A former electrician who has just completed a PhD at age 43 says his research shows a causal link between competitive procurement and the poor performance of the construction industry.
Dr Mark Hinton, who worked as an electrician for more than 25 years, did his studies at the University of Canterbury. He says rather than competition being good for the industry and consumers, in fact the opposite is true.
“I found that contractors, whether they are main contractors or subcontractors, have developed strategies to effectively improve their own position both during and after the tender process,” he says.
“The net effect of this is that the consumer is penalised by often paying higher prices than necessary for construction projects, while at the same time receiving an inferior product."
Dr Hinton says many if not most working within the industry would be aware of numerous poor practices. However, it is rarely in the best interests of anybody working within the industry to highlight such practices.
“Main contractors are reliant on subcontractors for market pricing. Subcontractors can generally only access the market by working through a main contracting company,” he says.
“My study identifies many behaviours and strategies that are mostly in response to the competitive procurement model, which often engenders mistrust, opportunism, power and ambiguity.”
He says productivity has been poor for decades and construction lags dramatically behind many other industries such as manufacturing.
The UK government commissioned reports in the 1990s that called for a move away from the competitive procurement model to one of a more collaborative nature within the supply chain.
“Initially, my research focus was directed toward understanding why the construction industry was so heavily focused upon the competitive model of lowest price wins. I interviewed 50 senior staff that included clients, architects, consultants, main contractors and, importantly, subcontractors.
“While my study at first looked at collaborative procurement, the direction changed after around two years as many issues relating to ethics and the morality of the industry began to emerge from the data collected.
“There is a need to reconsider the role that main contractors play in the construction industry. Most of the work is undertaken by relatively small subcontracting companies, with very little industry representation.’’
Dr Hinton’s research was supervised by Professor Bob Hamilton and was partly funded by The Building Research Association of New Zealand.