBLIC WORKS
Figure 3. Positioning of statutory councils for the built environment .
(Source: Own figure) .
3. Proposal From The Council For The Built Environment
3.1 Preamble from the Minister of Public Works
In the preamble to the proposed amendment to the statutory regulatory framework of the
built environment professions by the Minister of Public Works, he mentioned that since
2000 the Department of Public Works (DPW) have had to grapple with issues of access
to the professions. He also mentioned that there are shortcomings in the present
regulatory model as well as a need for the organised professions to serve the imperatives
of the national democratic revolution (South Africa. Department of Public Works, 2008:
3).
3.2 The DPW Mid-Term Review: Shortcomings In The Present Regulatory
Framework
In 2003 the Department of Public Works commissioned a study entitled “The role of the
Built Environment Professions in Enhancing Construction Industry Development in
South Africa”. This study was commissioned by the DPW as part of a mid-term review
of the DPW’s policies pertaining to the built environment professions. Both the CBE
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and the professional councils were required to give feedback on the progress of the
councils towards:
• Implementing policy;
• Constraints being faced by the various councils in implementing policy;
• Constraints in policy and legislation enabling councils to implement policy; and
• Future actions required from the DPW to implement policy.
Consequent upon the mid-term review and reports provided to the DPW, the DPW has
identified a number of challenges facing the built environment professions. These
challenges have, in turn, given rise to a need for the DPW to determine whether the
legislation governing the built environment professions and the professional councils
constituted in terms thereof, fulfil their mandate and whether there is a need to amend
existing legislation to enable the CBE and the professional councils to fulfil their
legislative mandate (South Africa. Department of Public Works, 2008: 6,7).
3.3 The DPW mid-term review: Findings
The following challenges facing the built environment professions have been identified:
• The emigration of built environment professionals.
• Limited access to built environment educational programmes, particularly for
historical disadvantaged individuals.
• Limited opportunities for potential graduates to get practical training in the
working environment – a requirement for graduating.
• The law level or registration of built environment professionals with the
professional councils, resulting in insufficient funding of professional councils.
• The lack of integrated planning and action by the professional councils and the
CBE. The current legislative framework provides for the professional councils
and CBE to be independent juristic bodies and accordingly there is no strong
link between the CBE and the professional councils in terms of executing
Government policy and their legislative mandate.
• There is a lack of alignment between the work of the professional councils and
national imperatives that changes from time to time (South Africa. Department
of Public Works, 2008: 7,8).
Following the study commissioned by the DPW in 2003 and the resultant interaction
between the DPW and the resultant interaction between the DPW, the CBE and the
professional councils, the DPW is of the view to review the current legislative
framework within which the built environment profession operate (South Africa.
Department of Public Works, 2008: 7).
3.4 The implications of the proposal by the Minister of Public Works
The Minister proposes that a single juristic body be established to be named the “South
African Council for the Built Environment” (SACBE). This body will serve as an
umbrella body for professional boards to substitute the current professional councils.
(South Africa. Department of Public Works, 2008: 12).
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The current professional councils will be converted into professional boards which do
not have juristic personality. Although the professional boards are not independent
entities they will retain autonomy in respect of matters relating to the built environment
professions which they regulate (South Africa. Department of Public Works, 2008: 15).
Figure 4 illustrates the proposal by the Minister of Public Works.
Department of
Public Works
SACBE
Board Board Board Board Board Board
PUBLIC
Figure 4. Proposal by the Minister of Public Works .
(Source: Own figure) .
The impact of the proposal by the Minister of Public Works is identifiable by comparing
Figure 1 and Figure 4.
Any decision of a professional board, relating to a matter falling entirely within its
ambit, shall not be subject to ratification by the council and the council shall for this
purpose determine whether a matter falls entirely within the ambit of a professional
board. Although it is proposed that professional boards no longer be independent
entities it is clear from the proposed functions and powers of the SACBE and the
professional boards that there will be a clear distinction between the powers and
functions of the SACBE and those of the professional boards (South Africa. Department
of Public Works, 2008: 18).
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The proposed changes in policy thus seek to establish a principle in terms of which the
SACBE is given the overarching responsibility of dealing with all matters relating to
strategic policy, implementation of Government policy and advising Government on
matters falling within the scope of the built environment professions (South Africa.
Department of Public Works, 2008: 18).
The professional boards on the other hand retain function of self regulation of the
profession in matters relating to accreditation of training institutions, education and
training, registration of professionals and maintaining and enhancing the dignity as well
as the integrity of the relevant built environment professions. This role the professional
boards will fulfil under the guidance of the SACBE, which will ensure universal
application of norms and standards by the professional boards (South Africa.
Department of Public Works, 2008: 18, 19).
It is further envisaged by the Minister of Public Works that the current professional
councils will cease to exist and all their assets, liabilities, rights and obligations will be
transferred to the SACBE. This will enable the SACBE to have the necessary
economies of scale in regard to financial, human and other physical recourses to support
all the professional boards in fulfilling their legislative mandate (South Africa.
Department of Public Works, 2008: 19).
4. Reaction From The South African Council For The Quantity
Surveying Profession (SACQSP)
In reaction to the proposal from the Minister of Public Works, Prof Gaye le Roux
(2008: 1), as Registrar on behalf of SACQSP in a letter dated 28 March 2008,
repudiated all the allegations with regard to the lack of integrated planning between the
CBE and the SACQSP. According to Prof le Roux the SACQSP has responded
willingly and readily to all requests by, and mandated submissions to, the CBE.
Le Roux (2008: 1) made it clear that the SACQSP finds the proposed amendments of
the statutory regulatory framework as an unpleasant surprise. The SACQSP were not
consulted by the CBE prior to the decision to revise the current statutory regulatory
framework according to Le Roux (2008: 1).
With reference to the findings of the DPW’s 2003 mid-term review of the built
environment profession, Le Roux (2008: 1) stated it on record that no interaction
between the Council and the DPW occurred, specifically in respect of the revered mid-
term review.
The SACQSP are cautious that a number of concerns such as immigration of built
environment professionals, limited access to educational programmes and low levels of
registration of professionals are not applicable in the extent context. According to the
SACQSP the lack of integrated planning and action by the professional councils and the
CBE is entirely rectifiable by the CBE and not due to a lack of willingness by the
councils (Le Roux, 2008: 2).
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The SACQSP noted that the shortcomings do not apply equally to all the statutory
councils, and the fact that some councils are challenged by some or all of these
shortcomings should not be used against all councils. The SACQSP also noted that the
trajectory of accomplishments that supported the national imperatives in respect of the
quantity surveying profession could be demonstrated with facts by the SACQSP.
The SACQSP is concerned that the proposed oversight structure and functions of the
proposed SACBE is too unwieldy to lack the cited shortcomings in the present
regulatory frame work (Le Roux, 2008: 2).
5. Quantitative Study
5.1 The Dimensions of a Matured Quantity Surveying Society
During 2008 the University of the Free State conducted a research study to determine
the most important dimensions for a matured Quantity Surveying Society. A selected
group of 107 registered professional quantity surveyors where requested to respond to a
questionnaire formulated by the Department of Quantity Surveying and Construction
Management. Fifty six responses were received from the invited group reflecting a fifty
two percent (52%) response rate.
The questions in the questionnaire were answered individually by the respondents in
order to determine their perceived opinion on the importance of each dimension’s role
and influence on the profile of the quantity surveying profession, specifically related to
South Africa. However, this may also be true in respect of quantity surveying in other
social systems and/or nations and perhaps for other professions.
The respondents were also requested to give their opinions on the level of maturity of
the quantity surveying profession related to the 11 dimensions, among others, Law and
Legislation. This was a perception test only, but may be valuable to understand the
anticipated difference between opinion of maturity and perhaps the under-valuation by
respondents of a very important dimension or determinants for a learned society
(Verster, et al., 2008).
Table 2 shows the respondents’ response averages for all twenty questions related to the
11 dimensions as determinants for the South African quantity surveying profession, to
be considered a mature and learned society (Verster, 2008: 11).
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Table 2. The importance of Maturity Dimensions
(Source: Verster, 2008: 11)
1 - Dimension Average on 1 to 5 scale Percentages
A. Education 4.0 80%
B. Training 4.0 80%
C. Mentorship 4.6 92%
D. CPD 4.0 80%
E. Research 4.0 80%
F. Marketing 4.1 82%
G. Infrastructure 4.0 80%
H. Law and Legislation 4.7 94%
I. Standardisation 4.4 88%
J. Management Practice 4.1 82%
K. Total Quality Management 3.8 76%
2 - Opinion
Quantity surveyors as a mature
learned society 3.9 78%
Results in Table 2 were captured from using a 5 point Likert scale where A to K ranging
from 1 = not important and 5 = most important. For testing opinions shown as 2:, a 5
point Likert scale was also used where 1 = not at all and 5 = completely.
Respondents indicated that all 11 dimensions are seen as very important to establish a
mature learned society. The weighting of each could not be done from the results and
more research is needed, but it is reasonably clear that the dimensions selected by the
research group are seen as important especially law and legislation.
The respondents also indicated strongly that Law and Legislation as a dimension to
determine the maturity of a quantity surveying society is very important with an average
response of ninety four percent (94%). Law, acts, regulations and professional ethics
were almost unanimously identified as vitally important.
The questionnaire also tested the perception of the respondents to establish the
importance of Continuing Professional Development (CPD), and their opinions in
respect of the current number of hours per year required by the SACQSP. The
respondents indicated with an average response of eighty percent (80%) that CPD is an
important dimension which contributes towards the maturity of a professional society.
This strengthens the necessity for a constitutional body, like the SACQSP, to manage
the CPD requirements.
The aim of legislation is to protect the South African public in their use of professional
Quantity Surveying services. The SACQSP is the nurturing body which specifically
addresses the law, acts, regulations and professional ethics in the Quantity Surveying
Profession(South Africa, 2000).
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The opinions of respondents related to sub-dimensions may also be noteworthy. Sub-
dimensions are seen as elements that may be important in supporting the eleven main
dimensions.
Table 3 illustrates the averages on a 5 point Likert scale, ranging from 1 = not important
and 5 = most important to measure sub-dimensions related to each of the 11 dimensions
included in the questionnaire.
Table 3. Sub-dimensions: the expected level of graduate education and profile of professionals
(Source: Verster, 2008: 11)
SUB-DIMENSIONS 1-5 Scale % Average %
Education 4.00 80%
1.1. An honours degree 4.4 88%
1.2. Number of Masters and Ph.D degrees present
in a professional society 3.4 68%
1.3. Education providers with international
accreditation 4.3 86%
1.4. Education of technicians 3.9 78%
Training 4.05 81%
2.1. Post-honours training (two years) 4.0 80%
2.2. SACQSP (three years) 4.1 82%
CPD 4.00 80%
4.1. Obligatory career CPD 4.2 84%
4.2. SACQSP rules: 25 hours CPD per year 3.8 76%
Marketing 4.10 82%
6.1. Identity and status of profession’s growth 4.1 82%
6.2. Profession’s official marketing strategy 4.1 82%
Infrastructure 4.00 80%
7.1. Institutional support and control 4.0 80%
7.2. Training and technical support (EduTech) 4.0 80%
Law and Legislation 4.70 94%
8.1. Discipline and control by Act, regulations, code 4.7 94%
8.2. Professional ethics 4.7 94%
An honours degree with international accreditation as entry level is identified by the
respondents as most important for a mature professional society.
Currently this responsibility is delegated to the SACQSP through Act 49 of 2000 by the
South African Government (South Africa, 2000).
In 2.2 of Table 3 the respondents indicated with an average of eighty two percent (82%)
that the current post-honours training period of three years as required by the SACQSP
is a necessity.
Analysing the above, it is clear that in respect of the sub-dimensions that respondents
were almost unanimous in identifying the value of a Quantity Surveying Act and a
statutory body like Act 49 of 2000 and the SACQSP.
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6. Conclusion
The quantitative study showed that South African legislation plays an integral role in
quantity surveying maturity and the development of the quantity surveying profession.
Legislation protects the South African public in their use of professional quantity
surveying services.
The literature review indicated that the Council for the Built Environment are of the
opinion that the different statutory councils are not performing according to
expectations.
Even some of the statutory councils are anxious about the built environment in South
Africa. According to The Sunday Independent (2008: 9), professional experts in the
South African construction industry are concerned about a downward decline in the
various technical professions, especially the engineering profession.
The Minister of Public Works proposed amendments to the statutory regulatory
framework of the built environment professions as a counter action to prevent further
deterioration of the professions and the building industry.
On reaction to the proposal the Engineering Council of South Africa (ECSA) states in
there media release on 6 March 2008 that it has become increasingly important for the
ECSA to remain autonomous because of issues of national crises, which can be linked
to the engineering skills shortage in South Africa. ECSA highlights furthermore the
role the organisation plays not only to the profession, but to the industry and all other
relevant stakeholders and target publics (Goba, 2008: 1).
It was noticed that the ECSA and the SACQSP opposed the proposed amendments of
the statutory regulatory framework of the built environment professions.
The SACQSP was of the opinion that the proposed structure separates responsibility
and accountability and will likely create governance problems. The SACQSP felt it is
inconceivable that a single board will effectively and adequately monitor and control
activities of boards that oversee the roles of the various built environment professions
with wide ranging expertise and interests (Le Roux, 2008: 2).
7. Recommendation
In October 2008 the Minister of Public Works placed the proposed amendment on hold
till further notice.
It was noticed that both the SACQSP and the ECSA claimed that no interaction between
the CBE and the statutory councils occurred, specifically in respect of the referred mid-
term review or the proposed amendments to the statutory regulatory framework of the
built environment professions.
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Since the proposed amendment was based on the mid-term review it is recommended
that the CBE should make the mid-term review public and open for discussion by the
statutory councils.
Should the Minister of Public Works feels it is still necessary to make amendments to
the statutory regulatory framework it is recommended that the Minister first consult
with all the statutory councils in order to find a common solution.
It is further recommended that the Minister of Public Works could allow the statutory
councils including the CBE to remain functional for a predetermined trail period. This
may indicate the functionality of the current statutory regulatory framework.
Furthermore each statutory council could incorporate a CBE division within each
council which could streamline the communication between the CBE and the other
statutory councils.
Finally it is proposed researchers undertake a quantitative study with regard to the
functionality of the current statutory framework. Should the study show that the current
statutory framework is functional it may be used as recommendation not to amend the
current statutory framework.
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8. References
CBE. 2009. About CBE. [Online]. Available from: <http://www.cbe.org.za> [Accessed
13 May 2009]
Garies, R. 2005. Happy Projects!. 1st ed. Vienna. Manz.
Goba, T.T. 2008. Engineering Council of South Africa under threat of losing autonomy.
Media Release, 6 March. Johannesburg.
Le Roux, G. 2008. Registrar. Comment by SA Council for the Quantity Surveying
Profession. 28 March. Johannesburg.
Norman, R.L. 1985. History of the Quantity Surveying Profession in South Africa.
Johannesburg: Association of South African Quantity Surveyors.
SACQSP. 2009a. Legal Framework. [Online]. Available from:
<http://www.sacqsp.org.za/html/legal.html> [Accessed 13 May 2009]
SACQSP. 2009b. Structure. [Online]. Available from:
<http://www.sacqsp.org.za/html/structure.html> [Accessed 13 May 2009]
South Africa. Department of Public Works. 2008. Draft Policy Document on the
Proposed Amendments of the Statutory Regulatory Framework of the Built
Environment Professions. Cape Town: Government printer.
South Africa. 2000. Quantity Surveying Profession act, Act 49 of 2000. Pretoria:
Government printer.
Sparks, D. 2008. Bill will deprive SA of its remaining civil engineers. Sunday
Independent, 26 October, p.9.
Verster, J.J.P. Hauptfleisch, A.C. and Kotze, B.G. 2008. Dimensions of quantity
surveying maturity and the development of the profession towards a learned society.
Pacific Association of Quantity Surveyors (PAQS). 17 – 19 June 2008. Edmonton,
Canada.
Wortmann, E. 2008. (Executive Director of the Association of South African Quantity
Surveyors). E-mail correspondence. 10 December, Midrand.
- 1461 -
COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Joanna Poon, pp 1462-1474
Use of moral theory to analyse the RICS Nine Core Values
and RICS Rules of Conduct
Dr. Joanna Poon1
1
School of Architecture, Design and the Built Environment,
Nottingham Trent University, Nottingham, NG1 4BU,
United Kingdom
Email: [email protected]
Abstract:
Ethics is a vitally important issue for professionals. Ethics is a vitally important issue
for professionals. The general public has trust and belief in professionals because of
their professional knowledge and the high quality services that they can offer, but it is
also due to their high level of conduct of the professionals.
The aim of this paper is to discuss the use of moral theory as a framework to analyse the
nine RICS Core Values (RICS, 2006) and the RICS Rules of Conduct for Members
(RICS, 2007). The chosen moral theories are `deontology', 'utilitarianism' and 'virtue
ethics'. Data were collected through semi-structured interviews, comprising twelve
chartered surveyors from the three major RICS disciplines: Building Surveying,
Quantity Surveying and General Practice. Their views on the application of the moral
theory to explain the RICS ethical principles were gathered.
The interviewees have mixed opinion on the use of moral theory on explaining RICS
Core Value sand Rules of Conduct. There is a slightly stronger view that deontology is
the most suitable moral theory. This is because the surveyors do not know the outcome
when they are working on it, so the best strategy is to ensure they have undertaken the
process correctly. On the other hand, the interviewees who have been RICS members
for longer and have more involvement with the RICS professional ethics tend to think
that virtue ethics is the most appropriate theory to explain RICS ethical standards as
they understand the importance of the correct ‘result’ and ‘process’.
The interviewees generally welcome the move from the 60-page RICS Rule Book to 10-
page RICS Rules of Conduct. However, they have suggested some improvement, which
is to refer to the separate Policies and Helpsheets on Handling Clients Money,
Complaints Handling Procedures and Professional Indemnity Insurance in the Rules of
Conduct.
Keywords:
Ethics, Moral Theory, RICS Rules of Conduct, RICS Core Values
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1 Introduction
Ethics is a vitally important issue for professionals. A profession is largely a creature of
public demand. Such organisations remain in existence because of the continuing need
by the public for them and the services of their members. The underlying reason for a
high level of conduct by any profession is the need for the public to have confidence in
the quality of the services offered by the profession. Professions can only survive if the
public have confidence in them. For a profession to command public confidence there
are two essential elements, professional knowledge and ethical conduct (Chalkley,
1994). Therefore, the cost of ignorance of ethics is potentially very high. Aside from
any effects on the professionals themselves, it can also have a significant impact on the
quality of services that are provided to clients and thereby on the resultant public
perception and image of the profession.
Unethical behaviour can impose negative costs at personal, group and organisational
levels, such as increasing client dissatisfaction, decreasing productivity, profitability
and low working morale. An organisation that constantly creates a negative ethical
impact will encounter a diminishing market for its services and withdrawal of public
approval. This is especially the case for the construction industry due to the inter-
organisational relationship of the project team. Suen et. al. (2006) echoed this comment,
stating ‘since construction professionals are working under temporary organisational
settings, which means, in practice, setting up special units to support ethical conduct
they face certain technical problems. There is no doubt that managing ethical behaviour
in construction organizations is possible, but it is not an easy task’ (p.264).
Bowen et. al. (2007) further listed the various business and professional ethical issues
facing the construction industry, including conflicts of interest, negligence of customer
needs, unfair competition, poor professional integrity and responsibilities. The recent
‘price-fixing’ scandal shows that there is ethical concern for the UK construction
industry. On 17 April 2008, the Office of Fair Trading (OFT) announced it had issued a
Statement of Objections (SO) to 112 companies alleged to have engaged in bid rigging
activities/ anti-competitive behaviour, particularly covering pricing, in the construction
sector. This allegation is not a one-off accusation for the construction industry, the
evidence received by the OFT in the course of its investigation indicated that cover
pricing was a widespread and endemic practice in the construction industry as a whole
(OFT, 2008). The finding of a FMI Corp survey conducted in USA in 2004 also showed
that bid shopping is one of most critical ethical issues facing the construction industry
(Business Environment, 2004; Contractor’s Business Management Report, 2004 and
EC&M, 2004). Eighty-four percent (270) of respondents of the same survey, including
owners, architects, construction managers, consultants, contractors and subcontractors
expressed their concern on decreasing ethical standards, said they had ‘experienced,
encountered or observed construction industry-related acts or transactions that they
would consider unethical in the past year’. Sixty-one percent of the respondents think
that the industry has been ‘tainted’ by unethical acts. Research on professional ethics of
surveyors conducted in the UK shared the same finding: 62 (38%) respondents think
that ethical standards decreased over the last decade (Poon, 2006).
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Some former British colonial territories, such as Hong Kong, have also shared concern
on ethical issues for several decades. During the 1980s, the most notorious ethical
scandal of the Hong Kong construction industry was ‘salt water’ buildings. About 100
reinforced concrete building blocks were noted to be deteriorating with abnormal speed
and after only 15 years of building life. In the 1990s and 2000s, there have been ‘short-
piling’ construction scams and other recent issues of unethical behaviour for
construction professionals including corruption, overcharge and defective works. The
‘Salengane’ case discovered some unqualified suppliers had become approved
contractors of the Hong Kong government by bribing local civil servants. The case
involved a total of HK$16.8 million of loss.
The cost of unethical behaviour is high. There are not only the financial costs to the
companies which deliver the services, but also to the whole industry. According to the
FMI Corp survey, 61% of respondents believe that unethical behaviour affects the cost
of getting projects built. Thirty-five percent of respondents think that 1% to 2% of the
total project cost is the cost of unethical behaviour, while twenty-five percent of
respondents estimated that between 2% to 5% of the total cost is lost because of
different types of unethical behaviour conducted by the construction project team
(Parson, 2005). Jeff Tickal, wrote in ‘The Contractor’s Compass’: ‘the actions of a few
unethical; contractors cloud the reputation of the entire construction industry’
(Contractor’s Business Management Report, 2004: p.12). This is exactly the case for the
recent ‘price fixing’ scandal in the UK which adds further blight to the UK construction
industry, on top of the impact from the recent slow-down in economic conditions.
2. Rationale for conducting this research
Previous research on the professional ethics of construction and surveying professionals
has been generally a-theoretical. The following are typical examples: the impacts of
ethical dilemmas on surveyors’ decision making; identifying typical ethical problems
for the surveying profession and their causes; identifying surveyors’ views on ethical
behaviour; studying surveyors’ rating and ranking of stakeholders’ interests when they
face ethical dilemmas and finally studying how professional ethics influence
construction performance. However, there is lack of research on the Codes of Practice
of professional organisations, which to codify some degree the relationship between
professionals, their professional body and the wider society. In addition, previous
research has not used moral theories to study and analyse professional ethics for
construction and surveying professionals.
The aim of this research is to investigate surveyors’ understanding of professional
ethics. It will explore the theoretical foundations of professional ethics. It will also
investigate how the nine Core Values of the Royal Institution of Chartered Surveyors
(RICS) (RICS, 2006) and the current RICS Rules of Conduct for Members (RICS,
2007) can be explained by the traditional moral theories. This reason for focusing on
Rules of Conduct for Members is that there has been longer standing history of having a
Code of Practice for Members. As the first stage of the wider research project, the
author intended to focus on the aspect which is more familiar with the respondents.
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3. Literature review
3.1 Moral Theories
3.1.1 Deontology
Deontology or duty based theory, is an approach to ethics that focuses on the rightness
or wrongness of actions themselves. This can be contrasted with the consequences of
those actions as the foundation for rightness, for example, in the consequentialist theory
of utilitarianism.
The rigorous version of deontology was developed by Kant (1785/ 1898). It focuses on
duty or moral obligation. The term ‘deon’ comes from Greek and means duty, so in the
general sense a deontological theory is concerned with our duties, obligations and
responsibilities to others.
Kant saw a sharp difference between self-interest and morality and proposes that an
action only has moral value if is performed from duty. Kant proposes his Categorical
Imperative (1785/1898, p.438):
‘Act only on that maxim whereby thou cast at the same time will that it should
become universal law’
A different version of the Categorical Imperative reads (Kant, 1785/ 1898, p.47):
‘So act as to treat humanity, whether in thine own person or in that of any other,
in every case as an end, never as means only’
3.1.2 Utilitarianism
Utilitarianism is consequentialist theory. It was developed by Bentham (1748/ 1832)
and Mills (1808/ 1873). Under the consequentialist principles, an act's rightness or
wrongness is determined by the goodness or badness of the results from it.
Telelogical or consequentialist ethics judges the rightness or wrongness of an act by its
consequences. The most elaborate consequentialist theory is that of utilitarianism, as
propagated by Bentham (1979/1962). In the definition of his disciple Mills (1981/ 1962,
p.257) stated:
‘Utility, or the Greatest Happiness Principle holds that actions are right in
proportion as they tend to promote happiness, wrong as they tend to produce the
reverse of happiness’
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3.1.3 Virtue ethics
Virtue ethics, in the West, traditionally was developed by Plato and Aristotle. It is a
branch of moral philosophy that emphasises character rather than rules or consequences,
as the key element of ethical thinking. In contrast to the universal emphasis on moral
duty in deontology and on general happiness in utilitarianism (Preuss, 1998), Aristotle
emphasised the importance of a person's character for morality. He suggests that highest
human good is happiness, not in a crude material sense, but in a comprehensive
meaning which carries connotations of flourishing and well-being. Virtue theory
emphasises character, rather than rules or consequences, as the key element of ethical
thinking. This highest good is closely linked to the function of a human being, which is
to obey reason, as this is the main characteristic to set humans apart from other living
beings.
3.2 Development of RICS’s Guidance on Ethical Standards
RICS is an institution with Royal Charter. The objective of the Institution is to
‘maintain and promote the usefulness of the profession for the public advantage’. RICS
has paid great attention to ethical standards for construction and property professionals.
Increasing the ethical standards of surveyors is one of the top priorities of the RICS’s
‘Agenda for Change’. The aim of this Agenda is to increase public recognition of the
value of the RICS qualification as the unrivaled mark of professionalism worldwide.
Under this principle, the RICS has conducted major work with the aim of increasing
ethical standards of its members.
The RICS first published the old ‘Rule Book’ on 1st January 2004 and it was updated in
January 2006. In the 2006 edition (RICS, 2006), the nine RICS Core Values were also
announced. They are:
• Act with integrity
• Always be honest
• Be open and transparent in your dealings
• Be accountable for all your actions
• Know and act within your limitations
• Be objective at all times
• Always treat others with respect
• Set a good example
• Have the courage to make a stand
These principles are adaptable to reflect changes in legislation and changes in society’s
expectations of the profession. The RICS expects members not only to demonstrate a
knowledge and understanding of these principles, but also to demonstrate a commitment
to meet these ethical standards and maintain the integrity of the profession.
The most recent major review of all aspects of the RICS Regulations was undertaken by
Sir Bryan Carsberg in 2004 to 2005 (Carsberg, 2005). As stated in the Carsberg Report
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(2005), Sir Carsberg commented on some principles that have governed his approach to
preparing the Report and formulating his recommendation. He emphasised the
importance of self-regulation which is fundamental to any profession. He stated that
‘strong ethical codes are the heart of what it means to be a profession and a professional
body is therefore fitted to regulate its members. In a professional body, ethics come
together with expertise to create a basis for sound regulation. The public interest in the
United Kingdom has benefited for more than a hundred years from having strong
professional bodies practising self-regulation. The merits of continuing with this system
seem to be clear’ (Carsberg, 2005: p.4).
The new Rules of Conduct for Members and Rules of Conduct for Firms have started to
apply from 4 June 2007 following Carsberg’s review. The aim of the principles is to
help surveyors in doubt about how to handle difficult circumstances or in situations
where there is a danger that members’ professionalism may be compromised. This has
demonstrated that the RICS is committed to maintain the ethical standards of the
surveying profession in order to ensure that the wider public interest is protected.
One of the key changes of the reform package is the reduction of the RICS’s 60-page
Rule Book to fewer than 10 pages of principles, in two parts. The first part covers
individual personal and professional conduct and applies to all RICS members. The
second part covers conduct of business matters and applies to firms. It reduces the
burden of regulations on members and positions RICS as a bold, cutting edge
professional regulator for the 21st Century. It is also the first time in the RICS’s history
that separate regulatory guidance to firms has been offered.
The RICS’ new principles-based Rules of Conduct for Members are:
• Integrity
• Competence
• Service
• Lifelong learning
• Solvency
• Information to RICS
• Co-operation
4. Methodology
The methodology for conducting this research is qualitative in nature. Semi-structured
face-to-face interviews were chosen as the method for collecting data. Quantitative
methods, such as the use of questionnaires were considered to collect data. However,
these were rejected because they were not able to give opportunity for the interviewer to
explain the various approaches to Moral Theory. Also, the views of the participants are
required for this research.
The other types of qualitative data collection strategy, such as focus group, were
considered. These were rejected as the interviewer would like to have detailed
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discussion with each interviewee. Also, it is difficult for the practical arrangement of
focus group as the interviewees are working in different organisations.
The interviewees were selected by the interviewer with the aim of ensuring that there is
a balance of the interviewees, who have different professional backgrounds. An e-mail
was sent out to invite the interviewees to participate in the research projects. Once they
agreed, a document which explains the definition of the three moral theories,
information about the nine RICS Core Values and RICS Rules of Conduct for
Members, the nature of the interview and the interview questions were sent out to them.
The definition and short explanation of the various ethics theories were sent to the
interviewees prior to the interview. These information were abstracted from Section 3 of
the paper. In addition, the detailed description of the RICS Core Values (RICS, 2006)
and RICS Rules of Conduct (RICS, 2007) were also been sent to all interviewees prior
to the interview. At the start of the interview, the interviewer explained the moral
theories and asked the interviewees whether they understand the information of various
moral theories which had been sent to them. The interviewer is prepared to explain the
theories further. Generally speaking, the interviewees who are more experienced and
have involvement in professional ethics have better understanding of the moral theories.
They understand the difference in principles and focuses of these three moral theories.
On the other hand, some of the less experienced interviewees who also have not had
involvement in professional ethics had not heard of these ethics theories and the
interviewer is needed to explain to them in detail.
5. Data Collection
The data was collected through semi-structured interviews with Chartered Surveyors.
Twelve surveyors, include four Building Surveyors (BS), four Quantity Surveyors (QS)
and four General Practice Surveyors (GP), were be interviewed. The reason for focusing
on these three disciplines is that they are major professional areas of the RICS and they
have the largest number of members. The aim of the interviews is to seek targeted
interviewees’ comments on the use of moral theory to explain the RICS Core Values
and RICS Rules of Conduct for the Members.
Firstly, some background information of the interviewees was sought:
• Discipline
• Duration of having full RICS membership
• Current role
• Involvement with the RICS activities, in addition to as a member
• Involvement in issues or activities related to professional ethics
Table 1 shows some background information of the interviewees. The interviewees
were also asked to comment on which moral theory is most suitable to explain the nine
RICS Core Values and RICS Rules of Conduct as overall. Then the interviewees were
also asked to comment on the suitability of the moral theory for each Core Value and
each Rule of Conduct. Furthermore, the interviewees were also asked for their
comments on the improvement of the RICS ethical principles and Rules of Conduct.
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Table 1: Description of Interviewees
Interviewee Discipline Duration of full Involvement with professional ethics
RICS
Membership
(Years)
1 GP 6 Uses professional ethics to underpin his day-
to-day professional practice
2 QS 5 Applied relevant RICS guidance when
teaching relevant subject
3 BS 23 None
4 BS 15 Ask APC candidates professional ethics
related questions at RICS APC1 interview
5 QS 47 None
6 BS 20 None
7 GP 13 • In his current role, he teaches RICS Rules
of Conduct for Undergraduate Year 2
students
• When he was a practitioner, he was
required to comply with the RICS Rules
of Conduct and had Professional
Indemnity Insurance for his company
8 BS 30 • As Chairman of RICS APC interview, he
asks professional ethics related questions
to candidates
• He also ensures that he underpins the
subject matter of the modules which he
teaches with professional ethics
9 GP 21 None
10 QS 30 None
11 QS 26 • Conducted research on professional
ethics in 1990s. The outcome of that
research project was that the RICS set up
the RICS Professional Ethics Working
Party and was a member of this Working
Party
1
APC is the RICS Assessment of Professional Competence
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• Published papers on area of professional
ethics
12 GP 29 None
The mean value of the duration of the full RICS membership is 22 years and thus the
sample consists of very experienced Chartered Surveyors.
4. Research Findings
4.1 Nine RICS Core Values
The interviewees have mixed views on the use of moral theory to explain the nine RICS
Core Values. Three respondents commented that more than one moral theory can be
used to explain the nine RICS Core Values, one respondent advocated the use of two
moral theories (deontology and virtue ethics) while the other two respondents
commented that all moral theories are relevant to the explanation of RICS Core Values.
There are mixed view on respondents’ comments on the use of moral theory to explain
the RICS Core Values. However, the one common theme is that the interviewees who
have been RICS members for longer and have more involvement with RICS
professional ethics tend to have stronger opinions. They tend to think virtue ethics
theory is the most appropriate theory to explain professional ethics because they
acknowledge the importance on ‘doing the right thing during the process’ and ‘ensuring
the final outcome is correct’
The dominant moral theory for explaining the RICS Core Values is deontology. This
followed by virtue ethics and utilitarianism. They received eight responses, five
responses and three responses respectively2. The respondents think that deontology is
the most appropriate moral theory for explaining RICS Core Values because it stated
the importance of duty and moral obligations. It is also related to the correctness of
actions and to ensure to do the right thing in the process. Interviewee 2 commented that
'RICS is more concerned with the process rather than the outcome'. The other
interviewees echoed this comment and they stated that the surveyors do not know the
outcome when they are working on their actions, therefore, the best thing that they can
do is to ensure the correctness of the procedures. Also, if the members have been
charged for negligence or breach of Rules of Conduct, it is important for them to
demonstrate that they have done the right thing in the process.
On the other hand, Interviewee 8, who has been a RICS member for 30 years and a
Chairman for RICS APC Panel has a totally opposite view. He stated that 'the RICS
Core Value is all about utilitarianism. The RICS aims to ensure that the client does not
come to any harm when they receive services from the RICS members. Therefore, the
way that the RICS acts is an utilitarianism approach'.
2
There are twelve respondents. Two respondents identified two moral theories and one
respondent used three moral theories to explain RICS Core Values. Therefore, there are sixteen responses
in total.
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Some other respondents have broader views on the use of moral theory. They think that
the RICS has concerns on the process as well as the result. Therefore, they think virtue
ethics is the most appropriate moral theory as it considered the characteristics of both
utilitarianism and deontology. Interviewee 7 commented that 'utilitarianism is not the
correct one to explain the RICS Core Values. The RICS is very concerned with how
you get there, deontology is also not the correct one as it is only concerned with the
process. RICS is very concerned with how you get there as well as the final outcome.
So, I would think it is more about virtue ethics as it considers both utilitarianism and
deontology'. This comment is further echoed by Interviewee 11, who has substantial
experience on research on professional ethics and involvement with the RICS activities.
He stressed the thought or thrust of the nine RICS Core Values are related to the
Chartered status of the RICS which means it is for the good of the member but more
significantly for the good of the public. In turn, the outcome is critical to the RICS in
the society. However, the implications for the Core Values are about governing the
rightness and wrongness of the actions for the members. Therefore, he commented that
virtue ethics is the most suitable moral theory as its core principles are about 'doing the
right things'.
Overall, there is a very mixed view on the use of the moral theory. The common theme
is the respondents think the respondents think the RICS has great concern on ethics and
it aims to ensure the interest of the clients and the general public are protected.
4.2 RICS Rules of Conduct
Similar to comments for the RICS Core Values, the respondents have different views on
the use of moral theory in the RICS Rules of Conduct. Five respondents commented
that deontology is the key moral theory to RICS Rules of Conduct; four respondents
think it should be utilitarianism and three respondents commented it should be virtue
ethics.
The comments on the use of utilitarianism are the same as for explaining RICS Rules of
Conduct, that is to ensure the clients are not subject to any harm as a consequence of the
negligence of the surveyors. The interviewee 8 stated 'the RICS's concern is that the
clients do not come to any harm. If the surveyors do any harm to the clients, it will
bring disgrace to the Institution and the professional itself'. It follows the fundamental
principle of utilitarianism on ensuring there is a good final outcome. Interviewee 3 also
echoed this comment as he thought that the focus of Rules of Conduct does not have
process involved but is about the rightness or wrongness of the outcomes. These two
interviewees have similar professional backgrounds; they are Building Surveyors and
have been RICS members for over twenty years. On the other hand, there are no
consistent comments from the General Practice surveyors and Quantity Surveyors.
Interviewee 6 summarised the major difference on the use of moral theory for the RICS
Core Value and RICS Rules of Conduct. He stated that ‘the RICS Core Values is more
emphasised on the ethical principles, which is more about governing members'
behaviour. It is more about deontology. While, the RICS Rules of Conduct is more
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about making the procedures function well and focus on achieving a good final
outcome, so it is more about utilitarianism’.
4.3 Improvement of the RICS ethical principles and Rules of Conduct.
Generally, the interviewees found that the RICS has offered clear guidance on ethical
principles. They welcome the introduction of the new Rules of Conduct. They found
them straightforward, simpler and easily to follow. Also, the interviewees welcome the
idea of having separate Rules of Conduct for Firms.
On the other hand, the interviewees suggested some improvement that could be made.
The current RICS Rules of Conduct for Members do not mention some key ethical
issues such as Complaints Handling Procedure, Handling Clients Money and
Professional Indemnity Insurance. Although there are separate Policies and Helpsheets
which give more guidance to the members on these issues, they are not cross-referenced
or referred to the Rules of Conduct for Members document. Interviewee 11 suggested
that one of the improvements is to add these documents or cross-reference them to the
Rules of Conduct.
5. Conclusion
This research aimed at investigating the use of moral theory to explain the RICS Core
Values and RICS Rules of Conduct for Members. The chosen moral theories are
deontology, utilitarianism and virtue ethics. The approach taken to conduct this research
of a qualitative nature. Twelve semi-structured interviews were conducted. The
interviewees are Building Surveyors, Quantity Surveyors and General Practice
Surveyors.
The interviewees have mixed opinion on the use of moral theory on explaining RICS
Core Value sand Rules of Conduct. The interviewees commented that all three moral
theories can be explained in RICS ethical principles in some respect. There is a slightly
stronger view that deontology is the most suitable moral theory. The argument is that
the surveyors do not know the outcome when they are working on it, so the only thing
that they can do is to ensure the process is right. Also, if there is any claim for
negligence for their activity in the future, they can provide the arguments that they have
done it correctly. On the other hand, the interviewees who have been RICS member for
longer and have more involvement with the RICS professional ethics tend to think that
virtue ethics is the most appropriate theory to explain RICS ethical standards as they
understand the importance of the correct ‘result’ and ‘process’.
The interviewees generally welcome the move from the 60-page RICS Rule Book to 10-
page RICS Rules of Conduct. However, they have suggested some improvement, which
is to refer to the separate Policies and Helpsheets on Handling Clients Money,
Complaints Handling Procedures and Professional Indemnity Insurance in the Rules of
Conduct.
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This paper has presented the finding of research on investigating the surveyors’ view of
the use of Moral Theory to analysis the Rules of Conduct for Members. There are some
interesting findings from this research which could lead to future research.
The first suggested future area for research is the use of Moral Theory to explain the
Rules of Conduct for Firms and it can then compare the results with the findings as
presented in this paper. The second suggested area is to research on wider surveyors’
view on the use of moral theory to analyse RICS Rules of Conduct and the suggested
improvements which can be made. It aims to find out surveyors’ theoretical
understanding on professional ethics and the areas of improvement that can be made.
6. Acknowledgements
The author acknowledges the financial support from Nottingham Trent University,
College of Arts, Design and the Built Environment’s Research Fund for this project.
7. References
Bentham, J. (1789/1962) Introduction to the principles of morals and legislations, In:
Warnock, E. (Ed.) Utilitarianism, Fontana, London.
Bowen, P., Pearl, R. and Akintoye, A. (2007) Professional ethics in the South African
construction industry. Building Research and Information, 35(2), pp.189-205.
Business Environment (2004) Engineering and construction firms fight corruption.
Business Environment, March, pp. 8-9.
Carsberg, B. (2005) Carsberg Report on the Regulatory Role of RICS. Final Report.
London: RICS.
Chalkley, R. (1994) Professional Conduct: A Handbook for Chartered Surveyors,
Surveyors Holdings Ltd., London.
Contractor’s Business Management Report (2004) Construction’s unethical rap’ costs
you business. Contractor’s Business Management Report, July, pp.1, 11-13.
EC&M (2004) Survey shows unethical behaviour a concern for the construction
industry. EC&M, July, p.22.
Kant, I. (1785/1898) Fundamental principles of the metaphysics of morals, translated by
Abbott, T. K. In: Kant’s Critiques of Practical Reason and Other Works on the
Theory of Ethics (5th Edition), Longmans: Green and Co., London.
Mills, J. S. (1861/ 1962) Utilitarianism. Warnock, M. (Ed.) Fontana, London.
Office for Fair Trade (OFT) (2008) OFT issues statement of objections against 112
construction companies, http://www.oft.gov.uk/news/press/2008/52-08, viewed
12/8/2008.
Parson, E. (2005) The construction industry’s ethical dilemma. EC&M, August, pp. 50-
56.
Poon, J. (2006) Professional ethics for the UK construction professionals. Construction
Information Quarterly, 8(2), Construction Paper 199, pp. 70-76.
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Preuss, L. (1998) On ethical theory in auditing. Managerial Auditing Journal. 13(9), pp.
500-508.
RICS (2006) Assessment of Professional Competence/ Assessment of Technical
Competence (APC/ ATC): Requirements and Competencies, ICS, London.
RICS (2007) Rules of Conduct for Members, RICS, London.
Suen, H., Cheung, S. O. and Mondejar, R. (2007) Managing ethical behaviour in
construction organisations in Asia: How do the teachings of Confucianism,
Taoism and Buddhism and Globalisation influence ethics management?
International Journal of Project Management, 25, pp. 257-265.
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Paul Chynoweth, pp 1475-1486
The built environment: disciplinary knowledge base and
implications for educators
Paul Chynoweth1
1
School of the Built Environment,
University of Salford, Salford, M5 4WT,
United Kingdom
Email: [email protected]
Abstract:
The built environment subject area is now well-established as a recognised field of
study. However, because of its vocational orientation it is usually defined in terms of a
particular range of professional activities and aptitudes. In consequence the theoretical
nature of its academic knowledge base is poorly developed. This has consequences for
research and teaching practice within the field. Using established literature on the
historical approaches to knowledge categorisation a theoretical model is proposed. This
defines the built environment as an applied, but theoretically coherent, interdiscipline
with a common epistemological axiomatic. The practical benefits of the model are
illustrated by examples in the context of curriculum design, research strategy and the
research-teaching nexus.
Keywords: built environment, disciplines, knowledge, research, teaching.
1 Introduction
The built environment subject area is now established as a recognised field of study by
the international academic community. However, its identity has traditionally been
defined in terms of the traditional construction and property professions from which it
has emerged, and more recently, by the cultural and behavioural aspects of its
international research activities.
Although there is broad acceptance that the field is multidisciplinary, there has been
little attempt to define the cognitive nature of its particular knowledge base, nor to
consider the implications of this for research and teaching practice. Studies of the field
are few in number (for example, Temple 2004) and tend to be characterised by a
pragmatic and issue-driven approach to the subject, with little attempt to understand its
underlying academic base. This may reflect a more general suspicion of the value of
theory within the field (Koskela 2008).
When cognitive issues have been discussed, they have tended to be addressed in a
piecemeal fashion, for example in the isolated contexts of construction management
(Loosemore 1997), surveying (Walker 2001), architecture (Penn 2008) or real estate
(Diaz 1993). Works of this nature have also largely drawn on the personal experiences
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of the authors, and on literature published by other built environment writers, rather
than on established academic sources.
By neglecting the established literature on disciplinary characteristics these studies have
missed the opportunity to develop a consensus within a recognised theoretical
framework. This lack of a recognised theoretical disciplinary base for the built
environment subject area is well recognised (Betts & Lansley 1993, Loosemore 1997,
Brandon 2002) and has inhibited decision making in both the research and teaching
arenas. The current paper explores these issues in the context of the historical and
theoretical approaches to knowledge categorisation. Based on these approaches it
proposes a model of the built environment as an applied, but theoretically coherent,
interdiscipline and demonstrates how this can be used to aid decision making in
particular areas.
2 Knowledge Categorisation
Human society has found it necessary to categorise the various forms of knowledge
since at least the times of Ancient Greece in order to render the world intelligible.
Although, over time, these categorisations have taken a number of different forms three
major themes emerge which contribute to modern views about the nature of academic
knowledge.
2.1 The Unity of Knowledge
The first of these is the notion that, although knowledge may be categorised according
to disciplines, it nevertheless maintains a unity which transcends any divisions so
created. This was first articulated by Plato (ed. Waterfield 2003). Aristotle later
developed the concept into a hierarchy of subject areas with Philosophy, a higher,
universal and undisciplined field of knowledge, binding all other fields together (trans.
Lawson-Tancred 1998; Rowe 2002).
This idea of the unity of knowledge survived the progressive emergence of organised
disciplines within universities from the late Middle Ages onwards. It is evident, for
example, in Descartes’ analogy of philosophy as a tree with the disciplines making up
its roots, trunk and branches (trans. Sutcliffe 2001) and also in Kant’s concept of an
architectonic of the structure of all knowledge (trans. Meredith 1978). It is, of course,
also preserved today in the name of the Doctor of Philosophy (PhD) degree which is
awarded for research in any area of knowledge.
2.2 Distinction between Pure and Applied Knowledge
The second major theme concerns the idea that knowledge can naturally be categorised
as either pure or applied. Pure knowledge is based entirely on theory whilst applied
knowledge involves the application of theoretical knowledge in a particular practical
context. Aristotle identified three classes of disciplines. Although he described an
intermediate class which was concerned with ethical issues, his main distinction was
between the theoretical and what he referred to as the productive disciplines. The
theoretical class included mathematics and the natural sciences whilst engineering was
an example of a productive discipline (trans. Lawson-Tancred 1998; Rowe 2002).
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The idea of pure and applied disciplines is a familiar one and Boyer (1990) has recently
described it in terms of the scholarship of discovery as opposed to the scholarship of
application. The distinction echoes the philosophical distinction between propositional
(or factual) knowledge and practical knowledge of how to do something (Audi 1999).
2.3 Influence of C.P. Snow
The final theme concerns the distinction between the sciences on the one hand and the
arts and humanities (often jointly referred to simply as the arts) on the other. Until the
end of the eighteenth century the term “science” was used interchangeably with
“philosophy” to refer to scholarship in all branches of knowledge.
This changed from the early nineteenth century when the description became restricted
to the natural sciences which by that time had become concerned with the investigation
of external phenomena through empirical methods. The success of the natural sciences
enhanced their credibility and this, in turn, influenced the development of the social
sciences which also later chose to adopt empirical methods.
Due to the greater unpredictability of the social world, there were inevitably differences
between the methods adopted in the natural and social sciences. Nevertheless, a far
wider gulf started to emerge between these sciences collectively, and the remaining
disciplines in the arts and humanities which continued to follow traditional patterns of
scholarship.
By 1959 this gulf had been given popular expression by CP Snow in his now infamous
Cambridge Rede lecture, The Two Cultures and the Scientific Revolution (Snow 1959).
The resulting media publicity ensured that the arts / science divide passed into the
popular culture and, no doubt partly for this reason, it has continued to play a dominant
role in disciplinary categorisation to the present day.
3 Conceptual Models
Each of these three themes is reflected in the various conceptual models which have
been developed since the 1960s to explain the nature of disciplinary differences. Within
these models the unity of knowledge and pure / applied themes are generally dealt with
implicitly and most attention is focused on what this paper has described as the arts /
science distinction.
In fact most of the models develop their ideas under this theme from Kuhn’s (1962) The
Structure of Scientific Revolutions. In this seminal work Kuhn argued that science
proceeds, not through a process of incremental development, but by periods of
uneventful “normal science” interspersed by periods of rapid change (or “paradigm
shifts”) following a crisis in the prevailing epistemological and methodological
paradigm.
Within his thesis he noted that different academic disciplines are characterised, to
varying degrees, by the presence of paradigms that prescribe the appropriate problems
of study and the validity of methodologies to be employed. Whilst some fields
(typically the natural sciences) are characterised by highly developed paradigms, others
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(for example the humanities) are less so and research within these disciplines therefore
tends to be more idiosyncratic.
Lodahl and Gordon (1972) used Kuhn’s thesis to develop the so-called “paradigm
development” model whereby variations in academic disciplines could be measured
according to their position along a scale of paradigm development. The results of their
study into university departments in the physics, chemistry, sociology and political
science disciplines appeared to support the validity of the model and this has
subsequently been used by others in a number of other studies (Braxton and Hargens
1996).
The most widely used model is however that developed by Biglan (1973). This also
draws on the concept of paradigm development which it uses to place disciplines on a
continuum from “hard” (paradigmatic) to “soft” (non-paradigmatic). The model also
explicitly incorporates the pure / applied theme which enables it to identify any
discipline on a hard-soft / pure-applied matrix. Based on Biglan’s empirical findings the
position of individual academic disciplines can be plotted on the matrix as illustrated in
Figure 1.
APPLIED
Applied Social & Creative
Sciences Professions
Technology Management
Civil Eng Education
Design
Mechanical Eng Social Work
Accounting
Electrical Eng Computer Science
Law
HARD SOFT
Economics Psychology
Sociology
Art
Physics Geography
Politics
Chemistry
History
Mathematics Languages
Natural Arts &
Sciences Humanities
PURE
Figure 1: The Biglan Disciplinary Model (Chynoweth 2008)
It will be seen that the natural sciences fall into the bottom left (hard-pure) quadrant
whilst the arts and humanities are to be found in the bottom right (soft-pure) part of the
matrix. In fact, there is a continuum from the natural sciences on the far left hand side of
the diagram, through the social sciences in the centre, to the humanities and finally to
the arts on the far right hand side. This transition reflects the progressive relaxation of
paradigmatic requirements and the increasing level of personal input by the individual
scholar into the academic enterprise. The matrix is completed by the inclusion of the
applied axis. The applied sciences, which serve the engineering professions, appear in
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the top left (hard-applied) sector whilst the social and creative professions are found in
the top right (soft-applied) quadrant.
A number of subsequent studies have tested the validity of the Biglan model. These
have demonstrated its ability to effectively distinguish between disciplines (Lattuca and
Stark 1995) and it now has general currency amongst higher education researchers
(Braxton and Hargens 1996).
4 The Built Environment as an Academic Subject
The precise boundaries of the built environment subject are not fixed but Griffiths
(2004) has described it as “a range of practice-oriented subjects concerned with the
design, development and management of buildings, spaces and places”. The relevant
UK Research Assessment sub-panel defines the field as including “architecture,
building science and engineering, construction, landscape and urbanism” (HEFCE
2005).
It will be seen that each of these definitions describes the field in terms of its various
fields of application, rather than by attempting to define its cognitive base. This is
entirely appropriate for an applied field but it does mean that the various descriptions
fail to provide a basis for understanding the nature of its knowledge base. In order for
this to be achieved it is first necessary to understand the nature of the work actually
undertaken by its academic community and the particular fields of expertise which are
employed by its scholars.
APPLIED
Applied Social & Creative
Sciences Professions
Technology Management
Civil Eng Education
Design
Mechanical Eng Social Work
Accounting
Electrical Eng Computer Science
Law
HARD SOFT
Economics Psychology
Sociology
Art
Physics Geography
Politics
Chemistry
History
Mathematics Languages
Natural Arts &
Sciences Humanities
PURE
Figure 2: The Built Environment Knowledge Base (Chynoweth 2005)
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The curriculum content of built environment undergraduate programmes provides an
indication of the relevant areas of expertise. A further indication is provided by the UK
Quality Assurance Agency’s subject benchmark statements within the various fields of
application identified above (for example, QAA 2002). The Royal Institution of
Chartered Surveyors has also defined its academic base by reference to particular areas
of knowledge (RICS 1991).
Although there are inevitably minor differences in the various descriptions, a degree of
consensus is seen to emerge regarding the substantive areas of built environment
knowledge. For the purpose of this paper, these are defined in terms of the following
five subject disciplines: Management, Economics, Law, Technology and Design.
The predominantly applied nature of the field’s knowledge base can be illustrated by
locating these areas of knowledge within the Biglan model (Figure 2). This exercise also
highlights the enormous diversity of academic practices within the built environment
which are seen to span almost the entire spectrum of the arts and sciences. This latter
point raises questions as to whether it is appropriate to describe the field as an academic
discipline at all, or whether it is simply an amalgamation of disciplines which
collectively serve the fields of application identified above.
5 Academic Disciplines
The term “discipline” is often used loosely to describe the built environment field to
reflect the fact that it has now acquired a distinct cultural identity in terms of its
academic practices and modes of discourse. However, academic disciplines are not
simply social, but also epistemic communities sharing a unified knowledge domain
(Becher & Trowler 2001).
The built environment field is not therefore a discipline in the strict sense. However, a
related question is whether it could instead be classified as interdisciplinary in
character. Although frequently also described in this way the term once again tends to
be used loosely, often simply to acknowledge that the field is too diverse to be described
as an academic discipline in its own right.
Multidisciplinarity Pluridisciplinarity
Crossdisciplinarity Interdisciplinarity
Figure 3: Taxonomy of Interdisciplinarity (Jantsch 1972)
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The term “interdisciplinarity” is notoriously misunderstood (Moran 2002).
Nevertheless, there is now a significant body of scholarship within the subject area,
including Jantsch’s (1972) frequently cited taxonomy of interdisciplinarity.
Jantsch draws a distinction between true interdisciplinarity and the lesser concepts of
multidisciplinarity, pluridisciplinarity and crossdisciplinarity (Figure 3).
Multidisciplinarity occurs where a variety of disciplines are encountered simultaneously
in circumstances where the possible relationships between them are not made explicit.
Klein (1990) notes that this is frequently associated “with undergraduate courses that
present different specialists either in serial fashion or on different days”. In a research
context multidisciplinarity may be encountered where scholars from different
disciplines use the same library or laboratory facilities. The concept is therefore additive
rather than integrative with any synthesis occurring as a matter of accident rather than
design (Klein 1990).
The first step towards integration involves a state of pluridisciplinarity. This requires
the deliberate juxtaposition of different disciplines so as to enhance the relationships
between them. Communication between disciplines is encouraged but not coordinated
and the nature of any integration is therefore, once again, largely a matter of chance. In
contrast, crossdisciplinarity introduces an element of coordination into the relationship
between disciplines. However this occurs where one discipline imposes its own
disciplinary concepts and goals (referred to by Jantsch as axiomatics) on the others by
force. Therefore, although coordination is present there is an absence of dialogue and
the relationship is more about control then cooperation. Jantsh suggests that most claims
to interdisciplinarity are at best pluri or cross-disciplinary in nature.
True interdisciplinarity only occurs where a number of separate disciplines surrender
their own axiomatics and collectively define themselves by reference to a common
strategic axiomatic. According to Jantsch this takes place where the traditional
disciplines of knowledge are brought together in structures which reflect “basic themes
of society or need areas” rather than their own disciplinary identities. The existence of a
common axiomatic then facilitates epistemological integration as the disciplines
collectively address the resolution of common problems. Where this occurs a new
hybrid form of knowledge is created which is usually referred to as an interdiscipline
(Klein 1990).
Built Environment
axiomatic
Management Economics Law Technology Design
Figure 4: The Built Environment Interdiscipline (after Jantsch 1972)
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Paul Chynoweth, pp 1475-1486
If this taxonomy is applied to the built environment it can be seen how the field is, at
least potentially, interdisciplinary in character. The extent to which it genuinely
achieves this will depend on the degree to which it is able to define its (practical) field
of application in terms of a (theoretical) common axiomatic. It will also depend on the
extent to which its component disciplines are prepared to subjugate their own
disciplinary axiomatics in favour of collective strategic goals, and to work with each
other in achieving them.
Jantsh cites architecture and urban and regional planning as examples of fields that
“have developed half way” towards genuine interdisciplinarity. The concept of a built
environment interdiscipline (Figure 4) therefore appears to be a realistic aspiration for
the field as a whole. It would also provide a framework around which the subject’s
long-neglected theoretical base could be developed. By generating a better
understanding of the relationship between the field’s common axiomatic and its
individual subject areas it is suggested that decision makers would then be better able to
address a range of issues that frequently arise within built environment education. Three
of these are briefly described below.
6 Implications for Educators
6.1 Teaching
The first issue relates to the question of the design of the teaching curriculum. Because
the field consists of a number of component disciplines the challenge is to ensure that
these are sufficiently integrated and that students receive more than what Klein (1990)
has described as a “cafeteria-style” educational experience. This integration is more
likely to be achieved where the educational institution has a well developed
understanding of the field’s common axiomatic, and where there is therefore genuine
interdisciplinary working between academic staff with responsibility for the particular
components of the programme.
Whilst this may be achieved in some institutions it seems likely that most students’
experiences are, at best, pluridisciplinary. This is illustrated by Hutchinson’s (2005)
description of law provision within a number of UK built environment institutions. He
describes a “traditional” pattern of subject content, teaching methods and assessment
which appear to differ little from the treatment of law in any other subject context. No
evidence of integration with other subjects was recorded and law subjects were
described as being “very largely delivered in exclusively, wholly legal, modular boxes”.
The prevailing axiomatic was clearly that of the law discipline. Indeed, it is difficult to
see how this could have been otherwise when a significant number of the law subjects
were reported as being provided by service teaching by academics from law
departments. Curriculum design may therefore be one area in which the field can benefit
from the interdisciplinary model and the proper development of a common built
environment axiomatic.
6.2 Research
The same process is also likely to improve the relevance of academic research within
the built environment. This should ideally be capable of delivering solutions to
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stakeholders within the field across the whole range of its sub-disciplines. A clear sense
of its common axiomatic would assist the field in utilising all parts of its knowledge
base towards this common end. Unfortunately the field’s academic research community
is still not “sharing a common journey” with its stakeholders (Brandon 2002).
One aspect of this may be the process of “epistemic drift” (Elzinga 1985) which occurs
where the availability of research funding encourages research in some areas to the
detriment of that in others. There is evidence that this has occurred in the built
environment with the growth of research in management subject areas at the expense of
that in technology (Brandon 2002). Research in the law subject area has been similarly
neglected, again to the detriment of stakeholders within the field (Chynoweth 2005).
In recent years the field has therefore seen the increasing dominance of the management
discipline within built environment research and the development of a strong
Management-led crossdisciplinarity. Despite the strength of the pressures which have
contributed to this trend it is likely that a clearer sense of interdisciplinary identity could
encourage a more evenly balanced approach to research in future years.
6.3 Relationship between Research and Teaching
The final issue concerns what has become known as the research-teaching nexus, or the
extent to which a university’s research genuinely contributes to the effectiveness of its
teaching activities. Griffiths (2004) has explained how this is particularly difficult to
achieve in the built environment due to the differing expectations of the teaching and
research components of the field.
He describes a professional “content coverage” mentality to curriculum design which
reinforces Hutchinson’s (2005) findings about the nature of law provision. This does not
fit easily with the wider, and more opportunistic, subject content of much built
environment research in the management field. The result is an increasing gulf between
the areas addressed by the field’s research and its teaching activities.
The problem arises from a conflict of axiomatics. To some extent the field’s teaching
activities are still driven by the axiomatics of the professional disciplines from which it
has emerged, or at least by the academic axiomatics of its various component
disciplines. However, as discussed above, its research activities are dominated by an
axiomatic that has more in common with the management discipline than with the built
environment as a whole. It seems therefore that the evolution of an effective research-
teaching nexus might also benefit from the development of a common built environment
axiomatic.
7 Conclusions
This paper has noted the lack of a recognised theoretical disciplinary base for the built
environment subject area. It has suggested how this might be addressed within the
context of the historical and theoretical approaches to knowledge categorisation. It has
explored a number of these approaches and identified the common themes on which
they are based. It has described these in terms of the unity of disciplinary knowledge
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Paul Chynoweth, pp 1475-1486
and the twin distinctions between the pure and applied, and the artistic and scientific
disciplines.
The paper has described the cognitive nature of the built environment knowledge base
by reference to the Biglan model which incorporates each of these themes. It has
demonstrated how this knowledge base incorporates a number of separate disciplines
with diverse epistemologies from across the spectrum of the arts and sciences. It has
concluded that the built environment field is not therefore a discipline in the true sense
of the word but has explored the possibility that it might nevertheless constitute an
interdiscipline.
Using Jantsch’s taxonomy the paper has concluded that the field does not presently
satisfy the definition of interdisciplinarity. Whilst it is certainly multidisciplinary its
teaching activities are more correctly described in terms of pluridisciplinarity whilst its
research is indicative of Jantsch’s definition of crossdisciplinarity. Nevertheless, the
paper has proposed the concept of a built environment interdiscipline is a realistic
aspiration, and one which offers a starting point for the development of a theoretical
base for the field as a whole.
It has been suggested that this would provide practical benefits for decision makers
when dealing with a number of areas, including curriculum design, research strategy
and the management of the research-teaching nexus. However, in accordance with
Jantsch’s taxonomy, the essential prerequisite for all these changes is the development
by the Built Environment academic community, of a common epistemological
axiomatic.
8 References
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University Press.
Becher, T. and Trowler, P.R. (2001) Academic Tribes and Territories. Buckingham:
SRHE and Open University Press.
Betts, M. and Lansley, P. (1993) Construction Management and Economics: A Review
of the First Ten Years. Construction Management and Economics, 11(4), 221-245.
Biglan, A. (1973) The Characteristics of Subject Matters in Different Academic Areas.
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Boyer, E.L. (1990) Scholarship Reconsidered: Priorities of the Professoriate. New
York: John Wiley and Sons.
Brandon, P. (2002) Overview Report on 2001 Research Assessment Exercise, Panel No.
33: Built Environment. Higher Education & Research Opportunities in the United
Kingdom.
Braxton, J.M. and Hargens, L.L. (1996) Variation Among Academic Disciplines:
Analytical Frameworks and Research. In: Smart, J.C. (Ed.) Higher Education:
Handbook of Theory and Research Volume XI. New York: Agathon Press.
Chynoweth, P. (2005) Law as a Critical Tool in Applied Construction Management
Research. In: Kazi, A.S. (Ed.) Learning from Experience: New Challenges, Theories
and Practices in Construction. Proceedings of the 11th Joint CIB International
Symposium, 13-16 June 2005, Helsinki. VTT & RIL, 62-72.
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Chynoweth, P. (2008) Legal Research. In: Knight, A. & Ruddock, L., Advanced
Research Methods in the Built Environment, Oxford: Wiley-Blackwell.
Diaz, J. III (1993) Science, Engineering and the Discipline of Real Estate. Journal of
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Griffiths, R. (2004) Knowledge production and the research-teaching nexus: the case of
the built environment disciplines. Studies in Higher Education, 29(6), 709-726.
HEFCE (2005) RAE 2008 Consultation on Assessment Panels’ Draft Criteria and
Working Methods – UOA 30, Architecture and the Built Environment. London:
Higher Education Funding Council for England.
Hutchinson, K. (2005) CEBE Working Paper 08: Content, Learning Methods and
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Interdisciplinarity: Problems of Teaching and Research in Universities, 7-12
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Klein, J.T. (1990) Interdisciplinarity: History, Theory & Practice. Detroit: Wayne State
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Koskela, L. (2008) Is a theory of the built environment needed? Building Research &
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Chicago Press.
Lattuca, L.R. and Stark, J.S. (1995) Modifying the Major: Discretionary Thoughts from
Ten Disciplines. The Review of Higher Education, 18(3), 315-344.
Lawson-Tancred, H. [trans.] (1998) Aristotle - The Metaphysics (Penguin Classics).
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Lodahl, J.B. and Gordon, G. (1972) The Structure of Scientific Fields and the
Functioning of University Graduate Departments. American Sociological Review,
37(1), 57-72.
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Kenley, R. & Chen, S.E. (Eds.), Proceedings of the 3rd and 4th International
Electronic AUBEA Conferences 3 & 4, 1997 & 1998. Australasian Universities
Building Education Association – Research, 13-21.
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Oxford University Press.
Moran, J. (2002) Interdisciplinarity. London: Routledge.
Penn, A. (2008) Architectural Research. In: Knight, A. & Ruddock, L., Advanced
Research Methods in the Built Environment, Oxford: Wiley-Blackwell.
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Assurance Agency for Higher Education.
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Profession: The Academic Base. London: Royal Institution of Chartered Surveyors.
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Oxford: Oxford University Press.
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Snow, C.P. (1959) The Two Cultures. Cambridge: Cambridge University Press.
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Classics). London: Penguin Books.
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Editorial, Property Management, 19(5), 1.
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Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
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London SW1P 3AD
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www.rics.org/cobra
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RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Petrus Steyn, pp 1487-1495
Promotion of administrative justice in decision-making on
town planning matters
Adv Petrus Steyn, TRP(SA)
Professional Town and Regional Planner, Futurescope Town and Regional Planners, Krugersdorp, South Africa
Email: [email protected]
Abstract:
The aim with the paper will be to compare the processes to adjudicate land use
applications, and comments / objections thereon, as prescribed in the various
ordinances and acts in South Africa, with the requirements laid down in the
Promotion of Administrative Justice Act. Reason for this being that it is the
submission that processes followed by municipalities when adjudicating land use
applications not always adheres to the requirements of the Promotion of
Administrative Justice Act – thereby not adhering to Constitutional requirements.
Keywords:
Planning law, administrative justice, South Africa Constitution, South Africa planning
laws and ordinances
1 Introduction
The purpose with this paper is to investigate the effect and implications of the
provisions of the Promotion of Administrative Justice Act, Act 3 of 2000 on
procedures and decision-making processes followed by administrative organs
of state, with specific reference to local government, when taking decisions on
town planning matters.
In order to address this, attention will be given to the following matters,
namely:
Ð Constitutional provisions on administrative justice;
Ð Provisions of the Promotion of Administrative Justice Act;
Ð Administrative arrangements in town planning legislation;
Ð Cases serving as examples;
Ð Practical examples; and
Ð Proposals / Conclusion.
2 Constitutional provisions on administrative justice
Section 33 of the Constitution of the Republic of South Africa, Act 108 of
1996 (Constitution) deals with just administrative action. The Section reads as
follows:
33(1) Everyone has the right to administrative action that is lawful,
reasonable and procedurally fair.
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(2) Everyone whose rights have been adversely affected by administrative
action has the right to be given written reasons.
(3) National legislation must be enacted to give effect to these rights, and
must
a. Provide for the review of administrative action by a court or, where
appropriate, an independent and impartial tribunal;
b. Impose a duty of the state to give effect to the rights in subsections
(1) and (2); and
c. Promote an efficient administration.
This paper concentrates on the impact and/or influence of the right to lawful,
reasonable and procedurally fair administrative action.
Section 33 of the Constitution is part of Chapter 2: Bill of Rights. It is
therefore clear that just administrative justice is a basic human right in terms
of the Constitution.
Section 33 – or the right to lawful, reasonable and procedurally fair
administrative action - can also be classified as a first generation of human
rights. This implies that this right’s function is to protect individuals against
the State and the misuse of powers by the State. Against this background it is
clear that the provisions of this Section should have an important influence on
administrative actions being part of approval processes in town-planning
matters.
3 Provisions of the Promotion of Administrative Justice Act, Act
3 of 2000
It is important to note that prior the commencement of the Promotion of
Administrative Justice Act (‘the PAJA’), challenges to the validity of
administrative action were constitutional challenges, based on the rights to
administrative justice in the Bill of Rights.
The enactment of the PAJA gives effect to the constitutional rights referred to
in Section 33 of the Constitution. The effect of this being that the PAJA
makes these rights effective by providing an elaborated and detailed
expression of the rights to just administrative action and providing remedies to
vindicate them.
According to the long title of the Promotion of Administrative Justice Act (Act
3 of 2000), this act was enacted in order to give effect to the right to
administrative action that is lawful, reasonable and procedurally fair and to the
right to written reasons for administrative action as contemplated in Section 33
of the Constitution.
Further to this, it is also mentioned in the preamble to the Act that the aim
with the act is to create a culture of accountability, openness and transparency
in the public administration or in the exercise of a public power or the
performance of a public function, by giving effect to the right to just
administrative action.
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In this regard ‘administrative action’ is defined as any decision taken, or any
failure to take a decision, by:
(a) an organ of state (defined below), when:
(i) exercising a power in terms of the Constitution or a provincial
constitution; or
(ii) exercising a public power or performing a public function in
terms of any legislation; or
(b) a natural or juristic person, other than an organ of state, when
exercising a public power or performing a public function in terms of
an empowering provision,
which adversely affects the rights of any person and which has a direct,
external legal effect.
As indicated above, the definition of ‘organ of state’ is also of importance.
‘Organ of state’ is defined in Section 239 of the Constitution as:
(a) any department of state or administration in the national, provincial or
local sphere of government; or
(b) any other functionary or institution-
(i) exercising a power or performing a function in terms of the
Constitution or a provincial constitution; or
(ii) exercising a public power or performing a public function in
terms of any legislation,
but does not include a court or a judicial officer.
Procedurally fair actions are one of the cornerstones of this Act. In this regard
‘procedurally fair administrative action’ is defined as administrative action
which materially and adversely affects the rights or legitimate expectations of
any person and this must be procedurally fair. It is further stated that in order
to give effect to the right to procedurally fair administrative action, an
administrator, must give a person adequate notice of the nature and purpose of
the proposed administrative action; a reasonable opportunity to make
representations; a clear statement of the administrative action; adequate notice
of any right of review or internal appeal, where applicable; and adequate
notice of the right to request reasons in terms of section 5.
The issues of importance for this paper are the following, relating to town
planning matters being considered:
In deciding a town planning matter, whether in terms of national or provincial
legislation, or in terms of an Ordinance, administrative action is taking place.
In most cases referred to, these administrative actions are taken by an organ of
state since a municipality is considered to be an organ of state, as defined
above.
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Since applications are made to ‘organs of state’, the applicants are entitled to
‘procedurally fair administrative actions’ when decisions on such applications
are taken.
4 Administrative arrangements in town planning legislation
Town Planning legislation, such a the various ordinances, with specific
reference to the Transvaal Town Planning and Townships Ordinance, as well
as the Development Facilitation Act, also deals to some extent with the issue
of administrative justice. In these cases there are specific references to actions
required as and when decisions on town planning matters are to be taken.
The following extracts are of importance, namely from the:
• Town Planning and Townships Ordinance;
• Gauteng Planning and Development Act;
• Gauteng Removal of Restrictions Act;
• Development Facilitation Act; and
• Practical examples.
4.1 Town Planning and Townships Ordinance (Ordinance 15 of 1986)
Section 56(9) of the Town Planning and Townships Ordinance, where
rezoning applications are dealt with, is of importance for this paper.
This section deals with the evaluation of applications and in this regard
it is stated that:
‘having considered the application in terms of subsection (8) (of the
Ordinance), the authorized local authority may:
(a) approve the application subject to any amendment which it may,
after consultation with the applicant, deem fit or refuse it; or
(b) postpone a decision on the application, either wholly or in part.
In this instance the authorized local authority is considered to be the
organ of state, and the action to be taken, namely considering the
application, is viewed to be the administrative action.
In Section 56(10) it is provided that the authorized local authority shall
without delay and in writing notify the applicant, an objector or any
person who has made representations, of its decision.
Although this Ordinance was enacted in 1986, it is important to note
that Section 56 provides for fair administrative action by means of the
provision that an application may approve an application, only after
consultation with the applicant. Therefore a procedurally fair
administrative action is provided for.
Whether this is taking place in practice remains another question.
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4.2 Gauteng Planning and Development Act (Act 3 of 2003)
Chapter 2 of the Gauteng Planning and Development Act deals with
principles for development. In this regard Section 9(1) specifically
refers to principles on administrative fairness, decision-making and
dispute resolution. In this regard it is stated that:
9. (1) Policy, administrative practice and law shall ensure that
administrative procedures are lawful, reasonable and fair, by:
a. providing clear laws and procedures and access to
information for those who are likely to be affected by it;
b. promoting trust and acceptance among those likely to be
affected by it; and
c. giving further content to the fundamental rights as set out in
the Constitution.
(2) Planning and development procedures and decisions made by
an organ of state shall be consistent with the general principles
of this Act and adhere to the provisions of the Promotion of
Administrative Justice Act, 2000 (Act 3 of 2000).
Specific reference is therefore made in this Act that procedures and
decision-making should be in accordance with the provisions of the
Promotion of Administrative Justice Act, and therefore also be in line
with Section 33 of the Constitution.
Although this Act was enacted it is not yet in operation since the
Regulations have not yet been finalised.
It is, however, clear that provision should be made in the Regulations
for procedurally fair administrative action, since direct reference is
made to constitutional provisions on this matter.
4.3 Gauteng Removal of Restrictions Act
In this Act, in terms of which applicants can apply for the removal of
restrictive title conditions and/or the rezoning of a property, an
application procedure is prescribed.
According to this, all applications should be published in the press as
well as on-site, whereby persons wishing to, can object against
applications. When objections have been received the local authority
should inform the applicant of objections received, and provide the
applicant with an opportunity to react on these, where applicable.
4.4 Development Facilitation Act (Act 67 of 1995)
Referring to administrative justice, as provided for in the Development
Facilitation Act, Section 35 is of importance. This Section deals with
the amendment of land development applications and conditions of
establishment; division of land development areas; and the
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continuation of land development applications by another land
development applicant. According to this Section:
(a) a land development application may be amended;
(b) any condition of establishment may be amended or deleted;
(c) a land development area may be divided into two or more land
development areas; and
(d) another land development applicant may continue with the land
development application in the place of the original or a
subsequent land development applicant.
It should be noted that in accordance with the above an applicant is
entitled to request an amendment to an application any time during the
hearing process. This possibility provides a measure of flexibility and
a wise applicant would by no doubt make amendments during the
course of a difficult hearing in order to procure an approval of the
amended application.
A further issue of importance for administrative justice is that the
applicant and interested or affected parties, also known as objectors,
are provided the opportunity to attend both the Pre-Hearing
Conference, as well as the Hearing itself. Regulation 21(24) provides
that the applicant and every person intending to appear at the tribunal
hearing must attend the pre-hearing conference. During the pre-
hearing conference the various parties, if there are objectors, should,
amongst others, attempt to reach consensus on issues such as means by
which disputes may be settled and identify facts which are common
cause and in dispute.
4.5 Practical examples
Local and Metropolitan Municipalities, as established in accordance
with the Constitution, adopts policies for consideration of land use
applications within their specific areas of jurisdiction.
In most cases a Committee of Council, specifically dealing with town-
planning or related matters, is responsible for this function. In order to
give effect to the audi alterem partem-dictum the ideal should be that
the following parties be present when any application not in line with
policy, or where objections have been received, should be present,
namely the applicant, the objectors and the Committee. In this regard
the objectors can either be interested and affected parties, or, where
officials contest the application, be the relevant officials at the
municipality. The applicant should be afforded to state his case, then
the objectors can raise their issues of concern, after which the applicant
can once again reply. Thereafter the Committee of Council should be
in a position to make an informed decision on the matter.
This ‘ideal’ situation is, however, not always applied.
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Examples exist where the views of the officials on an application are
not expressed to the Committee of Council during a town-planning
hearing. The effect of this being that the applicant is not afforded an
opportunity to reply to Council on the views expressed by officials.
In other instances applications are refused if not 100% in line with
Council policy. Applicants are not afforded the opportunity to present
their views to Council on such issues.
It is clear, as will also be outlined in the next section, that the above
examples is not in line with the objectives of the Constitution or the
PAJA.
5 Administrative justice as per cases
In this case specific reference is made to the following case, namely South
African Heritage Resources Agency (SAHRA) v Arniston Hotel Property1.
In this application the applicant (SAHRA) sought an order, under Section
29(1) of the National Heritage Resources Act 25 of 1999 (‘Heritage Act’),
interdicting the respondents (Arniston Hotel) from continuing with building
work on the hotel owned and operated by the respondents. The respondents
contended that the provisional protection order was invalid on several
grounds. For this paper the important one being that the procedure that had
been adopted before the making of the decision to issue the order was not
procedurally fair because the respondents had not been afforded an
opportunity to be heard before the decision to issue the order was made.
In deciding the matter the Court held that while the procedure prescribed in
Section 29 of the Heritage Act for the issuing of a provisional protection order
did not require the owner of the property to be consulted prior to the issuing of
the order, Section 10 of the Heritage Act gave effect to the provisions of
Section 33(1) of the Constitution of the Republic of South Africa, 1996, which
enshrined the right to administrative action which was lawful, reasonable and
procedurally fair.
It was further held that fairness sometimes required that a person who might
be adversely affected by a decision be granted the opportunity to make
representations before the decision was made.
One of the issues of discussion was that once a decision was taken the
applicants would not be able to apply for a new permit within a period of two
years from issuing of the decision. Therefore, when the timing of the order
was considered, the respondents had been entitled to be heard prior to the
making of the decision to issue the order.
It was also held that the applicant's conduct also constituted administrative
action and failed to meet the standards for procedurally fair administrative
1
South African Heritage Resources Agency v Arniston Hotel Property (Pty) Ltd and Another 2007 (2) SA 461 (C)
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action set out in Sections 3(1) and (2) of the PAJA, including a reasonable
opportunity to make representations and adequate notice of any right to an
internal review and of the proposed period of the order.
It was finally held that the applicant's conduct failed to comply with the
provisions of Section 10 of the PAJA in that the respondents were denied the
right of appearance at the meeting at which the executive committee of the
local authority made the decision to issue the order.
Of importance for this paper is that it was held that, in the particular
circumstances of the present case, the respondents had been entitled to a
hearing prior to the making of the decision to issue the order and, in not
affording them that right, the decision was not procedurally fair.
It is clear that the Heritage Act does not specifically provides for an
opportunity for a hearing, but that, according to the findings in this case, it was
the view of the Court that the respondents should have been provided with the
opportunity to present their case to SAHRA before a decision on the matter
was taken.
6 Proposals
As indicated above certain town planning acts does not provide specifically
for a hearing procedure to be followed. Further to this, procedures adopted by
certain councils do not provide applicants, and in some cases even objectors,
with a reasonable and fair opportunity to present their cases to the meeting.
In this instance reference to the Arniston-case is of importance. As pointed
out above, it was, amongst others, held that, although the Heritage Act does
not specifically provides for an opportunity for a hearing, it was the view of
the Court that the respondents should have been provided with the opportunity
to present their case to the organ of state to decide on this matter, before a
decision on the matter was taken.
As pointed out above, the Town Planning and Townships Ordinance of 1986
does not specifically refers to the 1996-Constitution since it was enacted prior
to that. Therefore the question could be raised whether provision should be
made in municipal processes for hearings and/or interviews before a
municipality takes a decision on town planning matters.
It is clear from this paper that a municipality is, as provided for in the PAJA,
an organ of state and is therefore bound by the provisions of the PAJA. This
was also clearly pointed out in the Arnison-case where the Act did not provide
for certain administrative actions, but the Court was of the view that the
provisions of the PAJA should be applied.
Back to the practical question – an application was made for the rezoning of a
certain land parcel and Council is not in support of this, or there are objections
against this – what procedure should be followed? The following should
address this:
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a) The applicant is entitled to a ‘procedurally fair administrative action’;
b) In addition to this, if there are objectors or parties opposing the
application, they are also entitled to the same; and
c) In accordance with the provisions of the PAJA and the relevant Act or
Ordinance, provision should be made for such hearing to take place.
Further issues could be raised as to what will be considered to be fair
procedural administrative action. For the purpose of this, it is proposed that
the audi alterem partem-rule should be applied – therefore both parties cases /
representations should be heard and only after that a final decision could be
made. Therefore, in practical terms the applicant should be provided an
opportunity to present his / her case, thereafter the objector should be provided
to do the same, and, in cases where municipal officials hold their view on a
matter, they should also be afforded an opportunity to present their case. After
this, the applicant should be provided an opportunity to respond, and then the
municipal council / committee thereof should be in a position to take a
decision on the matter.
7 Conclusion
It is clear that the Constitution, as well as the PAJA provides in no uncertain
terms for procedurally fair administrative action to be taken when deciding on
matters.
It was also pointed out that the fact that an act or Ordinance does not
specifically provide for procedurally fair administrative action, the Arniston-
case addressed this matter and pointed out that respondents should be provided
with the opportunity to present their case to a decision-making body before a
decision on a matter is taken. This is not only by means of a formal
application lodged, but by means of a hearing / meeting where issues could be
clarified.
8 References
8.1 Constitution of the Republic of South Africa, Act 108 of 1996
8.2 Promotion of Administrative Justice Act, Act 3 of 2000
8.3 Town Planning and Townships Ordinance, Ordinance 15 of 1986
8.4 Gauteng Planning and Development Act, Act 3 of 2003
8.5 Gauteng Removal of Restrictions Act, Act 3 of 1996
8.6 Development Facilitation Act, Act 67 of 1995
8.7 Currie I and de Waal, J. 2005. The Bill of Rights Handbook
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Deniz Ilter and Attila Dikbas, pp 1496-1504
An investigation of the factors influencing dispute frequency
in construction projects
Deniz Ilter1 and Attila Dikbas1
1
Istanbul Technical University,
Maslak, 34469, Istanbul
Turkey
Email: [email protected]
Abstract:
Management of disputes is one of the most important processes that determine the
performance of a construction project, and successful management of disputes depends
highly on a well understanding of the factors influencing the occurance of disputes.
Although the topic of dispute resolution has been widely discussed in the literature, few
studies have been conducted with respect to the identification of the interrelations
between disputes and project factors based on empirical data. In this study, an analysis
is made of quantitative data obtained from a survey with fifty project managers who are
working in on-going projects in Turkey. The findings reveal the interrelations between
frequency of disputes and thirteen factors regarding the project, project manager and the
upper management.
Keywords:
Construction industry, correlation analysis, ferquency of disputes.
1 Introduction
The importance of the construction sector in national economies has often been touched
on in the literature. Kumaraswamy (1998) explained the special attention the
construction industry attracted with being the only manufacturing industry where the
‘factory’ goes to the customer’s site and the uniqueness of each product, stressing the
need for re-tracing the roots of industry problems regularly due to the ever-changing
conditions. These features require extensive and continuous research on each and every
process of construction for an overall performance improvement in the industry. Dispute
management is one of these important and complex processes that determine the
performance of the projects and consequently the industry.
Almost all researchers in the field agree that disputes are inevitable and may become
destructive in the construction projects. Ellis and Baiden (2008) stated that disputes
between project participants have been identified as the principal causes of poor
performance in construction projects and that disputes very often lead to prolonged
delays in implementation, interruptions and sometimes suspensions. Matyas et al (1996)
drew attention to the substantial dilution of effort, delays, and diversion of capital
arising from the large number and magnitude of disputes between contractors and
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clients in construction. Chan and Suen (2005) listed the detrimental effects of
construction disputes as project delays, undermining the team spirit, increase in project
costs, and, above all, damaging business relationships.
In this context, a better understanding of the interrelations between disputes and the
factors related to the project, project manager and the upper management is invaluable.
However, despite the fact that dispute resolution has been a widely discussed topic in
the literature, few empirical studies have been conducted with respect to identification
of these interrelations in order to justify the theories suggested in the literature.
This paper presents principal findings of a survey carried out in 2009 among fifty
project managers in the Turkish construction industry and tracks the factors influencing
the frequency of disputes in construction projects. Despite limitations of coverage, the
determination of these patterns is seen to suggest managerial strategies for preventing
the avoidable disputes.
2 Construction Disputes
The difference between conflict and dispute is often unclear, and these two terms have
been used interchangeably especially in the construction industry (Acharya et al., 2006).
However, according to Fenn et al. (1997) the terms ‘conflict’ and ‘dispute’ are two
distinct notations.
Kumaraswamy (1997) described the necessary semantic differentiation between
conflicts, claims and disputes in the context of construction. While disagreements or
differences of opinion lead to conflict, such conflict could be beneficial in generating
alternatives, thus conflict management would seek to encourage such constructive
conflict, while curtailing destructive conflicts that could involve personality clashes or
assertions of a non-negotiable nature.
Citing Powell-Smith and Stephenson (1994), Kumaraswamy (1997) described claim as
an assertion of a right to money, property or a remedy which includes ‘extension of
time’ in construction. Disputes, on the other hand, are defined as rejection of claims or
assertions made by one party where this rejection is not accepted in return.
Rubin et al (1992) stated that the scenario for construction disputes is invariably written
right into the contract documents long before men and machines reach the job site and
conditions for disputes have often been signed by both parties. For instance,
procurement type, method of payment, finance or the contract type affects the frequency
of the disputes as well as the types of disputes that occur in a project.
3 A Study of Construction Disputes
The unit of analysis in this research was the construction project. Data were collected
through a questionnaire directed to fifty respondents consisting of engineers and
architects working as project managers in on-going projects in Turkey, each with a
contract amount of 1 Million USD or over.
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3.1 The Sample
Quota sampling method was adopted in the study with the aim of obtaining as closest
results to population as possible, where ‘project type’ and ‘ownership’ was used to
determine the segments. Quotas for the sample were calculated from the volumes of
segments determined in the population, which were obtained from The Building
Information Centre On-going Projects Report (2008). The survey questions were
prepared based on preliminary semi-structured interviews undertaken with 35
contractors, whose findings were previously reported (Ilter and Dikbas, 2009).
3.2 Variables and Measures
The first set of variables was designed to provide data on several aspects of the projects
investigated as well as the project managers and their firms. These are procurement
type, method of payment, project type, ownership, finance, contract type, project value,
project duration, professional experience of the project manager, firm age, the openness
of the upper management to alternative dispute resolution processes, number of partners
acting as main contractor in the project and firm size.
The second set involves dispute frequency and dispute types occurred in the projects
based on the judgement of the managers of the projects investigated. The findings
regarding the factors influencing dispute frequency is given in the next section,
however, those on the dispute types will be discussed in a separate study.
The interrelations between the first set of variables and the second set of variables are
analysed by descriptive statistics and correlation analysis depending on the level of
measurement. Average collective ratings for each item were calculated by computing
the arithmetic means in each category. This research methodology is potentially
applicable for benchmarking studies and can serve to elicit regime-specific patterns in
different countries (Kumaraswamy, 1998).
4 Analysis of Data
Table 1 shows the result of the analysis of the first set of variables in the projects
investigated. It can be seen that the sample is quite balanced in terms of its distribution
over the categories of the variables related to projects, project managers and their firms.
In project duration, category ‘1-2 years’ dominate the sample, however this is
understandable since most of the construction projects’ duration are in this range. A
similar result is obtained with the ‘number of partners acting as main contractors in the
project’ variable. Category ‘1’ dominate the sample and this is also understandable
since most of the construction projects’ are undertaken by a single main contractor
(instead of partnerships such as joint ventures).
The distributions over the categories of project type and ownership variables reflect the
segments in the population as explained in Section 3.1. The interrelations between the
first set of variables and the second set of variables is discussed below.
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Table 1. Profiles of the projects, project managers and firms analysed
Variable Category Frequency
Project Value (Million USD) 1-10 18
11-50 23
51-100 4
>100 5
Procurement type Build 31
Design-Build 19
Method of payment Unit price 23
Lump-sum 27
Project type Residential projects 18
Institutional projects 13
Commercial projects 10
Engineering / Transportation projects 4
Industrial projects 5
Project duration <1 9
1-2 25
2-3 7
>3 9
Number of partners acting as main 1 45
contractor in the project 2 3
3 1
MV 1
Finance Equity capital 25
Partnership 6
Bank credit 19
Firm age 1-5 13
6-10 8
11-15 6
16-20 3
>20 20
The openness of the upper management Very closed 0
to alternative dispute resolution Closed 1
processes Middle 11
Open 23
Very open 15
Firm size (annual turnover in Million <50 15
Turkish Lira)* 50-50 22
* 1 USD = 1.5 TL 500-1000 6
>1000 7
Ownership Pubic 35
Private 15
Professional experience of the project 1-5 2
manager 6-10 9
11-15 19
16-20 8
>20 12
Figures 1-6 shows the average frequency of disputes based on procurement method,
method of payment, project type, ownership, finance and contract type.
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5
4.5
4
3.5
3
2.5
2
1.5
1
0.5
0
design build build
Figure 1. Average frequency of disputes by procurement method
Figure 1 shows that disputes occur 8% more frequently in ‘design-build’ procurements
compared to ‘build’ procurements.
5
4.5
4
3.5
3
2.5
2
1.5
1
0.5
0
lump-sum unit price
Figure 2. Average frequency of disputes by method of payment
Similarly, Figure 2 shows that ‘lump-sum’ payment causes dispute occurrences 9%
more frequently compared to ‘unit price’ payments.
5
4.5
4
3.5
3
2.5
2
1.5
1
0.5
0
industrial projects residential institutional trasportation / commercial
projects projects engineering projects
Figure 3. Average frequency of disputes by project type
Figure 3 shows the average frequency of disputes by project type. The analysis shows
that industrial projects cause far more disputes than residential, institutional,
transportation/engineering and commercial projects. The dispute occurrence in
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residential, institutional and transportation/engineering projects are very close, whereas
there are less disputes in commercial projects.
5
4.5
4
3.5
3
2.5
2
1.5
1
0.5
0
public projects private projects
Figure 4. Average frequency of disputes by ownership
Figure 4 shows that disputes occur 7.5% more frequently in public projects compared to
private projects.
5
4.5
4
3.5
3
2.5
2
1.5
1
0.5
0
bank credit equity capital partnerships
Figure 5. Average frequency of disputes by finance
Figure 5 shows that financing the project with a bank credit causes disputes to occur
more frequently compared to partnerships or using equity capital. This is quite
predictable, given the extra pressure of credit payments on time and budget.
5
4.5
4
3.5
3
2.5
2
1.5
1
0.5
0
w orld bank municipality public housing FIDIC contracts private contracts public w orks
contracts contracts contracts contracts
Figure 6. Average frequency of disputes by contract type
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Figure 6 shows the average frequency of disputes by contract type. This analyses shows
that World Bank (WB) standard contracts cause more disputes than other types of
contracts. However, there is a strong possibility that this figure may change if a larger
sample is analysed, since there are very few WB projects in the projects analysed. The
frequency of disputes in other contract types are close, however, government contracts
used in public, municipality and hosing works are found to cause more disputes than
private (where no standard form of contracts are used) and FIDIC contracts.
Table 2. Correlation between variables
1 2 3 4 5 6 7
1 Project size 1
2 Project
duration 0.2912** 1
3 PM
experience -0.0584 -0.2175 1
4 Firm age 0.1822 0.1980 -0.1495 1
5 Openness of
the upper
management -0.0295 -0.0971 0.0279 -0.1131 1
6 No of
partners 0.7407*** 0.0802 -0.1886 -0.0626 -0.0860 1
7 Firm size 0.3172** 0.5117*** -0.1929 0.4359*** -0.2940 0.1971 1
8 Frequency of
disputes 0.1741 0.3223** -0.0627 0.2019 -0.2571* 0 0.4353***
*Signif. LE .1 ** Signif. LE .05 ***Signif. LE .01 (2-tailed)
The intercorrelations matrix of the variables in the study is reported in Table 2. There
are expected results of correlation in between the first set of variables. For example, it
can be seen that the higher the project size, the higher the project duration, the number
of partners and the firm size. There is also a positive association between the project
duration and the firm size. Not surprisingly, firm size and firm age also seem to have a
quite high positive correlation.
It is interesting to note that there is a significant negative correlation between the
frequency of disputes and the openness of the upper management to alternative dispute
resolution processes. This finding might show that some of the disputes are avoided or
resolved in their early stages by alternative dispute resolution methods in some of the
projects. Another noteworthy finding is the significant positive correlation between the
frequency of disputes and the size of the contractor organisation. This finding might
show that larger contractors defend their positions in disputes more unreservedly
compared to smaller contractors, who tend to endure the disputes resiquedly just to
maintain their relationships with the employers. It can also be seen in Table 2 that there
is a significant correlation between the frequency of disputes and the project duration.
This is understandable given that longer projects are more complex in many aspects and
it gets harder to keep up with the schedules as time passes. However an analysis on the
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Deniz Ilter and Attila Dikbas, pp 1496-1504
types of disputes occurred in the projects is required to understand what factors cause
which types of disputes.
5 Conclusion
Based on the findings of a survey carried out in 2009 among project managers in the
Turkish construction industry, this paper discusses the interrelations between the
frequency of disputes and thirteen factors regarding the project, project manager and the
upper management. The influence of these factors on the frequency of disputes was
explored through descriptive statistics and correlation analysis depending on the level of
measurement. As far as the frequency of disputes in a project is concerned, it was found
that ‘design build’ procurement method causes 8% more disputes compared to ‘build’;
‘lump-sum’ payments cause 9% more disputes compared to ‘unit-price’; industrial
projects cause more disputes compared to other types of projects, public projects cause
9% more disputes compared to private owned projects; financing the project with a
bank credit causes more disputes compared to partnerships or using equity capital and
government contracts used in public, municipality and hosing works are found to cause
more disputes compared to private (where no standard form of contracts are used) and
FIDIC contracts.
As a result of the correlation analysis, it was found that the frequency of disputes in a
project is positively correlated with the size of the contractor organisation and
negatively correlated with the openness of the upper management to alternative dispute
resolution processes. Another noteworthy finding is the significant correlation between
the frequency of disputes and the project duration. This may be explained with the fact
that longer projects are more complex in many aspects and it gets harder to keep up with
the schedules as time passes. However an analysis on the types of disputes occurred in
the projects is required to understand what factors cause which types of disputes.
An empirical alaysis of the common types of disputes and the interrelations between the
types of disputes with the factors regarding the project, project manager and the upper
management will be presented as a further research.
6 References
Acharya, N.K., Lee, Y.D. and Im, H.M. (2006), ‘Conflicting Factors in Construction
Projects: Korean Perspective’, Journal of Engineering, Construction and
Architectural Management, Volume 13 (6), pp 543-566.
Chan, E.H.W. and Suen, H.C.H. (2005), ‘Dispute Resolution Management for
International Construction Projects in China’, Management Decision, Volume 43
(4), pp 589-602.
Ellis, F. and Baiden, B.K. (2008), ‘A Conceptual Model for Conflict Management in
Construction Firms’, RICS & CIB International Research Conference (COBRA),
Dublin, 4-5 September.
Fenn, P. and Lowe, D. and Speck, C. (1997), ‘Conflict and Dispute in Construction’,
Construction Management and Economics, Volume 15 (6), pp 513-518.
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RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Deniz Ilter and Attila Dikbas, pp 1496-1504
Ilter, D. and Dikbas, A. (2009), ‘An Analysis of the Key Challenges to the Widespread
Use of Mediation in the Turkish Construction Industry’, International Journal of
Law in the Built Environment, Volume 1 (2).
Kumaraswamy, M.M. (1997), ‘Conflicts, Claims and Disputes in Construction’,
Engineering, Construction and Architectural Management, Volume 4 (2), pp 95-
111.
Kumaraswamy, M.M. (1998), ‘Tracing the roots of construction claims and disputes’,
RICS International Research Conference (COBRA), London, September.
Matyas, R.M, Mathews, A.A, Smith, R.J. and Sperry, P.E. (1996), Construction Dispute
Review Board Manual, Mc Graw-Hill, USA.
Powell-Smith, V. and Stephenson, D. (1994), Civil Engineering Claims, Blackwell
Science, Oxford.
Rubin, R.A., Fairwether, V., Guy, S.D. and Maevis, A.C. (1992), Construction Claims
Prevention and Resolution, Van Nostrand, New York.
The Building Information Centre On-going Projects Report (2008)
http://www.yem.net/yem/english/ , viewed: November 2008.
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Jeremy Coggins, pp 1505-1518
Has Mission Drift rendered Statutory Adjudication in NSW
open to valid criticisms?
Jeremy Coggins1
1
Lecturer, School of the Natural & Built Environments
University of South Australia, Adelaide, SA 5000,
Australia; Phd candidate, University of Adelaide,
Adelaide, SA 5000
Email: [email protected]
Abstract:
In recent years, the NSW courts have decided that claimed amounts under the NSW
Building and Construction Industry Security of Payment Act 1999 may include items for
delay damages. This was not the original intent of the Act and, as such, represents
mission drift. This paper reviews the key decisions which have led to this mission drift,
and considers criticisms which have been levelled at the Act in the light of such drift
from the legislative intent. It is concluded that the criticisms are only valid due to the
occurrence of mission drift and, therefore, the drift must be corrected by the courts or
Parliament if the effectiveness of the Act and respect for its adjudication scheme are not
to be eroded.
Keywords: Security of Payment, Statutory Adjudication, Mission Drift, New South
Wales
1 Introduction
New South Wales (NSW) was the first Australian jurisdiction to enact security of
payments legislation1 which came into force on 26 March 2000. Initially, the Act
proved ineffective primarily due to the original option provided for a respondent to an
adjudication to provide security by way of guarantee2 to the successful claimant in lieu
of payment, pending the final determination (e.g. by arbitration or litigation) of the
matters in dispute between the parties. However after the 2002 amendments to the Act3
corrected this problem, the uptake of statutory adjudication was rapid for the first 3
years (see Table 1) before dropping off.
1
The Building and Construction Industry Security of Payment Act 1999. Hereafter, referred to as ‘the Act’.
2
For example, by way of an unconditional promise by a recognised financial institution to pay to the claimant; or, by
payment of the adjudicated amount into a designated trust account – see s 23(2) of unamended NSW Act.
3
Which came into force on 3 March 2003.
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Despite the statistical evidence pointing to significant use of the statutory adjudication
process in the NSW construction industry, the NSW legislative model has been
criticised in some quarters as an undesirable alternative with many unintended and
inequitable consequences.4 Additionally, it has been suggested that, conceptually, the
equivalent construction industry payments legislation subsequently enacted in Western
Australia (WA)5 and the Northern Territory (NT)6 is preferable (Stenning & Associates
2006: 39).
Table 1: Amounts of Adjudication Claims in NSW
(Source of data: NSW Procurement, NSW Department of Commerce)
Time period Amounts claimed in adjudication Average Amount Claimed
7
2003 $178,238,581.77 $369,789.59
2004 $279,244,827.79 $355,273.32
2005 $867,026,763.99 $945,503.56
2006 $539,447,779.72 $586,994.32
2007 $263,230,279.20 $294,441.03
2008 $187,034,896.53 $198,973.29
This paper proposes that the criticisms levelled at the NSW model are only valid in the
context of mission drift occurring from the initial objective of the legislation. Mission
drift has been defined by Kennedy and Milligan (2007: 1) as:
a phrase often used to describe a tendency for the apparatus set up to tackle a specific task, to change
over time to expand the range of tasks being addressed or indeed to address related but different tasks.
Mission drift in NSW has occurred in recent years due to the courts allowing
adjudicators’ determinations to include monetary amounts for items of delay damages.
In other words, it is proposed that the criticisms of the NSW model would not be valid
if the NSW courts had adhered to the more limited definition of the term ‘ claimed
amount’ in the Act when appraising the suitability of the prescribed adjudication
procedure.
As such, this paper will, firstly consider the object of the Act in more detail. A
consideration will then be made as to whether any mission drift has occurred from this
object. Next, the criticisms levelled at the NSW statutory adjudication scheme will be
4
See Master Builders South Australia (2008: 2)
5
Construction Contracts Act 2004 (WA).
6
Construction Contracts (Security of Payments) Act 2004 (NT).
7
Reporting commenced 3 March 2003.
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reviewed in light of any drift identified from the legislative object and parliamentary
intent.
2 The Object and Intent of the NSW Act
The object of the 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 is able to recover,
progress payments in relation to the carrying out of that work and the supplying of those goods and
services.8
The definition of "claimed amount" under s 4 of the Act is “an amount of a progress
payment claimed to be due for construction work carried out, or for related goods and
services supplied…”.
Under s 8 of the Act, a person who has undertaken to carry out construction under a
construction contract or supply related goods and services under the contract is entitled
to a progress payment. According to s 13(2)(a), the payment claim must identify the
construction work, or related goods and services, to which the progress payment relates.
The object of the Act, thus, clearly relates to the swift recovery of progress payments by
a claimant contractor. As such, the Act intends that claims brought to statutory
adjudication be restricted to issues regarding valuation of construction work carried out,
and/or goods and services supplied, under a construction contract during a payment
period.
S 5 of the Act defines “construction work” under the Act, and s 6 defines “related goods
and services”. All items of construction work described under s 5 are physical forms of
construction, such as construction/repair of buildings, laying of foundations, and
erection of scaffolding. All items of related goods and services described under s 6 are
goods and services necessary for physical construction to take place, such as building
materials, plant, architectural design and surveying.
The valuation of payment claims under the Act mirrors that provided in the construction
contract agreed between the parties by virtue of s 9(a), which provides that the amount
of a progress payment to which a person is entitled in respect of a construction contract
is to be the amount calculated in accordance with the terms of the contract.
Therefore, as with contractually certified progress payments, adjudicated determinations
of payment claims under the Act should not generally include amounts for debts and
damages for which there is no express and immediate contractual entitlement. This
applies equally to the contractor’s claims for damages or debts (e.g. delay and
disruption costs) and any claims for damages or debts which the principal may attempt
to set off against the payment claim (e.g. liquidated damages).
8
S 3(1) of the NSW Act.
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In accordance with the object, the Act only permits claims to be made in statutory
adjudication in one direction only, from the contractor or supplier to the principal. If the
Act had intended for debts and damages associated with construction contracts to be
determined in adjudication, then equitable considerations would dictate that the Act
allow for claims to be made in both directions, both down the contractual stream as well
as up.
Considering its object, Davenport (2007: 13) views the role of the adjudicator under the
Act as mirroring that of the independent contractual certifier under a construction
contract and, therefore, terms statutory adjudication under the Act as the ‘certification
process’. The certification process ensures that the objective of the Act is fulfilled by, as
Davenport (2007: 13) puts it:
ensuring that the person carrying out construction work or providing related goods and services is able
to have the amount of progress payments decided quickly by an independent certifier and is able to
obtain judgment for that amount.
Being in a certification role, therefore, it may be argued that an adjudicator under the
Act is reasonably required to have expert knowledge about the construction process,
contract administration and valuation of construction works – as would a certifier under
a construction contract, a role often carried out by an architect or engineer. However, as
a certifier, the adjudicator would not be expected to be an expert in the law acting in a
judicial or quasi-judicial role.
According to Davenport (2007: 14), however:
Even when the adjudication is under a certification process, the courts see adjudication in their own
image and consequently have regarded the role of an adjudicator as similar to the role of a judge, a
magistrate or an arbitrator rather than a certifier.
It is this failure to distinguish between the certifier and quasi-judicial roles which led to
mission drift in the Act shortly after it was first enacted and again in more recent times
with respect to allowing claims for delay damages to be the subject of an adjudicator’s
determination.
3 Mission Drift of Statutory Adjudication
Kennedy and Milligan (2007) reviewed mission drift in statutory adjudication
particularly with respect to the UK Act.9 They found that the original mission of
statutory adjudication in the UK, that of dealing with payment disputes to allow cash to
flow, had drifted to a situation where statutory adjudication was being used for large
and complex disputes likely not envisaged by Parliament (Kennedy and Milligan, 2007:
12). Such disputes involved large value contracts, contracts with many issues of a
valuation, loss and expense and extension of time. According to Kennedy and Milligan
(2007: 7) the use of adjudication for such disputes was encouraged by support from the
courts for the upholding of adjudicators’ determinations notwithstanding containing
errors of law and/or fact.
9
Housing Grants, Construction and Regeneration Act 1996.
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In NSW, Kennedy and Milligan (2007: 13) identified that mission drift had initially
occurred in relation to the Act “as a result of judicial hostility (Uher and Brand 2007) as
the courts found it radically different from anything they had experienced previously”.
Drift, therefore, occurred in that the legislative objective was prevented from occurring
by the courts allowing judicial review of adjudicators’ determinations which contained
errors of law on the face of the record. This raised a question mark as to the validity of
adjudicators’ determinations generally, and thereby faith in the statutory adjudication
process as a whole, due to the high potential for errors of law in determinations made by
adjudicators, who are not typically legally trained, within a restricted timeframe of only
10 business days under the Act.10
The NSW Court of Appeal’s decision in Brodyn Pty Limited T/as Time Cost and
Quality v. Davenport & Anor,11 however, corrected the initial drift in NSW. Brodyn
established that an adjudicator’s determination should not be held up to the same level
of scrutiny as that of a judicial body. As such, Brodyn laid down five basic and essential
requirements of the Act for the existence of a valid adjudicator’s determination as
follows:12
1. The existence of a construction contract between the claimant and the respondent, to which the
Act applies (ss.7 and 8).
2. The service by the claimant on the respondent of a payment claim (s.13).
3. The making of an adjudication application by the claimant to an authorised nominating authority
(s.17).
4. The reference of the application to an eligible adjudicator, who accepts the application (ss.18 and
19).
5. The determination by the adjudicator of this application (ss.19(2) and 21(5), by determining the
amount of the progress payment, the date on which it becomes or became due and the rate of
interest payable (ss.22(1)) and the issue of a determination in writing (s.22(3)(a)).13
Therefore, errors of law concerning the more detailed provisions of the Act and
construction contract no longer have the potential to invalidate the adjudicator’s
determination in NSW.
Post Brodyn, there have been several cases in which the NSW courts have upheld
adjudicators’ determinations of payment claims including items for delay damages.
Such cases have involved an adjudicator determining the difference between the delay
costs claimed by a contractor as a result of an extension of time being granted and the
contractual certifier’s determination made in response to that claim. There is a strong
body of opinion that the recovery of delay damages in progress claims was not the
intention of the Act, and has resulted in a wider application of the adjudication scheme
than intended (Davenport 2007: 14, Uher & Brand 2007: 2257).
In Coordinated Construction Co Pty Ltd v. JM Hargreaves Pty Ltd,14 the NSW Court of
Appeal upheld the NSW Supreme Court’s decision15 to allow an amount by way of
10
S 21(3)(a) of the Act.
11
[2004] NSWCA 394.
12
The relevant sections of the Act are shown in brackets after each requirement.
13
Brodyn at [53].
14
[2005] NSWCA 228.
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delay damages to be included in the adjudicator’s determination. The amount was in
relation to an extension of time granted due to a compensable cause, claimed pursuant
to an express provision of the construction contract. The Court of Appeal found the
definition of “claimed amount”, that the progress payment must be for construction
work carried out or for related goods and services supplied, should not be given a
narrow construction or effect.16 The following considerations were instrumental in the
Court’s reasoning:
(i) Neither s 8, dealing with rights to progress payments, or s 9, dealing with amount of
progress payments, of the Act limit the payment to payment for construction work
and/or related goods and services.17
(ii) S 13(3) of the Act tells against the argument that the adjudicator can only include in
progress payments amounts claimed to be due for construction work carried out and/or
for related goods and services supplied.18 S 13(3) entitles a claimant to be paid for any
loss or expenses resulting from removal of any work or supply under the contract by the
respondent as a result of the claimant exercising its right to suspend the carrying out of
construction work or the supply of related goods and services due to non-payment by
the respondent of an amount due in a payment claim (where no payment schedule
provided), payment schedule or adjudicator’s determination.19
Accordingly, the Court of Appeal found that:
any amount that a construction contract requires to be paid as part of the total price of
construction work is generally…an amount due for that construction work, even if the contract
labels it as “damages” or “interest”.20
The Court of Appeal also found that any amount which is truly payable as damages for
breach of contract is generally not an amount due for that construction work.21
In his decision, however, Hodgson JA did acknowledge the possibility that some delay
damages claimed under a contract might possibly not be for construction work carried
out or related goods and services supplied and, in such a situation,
it would be for the adjudicator to determine whether or not such amounts should be included in
the amount determined, having regard to the particularity of s 9(a) and other provisions of the
Act and the contract.22
Thus it would appear that under the Act an adjudicator can determine their own
jurisdiction with respect to determination of damages provided for in the contract.
However, it is difficult to envisage that the original intention of Parliament was to allow
payment claims in which the adjudicator, who is not acting in a judicial role nor
15
Coordinated Construction Co v. J M Hargreaves and Ors [2005] NSWSC 77.
16
Coordinated Construction Co Pty Ltd v. JM Hargreaves Pty Ltd [2005] NSWCA 228 per Hodgson JA at [40].
17
Ibid at [38].
18
Ibid at [39].
19
See ss 15 (1), 16 (1) & 23 (2) of the Act respectively.
20
Coordinated Construction Co Pty Ltd v. JM Hargreaves Pty Ltd [2005] NSWCA 228 per Hodgson JA at [41].
21
Ibid.
22
Ibid at [45].
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necessarily legally trained, would be allowed the power to determine their own
jurisdiction. As Jacobs (2007: 40) points out, it took the English courts, possibly over
100 years, to allow arbitrators to determine their own jurisdiction in certain limited
circumstances.
Further, it would appear that if an adjudicator wrongly determined that he or she had
jurisdiction to determine such damages, and an amount for damages was included in
their determination, such a determination would remain valid. As McDougall J
concluded in Hargreaves at first instance, even if it was not open to an adjudicator to
include an amount for delay damages in their determination as provided in the contract
between the parties, the fact that such an amount was included would not render the
determination void.23 Thus, it seems that even though a jurisdictional error, the
wrongful inclusion of damages provided for in a contract would not qualify as a failure
to meet one of the basic and essential requirements laid down in Brodyn. This is
consistent with McDougall J’s view that:
that the basic and essential requirements, or essential preconditions, are more limited in scope than
those matters which, under the pre-Brodyn approach, were considered to be jurisdictional in nature.24
The NSW Court of Appeal affirmed its views in Hargreaves in Cooridnated
Construction Co Pty Ltd v. Climatech (Canberra) Pty Ltd & Ors.25
In Minister for Commerce (formerly Public Works & Services) v. Contrax Plumbing
(NSW) Pty Ltd & Ors,26 the adjudicator determined a progress payment in the amount of
approximately $1.5 million, most of which was for delay damages. The respondent’s
payment schedule proposed a payment of ‘nil’ in respect of the relevant payment claim
which sought approximately $2.6 million. The construction contract provided for the
award of any delay or disruption costs incurred due to extensions of time. In its payment
schedule, the respondent contended that the entitlement to be paid an amount for delay
damages was conditional upon either agreement of such amount by the parties or, if
agreement could not be reached, by determination of an amount by an expert, as
provided for in the contract terms. In its adjudication application, the claimant, for the
first time, asserted that the contractual terms regarding the calculation of the delay
damages were rendered void in accordance with s 34 of the Act. S 34(2)(a) of the Act
provides that a provision of any agreement under which the operation of the 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) is void. In its adjudication response,
the respondent submitted that the claimant was not entitled to raise s 34 in its
adjudication application because s 34 had not been raised in its payment claim.27 The
Court of Appeal upheld the decision of the adjudicator, and the Supreme Court28 in the
first instance, by finding that:
23
Coordinated Construction Co v. J M Hargreaves and Ors [2005] NSWSC 77 at [53].
24
Ibid at [46].
25
[2005] NSWCA 229.
26
[2005] NSWCA 142.
27
An argument based on s 20(2B) of the Act.
28
Minister for Commerce v. Contrax Plumbing and Ors [2004] NSWSC 823.
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(i) The claimant was entitled to rely on s 34 as its inclusion in the adjudication
application for the first time merely amounted to submissions to answer an
argument raised by the respondent in its payment schedule.29
(ii) An error by the adjudicator in interpreting and applying s 34 of the Act does not
render the determination invalid and, therefore, even if s 34 does not invalidate
the relevant contract terms, the adjudicator’s determination would not be
invalid.30
Hodgson JA also commented that even if the claimant was not allowed to rely on s 34
because it had not been raised in its payment claim, the adjudicator could have taken s
34 into account in accordance with s 22(2)(a) and (b)31 if he or she came to know of the
claimant’s submission and thought it to be relevant to the question.32 Additionally,
Hodgson JA viewed that it is strongly arguable that s 34 does render the relevant
contract valuation terms void.33
In John Holland Pty Limited v. Roads & Traffic Authority of New South Wales & Ors,34
the adjudicator awarded the claimant an amount for delay damages, in relation to a
disputed extension of time, in excess of the amount determined for the damages by the
contract superintendent. The respondent submitted in its adjudication response, but not
its earlier payment schedule, that the adjudicator did not have the jurisdiction to
determine the difference between what is claimed in an extension of time claim and
what has been determined by the superintendent in relation to a delay damages claim.35
The terms of the construction contract provided for the amount of a delay damages
claim to be determined by the superintendent and, in the event of a dispute, to be
referred to expert determination. As such, the respondent contended that the
independent valuation by an adjudicator of such a delay damages claim was not in
accordance with s 9(a) of the Act, which required calculation of the payment claim
amount in accordance with the terms of the contract. Additionally, the respondent
contended that the adjudicator is not supposed to be the arbiter of complex extension
claims36 which were subject to determinations under dispute resolution clauses in the
contract.37 The NSW Court of Appeal held that the submissions in the respondent’s
adjudication response were not “duly made” in support of the payment schedule, in
accordance with s 22(2)(d) of the Act, as they had not already been included in the
payment schedule.38 The court considered that even though the submissions were
expressed in the adjudication response as being submissions concerning the jurisdiction
of the adjudicator, this did not make them other than reasons for withholding payment
which should have been raised in the payment schedule.39 Furthermore, the Court of
29
Ibid at [29].
30
Minister for Commerce (formerly Public Works & Services) v. Contrax Plumbing (NSW) Pty Limited [2005]
NSWCA 142 per Hodgson JA at [50].
31
Which provide that the adjudicator consider the provisions of the Act and the construction contract.
32
See ibid per Hodgson JA at [35].
33
Ibid at [51].
34
[2007] NSWCA 19.
35
John Holland Pty Limited v. Roads & Traffic Authority of New South Wales & Ors at [13].
36
Ibid at [13].
37
Ibid at [13].
38
As required by s 20(2B) of the Act which engages with s 22(2)(d).
39
Ibid per Hodgson J at [42].
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Appeal held that, notwithstanding that the adjudication response had not been duly
made, the adjudicator was not required to consider the submissions pursuant to s
22(2)(a) or (b) 40 as, although the adjudicator had been aware of the matters in the
submissions, he did not believe them to be of any real relevance to provisions of the Act
or the contract for the issues before him.41
4 Criticisms of the NSW Act
Several criticisms have been made of the NSW legislative model.42 These are presented
below together with a consideration as to their validity in light of both the original
object of the legislation and the mission drift which has occurred.
4.1 Procedural ‘hoop-jumping’, not justice
This criticism particularly refers to the barring of the respondent from raising any
reasons for withholding payment in its adjudication response if not raised previously in
its payment schedule.43 Additionally, it has been suggested that the requirement for the
respondent to prepare comprehensive payment schedules, in order to preserve their right
to put forward the merits of their argument, is practicably too onerous. As Fenwick-
Elliott (2007: 3) states, this feature of adjudication in NSW
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.
This criticism, however, loses weight if payment claims are restricted to a valuation of
actual physical construction work done, or goods and services supplied, during a
payment period. The adjudicator then only needs to determine whether: the work
claimed has been done, any of the claimed work defective, the work claimed is within
the scope of the contract, and it has been valued appropriately in accordance with the
contract. This being the case, the preparation of a payment schedule becomes a more
straightforward process whereby the respondent only has to consider raising more
limited, non-complex issues than would be the case for a damages claim.
Additionally, it may be argued that the requirement for a payment schedule, under a
statutory payment regime which runs alongside a contractual payment regime, provides
some benefit in ensuring a consistently rapid timetable for the processing and resolution
of payment claims. However, there does seem to be some anecdotal evidence from the
author’s discussions with Authorised Nominating Authorities (ANAs) in NSW to
suggest that the failure to submit a payment schedule often bars unwitting respondents
from bringing their arguments before the adjudicator. This is consistent with Uher and
Brand’s (2008) survey finding that just over a half of the sampled contractor and
subcontractor firms had a ‘low/none’ level of knowledge of the Act.
40
See Minister for Commerce (formerly Public Works & Services) v. Contrax Plumbing (NSW) Pty Limited [2005]
NSWCA 142 per Hodgson JA at [35].
41
John Holland Pty Limited v. Roads & Traffic Authority of New South Wales & Ors per Hodgson JA at [49].
42
The criticisms in sections 2.2 to 2.6 below have been succinctly presented by the Master Builders South Australia
(2008) in their security of payment legislation submission to the South Australian Parliament.
43
Under s 20(B) of the Act.
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4.2 No freedom to agree on adjudicators
The Act’s requirement for adjudicators to be appointed by ANAs, and the absence of an
option for parties to agree upon a particular individual as adjudicator, has been criticised
for:
• creating an adjudication industry which prioritises its own commercial interests
rather that those of the adjudication process;
• leading to poor quality adjudicators, and discouraging good quality adjudicators
who cannot benefit from repeat appointments; and,
• leading to determinations which the parties are less likely to be satisfied with.
If payment claims under the Act were to be restricted in accordance with the original
legislative intent, the adjudicator’s role could be carried out competently by persons
experienced in contract administration in the construction industry. As such, the ANAs
then serve as an expedient ‘matchmaker’ between the contractual parties and
adjudicators.
However, the adjudication of large and complex damages claims is a task more suited to
adjudicators with legal training in addition to construction experience, akin to the skills
of an arbitrator. The contractual parties, therefore, would be more likely to prefer to the
appointment of a mutually chosen adjudicator for complex damages claims, who both
feel is qualified for the task, than they would for a straightforward payment
certification.
In this respect, it is interesting to note that the Building and Construction Industry
Security of Payment Bill 200844 currently before the South Australian Parliament
provides for the parties to agree upon the appointment of an adjudicator,45 and requires
adjudicators to have undertaken the training prescribed by the regulations and to have
been nominated as suitable for appointment as an adjudicator by a building and
construction body prescribed under the regulations.46
4.3 Restrictions on hearings
This criticism particularly relates to the restriction of the matters which the adjudicator
may consider in making his or her determination under s 22(2) of the Act, and the
restriction of any legal representation at any conferences called by the adjudicator.47 It is
argued that extending the adjudicator’s investigative powers, so that more than a
consideration of submissions may be made, would assist the adjudicator in ascertaining
the facts and the law (Fenwick-Elliott 2006: 43). Additionally, it is argued that
restricting legal representation at hearings detracts from the effectiveness with which
each party’s case is put forward to the adjudicator. It is put that these restrictions have
the effect of eroding the parties’ confidence in the determination and promoting poorer
decision making by the adjudicator.
44
A private member’s bill introduced by the Hon John Darley MLC.
45
See s 18(8).
46
See s 19(1).
47
See s 21(4A).
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There is, however, no need for wider investigative powers or for permitting legal
representation, which add time and cost to the adjudication process, if payment claims
under the Act are restricted to exclude complex damages claims. Furthermore, the
restrictions on matters which the adjudicator may consider under the Act result in most
adjudications being determined on documents alone thereby reducing exposure to
claims of bias or procedural error (Kennedy and Milligan, 2007: 13), which provides
more certainty for straightforward payment claim determinations.
4.4 Timescales
The ten business days allowed under the Act for the adjudicator to determine the
application48 is criticised as being too short for all but the simplest of cases. For this
reason, McDougall J (2005)49 views the Act to be less efficacious in dealing with larger
claims. However, this criticism loses much validity if payment claims are restricted to a
straightforward valuation of physical construction work, and goods or services
provided.
It is interesting to note that the Building and Construction Industry Security of Payment
Bill 200850 currently before the South Australian Parliament allows 15 business days for
the adjudicator’s determination.51
4.5 Ambush claims
A claimant may take months to prepare a comprehensive payment claim for delay
damages for inclusion in a payment claim leaving the unsuspecting respondent only ten
business days to respond in its payment schedule.52 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.
This is clearly an unfair practice which would not exist but for the allowance of delay
damages in payment claims under the Act.
4.6 One way street
Allowing payment on account for delay damages claims causes, as Davenport (2007:
14) puts it, “an imbalance because… only one party can refer a claim to adjudication
and recover money”. If the adjudication process is to be used for the assessment of
damages claims, it is only just that both parties be allowed to initiate claims.
Once again, if the scope of payment claims was restricted, this apparent inequity would
not exist.
48
See s 21(3)(a).
49
At [40].
50
A private member’s bill introduced by the Hon John Darley MLC.
51
See s 22(3)(a).
52
See s 14(4)(b)(ii) of the Act.
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5 Conclusion
Over the past five years, the NSW courts have emphatically supported the inclusion of
items of delay damages in adjudicated payment amounts if they fall within the scope of
the contract. In this respect, it would appear from the courts’ decisions that:
• An adjudicator has the power to determine his or her own jurisdiction as to whether
delay damages fit within a broad definition of construction works or goods and
services under the Act. Further, it seems unlikely that an adjudicator’s error as to
their own jurisdiction in this matter will render their determination void.
• Despite the Act requiring calculation of progress payments in accordance with the
terms of the contract,53 any contractual clauses making payment of disputed
damages claims conditional upon expert determination are likely to be rendered void
under s 34 of the Act.
• The claimant is allowed to raise issues in its adjudication application for the first
time if such issues are in response to the respondent’s payment schedule.
• If the adjudicator errs in applying s 34 to contractual valuation terms with respect to
damages, the adjudicator’s determination will remain valid.
• An adjudicator does not have to consider issues of jurisdiction in relation to damages
claims, raised by the respondent for the first time in its adjudication response, as
such issues are deemed to be reasons for withholding payment which should have
been raised in the payment schedule.
• Issues raised for the first time by a respondent in its adjudication response, and by a
claimant in its adjudication application, may still be considered by an adjudicator if
such issues come to the adjudicator’s attention and he or she believes them to be
relevant to the question in hand. However, so far in delay damages claims, the courts
have used this reasoning to support the reliance on s 34 by a claimant, and to defeat
an appeal by a respondent to challenge the jurisdiction of an adjudicator to determine
delay damages claims.
Despite this support from the courts, there seems to be little doubt that the assessment of
such complex damages claims in statutory adjudications was not intended by Parliament
or contemplated by the object of the Act. This mission drift, which mirrors to some
extent that which has taken place in the UK, has rendered the Act open to criticism in
several respects. Ironically, the features of the Act which have been criticised are the
very features which make the Act suitable for its originally intended object, the rapid
and inexpensive resolution of progress payment disputes.
An analysis of the main criticisms levelled at the Act has shown that if the courts had
interpreted the definition of “claimed amount” under the Act narrowly, such that the
53
See ss 9(a), 10(1)(a) & 10 (2)(a).
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progress payment must be for physical construction work carried out or for related
goods and services supplied, the criticisms would have little validity.
Whilst the Act appears to have initially achieved its objective in getting the cash
flowing to contractors for work carried out during interim payment periods, the
effectiveness of the Act and respect for its statutory adjudication scheme are under
threat if the courts continue to encourage complex damages claims to be the subject of
adjudication. Consequently, the courts must correct the mission drift that has occurred,
as they have done previously with respect to judicial review of adjudicators’
determinations in Brodyn, by restricting the scope of payment claims under the Act. An
alternative may be for Parliament to consider reforming the legislation to provide for a
dual process of adjudication, a certification process for progress payments and a
traditional process54 for all other payment claims (such as damages), as proposed by
Davenport (2007).
6 References
Davenport, P (2006), Construction Claims, 2nd edition, The Federation Press,
Leichhardt, NSW.
Davenport, P (2007), ‘A Proposal for a Dual Process of Adjudication’, Australian
Construction Law Newsletter, Issue #115, pp 12-24.
Fenwick-Elliott, R (2006), ‘Building and Construction Industry Adjudication – The UK
Experience’, The Arbitrator & Mediator, Volume 25 (no.2), pp 33-48.
Fenwick-Elliott, R (2007), ’10 Days in Utopia’, in Proceedings of the Institute of
Arbitrators & Mediators Australia, Glenelg, South Australia.
Jacobs, M (2007), Security of Payment in the Australian Building and Construction
Industry, 2nd edition, Thomson Lawbook Co., Pyrmont, NSW.
Kennedy, P, and Milligan, J (2007), ‘Mission Drift in Statutory Adjudication’, in
Proceedings of the construction and building research conference of the Royal
Institution of Chartered Surveyors (COBRA 2007), Georgia Tech, Atlanta, USA.
Master Builders South Australia (2008), Security of Payment Legislation Submission,
Master Builders South Australia, Adelaide.
McDougall, R (2005), The Court view of security of payment legislation in operation,
Supreme Court New South Wales, viewed 29 June 2009,
<http://www.lawlink.nsw.gov.au/lawlink/Supreme_Court/ll_sc.nsf/pages/SCO_mcdoug
al310805>
54
Such as that provided for in the UK and WA Acts, which provide, inter alia, for: payment claims to be made by
either party, less restrictions on the adjudication hearings, and for the adjudicator to have longer to make his or her
determination.
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Jeremy Coggins, pp 1505-1518
Stenning and Associates (2006), Security of Payment in the Tasmanian Building and
Construction Industry, Final Report for the Minister Administering the Building Act
2000, Hobart.
Uher, TE, and Brand, MC (2007), ‘The Evolution of Adjudication Law in the
Construction Industry in New South Wales’, in Proceedings of CIB World Congress
2007, Cape Town, South Africa, pp 2245-2260.
Uher, TE, and Brand, MC (2008), ‘Review of the performance of security of payment
legislation in New South Wales’, in Proceedings of the construction and building
research conference of the Royal Institution of Chartered Surveyors (COBRA 2008),
Dublin Institute of Technology.
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Peter Love, Peter Davis and Joanne Ellis, pp 1519-1539
Prometheus unbound: Unraveling the underlying nature of disputes
Peter E.D. Love, Peter R. Davis, Joanne M. Ellis
Department of Construction Management, Curtin University of Technology
GPO Box U1987, Perth WA 6845, Australia
Email: [email protected]
Philip Evans
School of Law, and Western Australian Institute of Dispute Management
Murdoch University, Murdoch Perth, WA 6150, Australia
Abstract
Research has revealed that factors such as scope changes, poor contract documentation, restricted access,
unforeseen ground conditions and contractual ambiguities are contributors of disputes. While this is
widely known, disputes still prevail over such issues. Before disputes can be avoided an understanding of
the pathogens that contribute to their occurrence needs to be determined so that mechanisms can be put in
place to prevent them from arising. To determine the pathogens contributing to disputes, a total of 41 in-
depth interviews were undertaken with industry practitioners who identified 58 examples of disputes in
projects that they have been actively involved with. Analysis of the findings revealed that the pathogens
of circumstance (arising from the environment), practice (arising from peoples’ deliberate practices) and
task (arising from the nature of the task being performed) accounted for 87% of dispute occurrences. The
environment associated with the use of traditional lump sum contracting was found to be associated with
72% of the disputes. The practice of deliberately not adhering to policies, and procedures, undertaking
design reviews and distributing tentative design documents contributed to the problems arising. The task
of failing to detect errors and misinterpreting contract terms and conditions contributed to disputation. It
is suggested that organizations need to fundamentally re-examine their work processes, policies and
procedures as well as behaviors if disputes are to be reduced in construction.
Keywords: Australia, causal path, disputes, learning, pathogens.
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Introduction
The myth of Prometheus, the benefactor of the human race and the creator of science and crafts, has not
lost its visual power despite the fact the story was recorded more than 2500 years ago. Modern scholars
associate the story of Prometheus with revolutionary change (Wutrich, 1995:p.140). In 1820, Percy Shelly
wrote his famous play: Prometheus Unbound. The title refers to the Aeschylus play ‘Prometheus Bound’
and reflects the second revolutionary change in human history: the liberation from the chains of feudalism
and the emergence of the industrial revolution. Is there a lesson from the Prometheus legend that can
enable researchers’ to better address the issues surrounding disputation in construction? Myths are visions
of fundamental truth and so it is not possible to extract from them lessons for the management of human
affairs. Myths imply ambiguity, fuzziness, but can enable a holistic viewpoint to be attained (Pels,
1973:p.240). They are, however, reminders of the legitimate forces that are present in the making of new
technological eras. They can act as a signpost through the clouds of uncertainty and ambiguity associated
with new scientific advances and technological breakthroughs. Far from providing recipes for managing
technologies and change, they can be used to provide an orientation toward ‘understanding’ the problems
that continually materialize in construction. The myth of Prometheus is a reminder of the cultural
disenchantment and issues that are related with disputes. The myth is also a reminder of the differing
goals and objectives of participants as well as the historical and professional boundaries that prevail. The
construction industry is still struggling for the reconciliation of change and cultural cohesion. Despite a
plethora of research and the countless legal precedents that have emerged, disputes have become an
endemic feature of the construction industry. Unfortunately, they have become a norm!
The determination of the causes of disputes has reached saturation point; consistently the same causal
variables are identified (e.g., Diekmann and Nelson, 1985; Semple et al., 1994; Kumaraswamy, 1997;
Cheung and Yiu, 2006; Yiu and Cheung, 2007). Because most of the studies undertaken have been based
upon questionnaires (e.g., Kumaraswamy, 1997) or derived from case law (e.g., Watts and Scrivener,
1992), the factors identified often lack contextual meaning. For example, poor communication has been
identified as a cause of disputes (Bristow and Vassilopoulos, 1995; Kumaraswamy, 1997). Yet according
to Busby (2001) problems do not arise because X does not communicate Z to Y, but the way Y interprets
Z in light of some prior experience (or lack of), which X does not know about. Thus, X fails to make
allowances for Z, and Y does not realize X does this because Y thinks both that their experiences are
representative. Simply improving communication practices by improving information flow with
technology or using Computer-Aided-Design will not reduce per se the incidence of disputes in
construction. Fundamentally, work processes, policies, and procedures as well as behaviors need to
change in concert if disputes are to be reduced in construction. Yet for change to have any significance a
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better understanding of the underlying conditions associated with disputes is needed. Thus, in this paper
the causes of dispute are re-examined through a different lens so that the process of situated cognition can
be used as mechanism to avoid disputes.
DISPUTE CAUSATION
The literature has propagated studies that have sought to determine the causes of disputes (Table 1). Fenn
et al. (1997) previously suggested that there had been limited empirical evidence that has been structured
to justify the theories that had been presented. It would appear that Fenn et al.’s (1997) observation is still
pertinent some ten years on. Much of the research that has been undertaken simply seeks to identify a list
of factors or triggers which show some association with disputes. In fact, many of the factors identified are
not dissimilar in nature as identified in Table 1. The identification of such factors, while useful, does not
explain the underlying causal nature of disputes. In an attempt to examine the causality of disputes,
Kumaraswamy (1997) sought to determine the root (the underlying reason of the problem and if
eliminated, would prevent recurrence) and proximate (immediately precedes and produces the effect)
causes. Root causes identified by Kumaraswamy (1997) include: unfair risk allocation, unrealistic
time/cost/quality targets by the client, adversarial industry culture, inappropriate contract type, and
unrealistic information expectations. Proximate causes identified included: inadequate brief, slow client
responses, inaccurate design information, inaccurate design documentation, inappropriate contract form,
inadequate contract administration, and inappropriate contractor selection.
A close examination of root and proximate causes of disputes proposed by authors such as Kumaraswamy
(1997) makes it difficult to determine what originally gave rise to the other in many instances. Here
parallels can be drawn with the ‘chicken or the egg causality dilemma’ and the circular cause of
consequence (Garner, 2003). There are many real world examples of circular cause-and-effect, in which
the chicken-or-egg dilemma helps identify the analytical problem. For example, fear of economic
downturn causes people to spend less, therefore reducing demand, resulting in an economic downturn. A
lack of professionalism by design professionals because of reduced design fees can result in inadequate
contract documentation being produced, and therefore lead to rework that manifests as a lack of
professionalism and may eventually emerge in a dispute. Many of the root causes of disputes identified in
the literature can be managed and controlled using various project management strategies, tools and
techniques. For example, errors in documentation can be reduced through the use of design audits and
reviews. The exception being uncontrollable external events such as weather, unforeseen ground
conditions and the behavior of parties (Kumaraswamy, 1997).
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Mitropoulos and Howell (2001) suggest that a combination of environmental and behavioral problems can
lead to disputes. The inherent degree of uncertainty that prevails within construction projects can result in
planning being a problematic issue, especially when information is not available. When uncertainty is
high, initial drawings and specifications will invariably change, and the project team will have to solve
problems as they arise during construction. Once changes arise they may be deemed to be ambiguous and
as a result disagreements between parties can arise. This is because under the concept of bounded
rationality not all potential contingencies are identifiable and can be assessed until they materialize
(Williamson, 1979). When parties enter into a contract and a specific clause fails to account for an
unforeseen event or it is interpreted to suit the particular circumstances that have arisen, then there is a
potential for opportunism. In this instance there is likelihood for a party to opportunistically exploit or
delay another to maximize own gains (Mitropoulos and Howell, 2001). The dispute causation factors of
uncertainty, contractual problems and opportunistic behavior identified by Mitropoulos and Howell (2001)
are similar to those recognized by Diekman et al. (1994): (1) project uncertainty, which cause change
beyond the expectation of the party, (2) process problems, which includes imperfect contracts and
unrealistic performance expectations, and (3) people issues, problems due to poor interpersonal skills,
opportunistic behavior and cognitive dissonance.
Table 1. Claims and disputes in construction (Adapted from Kumaraswamy, 1997)
Author(s) Factors contributing to claims/disputes
Blake Dawson Waldron (2006) Nine key causes in disputes:
1. Variations to scope
2. Contract interpretation
3. EOT claims
4. Site conditions
5. Late, incomplete or substandard information
6. Obtaining approvals
7. Site access
8. Quality of design
9. Availability of resources
Cheung and Yui (2006) Three root causes of disputes:
1. Conflict - Task interdependency, differentiations,
communication obstacles, tensions, personality traits
2. Triggering events - Non performance, payment, time
3. Contract Provision
Yiu and Cheung (2004) Significant sources:
• Construction related: variation and delay in work progress
• Human behavior parties: expectations and inter parties’
problems
Killian (2003) • Project management procedure: Change order, pre-award
design review, pre-construction conference proceedings, and
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quality assurance.
• Design errors: errors in drawings and defective specifications.
• Contracting officer: Knowledge of local statues, faulty
negotiation procedure, scheduling, bid review
• Contracting practices: Contract familiarity/client contracting
procedures.
• Site management: scheduling, project management procedures,
quality control, and financial packages
• Bid development errors: estimating error
Mitropoulos and Howell (2001) Factors that drive the development of a dispute:
1. Project uncertainty
2. Contractual problems
3. Opportunistic behavior
Kumaraswamy (1997) Five common category of claims:
1. Variations due to site conditions
2. Variations due to client changes
3. Variations due to design errors
4. Unforeseen ground conditions
5. Ambiguities in contract documents
Five common causes of claims:
1. Inaccurate design information
2. Inadequate design information
3. Slow client response to decision
4. Poor communication
5. Unrealistic time targets
Conlin et al. (1996) Six key dispute areas:
1. Payment and budget
2. Performance
3. Delay and time
4. Negligence
5. Quality
6. Administration
Sykes (1996) Two major groupings of claims and disputes:
1. Misunderstandings
2. Unpredictability
Bristow and Vasilopoulos (1995) Five primary causes of claims:
1. Unrealistic expectations by parties
2. Ambiguous contract documents
3. Poor communications between project participants;
4. Lack of team spirit
5. Failure of participants to deal promptly with changes and
unexpected outcomes
Diekman et al. (1994) Three main dispute areas:
1. Project uncertainty
2. Process problems
3. People issues
Heath et al. (1994) Five main categories of claims:
1. Extension of time
2. Variations in quantities
3. Variations in specifications
4. Drawing changes
5. Others
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Seven main types of disputes:
1. Contract terms
2. Payments
3. Variations
4. Extensions of time
5. Nomination
6. Re-nomination
7. Availability of information
Rhys Jones (1994) Ten factors in the development of disputes:
1. Poor management
2. Adversarial culture
3. Poor communications
4. Inadequate design
5. Economic environment
6. Unrealistic tendering
7. Influence of lawyers
8. Unrealistic client expectations
9. Inadequate contract drafting
10. Poor workmanship
Semple et al. (1994) Six commons categories of dispute claims:
1. Premium time
2. Equipment costs
3. Financing costs
4. Loss of revenue
5. Loss of productivity
6. Site overhead
Four common causes of claims:
1. Acceleration
2. Restricted access
3. Weather/cold
4. Increase in scope
Watts and Scrivener (1992) Most frequent sources of claims:
1. Variations
2. Negligence in tort
3. Delays
Hewitt (1991) Six areas:
1. Change of scope
2. Change conditions
3. Delay
4. Disruption
5. Acceleration
6. Termination
Pathogens: Latent Conditions
Pathogens are latent conditions that lay dormant within the project system until a problem comes to light.
Before the problem becomes apparent, project participants often remain unaware of the impact upon
project performance that particular decisions, practices or procedures can have. Pathogens can arise
because of strategic decisions taken by top management or key decision-makers within a project. Such
decisions may be mistaken, but they need not be. Latent conditions can lay dormant within a system for a
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considerable period of time and thus become an integral part of everyday work practices. However, once
they combine with active failures then the problem that arises and the subsequent consequences may be
significant. Active failures are essentially inappropriate acts committed by people who are in direct
contact with a system. Such acts include: slips, lapses, mistakes and procedural violations (Reason, 2000).
Active failures are often difficult to foresee and therefore cannot be eliminated by simply reacting to the
event that has occurred. Latent conditions, however, can be identified and remedied before an adverse
event such as a dispute between parties occurs. Pathogens have been defined by a number of qualities
(Busby and Hughes, 2004):
• they are a relatively stable phenomena that have been in existence for a substantial time before the
dispute occurs;
• before the dispute occurs, they would not have been seen as obvious stages in an identifiable sequence
failure; and
• they are strongly connected to the dispute, and are identifiable as principal causes of the disputes once
it occurred.
According to Busby and Hughes (2004) pathogens can be categorized as:
• Practice – arising from people’s deliberate practices;
• Task – arising from the nature of the task being performed;
• Circumstance – arising from the situation or environment the project was operating in;
• Organization – arising from organizational structure or operation;
• System – arising from an organizational system;
• Industry – arising from the structural property of the industry; and
• Tool – arising from the technical characteristic of the tool.
Love et al. (2008) have suggested that before causal inferences can be made it is necessary to initially
determine the latent conditions that contribute to the problem that is being experienced.
Research Approach
To determine the pathogens that contribute to disputes in construction projects an exploratory research
approach was adopted as there has been limited work that has sought to address these salient issues.
Interviews were chosen as the primary data collection mechanism because they are an effective tool for
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learning about matters that cannot be observed. Interviews were used as an attempt to understand the
views of practitioners, to unfold the meaning of practitioners’ experiences of dispute causation. In other
words, interviews were used to gain an understanding and the underlying change needed to prevent their
occurrence (Kvale, 1996). According to Taylor and Bogdan (1984:p.79), no other method “can provide
the detailed understanding that comes from directly observing people and listening to what they have to
say at the scene”.
Interviews
Three basic types of qualitative interviewing have been identified (Patton, 1991): the informal
conversational interview, the interview guide approach, and the standardized open-ended interview.
Although these types vary in the format and structure of questioning, they have in common the fact that
the participant's responses are open-ended and not restricted to choices provided by the interviewer. A
plethora of definitions as to what constitutes a dispute can be found in the normative literature. The
operational definition of a dispute used for the purposes of the study reported is:
“When parties cannot resolve an issue relevant to the performance of the project in a
proactive, timely and mutually acceptable manner, and each party forms an entrenched and
contrary opinion with respect to that issue that requires resolution”.
This definition focuses on dispute related to the performance of the contract, thus avoiding situations that
are purely behavioral in nature.
The interview guide is the most widely used format for qualitative interviewing and was adopted for this
research (Patton, 1991). In this approach, the interviewer has an outline of topics or issues to be covered,
but is free to vary the wording and order of the questions to some extent. For example, the interviewees
were asked to think of a recent completed project that they had been involved with where there had been a
dispute. Background details of the project such as contract value, duration were obtained. Then the
interviewer proceeded to ask the interviewee to select a dispute from the project and describe its
antecedents from their perspective. This enabled the researcher to delve into the contextual backdrop so
that inferences could be made. This type of interview requires relatively skilled and experienced
interviewers who need to know when to probe for more in-depth responses or guide the conversation to
make sure that all topics on the outline are covered. In this case, two interviewers with more than fifteen
years research and industry experience were used to conduct the interviews.
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Forty one in-depth interviews were conducted over a two month period with a variety of personnel such as
project directors, quantity surveyors (QS), architects, arbitrators, project managers, contract
administrators. Firms from the metropolitan area of Perth were selected from the Yellow Pages® using the
technique of stratified random sampling and invited to participate in the research. The interviews were
conducted at the offices of interviewees. Interviews were digitally recorded and transcribed verbatim to
allow for the nuances in the interview to be apparent in the text.
The interviewees’ details were coded to allow for anonymity, although all interviewees were aware that it
might be possible to identify them from the content of the text. The format of the interviews was kept as
consistent as possible following the themes associated with disputes identified from the literature (e.g.,
antecedents, costs, effect etc). The nature of the questions allowed for avenues of interest to be pursued as
they arose without introducing bias in the response. Notes were taken during the interview to support the
digital recording to maintain validity. Each of the interviews varied in length from 30 minutes to two
hours. Interviews were open to stimulate conversation and breakdown any barriers that may have existed
between the interviewer and interviewee.
Data Analysis
Content analysis was used as the primary analysis technique on the collected data. In its simplest form this
technique is the extraction and categorization of information from documents. Inferences from the data
can only be drawn of the relationship with what the data means can be maintained between their
institutional, societal and cultural contexts (Krippendorf, 1980). The text derived from the interviews was
analyzed using QSR Nvivo (which is a version of NUD*IST and combines the efficient management of
Non-numerical Unstructured Data with powerful processes of Indexing and Theorizing) and enabled the
development of themes to be identified.
One advantage of such software is that it enables additional data sources and journal notes to be
incorporated into the analysis. The development and re-assessment of themes as analysis progresses
accords with the calls for avoiding confining data to pre-determined sets of categories (Silverman, 2001).
Kvale (1996) suggests that ad hoc methods for generating meaning enable the researcher access to ‘a
variety of common-sense approaches to interview text using an interplay of techniques such as noting
patterns, seeing plausibility, making comparisons etc’ (p.204).
Using Nvivo enabled the researchers to develop an organic approach to coding as it enabled triggers or
categories of interest in the text to be coded and used to keep track of emerging and developing ideas
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(Kvale, 1996). These codings can be modified, integrated or migrated as the analysis progresses and the
generation of reports, using Boolean search, facilitates the recognition of conflicts and contradictions. This
process enabled the pathogens and causal paths of disputes to be determined.
Research Findings and Discussion
Project Characteristics
The sample of 41 interviewed comprised of: 3(7%) public sector client, 6(15%) private sector client,
3(7%) consulting project managers, 11(27%) contractors, 4(10%) consulting engineers, 4(10%) architects,
3(7%) QS, 4(10%) arbitrators/mediators 3(7%) and subcontractor 1(2%). Each individual was initially
asked to describe a recently completed project where they had been involved with a dispute. 11
respondents were not able to identify any particular project but were able to provide examples and their
perceived causes of disputes. 30 respondents identified and described a specific dispute that they had been
involved in, and in some cases were able to identify more than one example.
In total 58 projects and dispute examples were identified by interviewees (Table 2). The most common
project types were: commercial – offices 6(10%), commercial – retail 6(10%), administration – authorities
9(16%), hospital/health 5(9%), administrative – civic 5(9%), and railway 4(7%). The procurement
methods used to deliver the projects were traditional lump sum 42(72%), design and construct 10(17%),
construction management 2(3%), alliance 2(3%) and traditional cost-plus 1(2%). The type of contracts
used in the projects varied but the most popular form used was based on Australian Standard (AS) 2124
for 42(72%) projects. Other types of contract forms used were AS4902 2(3%), AS4000 4(7%), owner
bespoke forms 3(5%), AS4300 (Amended) 2(3%), AS4916 (Amended) 1(2%), engineering and
construction contract 1(2%), and NPWC3 1(2%). The total value of the projects sampled was
approximately A$4.47 billion. The contract value for the projects ranged from A$250,000 to A$1.8
billion with a mean of A$77.23 million. The duration of the projects ranged from 3 to 60 months with a
mean of 15.5 months.
Pathogens: Determination of Causal Paths
A number of themes emerged from the analysis of the interview data as to the underlying causes of
disputes from the 58 examples provided by interviewees. The most common issues were client influences
and expectations, scope and design changes, contract documentation, inadequate planning and
management, risk allocation and non-adherence to practices and procedures. Each of the examples
provided by interviewees was examined in detail and the latent conditions contributing to the dispute
determined. In almost all cases there appeared to be several pathogens working together and so related
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pathogens for the examples that were provided are also identified and denoted using a prefix as noted in
Table 2. It can be seen that the pathogens of task, practice and circumstance contributed to 87% of
disputes. Examples of the common pathogens and the dispute trajectories using a causal path diagram are
presented hereinafter.
Example 1 - Task pathogen: Procedural violation
In the following example a dispute arose because of a series of omission errors. Omissions errors can be
defined as failures to follow due procedure when undertaking a task(s). Architectural and mechanical
shop drawings were not checked and verified and as a result a very costly rework incidence occurred,
which eventuated into a dispute between parties who were not willing to take responsibility for the error
that arose. The project was a prison that was refurbished using a traditional lump sum contract AS2124.
The contract value was A$1.5 million and the schedule was 6 months. Because of the dispute that was
raised the project was delayed by 8 months. The dispute was resolved through the process of negotiation
at a cost of A$200,000, which equates to 13% of the project’s original contract value.
Table 2. Summary of pathogens occurring in the 58 construction disputes
Dispute
Pathogen Description Related
Category Cause Examples N pathogens
Practice Pathogens arising from • Failure to undertake design reviews 16 (T),(C)
people’s deliberate • Distribution of tentative design documents
practices • Failure to oblige by contractual obligations
Task Pathogens arising from • Failure to detect and corrects an 15 (P),(C),(CO)
the nature of task being omission/error in design documentation
performed • Misinterpretation of contract terms and
conditions
Circumstance Pathogen arising from • Low design fees meant tasks were 19 (P),(T),(CO)
the situation or deliberately left out
environment the project • Failure to provide access to site
is operating in • Unforeseen scope changes
Convention Pathogens arising from • Re-use of existing specification and design 5 (C),(T)
standards and routines solutions
• Failure to adhere to company polices
Industry Pathogens arising from • The use of competitive tendering resulting in 2 (C),(CO)
the structural property selection of lowest bid
of the industry • Contract forms and risk allocation (Limited
incentives)
Tool Pathogens arising from • Ineffective use of CAD software (no 1 (T),(P)
a characteristic of a checking for inconsistencies)
technical tool
Key: Practice (P), Task (T), Circumstance (C), Convention (CO) Organization (O), System (S), Industry (I), Tool (TO)
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Pathogens:
• The task of tendering on incomplete work
• The task failing to undertake a review of the design
• The circumstance of limited site access
Interviewee extract:
“And we had drawings that were supposedly “as constructed” drawings that show where the fittings
and conduits went. The contractor had to come through and cut holes in each of the ceilings to put
the air conditioning ducting. It was a special sort of ducting and it had a grill cover on a certain side.
And the grill cover was certain dimensions so you couldn’t tie things up and hang yourself from it.
So that’s the description of the work. Now a comedy of errors comes to mind with all this series of
errors. The first thing that happened was the contractor had difficulty getting access to the site. Now
the contractor bore a certain amount of that risk but it had gotten beyond him, ridiculous things.
When they first went in to cut the first cellblock they went to cut the first hole, they marked it all out
and cut it, and consequently blew the switchboard. It caused some damage to the switchboard as they
cut through a live power feed that wasn’t supposed to be there. The drawing said it wasn’t there.
Well, that should be the contractor’s responsibility to check where the cables are’, and we’re saying,
‘Well, that’s a bit unreasonable’, it was a bit unreasonable of the client. This particular client was a
hard client, everything’s the bloody contractor’s fault, and that didn’t help. And there were some
other issues it was just a nuisance for the prison to deal with, through no fault of the contractor. So
that was one issue. And in the end there were questions about how it should be resolved. The
contractor should have used an x-ray machine that could actually find out where the conduits were.
Decisions as what to do held up the job which extenuated the delay. That’s one part of the dispute.
Dispute
• Responsibility for conduit and power
supply
• Difficulty to access site caused delays
• Unreasonable client
Dispute Effect
• Increase in project costs
• Increased stress/anguish
• Inducement of conflict
• Negative influence on team morale
Figure 1. Causal path for a dispute: Task pathogen
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Two major incidents were identified as contributing to the dispute in this project. The first related to
access to the site and incomplete drawings, and the second related to erroneous drawings and unilateral
decision-making on behalf of the lead consultant. Figure 1 identifies the causal path of for the initial
dispute that happened because of incomplete information. Serendipitously, the previous as-built drawings
for the prison did not correspond with what had been actually constructed. Penetrations were required for
the installation of air conditioning (A/C) grills. The contractor was given limited access to prison cells
and as result this affected the program of works. After ‘setting-out’ where the penetrations were required
in the ceiling slab work commenced almost immediately. While undertaking the initial penetrations
electrical conduits were severed, which caused a fault to occur and subsequently damaged the
switchboard. A dispute arose as to who was responsible for fixing the conduit and replacing the
switchboard. In addition, the issue as to how to overcome the problem associated with electrical conduit
that had not been incorporated within the ‘as-built drawings’ took considerable time to resolve and
delayed the project by two weeks with considerable costs being borne by the contractor. The costs of
rectifying the damaged works were approximately A$30,000.
Example 2 - Practice pathogen: Failure to communicate an error
While the aforementioned dispute came to light and was in the process of being resolved another began to
manifest (Figure 2). The architectural drawings that had been produced were examined by the mechanical
engineer and it was revealed that the size of the A/C grills shown on the drawings was wrong and thus
would not meet the specified airflow requirements. The A/C documentation produced by the mechanical
engineer simply did not marry with the architectural documentation; the A/C grills were deemed to be too
small in size. The mechanical engineer informed the architect in writing about this error. The
architectural documentation was not amended and tenders were called from subcontractors with incorrect
information present. The mechanical subcontractor who was awarded the contract was not notified of the
error contained within the documents. Shop drawings were produced by the subcontractor and instead of
providing them directly to the contractor to gain the necessary approvals as noted in their contract; they
were bypassed and given directly to the mechanical consultant for approval. The subcontractor did this
because they had a close working relationship with the mechanical consultant. In addition, they needed
the shop drawings to be approved as soon as possible so as not to delay their program and the project. The
project was experiencing considerable delays at this point. Despite the mechanical engineer informing the
architect of the error, it was revealed that the architect had amended the grill sizes to match their drawings
without informing any other project team member. The mechanical engineer had assumed the architectural
drawings had been altered as requested, but unknowingly they had not. Instead the architect had
unilaterally made the decision to opt for the smaller size A/C grills without consulting the necessary
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parties. The mechanical consultant approved the shop drawings and failed to notice that the A/C grills
were the size originally specified by the architect. In fact, the shop drawings were not distributed to the
architect for checking. No detailed checking had been undertaken. The drawings were passed on to the
project superintendent’s acting representative who approved the drawings without also checking them.
The contractor on receiving the shop drawings also stated they had been checked by them, when in fact
they had not been. Thus, on the basis of the approvals received the A/C grills were manufactured and
delivered to site. During the installation of the A/C grills the subcontractor noticed they were too small as
penetrations were larger than the grill size. For some unknown reason, penetrations were cut as required
for the larger size A/C grills as originally specified by the mechanical consultant. The cost of
manufacturing the smaller A/C grills was $50,000. They did not fit and were inadequate. The architect
apparently abrogated their responsibility for the problem by explicitly stating the architectural
documentation were correct and if the shop drawings had been distributed to them then the error would
have been identified.
Example 3 - Circumstance pathogen: Appropriate procurement selection
In the next example, the pathogen of circumstance is described, as noted in Figure 3. A number of
pathogens and conditions interacted that contributed to the dispute that is examined. The selected project
was procured using an alliance contract and the client placed considerable pressure on the project team to
deliver the project as quickly as possible. Such pressure placed considerable strain on the design and
engineering team, especially with the skills shortage being experienced, particularly in Western Australia
(WA). The design team was not able to meet the required schedule and as a result it was perceived that
they adopted a work of practice of purposefully not checking what they had designed with one another so
as to meet their deliverables. The contractor made the following comment:
“We’re subjected to liquidated damages in our contract but designers weren’t. There was
no stick in place to whack them with, they don’t have penalties. They just send crappy
documentation and expect us to cop it.”
This set the scene for a battleground on the project despite an alliance being in place. The contractor
accepted the terms under the contract but did not expect to be subjected to documentation that was so
indecorously put together. Because the documentation was incorrect, scope changes had to be made,
which had an impact on the program and the contractor’s costs. Relations became strained and a great
deal of tension was present at site meetings. It was perceived that personal agendas began to take a
foothold and so it was agreed that the problems were to be resolved through negotiation.
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Pathogens:
• The task of withholding information/not informing participants
• The practice of not undertaking design audits, verifications and
reviews
• The circumstance of time pressures to complete the project
• The convention of not adhering to company policy
Interviewee extract:
Well is it the mechanical subcontractor who had the wrong grill size initially? Or hang on, the
architect when they just picked it up and amended the contract documents to say the right size. So
you say to the consultant, ‘So this guy basically has abrogated to that person,’ but who’s responsible?
Should the architect have told his mechanical subcontractor he’d made the change? Did the
mechanical subcontractor do the wrong thing going to the mechanical sub-consultant to have the shop
drawings checked? To expedite, to resolve – because they generally – they always talk to each other
because there’s always discrepancies in design requirement etc, so that’s quite a common route. But
in the end did he, by not going back through that way, cause the problem? Did the mechanical sub-
consultants cause the problem by actually accepting that without say, ‘No, hang on, you’ve got it
wrong’. Did the contractor do anything wrong? Well, actually no. The contractor took shop
drawings from his mechanical subcontractor, said, 'Okay, here are the shop drawings, it's not my job
to check them, I don’t know what I'm looking at, Mr Superintendent’s representative, here they are’.
Didn’t do anything wrong. Possibly you could argue, and these have been approved by – led to the
superintendent’s representative – so you could say he probably shares a little morally, if not literally,
but he didn’t do anything wrong. Did the superintendent’s representative do anything wrong?
Arguably not, because the contractor, without doing anything wrong, had said, ‘These have also been
checked’. Bit lazy, probably should have actually rung up and said, ‘Hey, do you want your shop
drawings’, but didn’t. If he’d had done the thing and handed it back on, it probably would have been
picked up early. So it was a combination of people all doing the right thing for the project, thinking
they were being helpful, but neglecting the contract flow, neglecting the document flow envisaged in
the contract.
Dispute
• Responsibility for checking and
verifying documentation was correct
• Abiding by contractual obligations
and responsibilities
• Cost of rework
Dispute Effect
• Increase in project costs
• Increased stress/anguish
• Inducement of conflict
• Negative influence on team morale
Figure 2. Causal path for a dispute: Practice pathogen
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Pathogens:
• The circumstance of the client demanding a building to be
delivered as quickly
• The practice of not undertaking design reviews
• The task of not detecting and correcting errors
Interviewee extract:
“The procurement method has got to suit the market, and the market at the moment is booming. We
agreed to take on an alliance project and it was our mistake. It was the wrong method I feel – should
have been a standard form of contract as we know what we are up against. We took on too much risk
and prices started to rise. There was urgency for the project to start as soon as possible because of the
price increases being experienced and because the client wanted to reap the benefits of the returns the
project would bring. It’s a tough market, and we took a punt to too speak. We had a rise and fall
clause but it didn’t really account for the increases experienced. You can see that the price of steel
has gone from $500 to over $1000 in 12 months. Our project had a huge amount of steel as there was
considerable reinforcement required. Then we experienced scope changes and errors in the
documentation! The engineers and architects drawings did not correspond. Yes, they were put under
pressure to document but I don’t think they bothered doing detailed checking – this put us under
considerable pressure and ended up delaying our works. We had to wait for the architect and engineer
to supply the correct information. We can only take so much and if I were honest possibly took on
too much risk. We didn’t know steel would increase so much, it was totally unexpected. Now we’re
in dispute over scope costs, and delay costs”.
Dispute
• Additional scope of works not clear
on drawings
• Cost escalation
• Errors in documentation
• Delay and disruption
Dispute Effect
• Loss of profit
• Increased stress/anguish
• Inducement of conflict
• Detrimental to future business
relationship with consultants
Figure 3. Causal path for a dispute: Circumstance pathogen
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Interrelationship of Pathogens
Figure 4 summarizes the relationship between the significant pathogens that have emerged from the
analysis and interpretation of the data. These findings are similar in nature to the research reported in
Love et al. (2008) where the underlying pathogens for errors were identified. However, the pathogenic
influence of ‘circumstance’ was also found to be a prevalent feature. The circumstance within which a
project is procured influences the work practices adopted and how tasks are performed. For example, a
skills shortage had been experienced and there was considerable cost escalation being experienced
because of the rising price of commodities. It was imperative, within WA for example, that projects were
delivered as quickly as soon possible to meet the demands of clients. Unfortunately, there were instances
where an inappropriate procurement strategy for projects was adopted.
External Environment
• Political
• Misinterpreting
• Economic
contracts
• Social
• Erroneous /incomplete
• Technological Task documentation
• Environmental • Defective work
Circumstance Behavioral
Adaptation
• Failure to undertake
design reviews
• Skills shortage Practice • Opportunism
• Client type • Poor planning and
• Procurement strategy resourcing
• Cost escalation
Figure 4. Interrelationship of pathogens
A traditional lump sum method, for example, was used for a project that was more than two years in
duration and was in excess of A$1 billion. The contract documentation contained many errors and
omission because of the ‘schedule pressure’ placed on consultants and because resource constraints.
Practices such as design reviews and distributing tentative information were adopted. Moreover, limited
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time was spent on checking for errors. When the problem is identified then there is a potential for a
dispute as there are invariably financial implications for the party who is affected by the error.
The circumstance may influence an individual’s behavioral adaptation because of their personality and
how deal with the environmental pressures imposed upon them. This can be further be exacerbated by the
existent culture, strategy and policies that prevail within their organization and those that are subsequently
transferred to the project. The environment within which projects are procured is constantly changing and
it is important for organizations and project managers realize how it can influence the nature of tasks and
practices are that employed. From the evidence provided from this exploratory study disputes appear to
materialize because of an organization’s inability to react effectively to environmental pressures (e.g.,
political, economic, social and technological) that they are subjected too as well as those being directly
imposed upon the project. Consequently, this may impact project tasks and procedures and stimulate the
occurrence of active failures. Such failures invariably lay dormant within the project system until they are
identified. If issues associated with the active failure are not effectively remedied, then a dispute can
materialize and have a significant impact on the performance of the project. Considering the underlying
latent conditions associated with circumstance, task and practice it is suggested that strategies for avoiding
disputes should initially focus on these areas.
Strategies for avoiding disputes were solicited by interviewees so as to identify pragmatic practices that
could be readily adopted and possibly have a significant impact. Nevertheless, the reduction of issues
such as scope changes, rework, and an overall improvement in productivity and performance would
require the construction industry to make a dramatic ‘paradigm shift’ from being essentially adversarial;
where there are only ‘winners’ and ‘losers’ to one that is based upon solidarity and collaboration where
mutual gains can be attained and sustained for the benefit of all parties. This will require organizations to
transform their businesses in terms of relationships, behaviors, processes, communications and leadership.
Conclusion
While a considerable amount of knowledge has been accumulated about dispute causation, they continue
to prevail and disharmonize the process of construction with considerable cost. The reason as to why they
still continue to occur is that many firms have failed to learn from previous experiences and continue to
adopt work practices that are opportunistic as well as posses a ‘blame culture’ that is used to dominate and
control in an oppressive tyrannical manner instead of taking responsibility for their actions. This
invariably translates to individuals’ behavior and how they respectfully solve problems with other
individuals.
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An underlying condition contributing to how individuals address problems that arise pertains to the
circumstances within which the project is being procured. The adoption of adversarial practices such as
competitive tendering often leads to the lowest price being adopted. In hindsight, however, many clients
and consultants have often regretted this choice when expected performance levels (in terms of time, cost
quality, safety and even information flows) are not achieved. A re-examination of original selection
processes often reveals decisions are dominated solely by price competition. This is particularly the case
for consultants who are also often forced to competitively bid for their services and as a result provide
minimal services for the fees charged, which often results in documentation being substandard. To obtain
‘best value’ there needs to be shift toward negotiation rather than the use of competitive selection so as to
ensure firms who have the capability and experience to undertake the project at hand. While negotiation
is probably amenable to many private sector clients, those from the public sector will have to confront
issues surrounding probity and the perception of public accountability.
There is a need for greater use of modern procurement methods, which by default promote the use of
constructability. A significant proportion of the dispute examples provided pertained to traditional lump
sum contracting. This procurement route by its very nature is adversarial and therefore it is not surprising
that disputes occurred, though it should be acknowledged that many successful dispute free projects have
been procured using this method.
Firms need to implement stringent policies and procedures that must be adhered too at all times (e.g.,
quality systems), but at the same being cognizant of not initiating blame. When an individual is deemed to
be non-compliant and ‘procedural violations’ arise, then behavior modification should be undertaken
using intervention. Behavior after error occurrence is influenced by the presentation of positive heuristics,
for example, “I made a mistake; I can learn from this!” Such positive heuristics are presented to facilitate
emotional coping after the events occurrence, thereby aiding people to consider that errors can also be
interpreted as informative feedback. Learning from mistakes is pivotal to dispute avoidance. The use of
communities of practices within organizations and projects can provide an opportunity to share
knowledge, solve problems, and derive innovative solutions. The transformation from an adversarial to
one of solidarity and collaboration can enable such discourse and learning to take place between
individuals and organizations through situated cognition, which is necessary for dispute avoidance and
resolution. While such actions are necessary, hope, remains locked away in Pandora’s Box.
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Jeremy Coggins, pp 1540-1556
A Review of Statutory Adjudication in the Australian Building
and Construction Industry, and a Proposal for a National
Approach
Jeremy Coggins1
1
Lecturer, School of the Natural & Built Environments
University of South Australia, Adelaide, SA 5000,
Australia; Phd candidate, University of Adelaide,
Adelaide, SA 5000
Email: [email protected]
Abstract:
Despite the recommendation of a 2003 Royal Commission that Australia should enact a
Commonwealth Building and Construction Security of Payment Act, security of
payment legislation has been enacted on a State-by-State basis in five jurisdictions. Two
distinct legislative models can be identified from the five Acts. This paper reviews the
key differences between the statutory adjudication schemes prescribed by the models
and considers the reason for such differences. Additionally a review of statistical
performance data for statutory adjudication, recorded by the government departments
and agencies in the relevant jurisdictions, is presented. The paper finds that whilst
statutory adjudication under both models is being well used by the building and
construction industry, one of the models is more suited to the efficient determination of
straighforward progress payment claims and the other model is more suited to the
equitable resolution of more complex payment claims for debts or damages. A dual
process of adjudication conceptualised by Davenport (2007), which essentially
combines the strengths of the two existing legislative models, is proposed as a basis
upon which a national approach may be taken.
Keywords: Security of Payment, Statutory Adjudication, Australia
1 Introduction
Of the eight Commonwealth jurisdictions which have enacted payments legislation for
the building and construction industry, five1 have been Australian States or Territories.2
The first Australian jurisdiction, and second Commonwealth jurisdiction after the UK,
to enact such legislation was New South Wales (NSW) in the form of the Building and
Construction Industry Security of Payment Act 1999. The title of the NSW Act has led
to the term ‘security of payment’ becoming widely used in the Australian construction
1
The titles of the five Australian Acts are presented in Table 1.
2
The others being the UK, New Zealand and Singapore.
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industry to refer to both the entitlement of contractors to receive payments due to them,
and the associated raft of legislation that has developed in the various jurisdictions to
address payment problems. Victoria, Queensland, Western Australia (WA), and
Northern Territory (NT) have followed NSW in enacting security of payment
legislation. South Australia (SA) has two alternative, yet similar, security of payment
bills currently before parliament, and proposed security of payment legislation is also
currently being carried forward through the Tasmanian Department of Justice. Both the
proposed SA and Tasmanian legislation is largely modelled on the NSW Act.
The uptake of security of payment legislation by Australian States and Territories is
consistent with the finding of the Cole Royal Commission Report into the Building and
Construction Industry (2003: Vol 1, 6)3 that there is an “absence of adequate security of
payment for subcontractors” in the Australian building and construction industry. Such
an uptake, however, is not consistent with the Cole Report’s (2003: Vol 8, 115)
recommendation that, due to reasons of equality and cost efficiency, the Commonwealth
enact a Building and Construction Industry Security of Payments Act. The Cole Report
(2003: Vol 8, Appendix 1) even went as far as drafting a proposed Building and
Construction Industry Security of Payments Bill 2003.
The consequence of security of payment legislation emerging on a state-by-state basis is
a lack of uniformity between the relevant Acts in the different Australian jurisdictions.
Of the enacted Australian legislation, there are some notable differences between, on
one hand, the NSW, Queensland and Victorian Acts and, on the other hand, the WA and
NT Acts. The NSW, Queensland and Victorian Acts have collectively been referred to
as the East Coast model legislation, 4 and the WA and NT Acts as the West Coast model
legislation.5 The differences between the two models are particularly marked with
respect to the procedure prescribed in each model’s statutory adjudication scheme.
Table 1: Government departments and agencies responsible for security of payment legislation
Jurisdiction Act Government department or
agency responsible
NSW Building and Construction Industry Security Office of Public Works & Services
of Payment Act 1999.
Victoria Building and Construction Industry Security Building Commission Victoria
of Payment Act 2002
Queensland Building and Construction Industry Payments Building and Construction Industry
Act 2004 Payments Agency
WA Construction Contracts Act 2004 Building Management & Works
Division, Department of Treasury
and Finance
NT Construction Contracts (Security of Department of Justice
Payments) Act 2004
The current situation with respect to security of payment legislation in Australia is not
dissimilar to the situation that existed with respect to inconsistencies in commercial
3
Hereafter, referred to as the Cole Report, after the Honourable Commissioner Terence Rhoderic Hudson
Cole RFD QC who led the Royal Commission into the Building and Construction Industry.
4
See the report by Stenning & Associates (2006) prepared for the Tasmanian Government.
5
Accordingly, this terminology has been adopted for this paper.
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arbitration State legislation – another key Act for the Australian construction industry
concerning dispute resolution – until the mid-1980s when the States agreed to introduce
uniform amendments so as to maintain consistency of the law and processes (Bailey
1998: 40).
The existence of two distinct statutory models, as well as some variations between Acts
of the same model,6 presents inconsistency on a national basis resulting in unfamiliarity
with key legislation for parties in the Australian building and construction industry
undertaking contracts located interstate. Such unfamiliarity, in turn, may result in parties
incurring extra costs in familiarising themselves with differences in interstate
legislation, or parties being unaware and/or confused as to their statutory rights with
respect to payment for construction work which, in turn, may affect compliance with the
relevant legislation. As stated in the Cole Report (2003):7
National consistency is desirable. It reduces the cost of businesses moving between jurisdictions
and operating in different jurisdictions. It means that the costs of subcontractors and the cost of
building are not inflated in those States and Territories where there is a higher risk that
subcontractors will not get paid.
Furthermore, there is a risk that building and construction will become relatively more
expensive in those Australian jurisdictions which have not enacted security of payment
legislation, as the cost benefits to the industry from an efficient form of payment dispute
resolution is not available. Such cost benefits arise primarily in the form of improved
cash flow during contracts, and lesser financial risk in tendering, to contractors.
Consequently, tender prices to clients fall in a business environment where certainty of
fair payment is increased. Jurisdictions without security of payment legislation,
therefore, are likely to become less competitive for businesses generally due relatively
higher overheads associated with building and construction capital.
On the basis that the inconsistent application of security of payment legislation currently
existing in Australia presents a problem to the building and construction industry as
outlined above, this paper identifies the key differences between the statutory
adjudication schemes operating under the East Coast and West Coast legislative models,
and reviews the use of statutory adjudication under each model in the respective
jurisdictions. Having appraised the East Coast and West Coast model statutory
adjudication schemes, a dual process of adjudication, as conceptualised by Davenport
(2007), is proposed as a basis for the implementation of a nationally consistent
approach.
6
Particularly within the East Coast model legislation between the Victorian Act and the
NSW/Queensland Acts.
7
Royal Commission into the Building and Construction Industry, Security of Payments in the Building
and Construction Industry Discussion Paper 12, page 22, October 2002.
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2 The Key Differences between the East Coast and West Coast Model
Statutory Adjudication Schemes
Whilst the intent of both the East Coast and West Coast models is similar – to improve
cash flow in the construction industry – there is a significant difference between the
scope of payment disputes which may be adjudicated under the two legislative models.
This difference is apparent in comparing the objects of the NSW and WA Acts which
epitomise the East Coast and West Coast models respectively. The object of the NSW
Act8 states:
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 is able to recover, progress payments in relation to the carrying out of that work
and the supplying of those goods and services.
Whereas, the object of the WA Act9 is “to provide a means for adjudicating payment
disputes arising under construction contracts”.
The West Coast model, therefore, allows all payment disputes under a construction
contract to be submitted to statutory adjudication. Whereas, the East Coast model
restricts statutory adjudication to progress payment disputes only.
The East Coast model provides for the adjudication of straightforward progress payment
claims for construction work carried out, or for related goods and services supplied
under the construction contract in a payment period.10 Accordingly, the legislation
defines “construction work” to be physical forms of construction,11 and “related goods
and services” to be goods and services necessary for physical construction to take
place.12 As such, the East Coast model legislation does not anticipate the adjudication of
more complex payment claims, such as those for damages for breach of contract – for
example, delay or disruption damages claimed by the contractor for a compensable
cause under the contract. The East Coast adjudication scheme has been likened to that
of an independent certifier (Davenport 2007: 13). Conversely, in addition to straight
forward progress payment claims, the West Coast model anticipates the adjudication of
more complex payment disputes for debts or damages, such as delay and disruption
costs, liquidated damages for late completion, or amounts owed by way of indemnity
from the other party. Such disputes require the adjudicator to make a determination of a
more judicial nature more akin to arbitration or litigation.. Accordingly, the West Coast
model requires the adjudicator to determine on the balance of probabilities whether any
party to the payment dispute is liable to make a payment or return any security.13
8
S 3(1).
9
Stated on page 1 of the Act.
10
See ss 4, 8 & 13(2)(a) of the NSW Act.
11
See s 5 of the NSW Act.
12
See s 6 of the NSW Act.
13
See s 31 (2)(b) of the WA Act.
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Furthermore, if the adjudicator feels that the dispute is too complex to make a fair
determination, he or she may dismiss the application without making a determination.14
Many of the procedural differences between the East Coast and West Coast statutory
adjudication schemes, considered below, can be attributed to the differing objects of the
respective legislative models with respect to scope of payment disputes covered.
2.1 Limitations on matters raised in an adjudication response
The East Coast model operates a ‘dual payment system’ for progress payment claims.
This means that if a payment claim is to be eligible for submission to adjudication under
the Act, it must state that it is made under the Act15 and be served upon the principal.16
This, in effect, amounts to a separate claim from the contractual progress payment claim
made by a contractor and served upon the contract administrator or superintendent. The
serving of a separate statutory claim theoretically means that the adjudicator is starting
from the point of assessing a fresh payment claim rather than a contractual payment
claim which has already been assessed by the contract administrator. This is in keeping
with an independent certification role. Such a dual payment system has been described
as a “dual railroad track system”,17 which creates a statutory system alongside any
contractual regime.18
Under the East Coast model’s statutory payment regime, a respondent has up to 10
business days 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.19 If the respondent does not provide a payment
schedule, it becomes liable to pay the claimed amount to the claimant on the due date
for the progress payment.20 If the respondent either fails to provide a payment schedule,
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.21 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,22 with a copy served on the respondent,23 within 10 business days24 after
receiving the payment schedule. The respondent then has either a period of 5 business
days after receiving a copy of the application or 2 business days after receiving notice of
an adjudicator’s acceptance of the application, whichever is the later, to lodge an
adjudication response with the adjudicator.25
14
See s 31(2)(a)(iv) of the WA Act.
15
See s 13(2)(c) of the NSW Act.
16
See s 13(1) of the NSW Act.
17
Transgrid v Siemens & Anor [2004] NSWSC 87 at [56], per Macready AJ.
18
Beckhaus v Brewarrina Council [2002] NSWSC 960 at [60].
19
See s 14(3) of the NSW Act.
20
See s 14(4)(b) of the NSW Act.
21
See s 17(1) of the NSW Act.
22
See s 17(3)(b) of the NSW Act.
23
See s 17(5) of the NSW Act.
24
See s 17(3)(c) of the NSW Act.
25
See s 20(1) of the NSW Act.
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Critically, the respondent may only lodge an adjudication response if it earlier served a
payment schedule upon the respondent.26 Additionally, a respondent may only include
in its adjudication response reasons for withholding payment which have been included
in the earlier payment schedule.27 Thus, a respondent will not be able to present their
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. This feature of
the East Coast model has been criticised by some as a ‘procedural trap’28 which
prevents a fair hearing and requires the respondent to divert significant resources to the
massive task of preparing appropriate payment schedules. The author is also aware of
anecdotal evidence from discussions with ANAs that the failure to submit a payment
schedule often bars unwitting respondents from bringing their arguments before the
adjudicator. This is a problem most likely due to inadequate knowledge of the
legislation by parties in the construction industry – accordingly a survey of contractors
and subcontractors in the NSW construction industry carried out by Uher & Brand
(2008) showed that 48% had either low or no knowledge of the NSW Act and 37% had
only moderate knowledge of the NSW Act. This issue aside, there are benefits in the
statutory payment regime in that it provides a consistent and rapid timetable for
payment claims and the adjudication process.
Bearing in mind that statutory adjudication under the East Coast model is essentially
supposed to be an independent certification process, the preparation of payment
schedules should not, in theory, prove too onerous. Reasons for withholding payment
in a payment schedule should be restricted to issues of claimed work being either
defective, beyond the scope of the contract, or not appropriately valued in accordance
with the contract. Furthermore, the requirement to identify issues to be later relied upon
in the payment schedule allows the claimant to respond to such issues in their
adjudication application, and means that no issues are brought up for the first time in the
adjudication hearing. This means that the claimant is fully aware of all the respondent’s
reasons for withholding payment before making the decision to progress to adjudication,
and that both parties have an opportunity to address all the issues before the
adjudication hearing commences.
The West Coast model does not have a dual payment system. Payment claims which
become the subject of adjudication are claims made under the construction contract.
Thus, respondents are not barred from raising issues in their adjudication responses.
This is a fairer and more practicable approach for claims which may be more complex
in nature, and require a more judicial approach from the adjudicator. It also means that
an adjudicator is making an assessment of what has already occurred under the contract
with respect to a payment claim, which is more in line with a judicial approach taken in
arbitration or litigation.
2.2 Who can apply for adjudication?
Under the East Coast model, only a person who has undertaken to carry out construction
work or supply related goods and services under the contract may apply to have the
26
See s 20(2A) of the NSW Act.
27
See s 20(2B) of the NSW Act.
28
For example, see Fenwick Elliot (2007: 3).
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dispute adjudicated.29 This, therefore, restricts adjudication applications to contractors
and suppliers, and precludes principals. This is consistent with the scope of adjudication
being limited to straightforward progress payments for construction work carried out, or
for related goods and services supplied.
Under the West Coast model, any party to the contract may apply to have the dispute
adjudicated.30 This is because it would, as Davenport (2007: 14) puts it, create an
“imbalance” if only one party was allowed to apply for adjudication of payment
disputes regarding debts or damages. Debts or damages claims may be initiated by
either contractual party and, therefore, it would be blatantly unfair to allow only one
party the right to refer such claims to adjudication.
2.3 When can a party apply for adjudication?
Under the East Coast model, an adjudication application may be made only pursuant to
a progress payment claim which has been disputed or not paid in part or in whole.31
Progress payment claims may be made on and from each reference date determined in
accordance with the contract or, if the contract makes no express provision with respect
to the matter, the last day of each month in which construction work was carried out.
Such requirement is consistent with the East Coast model’s limited scope of
adjudication to straightforward progress payments which, as Davenport (2007) points
out, become due after the payment claim is made.
Under the West Coast model, either party may apply for adjudication of a payment
dispute within 28 days after the dispute arises.32 A payment 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.33 The making of a progress payment claim does not prevent the contractor
from making any other claim for monies payable to the contractor under or in
connection with this contract. Therefore, the parties are not restricted as to the timing or
number of adjudication applications they may make by reference dates stated in either
the construction contract or security of payments legislation.34 This accords with the
West Coast model’s coverage of payment disputes regarding debts and damages which
if valid, as Davenport (2007) points out, are due at the time the payment claim is made.
Therefore, payment claims and subsequent respective adjudication applications may be
made at any time under the West Coast model.
2.4 The investigative powers of the adjudicator
In making his or her determination under the East Coast model, the adjudicator is only
to consider the submissions made by the parties (payment claim, payment schedule,
adjudication application, and adjudication response) together with the provisions of the
29
See ss 13(1) & 17(1) of the NSW Act.
30
See s 25 of the WA Act.
31
See s 17(1) of the NSW Act.
32
See s 26(1) of the WA Act.
33
See s 6(a) of the WA Act.
34
However, an adjudication application cannot be made in respect to a dispute which has already been
subject of an adjudication application – see s 25(a) of the WA Act.
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Act, provisions of the construction contract and the results of any inspection carried out
by the adjudicator of any matter to which the claim relates.35 In practice this often
means that the adjudicator makes a determination on documents only. This is
appropriate to the adjudicator’s role as independent certifier of progress payments.
Additionally, as Kennedy and Milligan (2007: 13) note, such limits reduce exposure to
claims of bias or procedural error, providing more certainty for straightforward payment
claim determinations.
The investigative powers of an adjudicator making a determination under the West
Coast model are wider. The adjudicator is not bound by the rules of evidence and may
inform himself or herself in any way he or she thinks fit.36 This is more apt to the quasi-
judicial role that an adjudicator may be required to undertake in relation to more
complex claims regarding debts or damages.
2.5 Legal Representation at Adjudication Hearings
Under the East Coast model, if an adjudicator calls a conference of the parties no legal
representation is permitted.37 Legal representation is unnecessary, and would only add
time and cost, to what is essentially a straightforward independent certification process.
The West Coast model allows the adjudicator to determine his or her own adjudication
procedure,38 and does not specifically preclude legal representation at hearings. Thus,
legal representation at conferences is at the adjudicator’s discretion. Allowing legal
representation at conferences regarding more complex debts or damages claims may be
prudent as the effectiveness with which each party’s case is put forward to the
adjudicator is improved. This will allow the adjudicator to gain a better understanding
of the issues in dispute. Additionally, the parties are more likely to have confidence in
the adjudicator’s determination if they feel that their case has been clearly
communicated and understood.
2.6 How is an adjudicator appointed?
Under the East Coast model, the adjudication application must be made to an ANA
chosen by the claimant.39 It is then the duty of the chosen ANA to refer the application
to an adjudicator.40 The parties, therefore, cannot agree upon the appointment of a
particular individual as adjudicator. The ANAs, however, ensure that their listed
adjudicators are suitably trained and qualified for their role. As such, the ANAs provide
an expedient means of appointing an adjudicator suitable for independent certification.
Under the West Coast model, the parties to the contract may agree upon a registered
adjudicator or prescribed appointor.41 The provision to agree upon a particular
individual as adjudicator is more important for complex claims, as the parties are likely
35
See s 22(2) of the NSW Act.
36
See s 32(1)(b) of the WA Act.
37
See s 21(4A) of the NSW Act.
38
See s 32(6) of the WA Act.
39
See s 17(3) of the NSW Act.
40
See s 17(6) of the NSW Act.
41
See s 26(1)(c) of the WA Act.
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to prefer the appointment of somebody who they feel is suitably qualified and
experienced, and in whom they have mutual confidence to determine complex disputes
in a restricted timeframe.
2.7 How long does an adjudicator have to make their determination?
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 days42 of the date on which the
adjudicator notified his or her acceptance of the application.43 The WA Act requires
determination within 14 days,44 and the NT Act within 10 working days,45 after the date
of the service of the adjudication response. All of the Acts allow for the extension of the
determination period with the agreement of both parties.
10 working days appears reasonable for a certification type adjudication. However, 10
working days or 14 days would seem, at first sight, a tight timeframe within which to
determine a more complex claim for debt or damages under the West Coast model.
3 The Performance of Statutory Adjudication in Australia
In each Australian jurisdiction, a government department or agency facilitates, promotes
and monitors the use of security of payments legislation in their building and
construction industry. The names of these government departments and agencies is
presented in Table 1 above. Each department or agency collects various statistical data
regarding the use of statutory adjudication which is available to the public either on the
internet or by request. A review of this statistical data has been carried out, and is
presented below, in order to obtain a comparative overview of the use of statutory
adjudication in the various Australian jurisdictions.
Figures 1, 2 and 3 indicate the level of use of statutory adjudication since 2003/0446 in
terms of number of adjudication applications, total value of amounts claimed in
adjudication, and amount claimed in adjudication per head of population respectively.
Figure 4 shows the mean value of payment amounts claimed in adjudication.
Figure 1 shows that the number of adjudication applications in NSW escalated rapidly
for the first two years after it was amended in 2003.47 However, the number of
applications appears to have plateaued since 2005/06. Queensland has experienced the
42
See s 21(3) of the NSW Act, and s 2222(4) of the Victorian Act.
43
The Queensland Act differs slightly in that it requires determination within 10 business days after the
earlier of the date on which the adjudicator receives the adjudication response, or should have received
the adjudication response.
44
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.
45
See s 33(3).
46
All jurisdictions record data each financial year with the exception of NSW which records each
calendar year.
47
Most significantly for the use of adjudication, the NSW Act was amended to remove the original option
provided for a respondent to an adjudication to provide security by way of guarantee to the successful
claimant in lieu of payment, pending final determination.
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steepest increase in adjudication applications since the legislation took full effect in
October 2004. Indeed, NSW had significantly more adjudication applications than any
other jurisdiction until 2008/09 when Queensland applications increased by 89% from
2007/08 to overtake the number in NSW. The high take-up rate in Queensland most
likely reflects the efforts of the State’s Building and Construction Industry Payments
Agency, which is relatively well resourced compared to its counterparts in other
jurisdictions, in promoting and facilitating statutory adjudication The numbers of
adjudication applications in Victoria, WA and NT are significantly lower than in
Queensland and NSW, and have only experienced a relatively gentle rise since
enactment of the legislation compared to Queensland and the initial take off in NSW.
Whilst lower numbers are expected in WA and NT due to significantly smaller
populations, this is not the case with Victoria. The slow adoption of statutory
adjudication in Victoria is likely due to the option provided for in the original 2002 Act
which allowed a respondent to an adjudication to provide security by way of guarantee
to the successful claimant in lieu of payment, and was not removed from the Act until
amendments were made to the Act which took effect on 30 March 2007. Additionally
the amended Victorian Act appears to be more complex than its counterparts in NSW
and Queensland, for example with respect to ‘excluded amounts’ which an adjudicator
must not take into account when determining the claim,48 which may possibly deter
industry usage.
Figure 1: Number of adjudication applications
Figure 2 shows that although the number of adjudication applications in NSW have
remained fairly constant since 2005, the total value of amounts claimed in adjudication
has dropped dramatically (a 78% decline between 2005 and 2008). This equates to a
decrease in the mean value of payment amounts claimed in adjudication from $945,504
in 2005 to $198,973 in 2008. In Queensland, the total value of amounts claimed in
adjudication has steadily increased on an annual basis (a 31% increase between 2006/07
and 2007/08, and a 26% increase between 2007/08 and 2008/09). In Victoria the total
value of amounts claimed in adjudication has also risen steadily (a 36% increase
between 2006/07 and 2007/08, and a 43% increase between 2007/08 and 2008/09). The
total value of amounts claimed in adjudication in WA increased by 553% between
48
See s 23(2A)(a) of the Victorian Act.
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2007/08 and 2008/09 whilst number of adjudication applications for the same period
only increased by 139%. This equated to an increase in mean value of payment amounts
claimed in adjudication from $442,726 to $ 1,142,116. NT experienced an increase in
total value of amounts claimed in adjudication between 2006/07 and 2007/08 from
$3,113,998 to $15,196,688. This figure has dipped slightly in 2008/09.
Figure 2: Total value of amounts claimed in adjudication
In order to gain a perspective as to the use of adjudication relative to the size of each
jurisdiction, the total value of amounts claimed in adjudication was divided by the
population49 for each jurisdiction in order to derive an amount claimed in adjudication
per head of population, as shown in Figure 3. On a per capita basis over the past two
years, NT has experienced the most claims in terms of value followed by Queensland
and WA.
Figure 3: Amount claimed in adjudication per head of population
49
Population data was sourced from Australian Bureau of Statistics (2003).
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Figure 4 shows that over the past two years, there has been a marked downward trend in
the mean value of amounts claimed in an adjudication in NSW and Queensland, and an
upward trend in the mean value of amounts claimed in an adjudication in WA and NT.
In 2007/08 the mean value of claims was $ 294,441 in NSW, $352,239 in Queensland,
$568,686 in Victoria, $ 1,142,116 in WA, and $1,013,113 in NT. Therefore, the mean
value of claims is significantly lower in the East Coast model as opposed to the West
Coast model jurisdictions.
Figure 4: Mean value of amounts claimed in an adjudication
Figure 5 shows the number of claims falling within various ranges of claim values for
WA, Queensland and NT.50 78% of adjudication claims in Queensland were between
$0 to $99,999 range. This compares to only 44% in WA and 25% in NT for the same
range.
50
This data was not available for NSW and Victoria.
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Figure 5: Frequency of claims by value
Figure 6 shows the mean adjudication fees charged by the adjudicators and/or ANAs in
WA and Queensland.51 It may be seen that mean adjudication fees in Queensland were
significantly lower (43% lower) than in WA for adjudication claims up to $99,999, but
significantly higher (64% higher) for adjudication claims over $100,000.
Figure 6: Mean adjudication fees
51
This data was not available for NSW, Victoria and NT.
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4 A Proposal for a Dual Process of Adjudication
If used as intended by parliament, adjudication under the East Coast model legislation
provides an extremely efficient way of assessing progress payment claims, in a manner
akin to an independent certifier, for the vast majority of claims. Ten working days is a
rapid and reasonable duration in which to determine a straightforward progress payment
claim. Furthermore, the data presented above supports the assertion that adjudication
fees are significantly lower for smaller claims (below $99,999), which form over three
quarters of all claims, in Queensland as compared to WA. The adjudication scheme
under the East Coast model legislation, however, is not designed to determine more
complex payment claims for damages, which has occurred in NSW over the past five
years.52 Such mission drift is a severe threat to the effectiveness of, and confidence in,
the statutory adjudication scheme in the East Coast model jurisdictions.53
The adjudication scheme provided in the West Coast model legislation is designed to be
able to fairly assess both progress payment claims of a certification nature and more
complex claims for debts or damages of a more judicial nature. Due to its wider scope,
however, the West Coast adjudication scheme is not as efficient at determining smaller
progress payment claims. Furthermore, it is questionable whether the 14 days (WA), or
10 working days (NT), allowed for the adjudicator to make his or her determination is
long enough to reasonably assess more complex payment claims.
Davenport (2007) has proposed a dual process of adjudication which appears to
combine the established strengths of the East Coast and West Coast model statutory
adjudication processes. This dual process retains the East Coast ‘certification’ process
for pure progress payment claims, and adopts the West Coast ‘traditional’ process for
other payment disputes. Davenport (2007) explains how the dual process of adjudication
would operate and describes its key features, which are summarised in Table 2.
52
See Coordinated Construction Co Pty Ltd v. JM Hargreaves Pty Ltd [2005] NSWCA 228, Cooridnated
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.
53
See Coggins (2009) for further discussion.
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Table 2: Key features of Davenport’s (2007) Dual Process of Adjudication
Certification Process Traditional Process
Determines pure progress claims, limited to claims Determines payment claims for debts due under or
for the actual value of work actually carried out or for damages for breach of the construction contract
goods or services actually provided
The object of the East Coast model legislation The object of the West Coast model legislation
applies applies
Only a supplier (a person who contracts to supply A supplier or a purchaser (the person who is liable
work goods or services) can make a progress claim to pay the supplier) can make a payment claim
A progress claim would have the endorsement A claim would have the endorsement “This is an
“This is a claim under the … Act” ex-contractual claim under the … Act”
Adjudication applications can only be made in Payment claims may be made at any time
connection with progress payment claims made on
or from contractual/statutory reference dates
Adjudicator appointments made by ANAs Adjudicator appointments made by ANAs
Respondent to provide payment schedule within a Respondent to provide a defence within a
prescribed time in response to payment claim. prescribed time in response to payment claim.
Failure to provide payment schedule precludes an Failure to provide a defence precludes an
adjudication response. adjudication response.
Cross claims or set offs not permitted unless Respondent permitted to make cross-claims in
decided in final proceedings or in adjudication of addition to defence against claimant. Claimant
an ex-contractual claim under the traditional would be able to make a ‘rejoinder’ against the
process cross claim.
Progress claim is payable after the amount is The adjudicator would not decide a due date for
certified by an adjudicator and on the due date payment as either the amount is due at the date of
decided by the adjudicator the ex-contractual claim or it is not properly the
subject of an ex-contractual claim
5 Conclusion and Further Research
There are several key differences between the adjudication schemes provided for in the
East Coast and West Coast model building and construction industry security of
payment legislation enacted in Australia. These differences may be explained by the
object of the West Coast model being wider in scope than the East Coast model with
respect to the types of payment claims which may be determined in adjudication.
Statistical usage data recorded by government agencies and departments shows that in
all jurisdictions, statutory adjudication is being well used by the building and
construction industry. Nevertheless, discussions with some of these government bodies
suggests that there is still a significant proportion of the industry which has little or no
knowledge of statutory adjudication. This anecdotal evidence is supported by a recent
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industry survey in NSW (Uher & Brand, 2008). Therefore, there is still significant
potential for increased usage of statutory adjudication in most jurisdictions.
Adjudication under the East Coast model is more suited to the efficient determination of
smaller progress payment claims (below $100,000) for construction works actually
carried out or goods and services actually supplied. Adjudication under the West Coast
model is not as efficient at resolving smaller, straightforward progress payment claims.
However, it is more suitable for the equitable determination of larger and/or more
complex payment claims. Therefore, both models have their own unique strengths.
The inconsistencies which exist in security of payment legislation in Australia are
detrimental to the competiveness of the building and construction industry, particularly
for those firms conducting business interstate. Thus, there is an extremely strong case
for a national approach to security of payment legislation, as recommended by the Cole
Report (2003). Such unification is perhaps inevitable, and should take place sooner
rather than later.
A dual process of adjudication has been conceptualised by Davenport (2007) which
combines the unique strengths of statutory adjudication schemes under the two existing
legislative models in Australia. The dual process provides for the determination of
straightforward progress payments under a ‘certification’ adjudication process (similar
to the existing East Coast model), and the determination of more complex payment
claims for debts or damages under a ‘traditional’ adjudication process (similar to the
existing West Coast model). It is proposed that this dual process would form a sound
basis for the research and development of a national approach to security of payment
legislation in Australia. Furthermore, Davenport’s dual process would allow the existing
statutory adjudication schemes which have been established in the various jurisdictions
to remain in place for payment claims for which they are suited.
Further research into the feasibility of operating a dual process of adjudication as a
national approach in Australia is recommended. Additionally, research into the key
features and provisions of such a process is recommended in order to fine tune and
establish agreement on an optimal dual process model which could be accepted by all
jurisdictions. The author proposes to follow up these recommendations as part of his
ongoing Phd studies.54
6 References
Australian Bureau of Statistics (2008), Australian Demographic Statistics Dec 2008,
Catalogue no. 3101, viewed 28 July 2009,
< http://www.abs.gov.au/AUSSTATS/[email protected]/productsbyCatalogue/6949409DC8B8F
B92CA256BC60001B3D1?OpenDocument>
Bailey, IH (1998): Construction Law in Australia, 2nd edition, LBC Information
Services, North Ryde, NSW.
54
The author is currently enrolled on a Phd in Law at the University of Adelaide.
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Jeremy Coggins, pp 1540-1556
Cole, TRH (2003): The Final Report of the Royal Commission into the Building and
Construction Industry, Royal Commission into the Building and Construction Industry,
Commonwealth of Australia, Canberra.
Davenport, P (2007), ‘A Proposal for a Dual Process of Adjudication’, Australian
Construction Law Newsletter, Issue #115, pp 12-24.
Fenwick-Elliott, R (2007), ’10 Days in Utopia’, in Proceedings of the Institute of
Arbitrators & Mediators Australia, Glenelg, South Australia.
Kennedy, P, and Milligan, J (2007), ‘Mission Drift in Statutory Adjudication’, in
Proceedings of the construction and building research conference of the Royal
Institution of Chartered Surveyors (COBRA 2007), Georgia Tech, Atlanta, USA.
Uher, TE, and Brand, MC (2008), ‘Review of the performance of security of payment
legislation in New South Wales’, in Proceedings of the construction and building
research conference of the Royal Institution of Chartered Surveyors (COBRA 2008),
Dublin Institute of Technology.
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
N C Maikesto and M Maritz, pp 1556-1567
What are the requirements for the South African construction
industry to fully utilise adjudication?
Maiketso NC1, Maritz MJ2
1
Trans-Caledon Tunnel Authority (TCTA), Centurion
2
Department of Construction Economics, University of Pretoria, Pretoria
Email: [email protected]; [email protected]
Abstract:
Adjudication as an alternative dispute resolution (ADR) mechanism has recently been
introduced to the South African (SA) construction industry. This paper outlines what the
requirements are for the industry to realise the full potential of adjudication. To this end the
paper reviews the necessary contractual, institutional and legislative framework, discusses
relevant skills and available training, and establishes what impact the situation has on the
current practice of adjudication in SA.
An extensive literature review was conducted, covering the local and international practice
of adjudication. A structured interview was conducted with adjudicators, and those who
were out of geographic reach were sent a survey questionnaire. The results obtained were
statistically analysed.
The research established that adjudication appears to have found acceptance in the SA
construction industry, but it was considered that the industry is not yet able to realise the
full potential of adjudication, and the main reason for this was considered to be lack of
knowledge.
Keywords: adjudication, alternative dispute resolution, payment, construction industry,
legislation.
Standard abbreviations used
JBCC Series 2000 Joint Building Contracts Committee (SA)
CIDB Construction Industry Development Board (SA)
GCC 2004 General Conditions of Contract (SAICE)
FIDIC Federation Internationale des Ingenieurs-Conseils
NEC New Engineering Contract (ICE)
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1. Introduction
Adjudication has recently been introduced into the four CIDB-endorsed forms of contract
(JBCC Series 2000, GCC 2004, FIDIC and NEC) as one of the standard methods of dispute
resolution. As with others elsewhere, the SA construction industry is more familiar with
other forms of dispute resolution, such as arbitration, mediation and litigation. Adjudication
is a relatively new concept and is, therefore, not yet well-understood. It also faces
challenges in application as most adjudicators are trained and/or experienced in these other
forms of dispute resolution and not in adjudication per se. Those meant to be served by it,
i.e. clients, consultants and contractors, also appear to have limited understanding of the
process or how best to make use of it.
The purpose of this paper is to investigate what the requirements are for the SA
construction industry to fully utilise and benefit from adjudication. To facilitate this, the
research reviewed the necessary contractual, institutional and legislative framework and
other enabling factors, discussed relevant skills and available training, assessed whether or
not these are in place in the SA construction industry, and established what impact the
whole situation has on the current practice of adjudication. Recommendations are then
made based on the findings.
1.1 Problem Statement
1.1.1 Main Problem
What are the requirements for the SA construction industry to fully utilise adjudication?
1.1.2 Sub-problems
The main problem was elaborated through the following sub-problems:
• How does the SA construction industry understand adjudication, how is it
distinguished from other forms of dispute resolution, and what makes it an attractive
alternative ADR process?
• Is adjudication adequately provided for in the contractual, institutional and
legislative framework?
• Are there enough adjudicators in SA? Is there an established set of skills for
adjudicators, and is relevant training available on adjudication?
• What impact does the status established above have on the realisation of the full
potential of adjudication in SA?
1.2 Hypothesis
Adjudication is neither sufficiently understood nor appropriately practiced for the SA
construction industry to realise its potential in full.
This was also broken down further into corresponding sub-hypotheses as follows:
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• Adjudication is not yet well-understood, and in practice it is not sufficiently
distinguishable from the other forms of dispute resolution. It is regarded as
attractive because of the perception that it is quick and cheap.
• Although all four CIDB-endorsed forms of contract now make provision for
adjudication it does not enjoy sufficient institutional support, as there is neither
legislation nor voluntary association for adjudication.
• There are not enough adjudicators in SA who possess of the required skills for
adjudicators, and there currently exist neither regulation nor organization and
training for the practice of adjudication.
• The status depicted above (as established through the findings of the research)
negatively impacts on the realization of the full potential of adjudication.
2. Literature Review
1.3 Definition
The term “adjudicate” is found in general usage to mean “give a ruling” or “to judge”. In
more recent times, a specialised use of the term “adjudication” appears as a form of ADR
available to the construction industry. Its definition in this context is not universally agreed,
it being more often defined by what it is not than by what it is, but the following
characteristics are reflected by most definitions (after CIDB 2004):
• Object is to reach a fair, rapid and inexpensive decision.
• The adjudicator is to act impartially and in accordance with rules of natural justice.
• Adjudication is neither arbitration nor expert determination, but the adjudicator may
rely on own expertise.
• The adjudicator’s decision is immediately binding.
1.4 Origins
Differing views have been expressed regarding the origins of adjudication in construction
(Gould 2006), but it is a commonly held view that its primary aim was to secure timely
payment, having recognised that one of the most notorious inefficiencies of the
construction industry is non- or late payment of contractors/sub-contractors by
employers/contractors respectively (see for example Maritz 2007). This is possibly why
adjudication is so closely associated with legislation of the form “Security of Payment
Act”, and why it has been characterised by the adage “pay now, argue later” (Uff 2005).
An earlier form of adjudication is recorded to have been in use in the United Kingdom
(UK) in the 1970’s, focusing on the payment problem between contractor and sub-
contractor. In the United States of America (USA), dissatisfaction with rising costs of
arbitration and litigation in the construction industry led to the appearance of dispute boards
in the 1960’s, and this started to take root in the 1970’s (Gaitskell-3 2005). Of perhaps
greater significance is that the quasi-judicial role of the principal agent has also been
brought into question in recent times. One of the principles of natural justice, that one
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cannot be judge in his own cause, appears to have played a major role in this latter
development, and this also features prominently in adjudication.
In their 1999 white paper to the Minister, the CIDB also recommended the use of ADR, as
arbitration and litigation were observed to have become costly and time-consuming (CIDB
PGC3 2005). The Latham report (UK 1994) is also referred to as a point of departure, as
with many other jurisdictions in the world, which have come to rely on the report as an
authority. The CIDB went further and made it mandatory for the SA construction industry
to adopt adjudication (CIDB PGC3 2005).
1.5 Adjudication within ADR
The rise in the modern use of ADR procedures appears to be due to the following factors
(Uff 2005; Butler and Finsen 1993), which to a large degree used to be claimed for
arbitration as its strong points before (in comparison to litigation):
• Expertise (of facilitator).
• Lower cost and shorter duration.
• Convenience and flexibility.
• Privacy and informality.
• Voluntary or customised dispute resolution process (can be made mandatory by
agreement/contract).
Having observed that arbitration had become more formal and legalistic, Butler and Finsen
(1993) expressed the hope that the advent of ADR would rekindle arbitration and provide it
with appropriate techniques to sustain its use. Indeed more than ten years later Uff (2005)
observed that positive developments like the “100-day arbitration procedure” had grown
out of the lessons learned from adjudication.
Many authors however view all dispute resolution methods as constituting a continuum or
spectrum, with each method having its rightful place (see for example M’khomazi and
Talukhaba 2004). Indeed for enforceability if nothing else, ADR has had to form an
alliance with the formal court system (Maritz 2007).
1.6 Adjudication in Practice
The practice of adjudication was reviewed through its three tiers of application, namely
standard forms of contract, institutional guidelines and legislation.
1.6.1 Standard Forms of Contract
Many believe that standard forms of contract are more important than statutes and case law,
as they reflect current professional practice and mindset. A comparison was drawn between
adjudication provisions of the four CIDB-endorsed forms of construction contract namely
JBCC 2005, GCC 2004, FIDIC ‘99 (“red book”) and NEC 3 (“black book”). From this, the
following summarised findings emerged:
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• The adjudicator (or Dispute Adjudication Board) is appointed jointly by the parties,
some at the beginning of the contract, others once a dispute has arisen. Otherwise a
named authority appoints.
• The adjudicator’s agreement is co-signed by both parties and the adjudicator/board
member. The agreement generally requires the adjudicator to be impartial and
independent, and to disclose any potential conflict of interest. The adjudicator’s
expertise is required to differing degrees.
• Adjudication is not to be conducted as an arbitration, but the adjudicator has
procedural discretion “…to ascertain the facts and the law”. Thus generally an
inquisitorial approach is encouraged, as is reliance on own expertise. Procedural
powers and duties are listed to differing levels of detail.
• The adjudicator is immune from liability unless his act or omission is in bad faith,
and is not to be called as a witness in subsequent proceedings.
• Disputes referred to adjudication can be in connection with anything under the
contract.
• A hearing is held at the adjudicator’s discretion, but is generally discouraged.
• Emphasis is generally placed on rules of natural justice or procedural fairness.
• The adjudicator can decide own jurisdiction under JBCC and FIDIC, but is
restricted to decide matters in dispute under GCC and NEC.
• The adjudicator’s decision is binding until revised by arbitration, litigation or
agreement. Failure to comply can be referred to court or arbitration
• Administrative aspects are provided for to differing degrees, e.g. communications,
termination, etc.
1.6.2 Institutional guidelines
A comparison was drawn between Adjudication Guidelines from selected institutions,
namely JBCC, CIDB, Dispute Resolution Board Foundation (DRBF), American
Arbitration Association (AAA), International Chamber of Commerce (ICC), World Bank,
and Construction Umbrella Bodies (UK).
The following major findings emerged:
• The guidelines generally go into more detail, particularly on procedural matters like
the hearing, unless the associated form of contract already provides procedural rules
e.g. FIDIC.
• Some institutions are more involved in the administrative aspects of the
adjudications, such as appointments and hearings (e.g. AAA).
• Some guidelines from financial institutions are prescribed for projects funded by
them, thereby effectively acquiring the status of regulation, one step closer to
legislation discussed below.
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1.6.3 Legislation
A comparison was drawn between selected adjudication legislation, namely that from the
UK, New Zealand, Queensland (Australia) and Singapore. The legislation was found to
generally address the following:
• Conditional payment clauses in contracts e.g. pay-when-paid.
• Establishing minimum payment terms.
• Establishing statutory adjudication system for disputes.
• Remedies available in case of non-payment.
1.7 Level of Use and Knowledge
The work of the Adjudication Reporting Centre at the Glasgow Caledonian University
(Kennedy 2005) appears to represent best practice for collecting statistics in the use of
adjudication. The centre issues regular reports based on information obtained from
Adjudicator Nominating Bodies in the UK. The data handled includes, inter alia:
• Number and discipline of adjudicators.
• Trends in adjudications (growth, decline, fluctuations).
• Performance of adjudication (dissatisfaction or otherwise).
From elsewhere, various levels of acceptance and use of adjudication have been claimed, in
all its various forms. Dispute boards continue to grow in use in the form of Dispute Review
Boards, Dispute Adjudication Boards or Combined Boards (DRBF 2007). The World Bank
along with other development banks is perhaps leading the way in this aspect, more
recently with the help of FIDIC’s harmonised conditions of contract. Povey’s research
(2005), whilst focusing on mediation, also revealed that SA mediators tended to conduct
themselves more like the modern adjudicator. Van Langelaar (2001) confirms the
international trends discussed above for Southern Africa and further notes that although the
adjudication system appeared to have been successful, the knowledge base needed to be
expanded.
1.8 Skills and Techniques
A comparison was drawn between information on adjudication skills and training from
selected institutions, namely the CIDB, Institution of Civil Engineers (ICE), Chartered
Institute of Arbitrators (CIArb), DRBF, AAA and FIDIC. The following major findings
emerged:
• Formal training is common, varying from workshops to formal tuition and
assignments.
• Formal assessment and accreditation is also common, including examinations and
peer reviews, used in different formats and to varying degrees of intensity.
• Continuing Professional Development (CPD) as an on-going requirement has
become universal.
Thus the right mix has to be found which would be suitable for SA conditions. Whilst one
does not necessarily want to “kill it with science”, there could be legitimate cause for
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concern that sub-standard levels of skill may not do justice to adjudication, or be able to
exploit its full potential for the benefit of the construction industry.
3. Research Methodology
1.9 Population Size and Sampling
Due to limited numbers of knowledgeable people on the subject, purposive or target
sampling was adopted. Panels of dispute resolution practitioners were sourced from
relevant organisations (Association of Arbitrators SA (AASA), South African Association
of Consulting Engineers (SAACE or CESA of late), South African Institution of Civil
Engineering (SAICE), NEC Users Group), within which adjudicators were targeted. Some
30 practitioners were identified as being theoretically accessible for interviews and were
contacted, out of which 18 availed themselves. Survey questionnaires were sent to some 17
practitioners who were outside geographic reach, out of which 6 were received. Some 9
additional candidates were identified by snowball sampling and acquaintance (including 2
based in the UK), from who 5 completed questionnaires were received. See Table 1 below
for summary.
Table 1: Sampling summary
Sampling group Total contacted Successful Percentage
Interview 30 18 60%
Completing questionnaire – adjudicators 17 6 35%
Completing questionnaire – general 9 5 56%
sample
Totals 56 26 52%
To the extent that this study leans towards engineering construction, its conception was also
structured as a collaborative effort with the Maritz (2007) study, which tended to focus on
building construction, the two studies thus covering the entire construction industry. Also,
certain findings of the Maritz (2007) study were unpacked as part of this study, for example
the possible content of an “adjudication qualification”.
1.10 Research design
The research design adopted was generally quantitative, but made provision for qualitative
data in the form of comment. A survey questionnaire was developed and administered to
answer the sub-problems or test the hypotheses, with input from the University of
Pretoria’s Department of Statistics on the final format for ease of data capture and
interpretation. The questionnaire design and administration incorporated considerations of
threats to validity and research ethics.
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The data was analysed statistically, and content analysis was employed for qualitative
results.
4. Results
The summarised results are presented in Table 2 below.
Table 2: Summarised results
Question Result
1. Background
1.1 58% of the respondents practiced in engineering construction and 34% in building construction
1.2 65% of the respondents held a qualification in engineering, 13% in architecture, and 10% in each
of quantity surveying and legal
2. Level of use and knowledge
2.1 46% rated their knowledge of adjudication very high, 39% high and 14% average
2.2 34% each use adjudication rarely, 56% often/regularly and less than 10% each for “never” and
“always”
2.3 Total of 96% agreed that adjudication was quicker, 86% for cheaper, 80% for providing interim
relief, 72% for immediately binding, 69% for expertise of adjudicator, 55% for enforceable, and
53% for consensual
2.4 Total of 80% of respondents had had satisfactory experience with adjudication.
3. Adjudication in practice
3.1 Contractual provisions for adjudication were considered sufficient by total of 55% of respondents
for JBCC, 48% for GCC, 68% for FIDIC, and 62% for NEC
3.2 Institutional guidelines for adjudication were considered adequate by 50% of respondents for
JBCC, and between 60% and 90% of respondents were not familiar with other (international)
guidelines
3.3 Legislation for adjudication was considered effective by 50% of respondents for UK, and over
75% of respondents were not familiar with legislation from other countries
3.4 Other enabling factors appeared in the order of (from most suggested) skills, party relations, court
support and publicity.
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4. Skills and techniques
4.1 65% of respondents considered that there were not enough adjudicators in the SA construction
industry
4.2 Total of 90% of respondents agreed that both technical expertise and legal knowledge were
relevant skills for adjudicators, and 70% agreed with project management skills
4.3 96% of respondents agreed that the inquisitorial approach was useful in an adjudication, 60%
disagreed with the adversarial approach, 80% agreed with the facilitative approach, and 90%
agreed with the evaluative approach
4.4 Total of 70% agreed that age was a desirable personal attribute in an adjudicator, 96% agreed with
experience, 60% agreed with professional registration, 40% did not agree with professional
accomplishments, 45% agreed with corporate seniority, 93% agreed with fairness, 84% agreed
with procedural approach, and 90% agreed with availability
4.5 Total of 80% agreed that participating in an adjudication was important to acquire knowledge and
experience, 90% agreed with conducting an adjudication, 80% agreed with self-study, 72% agreed
with attending seminars, and 84% agreed with taught courses and 72% agreed with assignments
4.6 62% agreed that examination was important to assess competence, 80% agreed with
interview/peer review, 65% agreed with mock adjudication, and 45% considered that a certificate
of attendance was a nice-to-have
4.7 Respondents were roughly split equally on regulating the practice of adjudication, but majority
believed it should be better organised (similar to AASA role in Arbitration).
5. Impact
5.1 Respondents were roughly equally split on whether or not SA is able to realise the full potential of
adjudication
5.2 75% believed the factors discussed had an impact on the practice of adjudication
5.3 50% considered lack of knowledge as the single most important contributing factor
5.4 Suggestions for improvement appeared in the order of (from most suggested) skills and training,
promoting adjudication, improving contracts, work-shopping lessons learned, introducing
legislation and providing institutional support
6. Legislation
6.1 Total of 75% agreed that SA needs a “Payment and Adjudication Act” similar to that in the UK
and other countries
6.2 Total of 60% agreed that such legislation should address minimum payment terms, 90% agreed
with statutory adjudication, and 95% agreed with remedy in case of non-payment
6.3 95% agreed that scope for such law should cover all disputes under the contract, and there was a
split opinion on professional liability as well as on special provisions for emerging contractors
6.4 80% agreed that such law should have an international component
7. Interest 96% of research respondents wished to see the results of the study
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5. Findings
The results appear to reveal the following on the research problem:
• The first sub-hypothesis was disproven as far as adjudication practitioners are
concerned: their understanding appears to be quite high, and is in keeping with
generally accepted characteristics of adjudication. However, the same cannot
necessarily be said of the rest of the construction industry.
• The second sub-hypothesis was disproven in the first part: contractual provisions
were generally considered sufficient in all standard forms of contract except GCC.
Lack of organisation and visibility was a recurring theme. Thus the other part of the
second sub-hypothesis was confirmed in that it was generally agreed institutional
support was lacking. Regularisation was suggested along the lines that the practice
of arbitration is organised under AASA.
• The third sub-hypothesis was confirmed: there were not enough adjudicators, and
although there was no established set of skills or minimum training requirements for
adjudicators, there was general agreement on relevant skills, useful techniques and
desirable personal attributes. There was also broad agreement on the possible
content of an “adjudication qualification” if it were to be implemented, from the
acquisition of knowledge and experience, to the assessment and accreditation of
competence.
• The fourth and over-arching sub-hypothesis was confirmed: the SA construction
industry was generally considered not to be able to realise the full potential of
adjudication in the current circumstances, and the main reason for this was
considered to be lack of knowledge.
Note on Interpretation
The results appear inconclusive on whether or not SA is able to realise the full potential of
adjudication, if based only on the results of Question 5.1 Ability to realise full potential
above which shows a split response. But if a holistic view is taken, starting with the results
of Question 5.2 Factors contributing to situation which show that the factors discussed are
in fact considered to have an impact on the situation, combined with the findings pertaining
to those factors themselves, which generally show adjudication facing more challenges than
successes (e.g. usage remains low, institutional support lacking, skills and training remains
a major concern), then it becomes evident that, overall, SA is not yet able to realise the full
potential of adjudication. Furthermore, it is through such an interpretation that the rest of
the research findings fit together: it is contended that it is due to the recognition of lack of
knowledge as the most important contributing factor to this untenable situation, that skills
and training has been identified as the most favoured means of addressing the situation.
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6. Conclusion
Based on the findings above, it can be concluded that adjudication has found acceptance in
the SA construction industry. However, it still has some way to go before its potential can
be realised in full. Certain challenges need to be overcome to enable this to happen, which
range from the contractual, institutional and legislative framework, to matters of skills and
training. It is in this spirit that recommendations are made below.
7. Recommendations
In keeping with the conclusion and findings, the following recommendations can be made:
• Increase knowledge and understanding of adjudication by the construction industry.
• Improve the wording of standard forms of contract, strengthen provisions for
adjudication, and standardise the process as far as possible.
• Organise the practice of adjudication, either through an existing organisation (e.g.
AASA, CIDB, DRBF etc.) or by establishing a dedicated one.
• Introduce legislation to support the process of adjudication.
8. References
Butler, D. and Finsen, E. 1993. Arbitration in South Africa: Law and Practice. Cape Town:
Juta & Co Ltd
Construction Industry Development Board (CIDB). Best Practice Guideline for
Adjudication #C3 2005 (2nd ed.), Pretoria, SA
Dispute Resolution Board Foundation (DRBF). 2007. Practices and Procedures. Seattle:
Dispute Resolution Board Foundation
Gaitskell, R (3). 2005. Using Dispute Boards under ICC rules – what is a dispute board
and why use one? Conference of Society of Construction Law (2005: London).
Proceedings. London: Society of Construction Law
Gould, N. 2006. Establishing Dispute Boards – Selecting, Nominating and Appointing
Board Members. Conference of Society of Construction Law (2006: Singapore).
Proceedings. London: Society of Construction Law
Kennedy-Grant, T., 2005. A review of the existing legislative models for a Construction
Industry Payment and Adjudication Act. International Forum: Construction Industry
Payment Act and Adjudication – ICW 2005, Kuala Lumpur, Malaysia
Maritz, M.J. 2007. An investigation into the adjudication of disputes in the South African
construction industry. International Conference: RICS COBRA 2007, Atlanta, USA
M’khomazi, X.J. and Talukhaba, A., 2004. Comparison of alternative dispute resolution
methods in resolving disputes in the construction industry. 2nd Postgraduate Student
Conference – CIDB, Cape Town, SA
Povey, A. 2005. An investigation into the mediation of disputes in the South African
construction industry. Journal of the South African Institution of Civil Engineering,
Vol. 47 No. 1
Uff, J. 2005. Construction Law. 9th ed. Sweet & Maxwell: London, UK
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N C Maikesto and M Maritz, pp 1556-1567
United Kingdom. Department of Trade and Industry. 2004. Construction Act Review,
Report by Construction Act Review Group (chaired by Sir Michael Latham) to
Construction Minister. London: DTI Construction Sector Unit
Van Langelaar, A. 2001. The use of dispute boards as an alternative dispute resolution
mechanism on construction projects in Southern Africa. Unpublished MSc dissertation.
Cape Town: University of Cape Town.
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Haryati Mohd Isa, Padzil Hassan, Mohd Fisal Ishak and Othman Mohd Nor, pp 1568-1584
Conception of Disputes Amongst Malaysian Quantity
Surveyors
Haryati Mohd Isa1, Fadzil@Padzil Hassan1, Mohd. Fisal Ishak2 and Othman Mohd
Nor2
1
Faculty of Architecture, Planning & Surveying,
UniversitiTeknologi MARA, Shah Alam, 40450, Selangor,
Malaysia
2
Faculty of Architecture, Planning & Surveying,
Universiti Teknologi MARA, Seri Iskandar, 31650, Bota, Perak,
Malaysia
Email: [email protected]; [email protected];
[email protected]; [email protected]
Abstract:
Disputes have been a common phenomenon in the Malaysian construction industry and
with the surge in numbers of construction projects, the numbers of disputes are expected
to increase. To overcome this, the Malaysian construction industry has introduced
various initiatives is to encourage the application of more effective ways of preventing
and resolving construction disputes but results have been variable.
While much has been done, critics are frequent in arguing that the initiatives have not
been effective. In was conceived that a critical weakness lies in the holistic
understanding of disputes and the contributing factors. The fundamental starting point
should be to firstly understand the nature of the disputes itself within the context of the
industry. This is necessary before appropriate means of dispute resolution can be
effectively identified. A research to identify this was carried out and part of its findings
found that the primary cause is misunderstanding of contracts and the inappropriate
choice of resolution methods when disputes occur. The paper posits that the industry
needs to re-learn disputes, its nature and the alternative dispute resolution methods.
Keywords:
Dispute, Conflict, Construction Industry Master Plan (CIMP), Alternative Dispute
Resolution (ADR), Claims
1. Introduction
At its best, the Malaysian construction industry is able to match the industry of the
developed countries in delivering complex and sophisticated construction projects with
high class performance standards. However, in many areas it was found to be under-
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achieving and performance in some areas of the industry had not been effective.
Construction projects not completed within time, cost or quality. Many completed
infrastructure projects are deteriorating rapidly because of poor management and
maintenance. Disputes have also been frequent. In realising the need to overcome the
weakness, the Malaysian Construction Industry Board (CIDB) has launched the
Construction Industry Master Plan (CIMP) in 2006. The promotion of more effective
alternatives of preventing and resolving construction disputes has been underlined as
one of the CIMP initiatives. While much is expected from the CIMP to reform the
industry, results have been poor. Reports from the CIDB reveal that performance
improvements following the reforms have not been up to mark. The percentage of
construction project overruns, projects were delivered not within the tender cost and
tender programme continue remain high. Construction was well short of reaching safety
targets with the low reduction in the number of fatalities and injuries. The number of
construction dispute cases waiting to be heard in courts is very high and it might take
years before they can be resolved. (The New Strait Times 2007) reported that in the
Malaysia, the numbers of cases pending the court hearing has increased to more than
900,000 cases in July 2006.
A research project was carried out to conceive the failure of the industry to address the
problems of disputes. This research is on-going and part of the research suggests that
the industry needs to re-learn construction disputes. The fundamental starting point is to
understand the nature of the disputes itself before appropriate means of dispute
resolution can be identified. The focus of the research was to firstly identify the
common causes of construction disputes and their impact. The theoretical framework is
provided together with the research methodology. The findings are discussed and the
conclusion is presented at the end of the paper.
2. The Theoretical Framework
2.1 Definition
Conflict and Dispute
A review of the literature on conflict and disputes in construction were found to be
variably used. In many instances, they are used separately or in pairs and frequently
without clear indication of the precise meaning of each use. Chan (2008) see conflicts as
the prime driver of disputes. Conflict emanating from opposing interest due to scarce
resources, goal divergence, frustration and mixed motive relationships; it exists
wherever there is incompatibility of interests among the disputants. Fenn et al. (1997)
suggest that conflict can be managed to the point before it leads to disputes.
Kumaraswamy (1997) observe that disputes occur when when a claim is rejected and
the rejection is not accepted.
Brown & Marriott (1993), Cheung and Yin (2006) and Cheung and Suen (2002)
commonly agree that dispute is the manifestation of the underlying conflicts and is
linked to difference in perspectives, interests and agenda of human beings. Zack (1995)
stress that disputes are not something that magically appears during the project
construction stage. The seeds of a dispute are usually planted during the design stage
but emerge during construction. Fenn et al. (1997) add that when this occurs, it requires
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resolution and usually involve third party intervention. Shin (2000) suggests that
disputes can be analysed from lessons learned, experiences and precedence knowledge.
Shin (2000) associates conflicts and disputes mostly in construction contract terms and
propose that conflict cannot be avoided but can be managed. Singh (2009) suggests that
claims are a sub-set of dispute, and occur when any party or third party rightly or
wrongly request an adjustment to the original time and cost and relate to legal
implications. Claim is wastage to the project resources and should be avoided by
identifying the principle reasons for the claims.
2.2 Why Disputes Occur?
The view that nature of the construction and the complexity of the project as the
primary contribute contributor to disputes were found to be consistent. McIntyre (1991)
notes that as projects increase in size and complexity, so then does the risk of cost and
time overruns, which invariably leads to disputes. Ball (1994) believes that the failure to
act, or incorrect action, to cope with information systems, communications and
knowledge are the primary causes of construction disputes. Mitropolous and Howell
(2001) and Cheung and Yin, (2006) associate disputes to project uncertainty,
contractual problems and opportunistic behaviour. Chan (2008) associate disputes with
(i) a combination of issues including time, cost and defects; (ii) the contractor’s cash
flow; and (iii) extra difficulty of the private sector to negotiate for commercial
settlement whereas public organisations usually seek determination of a dispute by a
competent tribunal. Vorster (1993) finds: (i) uncertainty causes change beyond the
expectation of the parties (ii) process problems including imperfect contracts and
unrealistic performance expectations and (iii) peoples issues, problems due to poor
communication, poor interpersonal skills and opportunistic behaviour, as the common
causes of disputes.
Cheung & Yin (2006), in their proposed ‘dispute triangle’ model, classify (i) contract
provisions, (ii) triggering events, and (iii) conflict, as the key the components of
disputes. In their study, Kumaraswamy & Yogeswaran (1998) maintain that
construction disputes primarily emanate primarily from contractual matters, but Chan &
Suen (2005) and Diekmann and Girard (1995) disagree.
Poh (2005), Mohd. Isa & Ishak (2005), Ismail et al. (2006) and Motsa (2006), and
identify disputes in the Malaysian construction industry as contributed by every parties
involved in the contract. Abdullah Habib & Abdul Rashid (2006), and Lian (2006)
identify that clients and the main contractors, the main contractors and their sub-
contractors or suppliers or both are the common parties that in dispute. The findings
from the studies on disputes by Poh (2005), Ismail (2006), Motsa (2006), Mohd. Isa &
Ishak (2007), Abdullah Habib & Abdul Rashid (2006), and Lian (2006) are summarised
in Table 1(a),(b) and (c). It was drawn that the main cause of construction disputes
relates to payment (particularly on non-payment for certified sums) and
misunderstanding in payment procedures among the main contractor and sub-contractor.
This is followed by delay, termination and variation.
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Table 1(a), (b) & (c): Nature of Disputes, Parties Involved and Stages of Dispute
Occurrence in the Malaysian Construction Industry
Causes of Disputes No. of cases Parties Involved No. of cases
(Defendant & Plaintiff)
Payment 37 Developer and client 1
Variation 9 Employer and architect 2
Termination 13 Employer and engineer 2
Delay 14 Employer and main contractor 45
Defect 1 Employer and sub-contractor 3
Damages 8 Employer and purchaser 3
Performance bond 6 Main contractor and sub-contractor 12
Default 6 Sub-contractor and sub-contractor 2
Construction Stage No. of cases
Initial stage 1
Design stage 0
Construction stage 55
Occupational stage 16
While most disputes are between the employer and the main contractor, the disputes
mostly occurred during the construction phase the five most causes of construction
disputes in Malaysia are variations, extension of time, financial claims, payment,
ambiguous contract, design errors and inadequacies.
2.3 Managing Construction Disputes
Lian (2006) stresses that the aim of managing disputes is to undertake damage control
measures by recognising the disputes earlier. He maintains that although measures can
be taken to avoid disputes, it frequently occurs, and there must be adequate mechanisms
to resolve them before they become chaotic. Zack (1995) stressed that dispute
management technique is important to avoid the the litigation phase. Shin (2000), Chan
and Suen (2004) and Mc Cormac (1994) sees dispute management process as
developing from knowledge from past dispute cases, but to achieve this, the contracting
parties have to be pro-active in the managing disputes. Clients should provide a clear
brief to the contractor in order to avoid disputes and getting a quality building because a
happy contractor usually will do a better job.
Zack (1995), Chan and Suen (2006) and Fenn (2002) stressed that dispute prevention is
better than cure. To enable this, Ismail (2008) and Dickmann & Girard (1995) suggest
that the parties should be aggressive in predicting the disputes by equipping themselves
with knowledge on contract and understand their rights and obligations. Otherwise, it
will be a very complicated process. Lian (2006) suggest that that the quantity surveyor
(QS) should also play a pro-active role at the various stages of the development cycle of
the project to ensure best management practices are adhered to. The QS is responsible in
avoiding construction disputes and claims from blowing into full fledge to litigation or
arbitration.
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Inception Stage
• Appoint experienced and competent consultants, arrange sufficient
funding for the project, identify potential risks and provide mechanism
to deal with such risks
Establishment of the Project Brief Stage
• Adequate design brief or specification of client’s requirements
Schematic Design and Cost Planning Stage
• Adequate planning and co-ordination is pre-requisite to a successful
project, apply value management techniques to confirm project
objectives, enhance value and eliminate wastages, confirm scope,
budget and feasibility
Dispute Design Development Stage
Prevention • Ensuring sufficient detailing and information
Measures • Cost checking and monitoring
Tender Documentation Stage
• Appropriate form of contract,
• Comprehensive and complete tender documents
Tendering Stage
• Ensure fair tender price, agree on realistic construction period
Contract Award Stage
• Appoint competent and experienced contractor
• Clarification and negotiation prior to award
Post Award Construction and Contract Administration Stage
• Signing of the formal contract , enhancing effectiveness of contract
administration i.e separation of design responsibilities from contract
administration for large and complex projects, changes & variations,
timely notices, timely decision, instruction & certification by contract
administrator, avoid interference with contract administration & pay
contractor on time
Final Handover Stage
Agree on the checklist for handover inspection
Defects Management Stage
Checklist on defects
Figure 1: Dispute Prevention Measures Undertaken by the Quantity Surveyor
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The dispute prevention measures that can be undertaken by the QS is summarised in
Figure 1 and the dispute prevention measures drawn from the literatures researched is
summarised in Table 2 below.
Table 2: Dispute Prevention Measures
Dispute Prevention Method References
1. Design and bid phase Zack (1995)
Constructability/bidability review, scheduling specification, payment for
variations, estimating requests for information and plan clarification, pre
purchasing owner delay time, bid mark-up rate and daily extended overhead rate,
predicting the weather & escrowing of bid documents
2. Construction phase
Partnering, Open communication, preconstruction audit, delegation of authority,
project trending, document tracking, time-lapse video photography, submittal of
contractor’s daily logs & submittal of contractor’s short interval schedules
3. Dispute phase - Negotiation team, decision ladder and dispute review board
4. People issues Jahren &
Being fair, reasonable, respectful, develop a team atmosphere, retaining an Dammeier (1990)
experienced staff & avoid adversarial relationship
5. Policy issues
Working through disputes in a timely manner, creating good documentation,
avoid competitively bid work, emphasising negotiated work
6. Communication issues
Good communication skills, having a good contract & clear scope of work
7. Through cogent management, use of appropriate contractual methods & equitable Cheung & Yin
risk allocation (2006)
8. Prevention of contractual disputes Chan & Suen
Understand contract terms, make sure that the partner is not insolvent & devise a (2005)
realistic risk assessment
9. Prevention of cultural disputes
Parties must be transculturally competent, recognise the expectations &
behaviour of others
10. Prevention of legal disputes
Keep up to date with the current laws & regulations
11. Management of contractual disputes Chan & Suen
Assess the risk assessment involved & reflect it in the contract, provide (2004)
contingency plan, parties should specify exact terms for payment &
performance standards & establish a realistic timetable, pay special attention to
any changes to the standard form of contract & spend time going through the
entire document
12. Management of cultural & legal disputes
Recognise the expectation & behaviour of others, good effective communication
& integration among members, organise project charter workshop involving key
participants to synchronise their thinking so that they can lay out problems &
resolve any conflicts, adopt international institution arbitration rules & seek
advise from local lawyers expert in construction law & local policy
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13. Reduce uncertainty, reduce contractual problems, prevent opportunistic Mitropolous &
behaviour, increase problem solving ability & minimise dispute resolution cost Howell (2001)
14. Allocate fair contract risk, drafting dispute clauses, team building, provision of a Jannadia (2000)
neutral arbitrator & binding arbitration
2.4 Impact of Construction Disputes and Dispute Resolution
While there is a general agreement that that resolving construction disputes during the
course of the project is preferable (Brown & Marriott, 1999; Sew, 2004; Naseem, 2005),
there were variable views as to the consequence of disputes. From his study, Abidin
(2007) identifies time, cost, and quality as the consequence of disputes. Conversely,
studies by Cheung (2002), Chan and Suen (2004), Harmon and Kathleen (2004) and
Poh, 2005) identify time delays and cost overruns, diminution of respect between
parties, deterioration of relationship and breakdown in cooperation and additional
expenses in managerial and administration as the major impacts of disputes. Disputes
can be detrimental to construction procurement if not being addressed and resolved
properly and, therefore, dispute resolution cannot be over-emphasized (Cheung et al.
2002; Chan and Suen, 2002, 2004, 2005). The process to attain the most appropriate
dispute resolution strategy is equally important.
Mohd. Isa & Ishak (2005) identified that traditionally parties go to court or arbitration
for their disputes settlement but neither solution is really adequate. Over the last decade,
it has become apparent that civil justice system around the world are in a state of crisis
such as excessive costs, delays, uncertainties and causing distortions in business
community (James, 2003). Even though, litigation is not growing rapidly, its volume
was still beyond the capacity of the courts to cope with adequately (Brooker and Lavers,
1997). In attempting to address this backlog, the construction industry has initiatives to
look for a new alternative dispute resolution (ADR) methods which include arbitration,
negotiation, mediation and adjudication Litigation remains as the traditional means of
resolving disputes (Jannadia et al. 2000; Cheung et al. 2002; Mohd. Isa & Ishak, 2005,
Hamidi, 2008).
Arbitration is perceived to be the most appropriate ADR method (Luen, 2006) and exist
in all major construction standard forms of contract. Even so, it is yet to be applied
vigorously by the construction parties (Isa and Ishak, 2007 and Ismail et al. 2008) due
to the time and cost factors, tedious process and unsatisfactory results by the third party.
Contradict with Diekmann and Girard, 1995; Meng, 2001; Cheung et al. 2002; Ismail et
al. 2008) argued that as a project team, any dispute should be resolved through direct-
negotiation among the disputants without third party involvement. Otherwise, other
issues will emerge and further detriment the concept of ADR. Mohd. Isa and Ishak
(2005) identifiy that the disputants are also unfamiliar with ADR. Therefore, it is
recommended that ADR framework to be formulated to assist all parties in resolving the
disputes. Ismail (2008) believed that in order for ADR to success in Malaysia, not only
the government support and the political influent are crucial but the most important
factor is the disputants themselves should change their adversarial mindset (Faruqi,
2000).
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3. The Research Methodology
The research aim was to establish the how construction disputes are conceived by
drawing the views of practising quantity surveyors. To enable this, a quantitative
research method was adopted for inquiry one which involves the administration of
questionnaire surveys to selected random samples of quantity surveyors. The research
questions were:
• what are the types and sources of construction disputes?
• what are the of common methods used to settle disputes?
• what are the views on litigation, arbitration and mediation? and,
• how can disputes be prevented
Table 3(a), (b) & (c): Respondents Position, Organisation Name and Working
Experience
Position Number Percent Working experience Number Percent
(Years)
Project Director 1 3.7 <5 4 14.8
Senior Assistant Director 1 3.7 6-10 6 22.2
Assistant Director 3 11.1 >10 16 59.3
Project Executive 1 3.7 Not indicated 1 3.7
Senior Manager 2 7.4 Total 27 100
Assistant Manager 1 3.7
Contract Manager 1 3.7 Organisation Number Percent
Quantity Surveyor 14 51.9 Public 14 51.9
Not indicated 3 11.1 Private 12 44.4
Total 27 100 Not indicated 1 3.7
Total 27 100
The summary of the respondents and their variables are as shown in Tables 3(a), (b) and
(c) above. Seventy questionnaires were distributed and twenty seven (38.6%) were
returned. Table 4 - Table 9 below recapitulates the findings of the preliminary survey.
The SPSS Software was used to analyse the quantitative data and the qualitative data
was analyzed manually.
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4. Findings
4.1 The Respondents Experience on Construction Disputes
Eighty nine percent of the respondents have experience in managing construction
disputes. Although design and build procurement is believed to be able to overcome
problems of disputes, it recorded the highest number of disputes (70%). Unfamiliarity
to operate the design and build procurement system among the building teams is
suspected to primarily contribute to this. As Suleiman (2008) pointed out, a design and
construction works are simultaneously ongoing, contractors tend to practice `build first
& design later’. Singh (2007) supports by underlining the lack of a systematic or
formalised guideline for the preparation of the needs statement in Malaysian design and
build projects. He added that poor needs statement given to the design and build
contractors have led to contractors facing the problems in providing a good proposal.
Table 4(a), (b) & (c): Dispute Involvement, Types of Procurement & Dispute
Contributors
Dispute Number Percent Types of Number Percent
Involvement procurement
Yes 24 88.9 Conventional 6 22.2
No 2 7.4 Design & build 19 70.4
Not indicated 1 3.7 Not indicated 2 7.4
Total 27 100 Total 27 100
Dispute Number Percent
contributors
Client 5 18.5
Consultant 4 14.8
Contractor 17 63
Not indicated 1 3.7
Total 27 100
Results from the analysis suggest that most of the disputes are contributed by the
contractors, followed by the consultant and client. Notwithstanding, construction
disputes are evolutionary and cannot be accused to just one party. Teamwork is very
important in any project delivery system to fulfil each party goal and the project
requirements.
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Table 5: Experience on Types and Causes of Construction Disputes
Causes of disputes Types of disputes Number Percent Rank
Ambigious contract document Contractual 17 63 4
Contract figures too low Contractual 5 18.5 9
Poor communication Organisational 10 37 6
Inadequate management Organisational 18 66.7 3
Failure to deal with changes and unexpected Organisational 13 48.1 5
conditions
Lack of team spirit or collegiality among Organisational 5 18.5 9
participants
Sett-off Contractual 3 11.1 11
Design errors and inadequacies Technical 21 77.8 1
Variations Contractual 20 74.1 2
Misinterpretation of contract documents Contractual 13 48.1 5
Financial claims Contractual 9 33.3 7
Unrealistic contract provisions Contractual 6 22.2 8
Unrealistic expectation of the parties Organisational 4 14.8 10
Table 5 presents the results of analysis of the causes and types of construction disputes.
The findings show that the five common causes of disputes are design errors and
inadequacies (77.8%), variations (74.1%), inadequate management (66.7%), ambiguous
contract documents (63%) and failure to deal with changes and unexpected conditions
and misinterpretation of contract documents (48.1%). In line with the views of Shin
(2000) and Chan & Suen (2004), contractual disputes are most common.
Table 6: Impact of Construction Disputes to the Project
Impact of construction Number Percent Rank
disputes
Cost increased 25 92.6 1
Prolong completion period 18 66.7 2
Destroy business relationship 2 7.4 3
There is a general agreement that the most common impacts of disputes are increase in
cost, prolongation of contract period and damage of the disputant relationship. This
tends to support the view of (Cheung et al, 2002) who suggests the need for more
consideration of dispute prevention during the initial project stage underpinned with
better understanding and harmonisation of the building team (Cheung et al, 2002).
4.2 Means of Resolving Construction Disputes
Figure 2 below outlines the respondents’ views towards litigation and arbitration.
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Views on litigation
Long & tedious process
Costly
Time consuming
Non-technical judges
Unresolved cases
Wasting money to pay the charge
Parties know their respective rights and becoming more defensive
Bias to the clients sides
Views on arbitration
Faster than litigation
Location for hearing is flexible
Technical expertise available
Tedious process
Costly
Figure 2: Views on Litigation and Arbitration
There is a general dissatisfaction over the litigation and arbitration process. Although
arbitration is preferred over litigation but neither seems to be really adequate. Drawing
from (Walls, 2000), it is suspected that this is may be due to the clauses in the standard
forms of contract stating that arbitration can only takes place in the end of the contract.
Thereby, the following difficulties occur: (i) disputes fester, (ii) relationships deteriorate
(iii) nobody can remember exactly what had happened and (iv) every one is on or wants
to be on the next project
Table 7 & 8: Dispute Resolution Method & Stages of Resolving the Disputes
Method of dispute Number Percent Stages Number Percent
resolution
Litigation 5 18.5 Ad-hoc 3 11.1
Arbitration 9 33.3 Construction stage 13 48.1
Negotiation 23 85.2 Completion stage 2 7.4
Most of the respondents (85.2%) favoured negotiation compared to litigation and
arbitration as the form of ADR. Most of the disputes were resolved during the
construction stage (48.1%), at the early stage when the problem arise (11.1%) and
completion stage (7.4%). Most ADRs are resolved only after the project completion
period and these disputes goes to arbitration if they dissatisfied with the decision made
earlier by the third party.
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12
10
8
Frequency
0
Recommended Highly recommended Not recommended
Recommendation on the use of ADR
Figure 3: Recommendation on the Use of ADR
The majority of the respondents are satisfied (70%) with the current means of dispute
resolution methods and more ADR should be considered.
Table 9: Dispute Resolution Experience
Methods of Dispute resolution experience
dispute resolution (No)
0 % 1 % 3 % 4 % >5 %
Negotiation 5 31.3 5 31.3 1 6.3 2 12.5 3 18.8
Adjudication 11 78.6 3 21.4 0 0 0 0 0 0
Mediation 10 76.9 3 23.1 0 0 0 0 0 0
There is a high awareness of ADR and the application in dispute cases among the
majority of respondents as shon in Table 9. Most of the respondents resolved their
disputes through negotiation (23.1%) while 21.4%. through adjudication.
A list of factors on why mediation is not widely used in Malaysia
1. Most problems can be resolved through direct-negotiation with the disputants without any
involvement from others. The involvement of a third party can make disputes become more
complicated or even worse
2. Not widely known in Malaysia since it is a new approach
3. Not exposed to any mediation procedure since no major disputes have yet arisen which need
settlement through mediation
4. Differential in value of work if substantial will be added or omitted progressively and this must
be agreed by both parties
5. The main contractor will offer alternative works or projects as replacement if the sub-contractor
suffers losses
6. Not agreed or initiated by both parties
7. Unaware
Figure 4: Respondents’ view on why mediation is not widely used in the Malaysian
construction industry
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Figure 4 above shows a list of contributing factors identified by the respondents as
responsible for ADR is not popularly used to resolved construction disputes in
Malaysia.
4.3 Dispute Prevention
All of the respondents agreed that dispute prevention is better than cure. They
commonly believe disputes are difficult to resolved and it is waste of construction
resources, increased cost, affect the quality of work, prolong the construction period,
involved unnecessary claims, very tiring and tedious process and to avoid stop work.
A list of recommended ways to prevent dispute in conventional project
1. Adequate time to prepare a complete and good documentation
2. Best practice of project management. The project team should put on high effort to ensure that
dispute will be minimised
3. Clarify any unclear issues before award the contractor
4. Select a knowledgeable and experienced consultants and contractor
5. Mutual trust among the participants
6. Understand the contract documents
7. Unambiguous drawings and bill of quantities
8. In the case of lump-sum tender, clear client needs is vital
A list of recommended ways to prevent dispute in design and build project
1. The project brief must be precise and clear especially the needs statement
2. Best practice of project management. The project team should understand the pre-bid document
and arise any area of disputes earlier
3. Appointment of a capable person to check on the document and a capable supervision team
4. Select a knowledgeable and experienced consultants and design and build contractor
5. Aware of the risks and process involved in design and build project
6. Understand the contract documents
7. Provide adequate time to prepare good documentation and the technical evaluation
8. Mutual trust and understanding
9. Technical evaluation is done by a competent officer
10. Practice value management
11. Teamwork
A list of recommended ways to prevent dispute in joint venture project
1. Clear distribution of tasks and defined roles of each party involved
2. Appoint a capable person to check on the document
3. Good documentation
4. Good supervision and monitoring system
5. Select a knowledgeable and experienced contractors
6. Mutual trust among the participants
7. Understand the contract documents
8. Best practice of project management
9. Teamwork and always be motivated
Figure 5, 6 & 7: Respondents’ View on Means of Dispute Prevention in the
Conventional, Design and Build and Joint-Venture Procurement System
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The respondents were then asked to identify the best ways to prevent disputes in three
different procurement systems popularly used in Malaysia such as conventional method,
design and build and joint venture. Figure 5 – Figure 7 summarizes the means of dispute
prevention identified by the respondents.
5. Conclusion
This paper concludes that the construction industry is dispute prone one and its effects
are detrimental. This issue an issue should be of great concern among the responsible
parties. The study suggests that most of the disputes are due to the contractual issues
particularly on the misunderstanding of the contract and incomprehensiveness of
documents. However, disputes can be prevented if the relevant parties adopt good
practices at various stages of the development cycle of the project, understand their
respective tasks and roles in the project and be more proactive in identifying matters
that will spark disputes at the earlier stage of the project. They should always exercise
teamwork, good communication and build trust among each other.
Resolving construction disputes is a difficult task, especially when the available
resources are limited and the dispute is of a complex nature. Notwithstanding, these
disputes must be resolved as soon as possible and the solutions must be prompt.
Therefore, a systematic selection of dispute resolution strategy is critical to dispute
management. Many Malaysian practitioners agreed that the current dispute resolution
methods adopted in many cases are ineffective. ADR should be the best option to
resolve Malaysian construction disputes. However, it is not being fully utilised.
Disputants are more preferred to negotiate or litigate their disputes. Therefore, it is
recommended that ADR framework to be formulated to assist all parties in resolving the
disputes. The government support and the political influent are also crucial but the most
important factor is the disputants themselves should change their existing adversarial
mindset.
6. References
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procedure and process for incorporating into the proposed Malaysian construction
industry payment and adjudication bill, Quantity Surveying National Convention, 4-5
September 2006 Malaysia: Universiti Sains Malaysia, 118-127.
Abidin, A., 2007. The profile of construction disputes, Thesis (Master). Universiti
Teknologi Malaysia.
Brooker, P and Lavers, A., 1997, Perceptions of alternative dispute resolution as
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Brown, H and Marriott, A., 1993, ADR principles and practice, London; Sweet and
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Chan, H.W., 2008. Innovations in construction disputology. A half day professional
workshop on international construction contract management, 23 October 2008 Kuala
Lumpur: Universiti Teknologi Malaysia, 5-17.
Chan H.W and Suen, C.H., 2004, Dispute resolution management for international
construction projects in China. Management Decision, 43 (4), 589-602.
Chan H.W and Suen, C.H., 2005, Disputes and dispute resolution systems in sino-
foreign joint venture construction projects in China. Journal of Professional Issues in
Engineering Education and Practice, April, 141-148.
Cheung, S.O and Suen, C.H., 2002, A multi-attribute utility model for dispute resolution
strategy selection. Construction Management and Economics, 20 (6), 557-568.
Cheung, S.O, Suen, C.H and Lam, T.I., 2002, Fundamentals of alternative dispute
resolution processes in construction. Journal of Construction Engineering and
Management, October, 409-417.
Cheung, S.O and Yin, T.W., 2006, Are Construction disputes inevitable?. IEE
Transactions on Engineering Management, 53 (3), 456-470.
Diekmann, J.E and Girard M.J., 1995, Are contract disputes predictable?. Journal of
Construction Engineering and Management, December, 355-363.
Faruqi, S.S., 2000, Justice outside the court:adr & legal pluralism. ADR seminar, 11-12
May 2000 Kuala Lumpur: Construction Industry Development Board, 1-11.
Fenn, P., 2002, Why construction contracts go wrong (or an aetiological approach to
construction disputes). Society of construction law meeting, Derbyshire, 1-12.
Fenn, P., Lowe, D. and Speck, C., 1997, Conflict and dispute in construction.
Construction Management and Economics, 15 (6), 513-518.
Harmon and Kathelene, M.J., 2004, Construction conflicts and dispute review boards:
attitudes and opinion of construction industry members. Available from:
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Ismail, Z, Abdullah, J and Mohamad Zin, R., 2008. Findings of alternative dispute
resolution (ADR) application and obstacles towards active development of ADR in the
Malaysian construction industry, 3rd conference law & technology, 11-12 November
2008 Malaysia: Universiti Kebangsaan Malaysia, 215-229.
Ismail, Z, Torrence J.V and Adnan, H., 2006. The application of construction alternative
dispute resolution in Malaysia: PhD research proposal, ASEAN postgraduate seminar in
built environment, 4-6 December 2006 Kuala Lumpur, Universiti Malaya, 1-11.
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Haryati Mohd Isa, Padzil Hassan, Mohd Fisal Ishak and Othman Mohd Nor, pp 1568-1584
Jannadia, M.O, Assaf, S, Bubshait, A.A and Nuji, A., 2000, Contractual methods for
dispute avoidance and resolution (DAR). International Journal of Project Management,
18(2), 41-49.
Kumaraswamy, M.M., 1997. Conflicts, claims and disputes in construction.
Engineering, Construction and Architectural Management, 4 (2), 95-111.
Lian, O.S., 2006. Avoidance and management of construction disputes-enhancement of
QS role, , Quantity Surveying National Convention, 4-5 September 2006 Malaysia:
Universiti Sains Malaysia , 1-9.
Mc Cormac, J., 1994, Small print big money. Contract Journal, July, 14-15.
Mc Intyre, J., 1991, Disputes under review. Chartered Quantity Surveyor,55-56.
Meng, interview by Mohd. Isa. Why Mediation is Not Popularly Used in Malaysia
(April 2001).
Mitropolous, P and Howell, G., 2001, Model for understanding, preventing and
resolving project disputes. Journal of Construction Engineering and Management,
May/June, 223-231.
Mohd. Isa, H and Ishak, M.F., 2005. The evolution and perceptions of mediation in
resolving Malaysian construction disputes, 9th PAQS congress, 4-6 July 2005 Dhalian,
China Engineering Cost Association, 208-223.
Motsa, C.D., 2006. Managing construction disputes, Thesis (Master). Universiti
Teknologi Malaysia.
Naseem, A.A., 2005. A construction industry payment and adjudication act-reducing
payment default and increasing dispute resolution efficiency (A Malaysian perspective),
International forum on construction industry payment and adjudication act, 13-14
September 2005 Kuala Lumpur: Construction Industry Development Board, 1-19.
Poh, K.C., 2005. The causes of construction dispute on client organisations, Thesis
(Master). Universiti Teknologi Malaysia.
Shin, K.C., 2000. Identification of critical dispute characteristics (CDCs) during
construction project operations, Thesis (PhD). Georgia Institute of Technology.
Sew, G.S., 2004. Arbitral hearing needs improvement to expedite settlement of dispute
at minimum costs. Can we help?. KLRCA Newsletter, September 2004, 10.
Singh, H., 2007, Contract administration of design and build/turnkey projects. Course
on contract and administration of design and build project, 10-11 April 2007 Kuala
Lumpur: Public Work Department, 1-15.
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Singh, H., 2009. Claims and disputes in construction contracts: Nature, principles,
practice and resolution, 7-8 April 2009 Kuala Lumpur, PWTC: Board of Quantity
Surveying Malaysia, 1-6.
The New Straits Times, 2007, Mediation as alternative to litigation. 24 March, p.15a.
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disputes. ADR seminar ,Kuala Lumpur: NADR, 5-7.
Zack, J.G., 1995, Practical dispute management. Cost Engineering, 37 (12), 55-60.
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Doubra Ndoni and Tara Elhag, pp 1585-1597
Cost savings, time savings and project quality in PPP/PFI: a
review of PPP/PFI projects
Doubra Henry Ndoni and Taha .M.S. Elhag
E-mail: [email protected]
Corresponding author Tel: +44 (0) 7780640548
Bartlett School of Construction and Project Management, University College London,
London WC1H 0QB, UK
Abstract
PPP/PFI is an innovative project delivery strategy used by the public sector to procure
infrastructure projects and public services but there are calls for improvement in the
procurement process for the reason that it is lengthy and costly to procuring organisations
and it reflects on the total transaction costs affecting value for money and affordability.
Case studies were reviewed to examine if there are evidence of cost savings, time savings
and project quality as a result of using PPP/PFI procurement strategy. The findings from the
review show that a number of the case studies that achieved cost savings; time savings and
project quality were not linked to PPP/PFI but were associated to the level of commitment
to partnership, interpersonal relationship, trust, innovative ideas, effective and efficient
communication and teamwork strategies. Drawing from the findings, the knowledge of
experts in PPP/PFI market can be desirable to further improve the procurement process to
achieve costs savings; time savings and project quality if captured. Nevertheless, the present
study did not identify any arrangement to capture project knowledge. However, other
intervening factors or variables that can affect successful project performance are: PPP/PFI
contractual framework; the structure of the project delivery team and public sector
influence.
Keywords: Case studies, Cost Savings, Knowledge Transfer, Time savings, Project
Quality, PPP/PFI
1. INTRODUCTION
PPP/PFI is now entrenched procurement method with huge worldwide interest as a means of
developing public sector infrastructure and services with private financing. This is based on
the expectation that the private sector provides services at a lower cost, efficiently and
effectively than the public sector. Albeit, the criticisms of PPP/PFI are that the procurement
approach has the effect of raising the cost of infrastructure development (Gaffney and
Pollock, 1999); that the true value is hidden to the future liabilities of the government
(Parker and Hartley 2003); and lengthy delays in negotiation and high participation costs
(Birnie 1999; Ball et al. 2000; Grimsey and Lewis 2005; Li et al. 2005). In addition, the
Public Sector Comparator (PSC) as a tool for assessing value for money is inadequate and
should not be wholly relied on as an indication of Value for Money in a PFI project (Pitt et
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al. 2006) for the reason that it is done in terms of costs and benefits to the purchasing public
body, without regard to costs imposed on other public bodies (Heald 2003) and that
procuring organisations are forced to manipulate their Full Business Case (FBC) to show
that PFI is the cheaper or preferred option (Shaoul, 2005).
The UK government approach to PFI is to ensure that an appropriate procurement option is
used that can offer value for money and; to meet the government requirements of efficiency,
equity and accountability. Based on the government’s analysis, it suggested that PFI is most
likely to offer value for money in major capital projects where there are significant ongoing
maintenance requirement, where the procurement governance structure allows the procuring
public sector to define its needs as service output and benefit from whole-of-life costing.
In summary, PFI procurement process entails the procuring public sector organisation
specifying output requirements and a private sector consortium is then contracted to meet
them. The project risk are shared between the parties each party managing the risks they are
best able to and the public sector ensures the quality and continued maintenance of the
project according to the stipulated project performance criteria (Treasury 2003). However,
the Office of Government and H. M. Treasury in May 2000 recommended three approaches
for project delivery as: 1) Prime contracting; 2) Design and Build and; 3) PFI sited in p.28 of
the H M Treasury report “PFI: meeting the investment challenge” (Treasury 2003). PPP/PFI
has been adopted in the UK in such areas as education, defence, road schemes, hospital and
London Underground. The design and development of a PFI project consists of fourteen (14)
stages (Treasury Taskforce, 1998) see Table. 1. However, “the decision to use PFI is taken
on value for money grounds alone and whether it is on or off balance sheet is not relevant”
(Treasury, 2003) p.13.
However, it is crucial to know the factors that can be useful to enable successful
implementation of PPP/PFI projects. The attributes of PPP/PFI procurement framework and
the network of relationships within a project team can be determining factors for successful
project outcomes.
The present review of projects procured through PPP/PFI is to investigate the factors that
enabled and affected project success in terms of cost savings, time savings and project
quality. However, previous studies have focused attention on cost effective innovative
design and operation and maintenance in PFI (Ball et al. 2000); developed framework for
logical thinking for best Value for Money (Heald, 2003); developed a system for evaluating
the implication of accountability and VFM (Demirag et al. 2004); conduct comparative
context analysis of approaches to Value for Money tests (Grimsey and Lewis, 2005). Also,
the implications of VFM methodology and practice for appraisal (Shaoul, 2005);
measurement of VFM within the concept of PFI (Pitt et al. 2006); risk assessment in PFI
(Akintoye and Chinyio, 2005); analysed decision making processes in risk estimation and
uncertainty (Broadbent et al, 2006). Furthermore, the benefits and problems in PFI process
(Dixon et al, 2005); the attractiveness and unattractiveness of PFI procurement system in the
United Kingdom (Akintoye et al. 2005); the management and governance of PFI projects via
the integration of alliance concepts (Clifton and Duffield 2006) and an investigation into the
stimulants and impediments to innovation within PPP/PFI projects (Eaton et al. 2006).
Nonetheless, little attention has been paid in examining the factors that enabled the
successful delivery of PPP/PFI projects.
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2. PROCESS GUIDANCE BY PARTNERSHIP UK (PUK) FOR PFI CONTRACTS
The three main objectives of the guidance process for PFI contract remain unchanged from
the first edition published by NAO in 1999. The objectives are: 1) To promote much
understanding of the main risks involved in a standard PFI project; 2) To enable consistency
of approach and pricing in similar projects; 3) To reduce negotiating time and costs by
agreeing a standard approach in procuring projects. Partnerships UK (PUK) was established
in 2000 by H M Treasury to succeed the Treasury Taskforce for the purpose to enable
implementation of the guidance processes and other aspects of PPP/PFI procurement. In
addition, PUK can take equity stakes in projects and in part provide loans to public bodies.
Table 1 PPP/PFI contract procurement process (Source: Treasury Taskforce Project
Finance; Revised Edition April, 1998)
urement Process Start
blish Business Need
aise the Options
ness Case and Reference Project
loping the Team
ding the Tactics
e Expressions of Interest; Publish OJEU Notice
ualification of Bidders
tion of the Shortlist
ne the Appraisal
nvitation to Negotiate
ipt and Evaluation of Bids
tion of Preferred Bidder and the Final Evaluation
ract Award and Financial Close
ract Management
While the purpose for establishing PPP as provided by the (Treasury, 2000) p.12 are: “1) To
deliver significantly improved public services, by contributing to increases in the quality and
quantity of investment; 2) To provide value for the taxpayer and wider benefits for the
economy and; 3) To allow stakeholders to receive a fair share of the benefits of the Public
Private Partnership”.
It is been argued by Ball et al. (2000) that the development of some projects under PFI is
eighteen months or more. However, there are calls for efforts to reduce the average time
period from project conception to contract award (NAO 2005) and this is one of the targets
of “Achieving Excellence in Construction”. Having a common vision and a commitment to
collaborate can be the difference to reduce the lengthy time period.
Based on the highlighted negatives of PPP/PFI in July 1999 the first edition of a
standardised contract on PFI was published to provide guidance in PFI projects to enable
procuring departments or procurers deliver best Value for Money (Treasury Taskforce,
1999) and a revised “Step by Step Guide to PFI procurement process (Treasury Taskforce,
1998). The second edition of Standardisation of PFI contract was published by the Office of
Government Commerce (2002) the third edition of the Standardisation of PFI contract took
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into consideration the experiences of both the public and private sectors to incorporate a
number of improvements identified since 2002 (Treasury, 2004). In March, 2007 the latest
Standardisation of Contract version 4 was published by H. M. Treasury based on findings
from operational PFI projects on key areas where improvements are needed such as service
variations and payment mechanisms for the reason that some projects are experiencing
costly and time consuming processes due to changes to service specification (Treasury,
2007).
Therefore, upon the recommendations of the Latham report 1994 and Egan report 1998 they
encourage project collaborative relationship through project partnering and alliancing to
enable project delivery to avoid some of the identified shortcomings of the construction
industry. The expectations of PPP/PFI can be achieved if the process is well guided and
having knowledgeable experts skilled in PFI project delivery.
3. COST SAVINGS, TIME SAVINGS AND PROJECT QUALITY ON PPP/PFI
PROJECT
The timely integration of knowledge across organizational boundaries (Eisenhardt &
Tabrizi, 1995; Szulanski, 1996) can be an effective strategy to enable cost savings, time
savings and project quality on a project. PPP/PFI has produced improved contracts and
design innovations but it has incurred extra costs in staff time, consultancy and legal costs,
tendering costs and costs of risk transfer (Spackman, 2002). Project delivery within planned
completion time, improved quality and better service provision are among other benefits for
PPP/PFI (Pongsiri, 2002; Dixon et al 2005), however, much of the evidence as to its impact
is still contradictory and inconclusive (Dixon et al. 2005). It is argued that school projects
procured through the conventional method are of higher quality than those procured through
PPP/PFI (NAO, 2003).
In a research conducted by Parker and Hartley (2003), they looked at the potential
transaction costs in Defence PFI procurement and found that the use of PPPs will not
necessarily lead to improved economic efficiency in defence procurement. They suggested
that the cost and benefits of PPPs must be carefully balanced against the costs and benefits
of more traditional form of public sector procurement. In another PFI school project to
replace a local authority high school building (Ball et al. 2000) found little evidence of
innovation on the part of the private sector and it is expected that the operational costs of the
new school facility will be higher than the existing school buildings.
In February 2003, the National Audit Office conducted a research to investigate the
construction performance of PFI projects and found that the majority of the English PFI
central government projects demonstrated good quality design and construction and
demonstrated no construction related price increase after contract award and were delivered
on time and at the agreed price to the public sector procurer (NAO, 2003).
The lengthy time and costly procurement process associated with PPP/PFI can be as a result
of: 1) the complexity of the procurement process that makes it difficult to manage the tender
process efficiently; 2) the lack of understanding from both the public and private sectors on
how to coordinate and enable collaborative working with the spirit of unity and 3) (Li et al.
2005) the lack of PPP/PFI experience and appropriate skills in public and private sectors.
However, the procurement process still remains lengthy and expensive and this can be
discouraging for smaller organisations to bid for projects.
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4. KNOWLEDGE TRANSFER IN THE CONSTRUCTION INDUSTRY
Knowledge transfer can generally be subdivided into knowledge sharing (the process by
which an entity’s knowledge is captured (Appleyard, 1996) and knowledge re-use (the
process by which an entity is able to locate and use shared knowledge (Alavi and Leidner,
2001). Knowledge transfer is the process through which knowledge acquired in one situation
is applied to another (Argote and Ingram, 2000). Latham (1994) recommended that a new
research and information initiative aimed at providing timely and relevant good practice
feedback should be initiated in the construction industry. In addition, Egan (1998)
recommended an urgent need for the construction industry to develop a knowledge centre
through which the whole industry can have access to knowledge concerning good practice,
innovation and the performance of companies and projects; in particular the knowledge
gained from demonstration projects. However, inefficiencies in PFI project delivery
processes could be addressed by introducing appropriate mechanisms for capturing and
transferring expertise and lessons learned in order to facilitate innovation (Carrillo et al.
2006).
5. RESEARCH METHODOLOGY
The research methodology adopted to collect evidence was through case studies and written
reports. The study seeks to understand whether PPP/PFI enables cost savings, time savings
and project quality. Furthermore, the study looked for examples of critical factors that
enabled successful project completion.
The case studies are projects procured within 1993 – 2000 through PPP/PFI. This is to
enable the analysis and comparism of the issues of costs saving, time savings, project quality
and knowledge transfer on the strategies adopted for project execution. In addition, the
selection of case studies is not based on specific types of project.
6. CASE STUDIES
Case studies were selected and analysed using different sources such as the database of
centre for construction excellence, 4ps, HM Treasury, NAO and other sources. The
investigations are based on the following criteria: the project should involve a multi-
disciplinary project team and the project should be operational.
6.1 Queen Elizabeth Hospital
Queen Elizabeth PFI Hospital was built to provide residents of the London Borough of
Greenwich with state-of-the-art healthcare. Consequently, one of the major problems of the
Trust is to resolve the issue of providing modern healthcare services in the Borough of
Greenwich. An Outline Business Case was submitted in March 1995 followed by a notice in
the OJEC (now OJEU) in April 1995. The Full Business Case was submitted to the Central
Government in January 1997 but a revised Full Business Case was developed and re-
submitted in April 1998 and full authorisation received to proceed soon after. Much
consideration was given to the long-term performance of the structure and equipment and
was reflected in the design and specification of the building and its component. The building
was designed for operational reliability, to ease maintenance and lower running costs. This
was achieved through the standardisation of components, the elimination of complex design
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solutions and specification for thermally efficient materials and components. The cladding
system used was reported as cheap, thermally efficient and reliable and appeared to offer
cost, time and project performance that are sought. The Construction Industry Council
(2000) considered the project as a successful PFI project. However, the current financial
difficulties of the PFI scheme confirmed the need for more research to improve the
procurement contract strategy. The remarkable successes reported in the case study were
attributed to the inter-personal relationship between the Trust and the SPV organisation
which enabled trust and cooperation.
6.2 Dartford and Gravesham NHS Trust
Dartford and Gravesham NHS Trust are three relatively old sites in need of major
maintenance and with limited public capital will unlikely to be built in the near future. The
Contract for the new hospital was between Dartford and Gravesham NHS Trust and
Pentland consortium which Tarmac was the main contractor. The contract was let in July,
1997 for the new Dartford and Gravesham hospital. Pentland was to design, construct and
finance the 400 in-patient bed hospital and to maintain the facility and provide a range of
non-clinical support services. The clinical services in the hospital will be provided by the
Trust. Pentland must complete construction by 2000 in time for the hospital to become
operational in September 2000. The contract negotiations started in July 1996 and it took 7
months to reach conditional contract and a further 5 months to reach final contract. The
hospital was completed two months ahead of schedule (July, 2000) and it become fully
operational from September 2000. The success achieved on Dartford and Gravesham NHS
Trust was as a result of the commitment of the Trust and the consortium.
The fiftieth report on PFI by the National Audit Office (NAO) examined Dartford and
Gravesham Trust’s hospital to see whether value for money was achieved after three years
of its operation. The following were outcomes of the report: 1) THC Dartford delivered
quality that was overall satisfactory; 2) the Trust received an immediate lump sum of £1.5
million and a reduction of £2 million to its annual contract price over the remainder of the
contract as a result of sharing in the refinancing benefits and agreeing to extend the contract
period after the completion of the refinancing in March, 2003; 3) because of the refinancing
there were new risks that arise such as cost of terminating the contract might exceed the cost
of the hospital to include some or all of the additional £46 million debt THC Dartford took
on to generate the refinancing gains and; 4) shareholders to THC Dartford have benefited as
a result of the refinancing by increasing and accelerating their returns from the project which
they invested £13 million and have withdrawn £37 million within 3 years of the hospital
operation (NAO 2005).
6.3 Dorset Police Authority PFI Project
Dorset Police Authority project involves the provision of the following facilities: Police
stations; a Divisional Head Quarter with associated specialist services such as a custody
suite; victim suite and scenes of crime facility; vehicle workshops and dog section.
However, the project was advertised in the OJEC (now OJEU) in September 1997 and
Submissions were received from sixteen consortia in mid October, 1997. The procurement
process was 42 months and much of the time was spent on final negotiations and this would
have been reduced if issues such as payment mechanism, draft contract terms and output
specification were developed in more detail at Invitation To Negotiation (ITN) stage (4ps
2001). The assessment of the cost of the project was difficult because of lack of comparative
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reference project. The procurement contract process was lengthy and this affected the
commencement of construction. Dorset Police Authority was satisfied with the completed
facilities because of the benefits of better service delivery to the public.
6.4 London Underground PPP Contract
London Underground is a system that serves a large part of Greater London and some
neighbouring areas. The Underground has 275 stations and runs over 253 miles (408km) of
line. However, because of the maintenance backlog of the system and significant under-
funding in the past options for modernisation of the Underground’s Infrastructure was
sought and the Department of Transport was given the task to look for avenues to improve
the system. The procurement process took 45 months from 22nd July, 1999, the Pre-
qualification date, however the reasons for the long delays were as a result of the following:
1) the need to revise Deep Tube bids after BAFO to meet affordability criteria; 2) the two
Judicial reviews in July, 2001 and June-July 2002 and 3) contested State aid proceedings led
to further unplanned delays. In conclusion, London Underground PPP demonstrates that it is
crucial to plan and prepare necessary documentation prior to contract procurement process
for service delivery. The incomplete information on the condition of the infrastructure
resulted in bidders factoring this uncertainty into their bids. In addition, the delay as a result
of the judicial reviews would have been avoided if steps were taken earliest to resolve how
the PPP structure can be implemented to enable successful service delivery which might
have saved time and cost. Furthermore, the contract procurement process for London
Underground PPP demonstrates how time consuming and costly the procurement process
can be and a reason for organisations in PPP/PFI market are selective on projects to bid.
Conversely, London Underground did reimburse a percentage of the bid cost. Table 2 shows
the critical factors that enabled/affected the projects under review. However, the difference
between success and failure can be how project teams interact.
6.5 Stretford Fire Station in Greater Manchester PFI Project
Stretford Fire Station in Greater Manchester responsibilities are fire related; however, to
perform and improve its’ services to the public it requires a facility that can provide
mechanical and electrical services, vehicle fuel storage, building and ground maintenance
facilities. The need for a new facility is to provide fire coverage in terms of speed and
capability for attendance to incidents in high risks. However, PFI was an option selected to
replace Stretford Fire Station and the Divisional Headquarters building. The contract term is
for 25 years with a consortium called PFF Stretford Limited. The contract was signed in
December, 1998 and it was commissioned on 27th October 1999. In conclusion, the reason
given to procure the new facility through PFI was as a result of declining funds; perhaps
traditional method would have provided similar gains achieved through PFI if well guided.
6.6 DISCUSSION ON DATA ANALYSIS
The review of the findings is representative of projects in the Health, Transport, Street
lighting and Infrastructure and facilities management sectors. These are perhaps the most
significant areas for PPP/PFI activities in the United Kingdom.
This study reviewed projects procured through PPP/PFI based on four aspects – Cost
savings, Time savings, Project quality and Knowledge transfer. This study was motivated by
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the implication of PPP/PFI procurement strategy on Cost savings, Time savings and Project
quality. First, the review sought to understand the reasons for the lengthy and costly
procurement process. Second, the study examined the impact of PPP/PFI on costs savings,
time savings and project quality. The findings of the case studies shed some light on both of
these issues.
The results of this study justified the recommendations of Latham (1994) and Egan (1998)
for the establishment of knowledge centres for good practice feedbacks as an efficient and
effective ways of maximizing project knowledge. The case studies examined show no
evidence of mechanism to capture project knowledge. One of the benefits that the
construction industry can achieve using the philosophy of knowledge management is
improved project management. The problems associated with PFI procurement such as: high
costs involved in bids; the inequality in experience between client and contractors; long
contract negotiation period and the inadequacy of client briefs (Robinson et al. 2004) can be
resolved where mechanisms are in place to transfer knowledge between projects.
Table 2 Summary of examined case studies
Examined Cost Time Knowledge Project Contract Project Project Success/Failure
Case Studies Savings Savings Transfer Quality Strategy Start Completion Factors
Date Date
Success
1.Effective
interpersonal
relationship
The Queen x
Elizabeth PFI 2. Trust
Hospital Not X √ PFI 1998 2001
reported 3. Cooperation
Setback
1.High fixed costs /year
increasing with
inflation
Success
Dartford and 1.Commitment to work
Gravesham in partnership
Hospital √ √ X √ PFI 1997 2000
2 Integration of
innovative ideas
Success
1.Multi-skilled project
team
2. Commitment
3. Clear project
objectives and
Dorset Police milestones
Authority PFI
Project X √ X √ PFI 1997 2003 Setback
1. Lack of
comparative
reference project
to asses project
cost
Success
1. Innovative output
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based contracts
Setback
London X X X √ PPP 1999 2003 1.Incomplete
Underground information on asset
PPP condition
2. Uncertainty and
complexity of the
procurement deal
3.Delays as a result of
the judicial reviews
Success
1.Commitment to
Stretford Fire partnership
Station in Setback
Greater X X X √ PFI 1998 1999
Manchester 1.Delay in project
commencement
Note: X – Not achieved
√ - Achieved
However, the second aspect is the impact of PPP/PFI on project success in terms of costs
savings, time savings and project quality. The results of this paper suggest that the level of
commitment to partnership, the interpersonal relationship of the project team, the trust
between project team, the innovative ideas of the project team and the communication
strategy are likely critical factors to impact on project success. Therefore, it is also
suggested that relational contracting through the formation of partnership as part of project
contractual strategy can be the difference to successful project delivery.
The findings of this paper draw attention to other variables that can affect successful project
performance in PPP/PFI as: the competencies of human resources, the project coalition
strategy and the suitability of the procurement strategy for project delivery. The findings
further suggested that there can be public sector influence affecting PPP/PFI contractual
process such as the various published standardised frameworks limiting project teams on
how to embark upon a project.
The implication of the findings in terms of the impact of PPP/PFI to costs savings, time
savings and project quality demonstrates that effective project coalition strategy can enhance
project performance. However, critical factors to enable project coalition/governance are
early project definition; effective contract procurement process; project coalition strategy
and collaborative network management (Ndoni and Elhag, 2009). The possible project
organisation structure to deliver a project should be viewed in terms of the multiple
networks of relationships. Although managing networks of relationships to achieve Cost
savings, Time savings, Project quality and Knowledge transfer involves the use of
appropriate mechanisms for coordination, control and investment in relationships as a result
of changes to organisational relationships. This perspective can provide the benefits of
reduction in transaction cost. PPP/PFI procurement route can be further improved where
attention is given to project relationships.
This review of the evidence highlights a number of areas in need of future research. The first
obvious gap in the literature concerns the relationship between PPP/PFI and Cost savings,
Time savings and Project quality. This may be difficult to study due to lack of access to
project information. On the other hand this is a major area of research that can assist in
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improving PPP/PFI delivery strategy. It may then be possible to compare PPP/PFI across
different types of projects and derive useful conclusions about the differences. Furthermore,
probably the most significant area of research is mechanisms facilitating interpersonal and
inter-organisational relationships in project delivery. The evidence from the case studies
reviewed suggests that the development of informal relationships and partnerships can
provide significant benefits for project delivery.
7. CONCLUSIONS
The successful implementation of PPP/PFI depends on how strategies for project finance
and project management process are coordinated and executed. PPP/PFI are financial tools
designed to enable service delivery it is a financial engineering strategy intertwined with
project management process to deliver a project. Organisations in PPP/PFI market need to
realise the importance of partnership working as part of project delivery strategy to enable
project outcomes. The reliance on PPP/PFI procurement strategy as a panacea to successful
service delivery can be misleading without consideration for the network of relationships
within a project team. Project teams can achieve success when there is an open line of
communication to interact.
The case studies reviewed demonstrated that cost savings, time savings and project quality
are not linked to PPP/PFI but to the level of commitment to partnership, interpersonal
relationship, trust, innovative ideas, effective and efficient communication and teamwork.
However, PPP/PFI still stands out as a financial engineering tool to procure services but the
context or environment of a project can have significant influence on project delivery.
PPP/PFI is a complex procurement strategy that requires the integration of innovative ideas
to enable a robust contract. However, confidentiality clauses attached to most PPP/PFI
contracts can be stumbling block to PPP/PFI project information to enable analyses of
project performances.
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8. REFERENCES
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Healthcare Sector: trends and risk assessment "Engineering, construction,
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• Audit, C. (2003). PFI in schools: The Quality and Cost of Buildings and
Services Provided by Early Private Finance Initiatives Schemes, Audit
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• Audit, C. (2007). Queen Elizabeth Hospital (NHS), Audit Commission.
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PFI PROCESS FOR A NEW HIGH SCHOOL: Room for improvement?"
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• Broadbent, J; Gill, J and Laughlin, R (2006) Identifying and controlling risk:
The problem of uncertainty in the private finance initiative in the UK’s
National Health Service. “Critical Perspectives on Accounting” 19: 40-78
• CIC (2000). The Role of Cost Saving and Innovation in PFI Projects.
London, Construction Industry Council
• CIRIA (2000). Innovation at the Cutting Edge - The Experience of three major
infrastructure projects. London, Construction Industry Research and
Information Association.
• CIRIA (2001). Infrastructure Embankments - conditions appraisal and
remedial treatment London, Construction Industry Research and
Information Association.
• Clifton, C. and C. F. Duffield (2006). "Improved PFI/PPP service outcomes
through the integration of Alliance principles." International Journal of
Project Management 24(7): 573-586.
• Demirag, I; Dubnick, M and Khadaroo, M.I (2004) A Framework for
Examining Accountability and Value for Money in the UK’s Private Finance
Initiative Journal of Corporate Citizenship 15:pp 63-76
• D'Eye, C. R. (2003). "Heathrow Express Cofferdam: Innovation & Amp;
Delivery Through the Single Team Approach - part 2: management." Civil
Engineering Practice 18(1): 41-50.
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• Dixon, T., G. Pottinger, et al. (2005). "Lessons from the Private Finance
Initiative in the UK benefits, problems and critical success factors." Journal
of Property Investment & Finance 23(5): 412 - 423.
• Eaton, D., R. Akbiyikli, et al. (2006). "An evaluation of the stimulants and
impediments to innovation within PFI/PPP projects. Construction innovation
6(2): 63.
• Eisenhardt, K. and B. N. Tabrizi (1995). "Accelerating adaptive processes:
Product innovation in the global computer industry." Administrative Science
Quarterly 40: 84 - 110.
• Gaffney, D. and A. M. Pollock (1999). "Pump-Priming the PFI: Why are
Privately Financed Hospital Schemes Being Subsidized?" Public Money &
Management 19(1): 55.
• Grimsey, D. and M. K. Lewis (2005). "Are Public Private Partnerships value
for money?: Evaluating alternative approaches and comparing academic and
practitioner views." Accounting Forum 29(4): 345-378.
• Heald, D. (2003). "Value for money tests and accounting treatment in PFI
schemes." Accounting, Auditing & Accountability Journal 16(3): 342-371.
• Highways Agency. (2006). "A34 Newbury Bypass: 'Five Years After'
Evaluation (1998 - 2003)." Retrieved 6 September, 2007, from
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After_1.pdf.
• Latham, M. (1994). Constructing the Team: Final Report of the
Government/Industry Review of Procurement and Contractual Arrangements
in the UK Construction Industry. London, HMSO.
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influencing the attractiveness of PPP/PFI procurement for construction
projects in the UK”. Engineering, Construction and Architectural
Management 12(2): 125-148.
• NAO (1999). The PFI contract for the new Dartford and Gravesham
Hospital London, National Audit Office
• NAO (2003). PFI: Construction Performance. London, National Audit
Report: HC 371 session 2002-2003.
• NAO (2004). London Underground PPP: Were they good deal. C. a. A.
General, The Stationary Office.
• NAO (2005). Improving Public Services through better Construction.
London, The Stationery Office.
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in Capital Development Projects: a case study of BSF Scheme In IPMA
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• OGC (2002). Public Private Partnerships. Norwich Office of Government of
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The integrated project team - teamworking and partnering. London, Office of
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• Parker, D. and K. Hartley (2003). "Transaction costs, relational contracting
and public private partnerships: a case study of UK defence” Journal of
Purchasing and Supply Management 9(3): 97-108.
• Pitt, M., N. Collins, et al. (2006). "The private finance initiative and value for
money." Journal of Property Investment & Finance 24(4): 363 - 373.
• Pongsiri, N. (2002). "Regulation and Public Private Partnerships"
International Journal of Public Sector Management 15(6): 487-495.
• Shaoul, J. (2005). "A critical financial analysis of the Private Finance
Initiative: selecting a financing method or allocating economic wealth?"
Critical Perspective on Accounting 16: 441-471.
• Spackman, M. (2002). "Public-Private Partnerships: Lessons from the British
approach." Economic Systems 26: 283 - 301.
• Szulanski, G. (1996) “Exploring internal stickness: impediments to transfer of
best practice within the firm” Strategic Management Journal 17: 27-44
• Treasury Taskforce, H. M. (1998). Step by Step Guide to the PFI
Procurement Process. London, HM Treasury Publication.
• Treasury Taskforce, H. M. (1999). Standardisation of PFI Contract. London,
H M Treasury.
• Treasury, H. M. (2000). Public Private Partnerships - the Government's
Approach. London, HM Treasury
• Treasury, H. M. (2003). PFI: Meeting the Investment Challenge. Norwich,
Her Majesty Stationary Office.
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London, Her Majesty Treasury.
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Kevin Chuks Okolie, pp 1598-1625
Building performance evaluation in educational institutions: a
case-study of universities in South East Nigeria
Okolie, Kevin Chuks.
Department of Construction Management. Faculty of Engineering Built Environment
and Information Technology. Nelson Mandela Metropolitan University. South Africa.
E-Mail; [email protected].
Abstract
In recent times, the performance of buildings and how they affect educational
effectiveness in Nigeria has increasingly been expressed by stakeholders in education,
particularly in the Universities. Nevertheless, there has been little or no research on the
issue in great detail. This paper reports on research aiming at evaluation of the
performance of buildings in educational institutions based on some identified key
performance indicators. The primary focus is on the end-user. The study explores the
contextual, operational and strategic variables that influence the performance of
buildings. Case-studies are used to underpin how these variables enhance or hinder
educational effectiveness. This is informed by the fact that data required for the study
are mainly qualitative and therefore demand direct observation at the scene of
occurrence. The case-studies illustrate the link between buildings, users and
organizational systems and further emphasize the need to highlight the range of factors
or variables that govern user satisfaction and organizational needs in the design process.
Interview schedules for the study are developed using guidelines from the research
methodology and literature review. The responses are analyzed using percentages, mean
scores, chi-square distribution, and correlation analysis as statistical tools. Walkthrough
evaluation and focus group discussion on specific aspects of buildings and designs are
used to draw out lessons and conclusions for clients, designers and facility managers.
The final output is the development of a model based on key performance indicators
that can be used to assess the end-user satisfaction in post-occupancy and overall
organizational efficiency.
Keywords: Building performance, Best practice, Evaluation, End-user, Facility,
Performance indicators.
1.0 THE PROBLEM AND ITS SETTING.
1.1 Introduction:
Buildings are systemic: they have many interacting systems and subsystems both as part
of the physical infrastructure and how human activity is organized within and in relation
to them. They also have clear hierarchic properties in which constraints are handed
down from one layer to the other. Different professions such as architecture,
engineering, valuation and planning tend to operate at different levels in this hierarchy.
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At the bottom of the hierarchy is the user, who lives with the consequences of all these
decisions (Leaman, 2004:18). Architects, planners and consultants may come and go,
but users spend their lives in the creations of the designers. Barrett and Baldry
(2003:94) observe that very few organizations ask their staff whether a building meets
their requirements even-though the people that understand a building best are the people
that use it everyday. In most cases, the people concerned and affected by the design are
never involved or considered in the design process. Design and decision-making is
rather concentrated, fragmented and involves only a small group of experts (Danny,
2003: 282). This process sees many consultants working in isolation, resulting to
inadequate briefs, with many variables that have considerable/significant effects on their
designs.
It is generally known that organizations simply identify their need to build and go
through the process of planning, briefing, design, construction and final occupancy.
This process is linear and usually repeated for every new building project that the
organization may undertake (Barrett & Baldry, 2003:93-104). Although this is the
typical process, it is not necessarily the best. Absence of evaluation does not allow
organizations to make use of their staff (users) which is a valuable resource at their
disposal; this gap limits the opportunity to learn from the staff how well the building is
performing in terms of user needs. Data and information from evaluation can be used as
a feed-back/feed-forward into designs for new buildings or improvement of existing
ones (Preiser, 1995). Buys (2004:47) notes that feedback should be obtained from
occupants who have the closest experience of building needs and maintenance
requirements. Feedback from completed buildings can help not only to fine-tune the
building and inform the client but also inform the design and building team on the
effectiveness of building operations. This shows that there is a nexus between design
brief, evaluation and feedback. Evaluation and feedback provide the necessary
information for good brief, which in turn contribute to high building performance and
overall organizational effectiveness. Unfortunately, Leaman (2004:19) observes that
feedback is not better used because most designers and builders tend to be territorial in
defending their perceived areas of expertise and often go on to the next job without
learning from the one they have just done. Evaluation of buildings provides opportunity
for organizations to see how well a particular building facility meets their requirements.
For long term strategic planning, evaluation of buildings provides information about
what kinds of buildings will be needed in the future to accommodate the organisations’
expected development (Barrett & Baldry, 2003:97-99). Information or knowledge of
buildings that are performing poorly and those that are performing well helps
organizations in the consideration of long term strategic plans. Besides, operational and
maintenance decisions can benefit from building performance data.
1.1.1 Background.
Until recently, building performance was evaluated in an informal manner and lessons
learned were applied in the next building cycle of a similar type. Knowledge of building
performance was passed from one generation to another generation of building
specialists who were often craftsmen with multiple skills (Preiser, 1995:19). These
multiple skilled craftsmen (artists/designers, draftsmen/builders) had not only a
complete control over the building delivery process but also a thorough knowledge of
the cultural, social and economic context in which the clients operated. Today, the
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situation has completely changed. Due to the proliferation of construction
specializations, advancement in technology and the rising demand for higher quality by
customers and stakeholders in service delivery, building performance has become more
documented and formal (Douglas, 1996:10). An increasing number of technical code
and regulatory requirements such as handicapped accessibility, energy conservation,
hazardous waste disposal, fire safety, health and safety are now placed on building
facilities. To balance and comply with these requirements, Preiser (1995) maintains that
building performance must be properly articulated and documented. However, in the
last two decades, thousands of new buildings and renovations have been planned,
designed and constructed but only a small proportion will ever be evaluated against
user-needs and service delivery objectives (Lackney, 2001:2). This, according to
Zimring and Rashidi (2008) can be attributed to the following:
• Lack of funds set aside by organizations for performance evaluations;
• Lack of the necessary skill to conduct performance evaluations;
• Professionals often do not like to have their work judged by other professionals;
• Difficulties in establishing a clear link among user assessments, positive outcomes
and the physical environment; and
• The complex and fuzzy nature of the relationship between facility design and
facility performance evaluations.
Organizations have successfully acquired buildings that do not perform due to poor
operations. Perhaps, this can be attributed to the fact that quite a number of buildings
are procured with none of the key players showing significant interest in their
performance. Once the building has been completed and delivered to the client, the
project team disbands and quickly moves on to the next project without learning from
the one they have just done (Leaman, 2004; Mayaki, 2005). Leaman (2004) reports that
a survey of buildings in the United Kingdom shows an average of two percent loss in
building-related productivity by staff. Leaman (2004) concludes that buildings do not
work as well as they should for their users and so demand more than their management
is prepared to give especially in the public sector. A well designed building should be
suited to context and purpose with sufficient space and access. Knirk (1993) affirms that
usable buildings should address a broad spectrum of occupant-related issues such as
creating a physically comfortable environment with adequate lighting, temperature,
noise control, technology and equipment, and user- access needs. To ascertain how well
the building is serving the needs of the occupier or to identify any major deficiencies in
its overall performance, building performance evaluation is very crucial.
Generally, the traditional functions of the major professionals in the built environment
(Architects, Builders, Engineers, Quantity Surveyors and Estate Surveyors/Managers)
have remained virtually the same (Mbamali, 2005:2). However, in the built asset sub-
sector, the trend has been a departure from the traditional estate manager/surveyor
towards the creation of an all-embracing professional (the facilities manager) who
harnesses the varied and complementary functions of these major professionals into a
cohesive approach to workplace management (Park, 1998). The primary objective of
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Kevin Chuks Okolie, pp 1598-1625
this profession (facilities management) is to relieve the organization of the burden of
ensuring that support structures and services run efficiently so that it can concentrate on
its core activity and thereby boost profit earning and productivity. Spedding and Homes
(1998) define facilities management as an umbrella term under which a wide range of
property and user-related functions may be brought together for the benefit of the
organization and its employees as a whole. The scope of facilities management
encompasses the workplace, facility support services, property, corporate real estate and
infrastructure. (Chitipanick, 2004:364-365). Its function is performed at three levels,
namely; the tactical, operational and strategic levels. Building performance evaluation
finds expression at the level of strategic building design, construction and management
(Omirin, 2005:10-20). Building performance evaluation is a diagnostic tool which
allows facility managers to identify and evaluate critical aspects of a facility in order to
develop design guidance and criteria for future facilities (Preiser, 1995:1; Obiegbu,
2004:10). It is part of a wider field of knowledge referred to as facilities management.
The concept deals with the continuous process of systematically evaluating the
performance and effectiveness of one or more aspects of buildings in terms of
accessibility, aesthetics, cost effectiveness, productivity, functionality, safety, security
and sustainability (Zimring, 2001:42). In his analysis of the relevance of building
performance to facilities management, Douglas (1996:10) asserts that building facilities
are key functional as well as economic resources and should therefore be regarded as
assets rather than liabilities. Douglas (1996) opines that a basic tool for the realization
of this objective is building performance evaluation.
In recent times, there is a growing concern for organizations to structure their built
asset to enhance the performance of their primary processes or core businesses.
Building performance evaluation provides this platform as it is now assuming a
prominent place in the strategic plans of most business concerns (Then, 2003: 69-80).
Generally, there are two broad divisions of building evaluations; user-based systems and
expert-based systems (Barrett & Baldry, 2003:119-128). The user-based system uses a
building’s occupants to evaluate the suitability of a building for their particular needs
and hence is also known as post-occupancy evaluation (POE). The expert-based
evaluation relies on experts’ assessments and typically covers far more areas, such as
provision for information technology, organizational growth, energy efficiency and
changes in work style. This study is directed towards good practice in facilities
management with emphasis on design and user-needs; it therefore uses only the post-
occupancy evaluation (POE) approach. Accordingly, the performance evaluation seeks
to assess the extent to which a building after construction, occupation and use meets its
conception and design purpose (Ornstein & Ono, 2009:152; Obiegbu, 2004:8). This
definition will be adopted for the study. Mayaki (2005:3) argues that the objective of
performance evaluation is to improve design practice and create a more functional
facility that better supports service delivery.
1.1.2 Buildings in Educational Institutions.
Buildings are important to all businesses and organisations. The cost of this asset alone
should make it a resource that is high on the agenda of business managers. This applies
to all organisations including educational institutions. In times of high operating costs,
increasing competition and rising user-expectations, educational institutions,
particularly universities must seek to maximize their return on building investments.
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An effective tool for the realization of this objective is building performance evaluation.
Although interest in building performance evaluation has significantly increased in
recent years, anecdotal evidence shows that the concept is a far more mainstream
activity in the United States of America, Australia and some European countries than it
is in Africa. To date, little data is available in Africa to assess how extensively the use
of the technique has diffused educational institutions, how it affects teaching spaces and
overall organisational performance (Mutlaq, 2002:15; Amaratunga & Baldry, 2000:295;
Zimring & Rashidi, 2008). Leaman (2004) reports that the reason for this is because
academic disciplines do not regard building performance as an area of legitimate
interest. It seems too trivial and at the same time too difficult. It is also interdisciplinary
and so does not fit well into career paths and funding stereotypes. Nevertheless, studies
have shown that buildings represent a substantial percentage of most educational
institutions’ assets, operating costs and user requirements; their performance level is
therefore very critical to educational effectiveness (Sanoff, 2001:4; Amaratunga &
Baldry, 2000:293-301; Douglas, 1996).
Educational buildings are designed and built to meet specific or group of needs already
determined to a large extent before implementation. The ability of the building to
successfully accomplish the purpose for which it is designed measures its success
(Mayaki, 2005:4). Buildings are designed to make use of space as an educational tool
for the transmission of knowledge and the promotion of learning capacity. Sanoff
(2001:8) maintains that the design of modern educational buildings strongly emphasize
stimulating and adaptable learning environments with spaces that support various styles
of teaching and learning. This implies the ability to make changes within the same space
function in the building. It is true that change is a constant phenomenon and for
educational institutions, especially university building facilities, the future is not totally
predictable. The pace of change affecting buildings primarily through technological and
economic influences is likely to increase rather than slow down (Weller, 1995:12). This
confirms the view of Belcher (1997) that some of the potential implications of changes
for universities are proliferation and diversity of technology, adaptation of sharing
facilities (use of common teaching spaces and laboratories) and greater emphasis on
quality in the study place. It is necessary for building facilities to respond to the
challenge of changing needs and demand in a knowledge economy (OECD, 2006). The
dynamics of the education sector makes it compelling for constant and periodic change
and this calls for proactive and strategic plan.
Currently, one of the challenges facing Nigerian universities is the massive expansion in
higher education participation and the explosion in yearly students’ in-take. As a result
of this, space requirements of classrooms, lecture theatres, hostels, laboratories and
workshops are hardly met in over 70% of tertiary institutions (Obaka, 2008:10;
Okebukola, 2002). Okebukola (2002:12) notes that facilities are overstretched, thus
presenting a recipe for rapid decay in the face of dwindling funds for maintenance.
There is no doubt however that the above scenario imposes severe constraints on the
institutions to effectively deliver their educational objectives and user value. This calls
for strategic and proactive facilities management skills. This research seeks to identify
the critical performance evaluation indices in facilities management and how they can
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Kevin Chuks Okolie, pp 1598-1625
be successfully integrated into the operations of educational buildings so as to attain key
educational objectives.
1.2 The statement of problem.
Most educational institutions in Nigeria do not regard facility performance evaluation as
an area of legitimate interest; do not lay emphasis on the user-value of buildings and
therefore procure buildings that are not adaptable, flexible and fit for purpose.
1.3 Statement of Sub problems.
S-p 1: Educational institutions do not lay emphasis on performance and user-value in
the procurement of building facilities.
S-p 2: Building performance evaluation appears too trivial, interdisciplinary and do not
fit into career paths and funding stereotypes.
S-p 3: A significant number of building facilities in educational institutions are not fit
for purpose.
S-p 4: Critical performance indicators are often absent in the design, construction and
management of building facilities.
S-p 5: There is poor perception and awareness of building performance evaluation
among stakeholders.
S-p 6: There is Lack of feedback mechanism in the design and procurement of building
facilities.
S-p 7: Building facilities are not adaptable and flexible.
1.4 Hypotheses.
H1.1: Emphasis on building performance and user-value enhances educational
effectiveness.
H2.2: The approach to funding of building performance evaluation is below best
practice standards in educational institutions
H3.3: Building facilities that are not fit for purpose impact negatively on teaching and
acquisition of key competences.
H4.4: Building facilities which lack critical performance indicators in their design
impact significantly on the operational effectiveness and academic performance of staff
and students.
H5.5: The level of perception and awareness of facility performance evaluation differ
significantly among stakeholders in educational institutions.
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H6.6: The lack of effective feedback mechanism results in poor design and procurement
of building facilities.
H7.7: Building facilities in educational institutions do not respond to the demands of
changing needs in a knowledge economy.
1.5 The aim and objectives:
The major aim of this research is to undertake an evaluation of the performance of
educational buildings in Nigeria. This will be based on key performance indicators for
best practices. In this regard, the following represent the specific objectives of the study;
• Examine the concept of performance evaluation with a view to identifying and
ranking the key performance indicators in educational buildings.
• Appraise the nature and type of building facilities in the study area.
• Determine the suitability of the buildings and establish the extent to which they
enhance both educational and operational effectiveness.
• Assess the strengths and weaknesses of existing approaches to performance
evaluation of buildings in the study area
• Develop a performance evaluation model that will incorporate best practice criteria
for educational buildings.
1.6 Importance of Study:
Building Performance Evaluation is still a developing field of knowledge and expertise.
There is a great need therefore for research that provides an objective assessment of the
performance of buildings especially in educational institutions. In recent times,
educational institutions are getting fewer subsidies from the government. This requires
the implementation of strategic and proactive facilities management strategies in these
institutions. Inadequate facilities, such as buildings and equipment in educational
institutions affect not only the number of students attracted each year but also the
academic standards of the institutions. In Nigeria, stakeholders have continuously
expressed concern over the appropriateness or suitability of educational buildings
especially in the universities; buildings often fail to meet the needs of educational
process and rarely provide the best value for users. Investment in physical facilities,
research, training and development is too little and therefore diminishes the contribution
of the construction sector to innovations in technology and educational effectiveness
(Nwosu, 2007). Besides, public perception of evaluation is very low and building
performance is widely seen as unpredictable in terms of user expectation and quality
standards (Nwosu, 2007; Obaka, 2008). Although there is an understanding among
designers and other stake holders in education that there is a nexus between buildings in
educational institutions and the academic performance of students, there is little or no
specific research on how, and to what extent the performance of buildings influence the
academic performance of students in Nigeria. In other words, there have been relatively
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few or no studies on this issue in great detail. These concerns provide the basis or
rationale for this study and will therefore increase the awareness and public perception
of building performance evaluation as a key business driver. The study will help to
identify appropriate performance evaluation methodology and factors that affect the
performance of buildings. It will also rank the performance variables that most
contribute to the realization of educational objectives of universities. Again, since
knowledge in this area of study is not yet adequate, the study is important because the
findings will contribute to knowledge in the area.
1.7 The Delimitation of the study.
The study will be limited to the performance evaluation of buildings in government
owned universities in South Eastern Nigeria. According to the Ministry of Education,
there are nine of such universities in that geo-political zone; four are owned by the
Federal Government of Nigeria and five by the state governments. These universities
are located in the five states that make up the geo-political zone. The study will
concentrate on the four universities owned by the Federal Government as units of
analysis. The study will evaluate specific aspects of planning and detailed design as well
as match performance against design expectations within the ambits of budget for
capital projects. The design expectations will be evaluated in terms of function,
accessibility, purpose, economy, aesthetics, experience and environmental quality.
These variables will be regarded as quality performance objectives and will be
evaluated against institutional standards, user requirements and best practices.
Accordingly, the study will not evaluate the engineering performance of buildings
which includes structural stability and the integration and robustness of systems.
Building performance evaluation, particularly, educational buildings with at least 12
months of occupation in their life cycle will be considered, and so will not consider
other forms of facilities outside this. The results of the research will be based on
information provided by the above institutions and conclusions drawn from them.
1.8 Assumptions of the Study
Assumptions are conditions that are taken for granted. They are therefore accepted as
true without proof (Leedy & Ormrod, 2003:5). In relation to the sub-problems, the
following assumptions provide a direction to the understanding of the study as
conceptualized;
• Performance indicators impact on the design and management of buildings;
• Buildings are major facilities and therefore constitute an educational tool;
• Financial resources for design and procurement of buildings will always be
limited;
• The current views of facility managers regarding performance indicators for best
practice will continue to be relevant now and in the foreseeable future;
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• The respondents are well informed and experienced enough to give authoritative
feedback on the information sought;
• There is a misplaced faith in design, technology, management and lack of
positive synergy for strategic thinking among stake-holders in the construction
industry; and
• Design, maintenance and operational effectiveness of buildings in educational
institutions must be considered as factors that positively contribute to learning
and working for both staff and students.
2.0 THE REVIEW OF RELATED LITERATURE.
To lay a theoretical foundation /framework for this study, a review of related literature
is necessary. This frame-work, according to Bak (2004:17) is vital for guiding the
research, ensuring coherence and establishing the boundaries of the study.
The role of building performance evaluation in facilitating organizational performance
is widely acknowledged. Amaratunga and Baldry (2000:294.) state that performance
evaluation is a key factor in ensuring the successful implementation of organizational
strategy. Amaratunga and Baldry (2000) maintain that it does not only play a vital role
but also provides standards for establishing comparisons. Omirin (2005: 8) in her
contribution states that it is a very important tool for strategic studies, budget
preparation, and organizational change. Facility performance evaluation allows an
organization to establish its position through the careful and consistent evaluation of
facility performance; it stimulates action through identifying what is to be done, who is
required to act and in what manner (Barrett & Baldry, 2003:74-78). This suggests that
the objective of performance evaluation is not limited to optimizing the running costs of
buildings; though that is important, but encompasses other strategic management issues
in an organization. For construction organizations, it encompasses the design and
management of space and related assets for people and processes in such a way as to
support the achievement of organizational mission and goals (Amaratunga & Baldry,
2002:178). As external and internal factors place more demands upon facilities in an
organization, resources must be suitably combined for efficiency and cost. Performance
evaluation explicitly focuses attention on feedback loops and this influences behavior.
For educational institutions, this feedback loop influences the overall project design for
improved performance and flexibility. Facility performance provides a mechanism to
learn from the past and evaluate contemporary future trends in the use of facilities
(Cots, 1990:40; Lackney, 2001:17). It is therefore believed that the collection,
interpretation and analysis of information about performance of buildings provide the
key to better planning and design for the future. Given the foregoing, it is now pertinent
to review the study in detail.
2.1 The Concept of Building Performance Evaluation in facilities management.
In simple terms, performance has been defined in BS 5240 as the behavior of a product
in use. It can be used in this context to describe the physical performance characteristics
of a building as a whole and of its parts (Cliff & Buttler, 1995:3). It therefore relates to a
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building’s ability to contribute to fulfilling the functions of its intended use. To make it
clearer, it involves the inspection of a building between one and five years after its
completion, and assessing whether and to what extent it has met its design goals for
resource consumption and occupant satisfaction (www.EcoSmartFoundationBpe.htm).
The primary purpose of Building Performance Evaluation is to improve design practice.
The methodology includes reviews of design documentation, interviews with operators
and occupants, site inspection, analysis of utility data and occupant satisfaction surveys.
Finally feedback is provided to the design team. Generally, Barrett and Baldry
(2003:97-99) report that building performance evaluation can serve two broad purposes,
namely;
• Improves current situations; and
• Aid in the design of future buildings (briefing).
Douglas (1996:23-32) outlines specific areas where evaluation of buildings can be
useful. These include:
• Property portfolio review, acquisition and disposal;
• Highlighting the areas a building is lacking in performance;
• Helping in prioritizing maintenance or remodelling works;
• Providing identification of performance or early warning signs of obsolescence in
buildings; and
• Assisting in achieving value for money from building assets through achievements
as well as failures
Baird (1996) maintains that the benefits of evaluation include:
• Better matching of demand and supply;
• Improved productivity within the workplace;
• Minimization of occupancy costs;
• Increased user satisfaction;
• Certainty of management and design decision making; and
• Higher returns on investment in buildings and people.
It is obvious from the above, that building performance evaluation should be considered
a potential success factor by the facilities manager. Building performance is important
in both inter and intra building sense. Douglas (1996:24) distinguishes between inter
and intra building evaluation by stating that inter building evaluation takes place when
one building is compared against another building. Douglas (1996) further states that
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this is important where clients or occupiers are undertaking a comparative analysis of
various properties for acquisition or portfolio assessment purposes. On the other hand,
intra building evaluation takes place when the building is assessed on its own without
direct reference to other properties. The goal here, according to Douglas (1996) is to
ascertain how well the building is serving the needs of the occupier or identify any
major deficiencies in its overall performance. It is in the later sense that this research is
anchored which is in tandem with the definition of building performance evaluation
earlier adopted for this study. Actual building performance inevitably declines over
time. Douglas (1996:26) in his study of the relationship between actual building
performance and performance of facilities states that actual building performance
declines over time due to such influences as wear and tear, user abuse or misuse,
climatic conditions and inadequate maintenance. When this decline sets in, the building
performance begins to fall below that of the facilities it is supposed to be supporting and
this will in turn adversely affect the efficiency of the whole organizational facilities
.Although his views are appropriate, the approach to the study was narrow, theoretical
and technically driven. This study will not only consider the theoretical aspects/
requirements in evaluation but will also dwell extensively on the user/occupier
requirements, perceptions, and empirical assessment of design and use specifications.
The evaluation of building performance in terms of user-needs provides a platform for
facility managers to make their contributions to the achievement of organizational goals.
Clearly, the efficiency and effectiveness of an organization is influenced by the physical
environment in which it operates and since buildings constitute the main physical assets
of an organization, a thorough understanding of the physical workplace and its impact
upon the user behavior is vital (Barrett & Baldry, 2005:93).
From the standpoint of commercial property, facilities management means the co-
ordination of management functions which concentrate on the interface between the
physical work-place and people. But from the non-commercial property standpoint, the
functions concentrate on the interface between the physical use-place and people
(Hakkinen & Nuutinen, 2007:438). The premise of this view, according to the authors,
is that facilities management has a role to play in supporting organizational
effectiveness in a non-commercial context and buildings in educational institutions are
no exceptions. Whatever the definition is, the consensus among authors is that facility
management is not only about buildings, but also about the people that occupy the
spaces within the buildings, the processes they are supporting within known constraints
of available resources and the prevailing corporate culture (Then, 2004:297-311).
Given the significance of buildings, it will be difficult to argue that they do not have a
role to play in sustaining the core business in an organization. If this role is to be fully
understood, Lavy and Bilbo (2009:5-20) submit that facilities and maintenance
managers must have someway of determining the extent to which buildings under their
control affect the performance of business in an organization. This further suggests that
a facilities manager needs adequate knowledge of building performance evaluation or
building diagnostics. Building diagnostics is the systematic study and evaluation of
building performance. It is sometimes used to describe facility performance evaluation
activities (Preiser, 2005:2). Douglas (1996) argues that building diagnostics is very
relevant to facility management and as part of facility performance evaluation; it should
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be considered as a potential success factor to the organization. Douglas (1996)
concludes that whether or not it is a critical success factor depends on the circumstances
and needs of the organization. However, the methodology for this study is not clear and
must therefore be interpreted with caution.
In his work titled “post occupancy evaluation; how to make our buildings work better”
Preiser (1995:4-5) opines that performance evaluation of buildings is a toolkit for
facility managers. Preiser (1995) submits that the technique can be used for trouble
shooting at the early planning and pre-design phases of a project. Thus, it can supply
valuable advice on building performance aspects of specialized systems and materials as
well as shed light on maintenance and operating costs. The other areas the tool can be
useful to facilities managers include problem identification of performance issues in
occupied facilities, intra-agency feed forward of design and guidance criteria to improve
future facility performance and documentation of data for litigation purposes. This is
because when facilities malfunction, the facilities manager is the first person to know.
Preiser (1995) concludes that performance evaluation can be used for fine-tuning, after
a building has been occupied. The fine-tuning process takes place when the building
has been occupied and the occupants begin to adapt to the facility to suit their needs. In
large facilities housing hundreds or thousands of occupants such as hostels and lecture
theatres, this is necessary to get feedback from the occupants efficiently and rapidly in
order to carry out the fine-tuning process. This study captures the numerous benefits of
facility performance evaluation but provides no details on the social and psychological
factors that affect the occupier of a building facility.
A survey carried out by the International Facilities Management Association (IFMA,
1994) to ascertain which aspects of performance are of concern to the facility manager
before and after the occupancy of academic facilities found that prior to building
occupancy, major performance problems include building code issues and changes as
well as scheduling. One year after occupancy, the major concerns include operational
problems with HVAC, building controls as well as peeling paints. Other problems in
this area include breakages, health, safety and security as well as
functionality/efficiency issues. The survey bears out the fact that facility managers do
experience significant facility performance issues on a recurring basis. Their expertise
in building performance can therefore be valuable input in the planning, programming
and design process of new or remodelled facilities. The methodology for this study was
the case study approach and therefore relevant and appropriate for this research.
2.2 Evaluation of Design and user-needs in educational buildings.
There is a consensus of opinion among authors that building performance evaluation (or
post-occupancy evaluation) should be an integral component of the building
procurement process (Duffy, 2001; Preiser, 2005; MARU, 2001; RIBA, 1991;
Zimmerman & Martin, 2001). There is logic in the argument that one purpose for the
evaluation of buildings in-use must be the provision of essential feedback to inform
future actions (Carthey, 2006:57). Never-the-less, despite the support for building
performance evaluation, many commentators agree that it has been neglected by the
industry, particularly the design profession. Cooper (2001) states that building
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performance evaluation has been in almost 40 years of continuous neglect in the United
Kingdom. In particular, the use of building performance evaluation as a feedback loop
to the design process has proved to be intractable. Viscer (2001) affirms that despite the
logical imperative to link building performance evaluation results to the front end of the
design process, efforts to do so have had to struggle to survive. In the last decade, there
has been a renewed interest in building performance evaluation/post occupancy
evaluation for the procurement and management of buildings (Cooper, 2001; Stanley,
2001). The research described in this thesis is indicative of this resurgence of interest.
The concept of building performance evaluation has been described as an integral stage
in the design and construction process (Lackney, 2001). As a mechanism for linking
feedback on newly built buildings with pre-design decision making, its goal is to make
improvements in public design, construction and delivery. Elsevier (2008:248) states
that one important driving force for building performance evaluation is the opportunity
for end–users to develop and articulate real needs concerning different functionalities of
a building and its parts. Elsevier (2008) submits that actual user-needs require support in
formulation and capturing of the requirements in the building design. Designers have
always argued that there is no such thing as one user or one best way to involve or
evaluate the needs of the user in the design process (Cotts & Lee, 1992). In reality, the
user or occupier is not necessarily a person; it may be an individual or an organization
comprising different factions of people with different interests and needs (Dewulf &
Van Meel, 2003). In the office design, for example, the term ‘user’ refers to a diversity
of people, ranging from the rank-and-file employees to top management staff of the
organization. All these people have different ideas, opinions, needs and interests, and in
such situations as this, it may be difficult to arrive at common needs that will be
incorporated into a single design. Logical, as this argument might sound, the fact still
remains that there is no single best method; the user needs and the extent to which they
are incorporated in the design depends on the specific context. As Dewulf and Van
Meel (2003) argues, the consultant designer, facility or real estate manager must be
aware that the interests and needs of the user or stakeholder in the design depends on the
political, legal, cultural, economic and social context in which they operate. The key
issue in building performance evaluation is to determine whose judgments should be
sought. The temptation and tendency is to regard expert opinion as always more correct
and reliable. But the fact is that, for many aspects of a building and its environment, the
experts are the people who know most about using it and these are the end-users.
For educational purposes, the design of buildings must emphasize the creation of
effective learning environments and aesthetics. In the United States of America, design
principles have been developed for educational buildings. These principles, according to
Lackey (2000) are predicated upon three conditions namely;
• Learning is a life long process;
• Design is always evolving; and
• Resources are limited.
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Lackney (2000) further states that educational buildings and learning environments
must satisfy the following;
• Enhance teaching, learning as well as accommodate the needs of all learners;
• Serve as community centres;
• Result from a planning process involving all stakeholders;
• Provide for health, safety and security;
• Make effective use of all available resources; and
• Allow for flexibility and adaptability of changing needs.
Based on these criteria, the success of a building in educational institutions is
determined by evaluating how the building facility is functioning, how the
learners/teachers are utilizing the space and how the educational process has changed as
a result of the design in reality.
The study carried out by the Organization for Economic Co-operation and Development
(OECD, 2006) recommends that educational buildings must;
• Increase access and equity to education;
• Improve educational effectiveness;
• Optimize performance, operation and cost- effectiveness;
• Be symbolic, visually pleasing and educational;
• Be fit for purpose;
• Provide a healthy and safe environment; and
• Be environmentally sustainable.
The study which drew experts from over 15 European countries indicates dearth of
international data on educational facilities. Facility performance evaluation tools such
as questionnaires, focus group discussion and interviews were used for the study which
was mainly qualitative. The methodology adequately captures the key issues in facility
performance evaluation and will be relevant to this study.
In another study on the assessment of school building methods, Sanoff (2001) argues
that in order to experience healthy development, students require certain needs to be
met. They require diversity, which entails different opportunities for learning and
different relationships with a variety of people. In educational buildings that respond to
students’ needs for diversity, one would not find students doing the same thing at the
same time in similar rooms; one would not expect to see students sitting in rows of
desks, all facing lecturers/teachers who are lecturing or reading from textbooks. Instead,
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students and lecturers engage in different learning activities in and out of the classroom.
Sanoff (2001) posits that a variety of teaching methods including small group work,
lectures, learning by doing, individualized assignments, and learning centres would be
used. Sanoff (2001) adds that forms of observation are needed in the evaluation of
school buildings to gain a more comprehensive understanding of the school
environment. Observations are required of the physical facilities where such items as
places for socialization, spatial flexibility and opportunities for students to personalize
their school. Observations are also required of the classroom centre to determine the
ability of the students to direct their own studies and modify the classroom to suit their
needs. Sanoff’s study provides a basis for an evaluation program that is basically a
checklist underscoring an ideal situation. Questions are asked to discover the extent to
which the building fulfils these expectations. However, Sanoff’s (2001) methodology is
relevant to this study especially in the design of interview schedules and direct
observation/inspection process.
2.3 Performance evaluation of buildings in strategic facility management.
In recent times, management is no longer seen as the controlling factor in organizations;
rather it is seen as a function. Its task is to enable the organization’s purposes to be
defined and fulfilled by adapting to change and maintaining a suitable balance between
the various and frequently conflicting pressures at work (Amaratunga & Baldry,
2002:328). Management can also be seen as the accomplishment of predetermined
missions and objectives. It can be argued that management is concerned with achieving
quality of performance. This implies that management performance is concerned with
the manner or quality of managing. That is, the way in which management is done or
how well management is done (Simpson, 1998; Hadjri, K. & Crozier, 2009).
Towards the end of the nineteenth century, interest in the evaluation of performance had
increased. From the classical management school of thought, there is need to evaluate
performance in order to guide management decision-making. This perspective agrees
with Danny (2003) who asserts that management covers key aspects of the facility
portfolio and reflects the organizational directions and performance benchmarks. Danny
(2003) concludes that management involves decision-making processes which affect the
organization as a whole. Similarly, there is the human relations school of thought who
sees the need to assess or evaluate performance to know whether an initiative is
producing the benefits intended. Feedback involving performance evaluation is also
shown as being the key concepts of the general systems theory (Kast & Rosenzweig,
1981). The above literature shows that the development of performance evaluation in
management has followed a path that is influenced by a push to improve quality, service
delivery and cost parameters. To achieve this, management must act proactively and
strategically. It has been established that evaluation can affect the implementation of
organizational strategies. Minzberg (1997:585) states that strategies are realized through
consistency of decision-making; indeed, performance evaluation is an integral part of
the strategic management control cycle in an organization. It provides information to
management in terms of the trade-offs between profit investments as well as introduce
individual strategic targets (Kaplan & Norton, 2000).
Thompson and Martin (2005:9-11) defines strategic management as a process by which
organizations determine their purpose, objective and desired levels of attainment; decide
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on actions for achieving these objectives in an appropriate time scale and frequently in a
changing environment; implement actions and assess processes and results . They went
further to say that whenever and wherever necessary, the actions may be changed or
modified, the magnitude of which can be dramatic and revolutionary or more gradual
and evolutionary. Thompson and Martin (2005) conclude that excellent implementation
of strategies yield effective performance. Again, performance evaluation is a process of
quantifying the efficiency and effectiveness of actions; it is a tool for balancing multiple
measures (cost, quality and time) across multiple levels of the organization, processes
and people (Ornstein, 1997:156). The level of performance an organization achieves is
a function of the efficiency and effectiveness of the actions it undertakes and thus,
performance evaluation ensures that an organization pursues strategies that will lead to
the achievement of high performance goals and objectives.
In the 1990s, literature on facilities management witnessed explosive growth to cover
total integration of people, process and places in the service of core business. This was
brought about by progress in theoretical and empirical investigation of the business
environment (Barrett & Baldry, 2003:20-22). In addition, facility managers in
organizations need to understand where their roles fit and how they can contribute to
strategic developments and changes. These are key strategic concerns and therefore
demand strategic thinking. Becker (1990) was a pioneer of what is now called strategic
facilities management. Becker (1990) shows that facility management developed out of
the need for organizations to manage change. Becker (1990) states that information
technology, global competition, high cost of space, and increasing employee
expectations of the working environment are seen to be hampering organizational
efficiency. Becker (1990) further argues that facility management is not only about co-
ordination but also about enhancing an organization; it ensures that facilities promote
organizational objectives and goals. Becker (1990) considers the strategic aspect instead
of the operational aspect as key in facilities management. Although Becker’s view of
facilities management as proactive and strategic is ideal, it is not common in practice.
However, his view adequately captures the role and scope of strategic facilities
management but fails to consider factors that influence the facility manager’s role.
Thompson (1990:8-12) sees strategic facilities management as a foundation around
which daily traditions are built; the absence of this strategic foundation can result in a
break of operational interface between the facility provider and the facility user. He
recommends the adoption of facility management for senior management by stating that
facilities management has the advantage of increasing the awareness of the facilities
function within the organizational levels. Thompson (1990) further refers to the
facilities management spectrum which follows the development of the facilities function
within the organization. This begins with the strategic planning phase and then followed
by tactical planning which results in a reactive facilities zone that includes most visible
parts of facilities management. Duffy (2001:23) identifies these visible parts as
operations and emergency repairs. The range of facilities management tasks, according
to Thompson (1990) covers construction management and real estate activities.
Although Thompson’s (1990) focus is on buildings, this view on the range of tasks is
narrow and does not include how facilities management can add value to organizational
performance. However, it can be deduced that the interface between performance
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evaluation and strategic facilities management lies at proactive strategic planning in the
development of effective functions in any organization.
3.0 THE DATA, THEIR TREATMENT AND THEIR INTERPRETATION.
3.1 Data:
In view of the problems and sub-problems advanced in this study, data will be derived
from both primary and secondary sources.
3.1.1. Primary data:
These are data originally sourced by the researcher. This study will focus mainly on
primary data which includes field investigation, direct observation,
inspection/walkthroughs, interviews, focus group discussion and photographs. Where
appropriate, observations will be recorded and focus group discussions held with
designers/architects, builders, facilities/maintenance managers, staff and students to
obtain what actually happens in practice.
3.1.2. Secondary data:
Secondary data will be used to lay a theoretical foundation for the study. These will
include published and unpublished books, dissertations and theses, journals and
conference papers relating to performance evaluation especially buildings in educational
institutions.
3.1.3 Criteria governing the admissibility of data:
Since the primary data will be obtained by physical observations, recordings and
analyses of what actually happens in practice, surveys will be self administered and
responses will be obtained from stakeholders directly involved in building facilities
management. Focus group discussion will be participatory involving staff, students, and
consultants. The same criteria will apply when conducting the interviews. Discussions
and interviews will be based on pre-arranged list of statements bordering on ideal or
standard requirements of a university building.
3.2 The research methodology:
This describes the procedures to be followed in realizing the aim and objectives of the
research. As data required for this study will be mainly numerical and direct
observations at the scene of occurrence, both the descriptive (qualitative) and analytical
(quantitative) survey methods will be used. However, the case approach which is a type
of descriptive survey will also be used. Case-studies are tailor-made for exploring new
processes or behaviours or ones which are little understood (Cassel & Gillian, 1994). In
this regard, the case-studies will focus on individual and group experiences related to
the performance of buildings in the study area. It will help to obtain objective and
quantifiable data as well as descriptive information on the institutional background with
a view to highlighting the demographic, educational and operational context of
performance objectives. Specifically, data and information will be obtained on location
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and site, demographics, ownership, financing and management of building facilities in
the institutions, construction and maintenance of buildings, space utilisation,
environmental sustainability, health and safety/security. The following research tools
and procedures will be employed in the study:
• Priority rating exercise for quality performance: This tool will be used to gain
insight into the broad issues and constraints impacting on the quality of
educational spaces. It will help to establish the necessary benchmarks against
which the performance of buildings and that of the students can be evaluated.
The performance quality will be based on the criteria set by the National
Universities Commission (NUC) for minimum standards of educational spaces.
Other international data and statistics, relevant case studies, standards, policies
and guidelines will be used. These will be categorised and rated in consultation
with the directors of physical planning and where necessary the vice chancellors.
• Walk-through/Questionnaires/Interviews on students and academic staff: This
will help to provide understanding of how staff and students perceive the quality
of building spaces in terms of accessibility, teaching and learning, comfort,
aesthetics, productivity, maintenance, health and safety/security. It will also help
to obtain data on the subjective aspects of quality in educational spaces.
• Focus group discussion: This will be participatory; involving staff, students and
consultants. Participants will be arranged in small discussion groups. Within
these groups, participants will be asked to discuss their needs and requirements
for an ideal educational building. Participants will also be asked to make
decisions based on group consensus. This discussion will be conducted after the
analysis of responses to explore in great details common and conflicting issues
raised in the earlier surveys.
• Direct inspection/observation: Observations will be recorded with cameras,
video recorders (where necessary), maps and .sketches to supplement the above
methods.
• Archival records: This will involve the consultation of records kept by the
various offices concerned with building procurement and delivery as part of its
regular record keeping. For example, drawings, specifications, bill of quantities,
as-built drawings, alterations, modifications and briefs.
3.3 Population/Sampling:
The research will cover the four federal universities in the South-Eastern part of Nigeria
as obtained from the federal ministry of education. Sample of buildings, staff, students
and managements of the institutions based on simple random sampling will be taken
from the study area. These will be subjected to a closer and detailed investigation. The
choice of targeting universities in the South-Eastern part of Nigeria is done for the
following reasons:
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• The researcher’s state of origin is in the same geo-political zone as the
universities under study.
• All the universities are fully funded and owned by the federal government of
Nigeria.
• The location of the universities in the same geo-political zone makes the study
more economical in terms of cost and time.
• The universities in the study area do not differ substantially from those in other
geo-political zones of Nigeria.
3.4 Analysis/Treatment of Data:
Data analysis consists of examining, categorizing, tabulating or otherwise recombining
the evidence to address the initial propositions of the study (Yin, 1994). The
organizational context and performance evaluation factors affecting buildings in the
four universities will be identified. All the case-study evidence will result in modifying
and developing several representative measurement items for each critical factor and the
explanation of the meaning of each. Analytical and statistical tools will be used for
analyses. Analytical tools will include tables, charts, graphs, maps, photographs and
simple percentage distributions. The statistical tools to be used will include analysis of
variance (ANOVA), correlation analysis, and chi-square tests. The analysed data will be
related to the problem and sub problems.
3.5 Validity/Reliability: This suggests the extent of truthfulness of data and gathering
instrument. The instruments will be subjected to face and content validity as well as a
pilot survey which will be pre-tested amongst a convenient sample of institutions that
will not be included in the survey. Feedback will then be incorporated into the final
draft.
4.0 Findings and Discussion.
From the literature presented in this paper, there is a consensus of opinion among
authors that facility performance evaluation is built around the central theme of a simple
statement that it is a process of evaluating buildings in a systematic and rigorous manner
after they have been built and occupied for some time. It means any and all activities
that originate out of an interest in learning how a building performs once it is built,
including if and how well it has met expectations. It also shows that performance
evaluation will continue to play increasing role in building design as external and
internal factors place more demands upon buildings. The authors rightly recognise that
Performance evaluation explicitly focuses attention on feedback loops. Feedback and
feed forward is a process of assessing and reviewing a building after occupation and
using the information obtained to incorporate or fine-tune the design of new buildings
(Preiser, 1995). When a loop is formed, it enables the benefit of hindsight to feedback
into early stages of decision-making on other building projects and activities in the
succeeding years. This is important for university buildings and more-so, when
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Kevin Chuks Okolie, pp 1598-1625
universities are entrusted with the responsibility of utilizing public funds judiciously.
There is a nexus between facility performance evaluation and strategic facilities
management (Becker, 1990). This is because performance evaluation is proactive and
therefore strategic in form. Besides, buildings are major facilities and as important
educational tools, there is need to move towards strategic and knowledge-based
management process that will improve their performance and promote the overall
organisational growth.
Building performance evaluation is a facilities management function. The facilities
manager not only understands how individual buildings perform but also builds an
understanding of user-demand within the management framework of an organization.
Authors argue that performance evaluations of buildings are based on key performance
objectives or parameters which include; accessibility, aesthetics, cost-effectiveness,
functionality, enhanced educational effectiveness/productivity, health, safety and
security, flexibility/adaptability and environmental sustainability. Educational buildings
are designed to make use of space as an educational tool regarding both the transmission
of knowledge and promotion of learning capacity. Anecdotal evidence show that the
performance of buildings impact on learning since they affect the performance and
attitude of teachers and students. Evaluation studies, particularly performance
evaluations of building facilities aim at improving not only the performance of the
particular facility being evaluated but also influences future design of similar facilities.
Accordingly, it utilises multi-method strategy including questionnaires, surveys,
observations and physical measurements (Preiser, 1995). All these allow for
comparisons to be made with other facilities for best practice. If facilities managers and
facilities management organisations are to be successful and relevant, they must
continually evaluate and improve the performance of both the existing services and
procurement of future facilities and processes. This will improve both the end-user
satisfaction and overall organisational effectiveness.
5.0 Conclusion:
This research is on-going. As stated earlier, the basis of this study is to increase the
awareness and public perception of building performance evaluation as a key business
driver. It seeks to identify appropriate performance evaluation methodology and factors
that affect the performance of buildings in Nigerian educational institutions. The study
presented in this paper provides the basis for the construction of a set of propositions for
building performance evaluation. Accordingly, it forms the framework for further study
at the next stage of the research. However, it has been established in this paper that
building performance evaluation is relevant to facilities management. Buildings are
major facilities as well as important economic resources in any organisation. There is a
challenge for facilities managers to develop an effective method of evaluating building
performance to ensure optimum performance and value for money. Although building
performance evaluation is still a developing field of knowledge and expertise within the
facilities management discipline, it has great potential as a valuable tool for decision
makers at both strategic and operational levels. The arguments presented in this paper
suggest that facilities management as a discipline can benefit immensely from the use of
building performance evaluation as a means of gathering data on facilities performance.
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Kevin Chuks Okolie, pp 1598-1625
This will help in closing the information gap that exists in the procurement of buildings
particularly in educational institutions. The emphasis here is the unique contribution of
performance evaluation to the improvement of building facilities operations and its
focus on the end-user which is largely ignored in the procurement process. The
following constitute areas for further research in the next stage:
• The impact of building performance on the performance of staff, students and
overall educational effectiveness;
• Evaluation of the end-user (staff and students) needs and satisfaction in building
performance;
• Benefits of involving the facilities manager in the early design and construction
process; and
• Critical success factors and performance evaluation model for educational
building facilities management.
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Appendix 1.
Definition of terms:
Facilities management: This is an umbrella term under which a wide range of property
and user related functions may be brought together for the benefit of the organization
and its employees as a whole (Spedding, 1994:8).
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.Facility: This is something designed or created to provide service or fulfil a function. It
is often used as plural. In this context, they refer to buildings designed for educational
purposes
Post Implementation Review: A comprehensive feedback mechanism designed to
assess project outcomes. This assessment focuses on how well the project outcomes
were matched to the actual needs that the project is aimed to fulfil.
Post Completion Review: A systematic and rigorous process of comparing the actual
performance of the project outcome with the stated objectives of the original brief. The
process seeks to identify ways in which future project conception, design development
and implementation can be improved.
Life cycle costing: This is defined as an assessment of competing design alternatives
considering all significant costs of ownership over the economic life of each alternative
expressed in equivalent monetary
Accessibility: A determination of the capability of a facility to permit handicapped
personnel/students to enter and use the building.
Adaptability: In building, the ability to make suitable for a particular purpose by means
of change or modification
Facility Condition Index: An indicator of potential shortcomings of the useful life of
facilities and likely increase in long term maintenance and repair cost.
As-built drawings: A set of drawings that show the building as it was actually built; all
changes made during the construction period should be included in such a drawing.
Life Cycle Costs: The total cost of a system, building or other products computed over
its economic life. It includes all relevant costs involved in acquiring, owning, operating
and disposing the system or product over a specific period of time including
environmental facilities cost.
Initial Cost: This is the capital or initial expenditure on an asset when first provided
Building facilities: This refers to buildings specifically designed and used for learning
and other educational purposes.
Evaluation: Assessment of value; the act of considering or examining something in
order to judge its value, quality, importance, extent or condition.
Strategies: These are means to ends and these ends concern purpose and objectives of
the organization. They are things businesses do, the paths they follow, and the decisions
they take in order to reach certain points and levels of success.
Building: A structure enclosing space for the purpose of carrying out specific programs
or operations.
Adaptability: The ability of a building to be made suitable for a particular purpose by
means of change modification.
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Building Users: These refer to all people with an interest in a building including staff,
students, managers, customers, clients, design and maintenance teams and particular
interest groups such as the disable.
Stakeholders: These refer to staff, students, clients/owners, design and construction
team, members of the community, facility and maintenance managers.
Simulation: This is a method evoking people’s comments from representations of
settings rather than from the settings themselves.
Interview: This is a method used to assess people’s reactions to physical settings. It can
be structured, where the type and order of questions are decided in advance or
unstructured where the interviewer asks questions of interest while visiting a site
(Sanoff, 2001).
Appendix 2.
Abbreviations used in the study.
BP: Best Practice.
BS: British Standards.
CELE: Centre for Effective Learning Environment.
FPE: Facility Performance Evaluation
H: Hypothesis
HVAC: Heating, ventilation and air conditioning.
IFMA: International Facility Management Association.
NBI: New Buildings Institute
OECD: Organization for Economic Co-operation and Development.
PCR: Post completion Review.
PDE: Pre-Design Evaluation
PEB: Program on Educational Buildings.
PIR: Post Implementation Review.
POE: Post Occupancy Evaluation
RIBA: Royal institute of British Architects
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Kevin Chuks Okolie, pp 1598-1625
S-p: Sub-problem
WBDG: Whole Building Design Group.
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Muhammad Ehsan Che Munaaim, pp1626-1639
The security of payment regime in Malaysia: will it be
effective?
M.E. Che Munaaim1*
1
Centre of Construction Law and Dispute Resolution,
King’s College London, Strand , WC2R 2LS, United Kingdom and Faculty of Built
Environment, University of Malaya, Kuala Lumpur, 50603, Malaysia
Email: [email protected]
Abstract:
This on-going research investigates the likely effectiveness of the security of the
payment regime in Malaysia. The success of this regime in other countries, coupled
with payment concerns in the Malaysian construction industry, has prompted the
government to establish an industry-specific Act that gives parties in contract with a
statutory right to progress payments and adjudication. This aim of the research is to
predict the effectiveness of the security of payment regime in the context of the
distinctive characteristics of the Malaysian construction industry. This paper reports the
findings of a preliminary study conducted via literature review and legal research
methods. The objective of this paper is to identify the lessons learned from the
application of the security of payment legislation in those jurisdictions. At a later stage,
data will be collected using semi-structured interviews conducted with experts from the
industry and academia. The identification of the lessons learned from the operation of
these regimes could provide useful information to legislators in other countries
contemplating to introduce a specific payment and adjudication legislation. If certainty
and clarity are the objectives of legislators in countries contemplating to have this
security of payment regime in operation it is worthwhile to consider the suggestions
proposed in this paper.
Keywords:
adjudication, cash-flow, construction contracts, disputes, payment.
1 Introduction
Several developed countries have endorsed an act to address the need for prompt
payments in the construction industry. This legislative regime was deemed necessary to
protect parties who are susceptible to cash-flow stringency, namely contractors,
subcontractors, suppliers and consultants. Irrespective of the titles given to the Act in
operation in those countries, the regime fundamentally deals with two matters: Firstly, it
creates a statutory right to progress payments for those who have carried out work and
supplied services and goods 1 . Secondly, a statutory right to adjudication is made
* Supervisors : Professor Phillip Capper, Louise Barrington and Nicholas Gould.
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Muhammad Ehsan Che Munaaim, pp1626-1639
available to parties2 in contract in the event a dispute crystallises3. These two rights are
regarded as the central pillars of this security of payment regime4. Contrary to the name
of the regime, it could be argued that it does not necessarily guarantee that payments
will be channelled to the appropriate parties. This regime merely provides a mechanism
for obtaining payments and resolving disputes via adjudication. However, to avoid
doubt, the generic term of ‘security of payment’ is defined as ‘the entitlement of
contractors, consultants or suppliers in the contractual chain to receive payment due
under the terms of their contract from the party higher in the chain (NSW Government
1996, p. 41 in Uher and Brand, 2007). Throughout this paper, the term ‘security of
payment regime’ will be used to describe the two central pillars (payment and
adjudication mechanisms) introduced by the Acts.
The aim of this research is to predict the effectiveness of the proposed Malaysian
Construction Industry Payment and Adjudication Act (the proposed Malaysian Act) in
terms of eliminating poor payment practices and allowing a swift and cost-effective
resolution of disputes by means of adjudication. The aim is supported by the following
objectives:
1. to identify the distinctive characteristics of the Malaysian construction industry;
2. to identify the lessons learned from the operation of the security of payment
regime in other jurisdictions and to establish whether these have been
incorporated into the proposed Malaysian Act;
3. to identify the missed opportunities that should have been included in the
proposed Malaysian Act; and
4. to critically analyse the suitability and adequacy of the features provided under
the proposed Malaysian Act in realising the government’s intention, taking into
consideration the characteristic of the native construction industry.
This paper attempts to highlight some of the lessons learned from the application of the
security of payment regime in those selected jurisdiction. To achieve the objective of
the paper, literature review and legal research methods have been performed. The
security of payment legislations and relevant case law in the United Kingdom, New
Zealand, New South Wales and Singapore were examined to identify common and
divergence aspects of the operation of the security of payment regime in the United
Kingdom, New South Wales in Australia, New Zealand and Singapore. From this, the
1
Depending on jurisdictions, certain jurisdictions allow all three contracts namely contracts for
construction operation/work, services contracts and supply contracts (see for example, the New South
Wales and Singapore Acts) whilst other jurisdictions only allow contracts for construction operation/work
and services contracts (see for example the UK Act). The New Zealand Act on the hand only covers
contracts for construction operation/work.
2
Depending on jurisdictions, certain jurisdictions only allow parties entitle to payments to initiate
adjudication (for example the New South Wales and Singapore Acts) whilst other jurisdictions allow
reference to adjudication can be made by both parties (for example the UK and New Zealand Acts)
3
Depending on jurisdictions, certain jurisdictions allow all types of disputes can be referred to
adjudication (for example the UK and New Zealand Acts)whilst other jurisdictions confine only progress
payments disputes are subject to adjudication (for example the New South Wales and Singapore Acts).
4
The ‘security of payment regime’ is a term normally associated with the Building and Construction
Industry Security of Payment Acts, for New South Wales and Victoria in Australia, and Singapore.
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Muhammad Ehsan Che Munaaim, pp1626-1639
lessons learned with regard to the application of this regime in those jurisdictions were
established.
2 Literature Review
2.1 Introduction
The Government of the United Kingdom was the first to introduce the security of
payment regime when the Housing Grants, Construction and Regeneration Act 1996
(The UK Act) came into force in May 1998 to combat ailing payment practices in the
construction industry. This regime was then replicated by the New South Wales State
Government when the Building and Construction Industry Security of Payment Act was
enacted in 1999 (The NSW Act). The NSW regime, however, offers a completely
different approach in its application from its predecessor. The key difference is that,
under the NSW Act, the reference to ‘compulsory adjudication’ is made contingent on
the materialisation of progress payment disputes. The UK Act, on the other hand, was
drafted in a manner in which adjudication is independent of payment. The analogous
developments of having a security of payment regime were then followed by New
Zealand5, Australia (Victoria6, Queensland7, Northern Territory8 and Western Australia9
states), the Isle of Man10 and Singapore11. Except for New Zealand, the regime in those
countries either followed the UK or the NSW model. New Zealand’s Construction
Contracts Act 2002 (The NZ Act), having been enacted after the UK and NSW Acts,
followed the former’s adjudication provision and adopted the latter’s payment
provision.
As addressed by several pieces of literature, this regime has achieved considerable
success in eliminating poor payment practices and allowing a swift and cost effective
resolution of disputes in various countries (Uher and Brand, 2008; Chan, P.C. 2006;
Gaitskell, 2007; Uff, 2005; Kennedy-Grant, 2008). The success of this payment and
adjudication regime in other countries, coupled with payment concerns in the Malaysian
construction industry, has prompted the Government to establish an industry-specific
act to give rise to a statutory right to adjudication and to regulate regular and timely
payments between the contracting parties (Ali, A, 2006). The Cabinet Paper on the
proposed Construction Industry Payment and Adjudication Act (proposed Malaysian
Act) is awaiting distribution for cabinet discussion (Ali, A, 2009). It is hoped that once
the Bill becomes an Act, the landscape of the Malaysian construction industry will be
changed both in terms of a reduction in payment-related problems and improved
efficiency in dispute resolution.
5
Construction Contracts Act 2002, New Zealand.
6
Building and Construction Industry Security of Payment Act 2002 amended in 2006, Victoria, Australia.
7
Building and Construction Industry Payments Act 2004, Queensland, Australia.
8
Construction Contracts (Security of Payment Act) 2004, Northern Territory, Australia.
9
Construction Contracts Act 2004, Western Australia, Australia.
10
Construction Contracts Act 2004, The Isle of Man.
11
Building and Construction Industry Security of Payment Act 2004, Singapore.
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Muhammad Ehsan Che Munaaim, pp1626-1639
It must be noted, however, the characteristics of the construction industry in Malaysia
are different from those in the United Kingdom and New Zealand. For example,
procurement methods in Malaysia have been largely based on a traditional system and
this has not only led to fragmentation within the construction process but has also
created adversarial relationships among project participants. In addition, new innovative
modern contracts, such as partnering contracts, have not been widely used. Further,
innovations in construction have been minimal and if there is a new innovation, the
uptake is typically slow. A good example would be the Construction Industry
Development Board’s (CIDB) Standard Form of Contract launched in 2000 to promote
a fair balance of risk allocations. This form has not been well-received by the industry.
In addition, the applications of other Alternative Dispute Resolution (ADR) methods in
Malaysia have not been widely used despite various attempts to set in motion this type
of system. Mediation for example has been in the industry since 1998 but has not been
widely used. Given the current conditions in Malaysia it will be interesting to see
whether this security of payment regime will have the success seen in the UK and other
countries.
2.2 Review of Past Literature
The topic of security of payment regime has attracted substantial worldwide research
interest. However, the research has been limited to a particular country (see for
example, Wallace, 2002; Kennedy, 2006; Kennedy, 2008; Gould and Linneman, 2008;
Teo, 2008 and Uher and Brand, 2005) or to comparative studies involving only a few
countries (see for example, Uher and Brand, 2007; Chan, E.H 2005 and Kennedy-Grant,
2008). In addition, there is still a shortage of empirical data in this area of study and that
justifies undertaking the current research as it could provide some useful findings in a
literature currently dominated by anecdote and hearsay. Furthermore, much of the
research has been descriptive in nature and based largely on personal knowledge. There
are, however, a few longitudinal empirical studies in which data looking at the
performance of the security of payment regime was quantitatively collected and
presented in statistical form. From this statistical evidence, it would appear that the
regime is working well and is being widely-used by parties in construction contracts
(Kennedy, 2006; Uher and Brand, 2008).
The adjudication system introduced by the regime has attracted widespread use. It has
been studied that adjudication has had an impact on litigation and arbitration (Gaitskell,
2007; Chan, P.C. 2006; Gould and Linneman, 2008). In the United Kingdom, the
number of cases brought before the Technology and Construction Court (TCC) has
dropped significantly since 1998; the year in which adjudication came into force
(Gaitskell, 2007). This proposition, however, should be treated with caution as the
Woolf Reforms introduced in 1999, as well as mediation, may have also impacted on
the number of claims brought before the TCC (Gaitskell, 2007; Gould and Linneman,
2008). As for arbitration; due to its confidential nature, statistics from before and after
the introduction of adjudiction are not made available to the public. This has resulted in
speculation among researchers about the impact that adjudication might have had on
arbitration. The speculation seems to suggest that the number of referrals to arbitration
has declined slightly since the inauguration of adjudication (Gaitskell, 2007; Chan, P.C.
2006).
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In the Malaysian context, there has been no extensive local research in the area of
security of payment regime. Instead, the research undertaken has focused on the
possible introduction of a Malaysian Construction Industry Payment and Adjudication
Act (Ali, A, 2006) and the choices for security of payment regime provisions that are of
interest to the Malaysian Government (Constable, 2006). Given the lack of reseach
concerning this subject, this research has the potential to provide a better thereotical and
practical understanding of the likely efficacy of the security of payment regime in the
context of the Malaysian construction industry.
3 Research Methodology
Since there is lack of studies in this area and ‘not much is known about the situation at
hand’ this research is exploratory in nature (Sekaran, 2006). This research is also
predictive in nature in the sense that it predicts the effectiveness of the security of
payment regime in the context of the Malaysian construction industry. This regime has
achieved enormous success in the UK, Australia, New Zealand and Singapore in terms
of improving payment practices and creating an unfettered right to speedy and cost
effective adjudication. It must, however, be stressed that the success of the security of
payment regime in those countries is not necessarily replicable in other countries
wishing to have the regime in operation, if it were to be adopted outright without due
regard to the unique features inherent in a particular industry. Cultural differences,
idiosyncratic trade practices, historical influences and others unique features inherent in
a particular industry should also be taken into account when drafting this adjudication
and payment legislation. Therefore, in practice, the effectiveness of such a regime is
contingent with the fact that how the legislation is drafted to tailor suit the distinctive
characteristic of the native construction industry. An exploratory interview approach
will be adopted in this research, since the need to collect detailed data from experts
indicates that a qualitative study methodology is considered appropriate. The experts in
this area, from Malaysia and abroad, predominantly include drafters of the payment and
adjudication legislation, policy makers, construction lawyers, and academics. Semi-
structured interviews are used since they allow researchers to study various elements of
the research more profoundly. Data will be analysed using Nvivo (version 8) qualitative
research software.
Apart from semi-structured interviews, legal research methods will also be utilized, in
which the security of payment legislations and relevant case law from the United
Kingdom, New Zealand, New South Wales and Singapore will be examined. This
detailed examination will result a look at the lessons learned and the missed
opportunities from the operation of the legislation in these jurisdictions. The reason for
choosing the United Kingdom as a case study is due to the fact that statutory
adjudication was introduced first in the UK. Since the UK Act has the longest history of
experience with this regime, it is assumed that a sufficient body of case law has been
developed. This well-established case law could offer useful precedents regarding the
operation of the UK Act. As for New Zealand, the adjudication regime operating in this
country is regarded as an improved version of the adjudication regime in the UK
(Wallace, 2002).
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Furthermore, many features of the NZ Act, including a general framework of the
proposed Malaysian Act, are imported from the NZ Act. The NSW Act is chosen as a
case study because the security of payment regime in operation in this state is regarded
as the second version of the regime, with different coverage and procedures, but with a
fundamentally similar objective. Moreover, the fact that the NSW Act is the longest
serving Act in operation in Australia is considered to be a worthy aspect in providing
useful precedents with regard to its function. Singapore, apart from its geographical
proximity with Malaysia, is chosen as a case study due to the uniqueness of some of the
features provided under its Building and Construction Industry Security of Payment Act
2004 (the SG Act). The effectiveness of the Malaysian version of the security of
payment regime in terms of improving poor payment practices and allowing a swift and
cost-effective adjudication will be predicted.
4 Findings from Initial Literature Review and Legal Research
Methods
4.1 Lessons Learned from the Application of the Security of Payment Regime.
If certainty and clarity are the objectives of legislators in countries contemplating to
have this security of payment regime in operation the following suggestions should be
considered by them when drafting their respective adjudication and payment legislation.
4.1.1 Inclusion of Supply of Goods Contracts
All jurisdictions in this case study provide contracts for construction operation/work to
be governed by the provisions of the Act. Accordingly, this will not be the subject of
further discussion here. The UK Act expressly excludes contracts for the supply of
goods12. The NZ Act13 also excludes supply of goods contracts; however, the NSW14
and SG Acts 15 include these contracts. If it is established in any jurisdiction that
suppliers are as vulnerable as any other parties down the contractual payment chain with
regard to financial stringency, contracts for supply of goods should be covered by the
provision of the security of payment legislation. There are two potential areas of
peculiarity are likely to arise if supply contracts are not covered by the Act. Firstly,
consider a situation in which a contractor is liable for liquidated damages as a result of a
supplier’s late delivery of material. The contractor in this situation will not be able to
recover his loss swiftly against the supplier if adjudication is not made available to him
under a contract. Another area that could also give rise to absurdity is contracts of
supply of prefabrication components. If a manufacturer is delayed in supplying
materials, the contractor will be in danger of receiving an adjudication notice for such
delay by the employer. The manufacturer’s delay, however, will not be referred to
adjudication as a result of the exemption provided by the Act. To avoid these, the
inclusion of supply of goods contracts is necessary.
12
Section 105(2)(d) of the UK Act.
13
Section 6(1)(f)(iv) of the NZ Act, however, states that prefabrication components, whether carried out
on- or off-site, is construction work and thus covered by the Act.
14
Section 6 of the NSW Act.
15
Section 2 of the SG Act.
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4.1.2 Distinction between supply of goods contracts made between contractors and
suppliers supply of goods contracts made between developers and suppliers
The SG Act as well as its predecessor i.e. the NSW Act provide refuge to suppliers of
goods. In these two jurisdictions the definitions of goods are broad and comprise of
‘materials and components’ to form any part of any building, structure or work’, as well
as ‘plant and materials (whether supplied by sale, hire or otherwise) for use in
connection with the carrying out of construction work’16. The SG Act, however, defines
supply of goods contracts to include contracts under which ‘one party undertakes to
supply goods to any other party who is engaged in the business of carrying out
construction work or who causes to be carried out construction work’17. The first part of
the definition covers normal supply of goods contracts entered into between contractors
and suppliers. The second part of the definition effectively covers supply of goods
contracts made between employers or owners or developers and suppliers. These
contracts are not uncommon nowadays and particularly of importance in a situation
where a large developer uses his bargaining strength to leverage a supplier to provide
discounts in large volume purchases for the financial benefit of the project.
Accordingly, the distinction made by the SG Act is of worthy consideration by those
legislators wishing to introduce this security of payment regime.
4.1.3 Exclusion of Residential Occupier Contracts
A detailed analysis of the application of the security of payment regime in the selected
jurisdictions show that there are three approaches to the drafting of the residential
occupier contracts provisions. First of all, as provided under the UK and NSW Acts, all
types of residential occupier contracts are excluded regardless of size and complexity.
The UK states that as long as residential occupier contracts ‘relate to operation on a
dwelling which one of the parties to the contract occupies, or intends to occupy, as his
residence’, will be exempt from its provision18. The NSW Act, by virtue of Section
7(2)(c), also excludes contracts ‘for the carrying out of residential building work on
such part of any premises where the party for whom the work is carried out resides in or
proposes to resides in’. It is important to note, however, that these two definitions
provided by the UK and NSW Acts only extend to contracts in which one of the parties
is a residential occupier. Contracts between the main contractor and subcontractor and
the main contractor and supplier are within the operation of the Act. The blanket
exclusion of all residential occupier contracts may also hamper the operation of the Act,
because some residential occupier contracts are large in value and administered by
consultants appointed by homeowners. Contracts that are large in value are likely to
generate costly and more numerous disputes. In this regard, adjudication could be seen
as an effective tool to recover the payment debt.
The NZ Act offers an interesting approach in drafting the residential occupier contracts
provisions. Although the NZ Act expressly includes residential occupier contracts, such
an inclusion comes with a detailed list of exceptions. Adjudication is the only right
available if a contract is defined to be a residential occupier contract for the purposes of
16
Section 4 of the NSW Act and Section 2 of the SG Act.
17
Paragraph (a) of the definition of ‘supply contract’ in s 2 of the SG Act.
18
Sections 106(1) and 106(2) of the UK Act.
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the Act. The right to progress payments, the right to suspend work and the right to a
charging order over the construction site are explicitly not made available in a
residential construction contract.19 The right to refer a dispute to adjudication by either
party is judicious; nevertheless, one-off homeowners who contract on the basis of
relatively small contract value may not be able to comply with the detailed and rapid
procedure of adjudication. This could place the homeowners in a difficult position and
undermines the whole process of adjudication. In a large residential occupier project,
the sole right to adjudicate may not suffice to protect contracting parties’ financial
interest if that right is not complemented with the rights to payment, suspension of work
and withholding payment.
The SG Act offers an innovative approach with regard to the exclusion of residential
occupier contracts. Under the SG Act, the exclusion of the Act is confined to contracts
relating to certain residential properties that do not require the approval of the
Commissioner of Building Control 20 . These types of contracts would include small
renovation work and minor repair work, which do not involve large square footage and
structural changes. The exclusion of these types of contracts is understandable, because
these types of work are often performed without formal contracts. Interestingly, this
division allows contracts relating to certain residential property that requires the
approval of the Commissioner of Building Control to be governed by the Act. Having
discussed the three approaches adopted by those jurisdictions it could be considered that
the approach taken by the SG Act is more sensible to protect the interests of various
parties in construction.
4.1.4 Inclusion of Contracts that are in Writing or Oral
An investigation into the operation of Construction Acts in the UK, NSW in Australia,
NZ and SG shows that there are two approaches in defining what constitutes a contract
in writing and thus subject to payment and adjudication provisions imposed by the Act.
The approaches are as follows:
1) Contracts that are in writing or evidenced in writing (the UK and SG models)
2) Contracts that are in writing or oral (the NSW and NZ models)
The UK Act, by virtue of Section 107, provides that the provisions of the Act apply
only to construction contracts that are in writing21. The definition of writing as provided
by the Act is wide and beyond what one would expect as the common form of writing
(Riches and Dancaster, 2004). Agreements that are made in writing or exchange of
communications in writing or evidenced in writing are construed to be agreements in
writing for the purposes of the Act22. Notwithstanding the fact that the SG Act is closely
modelled after the NSW Act, the definitions of what constitutes an agreement in writing
as stipulated in Section 4 (3) of the SG Act bear close similarity to the UK Act. Section
7(1) of the NSW Act provides that the Act applies to any construction contract, whether
written or oral, or partly written and partly oral. Similar to its New South Wales
19
Section 10 of the NZ Act.
20
Section 4(2)(a) of the SG Act.
21
Section 107(1) of the Housing Grants, Construction and Regeneration Act 1996, United Kingdom.
22
Section107 (2) of the Housing Grants, Construction and Regeneration Act 1996, United Kingdom.
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equivalent, the NZ Act applies to every construction contract that is written or oral, or
partly written and partly oral23.
The definitions of what constitute an agreement in writing in the UK Act are not
sufficiently clear. On the one hand, we find the judgment of Ward LJ in an appeal case
of RJT Consulting Engineers v. DM Engineering 24 , where an enforcement of the
adjudicator’s decisions was refused on the ground that all of the express terms were not
made in writing. On the other hand, in the same case we find Auld LJ’s statement that,
despite allowing the appeal, disagrees as to the requirement of what constitutes a
contract that is evidenced in writing to confine to material terms that are of relevant to
the dispute in question. The first proposition has been given judicial support in the cases
of Debeck Ductworth Installations Ltd v. T & E Engineering Ltd25 and Trustees of the
Stratfield Saye Estate v. AHL Construction Ltd26, whilst Bronlow Ltd. v. Dem-Master
Demolition Ltd27 followed the latter.
There are further difficulties concerning the above propositions made by both learned
judges. The principle introduced by Ward LJ requiring that all the terms be in writing
for a contract to be within the ambit of the Act could cause difficulties in a situation
where a contract is varied by an oral agreement. This was experienced in the case of
Carillion Construction v. Devonport Royal Dockyard, which leaves further scope of
argument among academics and practitioners alike. The fact that a construction contract
that is within the provisions of the UK Act with regard to payment, suspension and
adjudication ceases to be subject to the Act if the contract is varied orally poses
peculiarities in the operation of the Act (Constable, 2006). The substantive rights and
obligations of the parties will be significantly altered when an oral variation to the
written contract is made. For example, the employer who was initially required to issue
a withholding notice under a written contract is no longer under that obligation if the
contract is varied orally. By way of contrast, the contractor could be in repudiatory
breach against the employer if suspension of work is resorted to by the former following
an oral variation to the written contract. This problem, however, will never be an issue
in New Zealand, because the definition of ‘construction contract’ includes any variation
to the construction contract.28
The principle introduced by Auld LJ requiring that all the material terms be made in
writing for the Act to be operative is also not without difficulty. It should be noted that
adjudication is not the only outcome of the contract being caught by the application of
the Act. Payment and suspension regulations are also part of the package if a contract is
subject to the Act. This could cause further difficulties in the sense that in determining
whether a contract is subject to the coverage of the Act, a reference will be made to a
dispute that might not have crystallised (Constable, 2006).
23
Section 9 of the of the Construction Contracts Act 2002, New Zealand.
24
[2002] BLR 217.
25
[2002] EWHC BM250063 (TCC).
26
[2004] EWHC 3286 (TCC).
27
[2004] ScotSC A904/03.
28
Section 5 of the NZ Act.
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4.1.5 Exclusion of Process Plant Exception
Unique to the UK Act, is the availability of a ‘process plant exception’ clause 29. This
clause refers to process plant operations that are not covered by the Act which are the
assembly, installation or demolition of the plant and machinery and associated
steelwork that provides support or access to a site which primary activity is related to
‘nuclear processing, power generation, or water or effluent treatment; or the production,
transmission, processing or bulk storage (other than warehousing of chemicals,
pharmaceuticals, oil, gas, steel or food and drink’ 30 . This ‘process plant exception’
clause has resulted in satellite of unwarranted litigation 31 as to whether a particular
operation is included or excluded from the operation of the Act. For the sake of clarity
and certainty to the operation of the security of payment legislation, the ‘process plant
exception’ clause should be excluded.
4.1.6 Exclusion of Professional Negligence Claims
The United Kingdom is the only jurisdiction that permits professional negligence claims
to be referred to adjudication. The rest of the jurisdictions attempt to exclude such
claims from the ambit of their acts. New Zealand, for example, although offering all
types of disputes to be adjudicated under its Act, somewhat excludes these professional
negligence disputes from the constituency of adjudication. This is achieved by expressly
excluding professional services contracts from the operation of the Act. The exclusion,
however, comes with great ramifications, as professionals in New Zealand will not avail
themselves of the payment provision imposed by the Act with respect to fee recovery.
In New South Wales, Australia, there was a case in which a consultancy firm
successfully recovered professional fees under the Act by way of progress payments for
consulting services rendered in a development project 32 . However, the inclusion of
service contracts may also pose difficulties in the context of suspension of work, as a
consultant may suspend the work and be relieved from any liability whatsoever caused
to an employer who has failed to pay his fees.
The NSW and SG Acts, despite covering services contracts (or ‘supply of service
contracts’, the term used by the Acts) prohibit professional negligence claims to be
subject of adjudication. This prohibition is achieved through limiting the party that can
initiate the adjudication process. In these jurisdictions, only a claimant can institute
adjudication proceeding33. A claimant is defined as ‘a person who is or who claims to be
entitled to a progress payment’.34 It is sensible to adopt the approach taken by the NSW
and SG Acts in order to exclude professional negligence claims from the ambit of the
legislation.
29
s 105(c) of the UK Act
30
s 105(c) of the UK Act
31
See for example Palmers Ltd v ABB Power Construction Ltd [1999] BLR 426, Homer Burgess Ltd v
Chirex (Annan) Ltd [2000] BLR 124, ABB Zantingh Ltd v Zedal Building Services Ltd 2001 BLR 66,
ABB Power Construction Ltd v Norwest Holst Engineering Ltd [2001] 77 ConLR 20 and Conor
Engineering Limited v Les Constructions Industrielles de la mediterranee SA [2004] All ER (D) 75 (Apr).
32
Parist Holidngs Pty ltd v WT Partnership Australia Pty Ltd (2003) [2003] NSWSC 365.
33
Section 17(1) of the NSW Act and Section 12(1) of the SG Act.
34
Section 13(1) of the NSW Act and Section 2 of the SG Act.
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5 Conclusion and Further Research
This paper reports the findings from initial literature review and legal research methods
conducted for the purposes of identifying the lessons learned from the application of the
security of payment legislations in the United Kingdom, New South Wales in Australia,
New Zealand and Singapore. These identified lessons learned could provide useful
guidance to legislators in other countries that are contemplating to introduce a specific
payment and adjudication legislation. There are choices available at the legislators’
disposal either to adopt or not to adopt certain key provisions of the legislation that
could improve the effectiveness of the security of payment regime in their respective
jurisdictions. For instance it is sensible to include supply of goods contracts within the
jurisdiction of a payment and adjudication legislation for the obvious reason that
suppliers are also susceptible to cash-flow stringency. At a later stage, to complete the
research, data will be collected using semi-structured interviews conducted with experts
from the industry and academia in order to predict the effectiveness of the security of
payment regime in Malaysia.
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Appendix ‘A’ – Comparative Analysis of the Application of the Security of
Payment Legislations in the United Kingdom, New South Wales in Australia, New
Zealand and Singapore
UK NSW NZ SG
Item
Act Act Act Act
Definitions of Construction Contracts
1. Contracts for construction operations/work √ √ √ √
2. Contracts for the supply of services √ √ √
i. Contracts for supply of labour √ √ √
ii. Contracts for supply of professional consulting services √ √ √
a) Contracts for architectural, engineering and surveying √ √ √
services
b) Contracts for project management services (management √ √
contracts included) √
c) Contracts for specialist advisory services √ √ √
3.Contracts for supply of goods √ √
i. Contracts for supply of goods between the contractor and the supplier √ √
ii. Contracts for supply of goods with the developer and the supplier √
4. Excluded contracts
i. Residential occupier contracts √ √ √
a) Contracts under which one party intends to occupy or reside √ √
b) Contracts that do not require the approval of Building √
Authority
c) Residential occupier contracts included (only right to √
adjudication available)
ii. Private Finance Initiative (PFI), finance and development agreements √ √ √ √
a) PFI/PPP agreements √ √
b) Finance agreements √ √ √ √
c) Development agreements √
iii. Employment contracts √ √ √ √
iv. Construction contracts outside jurisdiction √ √ √ √
Definitions of Construction Operations
1. Building operations/work √ √ √ √
2.Civil and infrastructure engineering operations/work √ √ √ √
3. Operations forming part of the works √ √ √ √
4. Cleaning, painting and decorating √ √ √ √
5. Excluded construction operations
i. Extraction of oil and natural gas √ √ √
ii. Extraction of mineral √ √ √
iii. Process plant exception clause √
a) Plant and machinery √
b) Structural steelwork that provides access and support to the √
plant
Definitions of contracts in writing
1. Contracts that are in writing or evidenced in writing √ √
2. Contracts that are oral and in writing √ √
Dispute Type
1. All types √ √
2. Progress payments related √ √
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6 References
A. Ali, N. A. (2006). A "Construction Industry Payment and Adjudication Act":
Reducing Payment - Default and Increasing Dispute Resolution Efficiency in
Construction. Master Builders Journal (3), 4-14.
A. Ali, N.A (2008). Statutory Adjudication Under Nine Commonwealth Jurisdictions –
A User’s Perspective on Legislative. Drafting Style Commonwealth Association of
Legislative Counsel (CALC) Conference 2009. Hong Kong Dublin: Commonwealth
Association of Legislative Counsel (CALC).
Chan, E. H., Chan, C. K., & Hills, M. J. (2005). Construction Industry Adjudication: A
Comparative Study of International Practice. Journal of International Arbitration ,
22 (5), 363-374.
Chan, P. C. (2006). Security of Payment Legislation - Case of a Blunt but Practical and
Equitable Remedy. Journal of Professional Issues in Engineering Education and
Practice , 132 (3), 248-257.
Chandran, R. (1999). Mediation –: Charting the Right Course for the New Millennium,
Current Law Journal , [1999]3 CLJ xiii
Constable, A. (2006). Construction Industry Payment and Adjudication Legislation: The
Choice That Lies Ahead for Malaysia. International Construction Law Review , 78-
88.
CIDB (2008), A Report on the Proposal for A Malaysian Construction Industry
Payment and Adjudication Act, December 2008.
Gaitskell, R. (2007). International Statutory Adjudication: Its Development and Impact.
Construction Management and Economics , 25 (7), 777-784.
Gould, N., & Linneman, C. (2008). Ten Years on: Review of Adjudication in the United
Kingdom. Journal of Professional Issues in Engineering Education and Practice ,
134 (3), 298-305.
Kennedy, P. (2006). Progress of Statutory Adjudication as a Means of Resolving
Disputes in Construction in the United Kingdom. Journal of Professional Issues in
Engineering and Education Practice , 132 (3), 236-247.
Kennedy, P. (2008). Evolution of Statutory Adjudication as a Form of Dispute
Resolution in the U.K. Construction Industry. Journal of Professional Issues in
Engineering Education and Practice , 134 (2), 214-219.
Kennedy-Grant, T. (2008). Adjudication: The New Zealand Position. Construction Law
Journal , 24 (5), 382-409.
Sekaran, U. (2006). Research Methods for Business – A Skill Building Approach (4th
ed.). India: John Wiley & Sons, Inc.
Teo, P. J. (2008). Adjudication: Singapore Perspective. Journal of Professional Issues
in Engineering Education and Practice , 134 (2), 224-230.
Uff, J. (2005). 100-day Arbitration: Is the Construction Industry Ready for it?
Construction Law Journal , 21 (1), 3-10.
Uher, T. E., & Brand, M. C. (2005). Analysis of Adjudication Determinations Made
under Security of Payment Legislation in New South Wales. International Journal
of Project Management , 23, 474-482.
Uher, T.E. , & Brand, M. (2007). A Comparative Analysis of the Operation of
'Compulsory Rapid Adjudication' in New South Wales and New Zealand.
Construction Management and Economics , 25 (7), 765-775.
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Uher, T., & Brand, M. (2008). Claimants' View of the Performance of Adjudication in
New South Wales. Engineering, Construction and Architectural Management , 5
(5), 470-484.
Wallace, I. D. (2002). HGCRA: A New Zealand Version. International Construction
Law Review , 130-134.
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COBRA 2009
The Construction and Building Research Conference of the
Royal Institution of Chartered Surveyors
Held at the University of Cape Town, 10-11 September 2009
ISBN 978-1-84219-519-2
© RICS
12 Great George Street
London SW1P 3AD
United Kingdom
www.rics.org/cobra
September 2009
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Aisha Almansuri, Steve Curwell and David Dowdle, pp 1640-1652
Climatic design strategies in hot regions: an application of
Tripoli-Libya
Aisha Almansuri, Steve Curwell and David Dowdle
1
Research Institute for the Built and Human Environment,
University of Salford, Salford, M5 4WT, United Kingdom
Email:[email protected]; [email protected];
[email protected]
Abstract:
Climatic design aims to maximize the benefits of nature, and the climate in particular, to
design the built environment with minimum use of mechanical heating or cooling. The
idea of climatic design has been with us for a long time. Today, Passive Climatic
Design has become the main approach to achieve sustainable architecture. Many
authors, researchers and institutes pay great attention towards the importance of passive
climatic design. This paper aims to discover the theoretical and experimental studies
that have demonstrated the usefulness of passive climatic design techniques in context
with cooling of buildings in hot regions to establish climatic design guidelines that can
be applied in Tripoli-Libya. To achieve the aim, a deductive approach has been selected
where theoretical strategies are first confirmed from the existing literature which will be
investigated by using the focus group method in the case study as well as sampling the
internal temperature inside selected case studies to examine the thermal comfort in both
vernacular and contemporary housing.
Keywords:
Architecture, Climatic Design, Guidelines, Hot Regions, Tripoli-Libya
1 Introduction
Climatic design has been promoted as an essential approach to achieve a sustainable
built environment. As Hassan Fathy clarified that building is affected by its
environment, the climate of the locality and the buildings around it form the building in
addition to the other aspects such as social, cultural, and economic aspects are forms
much of its shape (Fathy, 1986). McMullan (2002:2) identifies that ‘the built
environment is formed by buildings and structures that humans construct in the natural
environment’.
Although buildings and development provide numerous benefits to society, they also
have significant environmental impacts. The impact of contemporary buildings has been
highlighted by Enertia Building Systems(EBS) (2006) building is the second largest
industry in the world after agriculture, and the pollution from heating and cooling of
buildings cause the main damage to the environment. Now it is greater than that from
cars. According to Gomes (2003) The Building Research and Establishment (BRE)
stated that the environmental impacts of construction include a wide range of issues,
including climate change, mineral extraction, ozone depletion and waste generation.
The importance of climatic design researches has been mentioned by many sources, for
instance; Roaf et al., clarified that a change towards lower energy and/or lower carbon
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society is a key part of more sustainable development. The urban built environment has
become the most energy consuming sector of society, contributing between 50 - 70% of
CO2 emissions, directly in heating and cooling buildings and through the mobility
requirements of urban populations. “It is the responsibility of our generation to begin to
adapt our building to ensure that we can stabilise climate change” (Roaf et al., 2005:13).
Design strategies in warm-humid climates have been explored by a number of
researchers in a wide number of sources, however the application of climatic design in
the contemporary Arabic countries in general and particularly in Libya is very rare.
Within this background, this research aims to provide guidelines for architects to
consider how to practice climatic design in creating architecture related to the local
environment that can provide more sustainable solutions in hot climate regions with a
particular focus on Tripoli. This research depends on using a triangulation approach
which helps contribute additional knowledge to the research and in that way different
methods complement each other. Each of the different methods (questionnaire, semi-
structured interviews and focus group interview, as well as direct observation, sampling
and the collection of supporting documentation) will help capture a more complete,
holistic and contextual portrayal of the cases and reveal the varied dimensions of the
best ways to conduct passive design in our future housing.
This paper presents preliminary findings of the study with more concentration on the
results of the focus group discussion on the possibility to adapt the guidelines captured
from the literature in Tripoli Libya, this can help to gather many strategies needed to
formalise the appropriate climatic design guideline to Tripoli.
2 Climatic design
Climatic design is in essence to take maximum advantage of nature, and the climate in
particular to design built environment. It may seem to be a new trend in building design,
but it is an idea that has been with us for a long time. Fathy (1977:3) believed that
“Over many centuries, the people in each part of the earth have learned, by trial and
error, how to deal with their environment; their solutions to the problem of housing
grew out of countless experiments and accidents, out of the experience of generations of
builders who kept what worked and rejected what did not, and these solutions were
passed on as tradition.” Arslan and Kumkale(2005) confirmed Fathy’s opinion that
man, in order to survive, observes nature and provides solutions for his existence as a
result of these observations and by imitating, understanding and creating the processes
in nature. Cofaigh et al., (1996) stated that climatic architecture became a concern in the
mind of many architects and when the majority of them realise the importance of
working with and not against climate, the term will change to architecture. Hyde (2000)
mentioned that climate responsive design is an essential part of the environmental
framework that is being developed to reduce environmental impacts and provide for
human well-being. Cofaigh et al, (1996) explained that the simplest way of cooling the
dwelling is by natural ventilation which can be achieved by using the benefits of night-
time air and the evaporation effect of water such as using the fountains and pools.
Cofaigh et al, (1996) and Givoni (1998) summarised the main objectives of bioclimatic
design in hot-humid regions as follows;
• Minimising solar heating of the buildings;
• Maximizing the rate of cooling in the evenings;
• Providing effective natural ventilation, even during rain;
• Providing spaces for semi-outdoor activities as an integral part of the living space.
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• Preventing entry of insects while the windows are open for ventilation; and
• Using vegetation and water for positive cooling.
2.1 Factors Affecting Climatic Design
As stated above, architects can achieve passively designed buildings by studying the
macro-and micro-climate of the site, applying bioclimatic architectural principles to
counter the adverse conditions, and taking advantage of the desirable conditions.
Some common design elements that directly or indirectly affect occupant thermal
comfort conditions and the energy consumption in a building are [collected from many
sources such as The State of Queensland (2008); Muhasien (2006); Krawietz (2006)
CLEAR (2003); (Hui, 1997) and Givoni (1998)] as follows:
• Building layout;
• Orientation of the main rooms and the openings;
• Size and details of windows and doors;
• Organization and subdivision of the indoor space ;
• Shading of openings and walls; Provision of verandas and balconies;
• Roof type and details;
• Thermal and structural properties of walls and roof;
• Site landscaping; the plan shape and orientation of the dwelling ;
• Location of particular rooms ;
• Materials used for construction;
• Location and shape of openings ;
• Location of internal walls with respect to cross-ventilation ;
• Roof form ;
• Ceiling heights ;
• Landscaping of adjacent ground to provide shading;
• Insulation, and.
• Protection of openings against excessive solar access and rain penetration.
To sum up; the design variables in architectural expression that are important for the
aim of this study are collected from different references and will include the major
factors that should be taken into consideration to control the thermal environment in
buildings. These can be listed as follows:
Buildings layout; from the urban point of view is very important to achieve
climatic design
Ratio of built from to open spaces; surface-to-volume ratio;
Orientation; Building orientation is an important design consideration, mainly
with regard to solar radiation and wind.
Building envelope and fenestration; the building envelope and its components
(roof, walls, openings, shading devices, finishes and building materials) are key
determinants of the amount of heat gain and loss and wind that enters inside.
Landscaping is an important element in altering the microclimate, and good
landscaping could help to reduce heat gain, prevent reflected light; create different
airflow patterns and create shade.
To understand climatic design strategies in hot regions, taking in consideration the
factors affecting climatic design, it has been shown that an understanding of vernacular
architecture and contemporary passive design strategies in hot regions is the main focus
to achieve the aim of this research. The next section will simplify some techniques that
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can be used to achieve climatic design starting by clarifying the relationship between
climatic design and vernacular architecture.
2.2. Climatic design and Vernacular architecture:
By the phrase “vernacular" or "traditional" in architecture it is meant buildings produced
by a cultural group for itself and serving as a framework for its daily life. Hassan Fathy
quted by Oliver (2003: 11)"the vernacular architecture of the Arab world and
neighbouring regions not only solved the climatic problems but did so with a
combination of beauty and physical and social functionality"
Park (1998) stated that vernacular architecture is by its very nature “green” because it is
deeply joined to the land. The use of locally available materials; good orientation of
buildings to take advantage of natural prevailing winds and sun patterns; using natural
systems of solar heating and ventilation and the use of durable materials means that
many historic buildings already meet many of the principles outlined for new structures
intended to be of a sustainable design. He argues that most research and product
development for sustainable design has been for new construction with little attention to
the rehabilitation of existing or historic structures and modern designers should not
ignore the role of historic features, such as sunshades, large windows, skylights, roof
ventilators, deep projecting overhangs, and deciduous shade trees.
Gedik (2004) and Hyde (2000) believe that climatic design can be learned and inspired
by observation of the old traditional buildings. Traditional models can be examined as
examples, which inform the architecture, rather than to provide a set of readymade-
solutions. Roaf et al., (2002) and Roaf et al., (2005) maintains that traditional buildings
have much to teach architects about how to design regionally suitable structures.
The features of vernacular architecture can be useful to understand the importance of
this architecture and how to improve these features to meet today’s needs. These
features will be presented in table (1).
2.3. Passive climatic design and contemporary architecture
Passive design has become the main approach to achieve sustainable architecture.
Several theoretical and experimental studies have demonstrated the usefulness of
passive design techniques. In context with cooling of buildings in hot-dry and warm-
humid climates, the passive techniques mainly aim towards reduction in heat infiltration
through building envelope and provision of fenestration for inducing desired natural
ventilation indoors (Mathur and Chand, 2003). Reardon (2005) explained that Passive
design is design that does not require mechanical heating or cooling, dwellings that are
passively designed take advantage of natural energy flows to sustain thermal comfort.
According to the U.S. Department of Energy (2004) and Panchyk (1984) passive solar
design or climatic design is designing the components of the building, windows, walls,
and floors to collect, store, and distribute solar energy in the form of heat in the winter
and reject solar heat in the summer.
Passive solar design techniques have been clarified by many references, for instance,
U.S. Department of Energy (2004); Christensen (1994) stated that there are three basic
types of passive solar design; direct heat gain, indirect heat gain (thermal storage wall
systems and roof pond systems), and isolated gain (solar green house), and some others
such as Christensen, (1994), Evans (2007) and Roaf et al., (2002) added two further
types; combined (mixing more than one type) and composite (mixing passive and active
systems) . To sum up, the concept of passive climate control is completely in line with
the notion of sustainable building. It provides an alternative to a mechanical air-
conditioning system and as such is an essential part of low energy solutions.
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2.4. Climatic design strategies in hot and hot-humid regions:
A primary strategy for cooling buildings without mechanical assistance (passive
cooling) in hot humid climates is to employ natural ventilation. From the analysis of the
literature conducted to date, for instance, Olgyay (1969); Edwards and Hyett, (2001);
greenbuilder.com (2007); Askar et al., (2001); Hui (1997) ; Commonwealth of Australia
(2005); Northern Territory Government (2006); Commonwealth of Australia (2007);
The State of Queensland (2008); Evans (1980); Meir and Roaf (2007); Muhasien (
2006); Roaf (2007); and Hassan Fathy (1986), the collected climatic design strategies
in hot and hot-humid regions which can be adapted in Tripoli and discussed with the
professionals focus group are presented in the next table (1).
Table (1) the main strategies captured from the literature review and discussed with the
Libyan professionals group in Tripoli ‘August 2008’.
Keys: 9 Agree Agree with comments
Principles Component Strategies
Opinion of
Professionals
• To reduce the surfaces exposed to solar radiation and increase shaded 9
areas. the compact city is the ideal city form;
Building type
Local micro-
• Narrow streets can behave as cooling ducts by venting away hot air. 9
climate
• The spacing of buildings should be carefully considered to avoid 9
obstruction of the wind.
• The lower the ratio between the building size and the width of spaces, the 9
lower temperature in buildings and outdoor spaces.
• green squares and tree-lined streets get nature into the heart of the city; 9
• Green spaces will help to stitch together the urban fabric; 9
• Shading by natural means (e.g. via trees) reduced the insolation entering 9
Landscaping and Kind of vegetations
adjacent buildings and the effects of wind;
• The pergola system restrains the rate of heat gain and reduces diffuse 9
reflection to surrounding dwellings.
• Provide open spaces such as streets, squares and courtyards; 9
• Trees creates different airflow patterns and can be used to direct or divert 9
the wind advantageously by causing a pressure difference;
• The shade created by trees and the effect of grass and shrubs reduce air 9
temperatures adjoining the building and provide evaporative cooling;
• Trees and other plants represent a natural protective element against solar 9
radiation as well as wind control;
• Vegetation may be used like a sunshade; like palm trees whose leaves are 9
able to block solar radiation and tall trunks will easily allow unimpeded
ventilation.
• The most appropriate plant in landscaping in hot-humid climates is a 9
mixture of grasses, low flower bed, and shade trees with high trunks.
Comments: The panel confirmed the importance of landscaping in providing shading
areas and reducing heat gains, also they mentioned the lack of water resources in Libya
and choosing the kid of vegetation is very important.
• Open-plan living areas with high ceilings, to maximise air movement and
desig
Plan
Building design
reduce radiant heat to occupants; 9
• ceiling heights - ventilation of the roof space, to reduce heat build-up 9
heights
Building
there: the increased heat loss in the cooler season is not important;
• Two floors to three maximum. 9
9
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• The building should be elongated on an east-west axis;
• The square house is not the optimum form in any location;
• The whole building should be lightweight to allow rapid cooling down at
night;
• To reduce the roof area, two story building can solve the problem;
• Raising the building off the ground can improve the potential of
Building form
ventilation;
• To reduce the size of any A/C equipment, the building should be
compact to minimise the surface areas of its envelop and thus to reduce
the heat gain;
• For depending on natural ventilation, a spread-out building with large
windows enables more natural cross ventilation;
• The ideal building plan is detached elongated building with a single row
of rooms with openings in two opposite walls.
•
rooms • Living-room and Guest- room can be located in the south or north. 9
orientation • Bed-rooms can be located in the east. 9
• Services such as kitchen and toilets can be located in the west. 9
Comments: The panel confirmed all points with some comments; the square house if it is
not compact and there is a shaded voids with minimum widows areas in the east and
west direction can provide air movement; heavyweight construction is most appropriate
because of the increase of the time lag and available materials; large windows may
provide good ventilation but in the same time expose more heat gain; detached building
is good if the east and west elevations are shaded.
• Vaults and domes are climatically superior to flat roofs; 9
• using light colours for walls and roof, to reflect the heat of the sun; 9
• Metal roofs which cool rapidly at night. Daytime heat gain can be
minimised by using sheeting with a reflective coating on its underside;
• Shade the roof with suspended reed matting or timber boards or by 9
vegetation above the roof;
Roof
• Using insulation layer on the outside of concrete slab can increase the 9
time lag to eight hours;
• Lightweight roofs have important effects on the thermal performance of
buildings (even with extra-heavy walls);
Main Building Component
• The outer surface of the roof and the thermal resistivity of its materials 9
are of primary important;
• Properly designed roof gardens help to reduce heat loads in a building. 9
• The external envelope should be have high thermal mass; 9
• The walls should be reflective and/or well insulated. 9
• using vertical wing walls to shade windows and walls from the low west-
southwest and east-southeast sun;
• location of internal walls with respect to cross-ventilation; 9
• Incorporating walls with cavities that acted as air ducts for heat-exchange
Walls
9
purposes.
• Using wall materials with good insulation properties; 9
• Light internal walls are preferable in rooms which are used by day such 9
as living room and kitchen;
• The heat storage capacity and heat conduction property of walls are key 9
to meeting desired thermal comfort conditions
• A suspended floor with a large well ventilated under-floor cavity will
Floors
give a quicker response when temperatures drop slightly in the evening
than a floor directly in contact with the ground.
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• For open plan dwellings, privacy can be provided by designing doors
made like shutters blocking the view but giving passage to airflow, also to
Doors
leave the upper part of a room-height door open hinges at the top.
• The openings should be few and of a small size;
• East and west walls should have minimum or no windows in order to
exclude the low angle east and west sun;
• To provide cross ventilation, north and south walls should be as open as
possible;
• Skylight windows offer the best airflow;
• Use two widely spaced windows if a room can have windows on only
one side;
• Make the outlet openings slightly larger than the inlet openings;
Windows
• Place the inlets at low to medium heights to provide airflow at occupant
levels in the room;
• blinds and lattices in the openings help in reducing heat gain;
• Windows positions should be opposite each other to allow cross-
ventilation and all windows should have curtains;
• To achieve good ventilation, windows should be located in both sides of
the building;
• avoid openings in west elevations, and if widows are poorly oriented or
too large, external shading devices with additional shutters can help to
reduce heat gain;
• Using ventilation blinds is useful in regulating solar radiation and wind
flow into rooms;
• The mashrabiy1a has five functions: (1) controlling the passage of light,
(2) controlling the air flow, (3) reducing the temperature of the air
Shading
existing, (4) increasing the humidity of the air existing, and (5) ensuring
devices
privacy.
• To reduce the effects of the sun on buildings the outside walls should be
Finishing
painted white or in light colours
• The reflectivity of a facade with respect to insulation could be increased
by painting it white or utilising glazed brick-facings.
Earth- • Earth-sheltered and underground housing are ideally suited to this
sheltered climate;
Building • choose roof and wall types with high insulating properties (U-values)
materials • Adobe buildings are better suited for hot regions.
• Insulation can improve indoor conditions provided thermal mass is not
excessive;
• Extreme thermal mass (typical of stone and mud) can have an important
positive effect on the thermal performance of buildings;
Comments : The panel confirmed most of the points with some comments; metal roof is
not the ideal solution because it increases heat gain and needs much more shading;
lightweight roof is not appropriate for the time lag properties and materials available;
shading east and west elevation can be by using shading devices, vegetation or the
design of the building; a suspended floor is not advised because it needs carful use and
maintenance; for cultural reasons doors are important in almost all the house, however,
the design of the doors can be changed by providing upper or lower openings to allow air
movements; there is a need of more research in improving local building materials.
1
A wooden lattice screen used on windows to provide privacy, reduce glare and allow cool
breezes to enter homes in the heat of summer
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Patio/ • Courtyard house is ideal solution; 9
courtyard • Internal and semi-enclosed courtyards can prove a liability under 9
hot arid conditions; orientation and proportions matter;
• The courtyard serves as a reservoir of coolness;
Wind • Windcatchers can help in increasing the flow of air in houses ; 9
Additional Building Components
catcher • the malqaf 2 is more suitable to catch wind because it rises up high 9
in the air;
• It can be incorporated into modern building aesthetically 9
Sun • It employs a combination of direct gain and indirect gain system 9
space/ features.
solarium
The • The fountain is discharges its water and mixes it with air to 9
fountain increase humidity and to cool the air by evaporation;
Solar • Can be used for hot water and heating the spaces. 9
panels
balconies • The balconies provide protection to walls and windows from sun 9
and rain.
• The rooms should have direct access to open balconies or verandas
on one or two sides;
Comments; The panel confirmed the all points with some useful suggestions; the
courtyard is the ideal solution in the case of using appropriate building materials and
good proportion also the position should not be in the middle unless a movable cover
provided to avoid excess summer heat and winter rain; solarium house is a good solution
and courtyard can be used as a solarium when using moveable covered windows;
balconies are important for providing shading, however, socially they are not often used
by occupants unless a big part of it can be covered by musharbia.
3 The case study –Tripoli - Location and climate
Tripoli is located in Libya in the Mediterranean Sea. Geographically it is situated to the
north of the Equator, at longitude 32.56 degrees, and latitude 13.15 degrees (Amer,
2007). The weather in the Mediterranean and semi Mediterranean Sea (coastal region) is
characterised as hot and humid in the summer season and warm and rainy in the winter
season (Shawesh, 2000). The average humidity in this region is 58% to 65%, which in
some years may increase in the summer months June to the end of August (Emhemed,
2005). Contrastingly, Amer (2007) stated that the costal regions are characterised by
cold, wet winters, and hot, dry summers.
The average temperature in Tripoli ranges from 30ºC in summer to 8ºC in winter and in
the desert summer temperatures rise to over 50°C, but daytime winter temperatures
range between 15 and 20°C, falling below zero at night (Arab.net 2002). According to
Al-Fenadi (2007) and Bukamur (1985), El-Azizia city which is located 55 km south-
east of Tripoli, recorded the hottest maximum shade temperature recorded on the face of
the Earth (58°C) recorded on 13th September 1922. The prevailing winds in the costal
strip are from the north and become less and less dominant as the distance from the sea
increases, the wind speed in Tripoli can reach 30-35 knots in winter (El-Fortea, 1989).
Amer (2007) added that this area in July and August is affected for many days by a
south wind (Ghibli) which raises the temperature in this region. The annual average
rainfall in the plain coastal region reaches 300-400mm though it sometimes exceeds
650mm or falls to less than 200mm in the driest years (Emhemed, 2005).
2
Wind tower: The function of this tower is to catch cooler breeze that located at a higher level
above the ground and to direct it into the interior of the buildings.
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4 Research Methodology
The nature of architectural work is mainly to provide comfortable buildings for people,
therefore, understanding peoples’ opinion is very important as well as the performance
of the building itself. Accordingly a combined research approach (inductive and
deductive) has been selected. The main reason for using both approaches is that the
subject is supported by an extensive theoretical background, focusing on the level of
peoples’ satisfaction and housing preferences and the measurement of thermal comfort
inside buildings. This research depends on using triangulation in all methodological
stages which helps contribute additional knowledge to the research and in that way
different methods complement each other. Each of the different methods (questionnaire
and semi-structured interviews, focus group interview, as well as direct observation,
sampling and the collection of supporting documentation) will help capture a more
complete, holistic and contextual portrayal of the cases and reveal the varied dimensions
of the best way to conduct passive climatic design in the future housing. To fulfill the
aims and objectives of this research the research carried out will be mainly qualitative
though the statistical data from temperature measurements in buildings will be
quantitative. To achieve the objectives of this study, in addition to the literature review,
two methods have been used to collect data (Figure 1), Firstly; survey and interviews -
A questionnaire survey has been carried out to understand the residents’ satisfaction of
their buildings and what they like and do not like in the future dwellings.
Personal interviews were carried out with a series of professionals (architects and urban
planners, civil, mechanical and property of materials engineering) , as it was considered
that this approach offered the opportunity to ask more exploratory questions about the
advantages and disadvantages of local and contemporary housing in Tripoli in relation
to local microclimatic conditions.
A focus group was completed in August 2008 with one professional group (architects
and urban planners) to discuss the climatic design strategies in hot and hot-humid
regions that are produced in the literature and applied in many western and Arabic
countries. The underlying reason for choosing focus groups is because most of these
strategies have already been tested and approved by the professionals and institutes,
accordingly, focus groups discussed whether these strategies can be adapted to the
Tripoli microclimate from climatic, social and economic points of view and offer
suggestions in how these strategies can be improved. Secondly; Air temperature
measurements were taken by the first author between the 7th of August and the 7th of
September 2008, using sensors that recorded day and night temperatures at 30 minute
intervals.
Measurements were recorded in the living room in four selected case studies; two are
located inside the old city and two outside the old city. The first case is a two story
courtyard house inside the old city and the residents have covered the courtyard. The
second case is a one story courtyard house inside the old city with open courtyard. The
third case is a one story courtyard house with covered courtyard located in outside the
old city and built in 1964. The last case is a contemporary two story villa built in 1983.
All of the cases are using natural ventilation and fans to cope with the high temperature
and humidity. Eight days from starting measuring the temperature, two of the case
studies started using air conditioning (case two and three). Accordingly, the
measurements concentrate on the first eight days.
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Literature review Observation
Questionnaire Interviews
Focus group Climatic design guidelines
Sampling
Figure (1) the data collection Source; Almansuri et al., (2009A)
5 Findings and Discussion
From the observation of the case studies, many courtyards are covered and by exploring
the opinion of residents, many reasons have arisen for covering the courtyard as
follows:
* The position of the courtyard in the middle of the house is not appropriate; it is
difficult in both summer and winter time to move from one space to another.
* All the rooms are too small in width; the court can add an extra space with a big area.
* Difficult to use air conditioning (because of the open courtyard).
* Many people wanted to emulate the modern type and saw their own houses as old
fashioned
* People associated the courtyard house with poverty, slum areas, lack of facilities,
outmoded style and inadequacy of services
By observing some covered courtyard houses, some problems accrued as a result of
covering the courtyard as follows:
* A lack in lighting and air movement.
* An increase in the humidity levels.
* An increase in the temperature levels.
* No connection to the outdoors
* Loss of the aesthetic and climatic features (trees and fountain).
The focus group confirmed most of the strategies collected from the literature and gave
comments for some of them listed in Table (1). They have confirmed some of the
courtyard problems and provided possible solutions.
The results of the measurements recorded in the four selected case studies (Table 2)
seems to confirm the theories and the professionals’ opinion where the maximum air
temperature was recorded in case four which was built in a contemporary housing style
and the lowest air temperature was recorded in case two which is the open courtyard
house style. These results suggest that the courtyard house is the ideal solution in hot
climate regions, however, more comprehensive research is needed.
The temperature differences between case 4 and case 2 are only of the order of 1 or 2
degrees and further testing, over a longer period and at varying times of the year, would
be ideally required to demonstrate a statistical significance in the data.
The monitoring equipment is still in situ and cllecting data to allow statistical analysis
to be carried out at a laterdate.
Table 2 shows the thermal comfort inside the cases during 8 days -
14/8/08 15/8/08 16/8/08 17/8/08 18/8/08 19/8/08 20/8/08 21/8/08
Ext. 31.2 31.2 28.8 30.5 29.5 30.5 29.3 29.7
Case1 29.5 29.5 29.5 29.5 29.5 29.5 29.0 29.0
Case2 29.0 29.5 28.5 29.0 29.5 29.0 29.0 28.5
Case3 30.0 30.0 30.0 30.0 30.0 30.0 29.5 29.5
Case4 31.0 30.0 30.5 31.0 31.0 30 29.5 30.0
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According to the theories and the opinions of the professions and some of the
householders who are still living in the courtyard houses in Tripoli, as well as the
temperature measurements in the selected case studies, all confirmed the importance of
the courtyard house as the ideal climatic solution in hot regions. However, these
courtyards will not work properly unless most or all factors shown in (Figure 2) are
including in their design, particularly:
Building
Location materials Location &
1- The position of the courtyard in the & size of size of the
windows courtyard
centre of the house should be changed
to avoid crossing them all the time,
and using new technology to provide Pool or Courtyard Trees &
the possibility to cover the courtyard fountain house vegetations
and open it when necessary.
2-The walls surrounding the courtyard Bright
Shading
devices
should have a good thermal resistance colours Possibility to
and a long time lag. cover the
courtyard
3-The courtyard should include trees
and a fountain to provide shade area Figure (2) Factors affecting the performance of
and evaporation. the courtyard
source; Almansuri et al., (2009B)
6 Conclusion and Further Research
Because the characteristics of the climate is the same in any where, most of the
strategies provided by architects and professionals from different places in the world
have been confirmed by the focus group and can be used in Tripoli with some
modification related to the microclimate and location characteristics as well as the other
social, cultural and economical factors. From a climatic point of view, vernacular
architecture offers solutions which can be improved upon and re-used in future
architecture, such as providing necessary shade and ventilation. The results obtained
from the thermal investigation and the interviews with professionals and householders
explore the potential of using a vernacular design for providing comfortable living areas
and still fulfilling the requirements of contemporary lifestyle if redefined and
considered in the light of technological and socio-economic changes.
This paper provides a bioclimatic guideline that can be used in Tripoli as well as cities
located in the same culture and region type.
7 References
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Tripoli: Libyan National Meteorological Centre (LNMC).
Almansuri A. Dowdle D. And Curwell S., A. (2009A) Future practice of climatic
design in housing in hot climates regions: a methodological perspective. In: A.
M. Ahmed V., Egbu Ch., Sutrisna M., ed. the buhu 9th international
postgraduate research conference 2009. Greater Manchester: The University of
Salford.
Almansuri A. Dowdle D. And Curwell S., A. (2009B) Do Courtyard Houses Provide
the Ideal Climatic Solution in Hot Climate Regions? Case study- Tripoli, Libya.
- 1650 -
RICS COBRA Research Conference, University of Cape Town, 10-11th September 2009.
Aisha Almansuri, Steve Curwell and David Dowdle, pp 1640-1652
In: A. M. Ahmed V., Egbu Ch., Sutrisna M., ed. THE BUHU 9TH
INTERNATIONAL POSTGRADUATE RESEARCH CONFERENCE 2009.
Greater Manchester: The University of Salford.
Amer, A. (2007) comparison studying of traditional and contemporary housing design
and measuring people’s satisfaction with reference to Tripoli, Libya. Thesis
Salford.
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Arslan S. And Kumkale E. (2005) Biomimesis: Architectural Inspiration for the Future.
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