Assessment of Factors Affecting Contractors Tender for Construction Projects in Nigeria
Chapter One
OBJECTIVES OF THE STUDY
This research aims to analyze and assess the local factors that account for the success or failure of tenders submitted by contractors when applying for a construction project in Imo State. The aim of this research can be broken down into the following objectives:
To identify the challenges faced by contractors when applying for contracts in Nigeria
To assess the factors that affect contractors’ tender for construction projects.
CHAPTER TWO
LITERATURE REVIEW
Introduction
Companies need to win tenders to survive in the construction industry. Companies must be able to deal with various tendering situations successfully in today‟s highly competitive construction market. The first step that the companies need to consider is whether to tender or not to tender before they decide on a competitive tender strategy to win the tender. ( Egemen & Mohamed, 2007, p. 1373). Shash (1993) argues that a construction company can either negotiate with the client or use a competitive tendering process to obtain a job. To make the tender/no did decision, the company‟s human resources, time and costs need to be considered.
With the focus on to d construction contractors in Lagos, a review of the literature around the topic of factors that affect the contractors tender/ no tender decision making process and more relevant information are presented in Chapter 2. First, the overview of competitive tendering in the construction industry is presented. Then the general issues surrounding the tender/ no tender decision making process are indicated. Finally, the specific factors that contractors need to be considered when making the tender/ no tender decision are identified.
Competitive tendering in the construction industry
Varying procurement strategy
A successful project means that projects are delivered on time, has a standard quality and within an appropriate cost. (Barclay, 1994 as cited by Love, Skitmore and Earl, 1998, p. 221). Client selection of a suitable procurement is very important to achieve successful project. (Love, Skitmore and Earl, 1998, p. 221). Love, Skitmore and Earl (1998) says procurement system means an organizational system which responsibilities of different job roles are arranged to achieve a target project. Procurement methods are categorized by Love, Skitmore and Earl (1998) as traditional method, design and construct methods and management method.
Brian and Graham (2011) explain traditional method is “single stage lump sum competitive tendering.” The traditional method is the procurement method we will focus on in this research. The characteristics of traditional method are:
- Project are delivered step by step
- The building design is completed before construction can start
- The project responsibilities are divided and carried by two groups: client and contractor.
- The contractor is paid either lump-sum or expenses basis.
Under this traditional method, the client hires a consultant to complete the building design and prepare tender document first, through competitive tendering client select an appropriate contractor to carry out the project mostly are lump-sum contract. (Hughes, 2006, p. 7). Fu and Drew (2002) say the competitive tendering is the most common method used for contractor selection. The advantages of traditional method are:
- Design is completed which means uncertainties are minimized and trough competitive tendering, the construction cost can be lower.
- Schedule of quantities are developed, it makes some work easier such as progress payment and variation can be easier evaluated.
Disadvantages of traditional methods includes:
- Poor communication between design team and construction team, buildability could be less considered.
- Changes are hard to make at construction stage. Because everything is priced and agreed at early stage. (Brian and Graham, 2011, p.108-109).
Design and building procurement method is explained by Hughes (2006) as one single team carry out all the responsibilities for both design and construction. The payment for this method is a monthly lump-sum based on monthly expenses. The contract can be negotiated or tendered.
CHAPTER THREE
RESEARCH METHODOLOGY
Introduction
This research looks at “What are the factors affecting tender/ no tender decision making process of contractors in Lagos?”
This chapter outlines the research methodology will be used to carry out the research. The chapter will describe the research methodology, the research method, data collection method, data analysis method and research ethics in detail which will be used to ensure the research is reliable and valid.
Research design
Research methodologies utilized in the literature
The similar studies done in the literature demonstrate that both quantitative and qualitative methodologies have been used to identify the factors affect tender/ no tender decision making. There are two main types of research method used to implement the research which are questionnaire survey and multi-case study.
There is one typical research done by Shash (1993) which collects quantitative data through mailed questionnaire surveys from 300 top UK contractors. The questionnaire is based on the study carried out at the University of Cincinnati by Ahmad and Minkarah (1988, as citied in Shash, 1993). Then Shash (1993) modifies the questionnaire to suit the UK construction industry environment in 1990 which identified 55 potential factors that influence tendering decision making. The 300 top contractors were identified randomly from Independent Community Consultants (Hampton) ICC publications Search Utility (version 2.00, June 1990) database. The questionnaire has three main parts, firstly, the company type, capacity and relevant information. Secondly, it asks contractors to rate the 55 factors by using 1-7 categories. “1” means the lowest effect, “7” means highest effect. The last part is asking the company‟s rules of tendering decision. A total of 85 surveys were received which was a 28.3% response rate.
Lowe and Parvar (2004) use a multi- case study to implement the research. Case study involves detailed investigations of instances which relate to a project subject. The multi- case study involves numbers of instances rather than single instance. (Fellows & Liu, 2009, p.23). The reason for using case study approach is to undertaken an in-depth study on a particular firm, and reflects the entire population by using the particular company‟s performance. Lowe and Parvar (2004) is based on one UK construction company and involved semi-structured and unstructured interviews. The data were collected from the company‟s 115 historical projects which were consisted by 16 rejected projects and 99 accepted projects. The identified factors were categorised according to functions. The collected data was analysed by using the Statistical Package for the Social Sciences.
Another typical study done by Egemen and Mohamed (2007) breaks the research down to two stages, firstly an initial questionnaire was made based on the literatures and consultation with some experienced contractors. A pilot survey was implemented firstly; through semi-structured interviews then the researcher was familiar with market conditions and the industry environment. In the second stage, the final version questionnaire was established after pilot study in which 83 factors are identified. The questionnaire survey was implemented through 80 to d contractors in Northern Cyprus and Turkey. The questionnaire includes both qualitative and quantitative questions which were to gain a better understanding of the collected data. The participants were asked to rate the 83 factors by using 0-6 rating score to weight the factors. Additionally, as the research focused on two different sizes of contractors, the research categorized the contractors according to annual turnover of contractors.
Sampling
The convenience sampling is used because there is no particular indication of the form of sample according to the natural of study question. The data is collected from the sample where as easy as possible. As the nature of researcher is a student, data access is the biggest issue on sample selection. Also any of the to d contractors in Lagos can present same level of information. The convenience sampling is employed as the sampling method to collect the required data. But the weakness of convenience sampling is high possibility of involve significant biases. (Fellows & Liu, 2009, p.162).
CHAPTER FOUR
DATA PRESENTATION AND DISCUSSIONS
Data presentation
Quantitative data
The participants
As we presented above, there are 8 participants are involved in this research.
According to ethics issue, the participants‟ name and any information which can identify the identity of participants will be removed from this report. All of the participants are to d contractors in Lagos region. The participants are coded as participant 1-8 according to the order of interviews.
CHAPTER FIVE
SUMMARY AND CONCLUSION
summary
The response rate was 67% which were 8 participants involved in this research. Those 8 participants are Lagos based construction contractors which include 4 participants are d contractors and remaining participants are d contractors. Most contractors have less than 50 percent jobs obtained through competitive tendering.
Importance weights given to specified factors are very different by different sized contractors. Research revealed the d contractors give more considerations to those listed factors. It is different finding to Egemen and Mohamed (2007) that d contractors sign higher importance weight to those specified factors. The most important factors for d contractors are “experience and familiarity of your firm with this specific type of work”, “current financial situation of the company”, “current financial capability of the client” and “history of client‟s payments in the past projects”. The most important factors for d contractors are very different to d contractors which are “having qualified subcontractors”, “profits made in similar projects in the past” and “possible contribution in building long-term relationship with other key parties”. This is very similar finding to Egemen and Mohamed (2007) that different sizes of contractors have different tendering decision making criteria.
Furthermore, the d contractors provide very similar responses which the factors affecting the d contractors‟ tender/ no tender decision making are much unified. By contrast, every contractor has every different individual opinion about those specified factors. It is seen that d contractors have stronger individual business strategy.
Both contractors think factors are important under categories such as “strength of firm”; “need for work”; “client and consultant of the project” and “project considering long term gains and losses”. It is seen that both of them concern about their capability, workload and client characteristics.
Differences between two sized contractors are factors relative to job uncertainty are very important to contractors. It is seen that contractors are more difficult to deal with project uncertain risks. Factors under categories like “project conditions contributing to profitability of the project”; “risk creating job” and “foreseeable future market conditions” are signed very important rate by d contractors. It is seen that contractors are more concern about profit they can make from purposed projects, and risks involved in projects and especially, they take more business strategy consideration. It is similar finding to
Egemen and Mohamed (2007, p.1384) that “strategic consideration is assigned more significance by larger-sized contracting organizations.”
Compared with literatures, research shows the tender/ no tender decision making very depends on where the contractors are. The Marco environment is very big influence that drives contractors‟ decision. For instance, “history of client payment” and “availability of qualified subcontractors” are very concerned by contractors in developing countries. It is seen that countries regulation, standard, economy and qualification level are all influence on contractors‟ tender/ no tender decision. So, it is important the construction organisations should not use one standard to make the tender/ no tender decision for projects in different countries.
From literature review we find there are tiny numbers of contractor have been used some kind of systematic model to assist with decision to tender making. Lowe and Parvar (2004) and Egemen and Mohamed (2007) agreed that a systematic model would be able to helps the contractor to achieve the business objectives, increase productivity and improve the quality of the decision making. Therefore, there is an opportunities for companies who are looking for a systematic model for tender/ no tender decision making. Those 50 factors extracted from Egemen and Mohamed (2007) have been ranked which would form the basis of tender/ no tender decision making model.
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