The impact of an economic recession Essay

Abstraction

Aim– The purpose of this study is to measure the impact of an economic recession on the current tendering patterns of UK contractors.

Design/methodology/approach– An extended literature reappraisal of the subject was undertaken to organize the research hypothesis and a figure of research inquiries. This was further developed through two interviews with industry specializers which formed the footing for cognitive function which when mapped can so help in organizing a questionnaire. A pilot survey was conducted and upon having positive feedback the questionnaire study was completed.

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Key findings– The consequences show that clients and contractors are returning back to type and that the progresss made by the Latham and Egan studies has stalled as monetary value has become more of import than quality one time once more. Public sector contracts have been observed to offer considerable chances for contractors as the client has a three-base hit A evaluation and the undertakings are typically long term which can assist contractors to last the recession.

Deduction for pattern– The building industry can non blockade alteration but needs to encompass it and follow and better bing patterns which can profit all the stakeholders. Comparable to the Latham and Egan studies, a new study needs to be completed which can help the building industry so that the effects of this recession are felt for the shortest clip possible.

Originality/value– The literature reappraisal and cognitive function provide a elaborate penetration into the subject but due to clip restraints the quantitative analysis does non incorporate an equal sum of responses to be relied upon.

1. Introduction

The building industry is invariably germinating as a consequence of ; a levelling of the trade rhythm, methods of puting contracts, increased accent on quality, experience and inventions, increased competition among houses and a alteration in clients purchasing behavior ( Yisa, Ndekugri & A ; Ambrose, 1996 ) .

In add-on to the altering attitudes of clients in building which was promoted by the Latham and Egan reports the economic clime has brought extra troubles to the industry. Clients have become more advanced and are continually seeking betterments within the industry to run into at that place demands. They have besides realised that during hard times, they can utilize their laterality to get a better trade ( Woods & A ; Ellis, 2005, pp.321 ) .

This study presents a survey aimed at measuring the impact of an economic recession on current tendering patterns of UK contractors. The hypothesis of this research is ;

“ That the building industry has adapted and improved in the last figure of decennaries but will hold to go on to make so in the face of new challenges ” .

The research inquiries include ;

  1. What are the chief factors considered by contractors when make up one’s minding to tender and how does an economic recession alter these? e.g. Below cost tendering.
  2. How can tilt building, partnering and supply concatenation integrating be used in building to add value?
  3. How has a alteration in procurance methods been used to better tendering patterns in building?

It was decided to unite qualitative and quantitative research methods in order to have a greater apprehension of the subject. The attack employed is that qualitative research facilitates quantitative research by supplying a hypothesis or aids measuring by proposing inquiries ( Oyedele, 2009 ) .

The hypothesis was established through reading relevant diaries and this was developed farther through transporting out two interviews which when mapped assisted in organizing a questionnaire. This questionnaire was completed by a figure of industry forces in order to ease farther analysis through factor analysis which followed on to regression analysis.

The study provides a elaborate analysis of relevant literature aswell as two elaborate interviews with industry specializers. Due to clip restraint nevertheless the quantitative analysis was limited to fewer questionnaires than would hold been liked so the consequences are helpful but non to the criterion that would be required for this study to be become important to industry.

A future quantitative analysis is recommended in order to do usage of the work to day of the month and finish the research.

2. Literature Reappraisal

2.1 Tendering Practices

The building industry has evolved greatly in the last figure of decennaries and this has been largely due to alterations in the economic system and how the building industry and others viewed it. There was an obvious demand for alteration following old recessions and a common understanding that the industry was neglecting to run into all the stakeholder ‘s demands.

2.1.1 Construction Industry Reports

The different studies which have been published in an effort to better the building industry and accordingly tendering patterns are discussed by Cooke & A ; William ‘s and shown below in Figure 2.1. ( Cooke & A ; Willams, 2009, pp.5 ) .

Naoum ( 2003, pp.72 ) highlights the Egan study which was published in 1998 and how it compares the building industry to that of the 1960 ‘s fabrication industry. This subject of the building industry dawdling behind its industry opposite number is apparent in non merely tendering patterns but many other facets ( Emmitt & A ; Jorgensen, 2008 ) .

Lathams ( 1994 ) chief focal point was that there needs to be a ‘win-win ‘ outlook between the client and the contractor whereas Egan ( 1998 ) focused on how quality and efficiency could be improved within the industry. This led to a more client focused attack which Oyedele & A ; Tham ( 2005, pp.53 ) feel aided in making a more incorporate procedure within building.

2.1.2 Changing Client in Construction

Awareness and competition between contractors has allowed the client to go more advanced and to seek betterments within the industry to run into there demands ( Yisa, Ndekugri & A ; Ambrose 1996, pp.51 ) . The client has realised that during hard times, they can utilize their laterality to get a better trade ( Woods & A ; Ellis, 2005, pp.321 ) .

The largest client for the building industry at present is doubtless the populace sector and this is discussed by RICS in their 3rd one-fourth study for 2009 when they use the headline, “ Public sector work loads continue to back up building activity ” , ( RICS, 2009 ) .

This fact was besides noted by Naoum in 2003 when she noted that despite a diminution in public disbursement the public sector was still the largest client, ( Naoum, 2003 ) . The altering face of the client can be traced back to the early 80 ‘s where there was a rapid denationalization of authorities organic structures such as the NHS, prison services, H2O services, schools, etc, ( Yisa, Ndekugri & A ; Ambrose, 1996, pp.54 ) .

These clients sought farther alterations in tendering patterns as their accent was on velocity, value based services and cost-time-quality public presentation and a move towards partnering ( Langford & A ; Fellows, 1993 ) .

2.1.3 Current Tendering Practices

( Edum-Fotwe & A ; McCaffer, 1999 ) discourse how tendering has transformed from the 1960 ‘s whereby private and public occupations were awarded entirely on competitory tendering to a state of affairs whereby a assortment of issues are evaluated. There has been an industry broad displacement from “ lowest monetary value wins ” outlook to a “ multi standards choice ” .

Naoum ( 2003, pp.72 ) goes into farther item by sketching the disadvantages of utilizing price-based competitory tendering. The traditional signifiers of contract have been adapted ( JCT 98 standard signifier – JCT 2005 ) to suit alteration in the industry but the Latham study regarded the NEC contract as holding the best potency for accomplishing a positive result for all the stakeholders, ( Cooke & A ; Willams, 2009, pp.7 ) .

The alteration in procurance methods are shown in the late 90 ‘s in Figure 2.3 ( Yisa, Ndekugri & A ; Ambrose, 1996, pp.55 ) . This alteration can be contributed to the demand for a more incorporate and less disconnected attack as the chief contractor is pull offing both the design and building activities and can advance contractor led invention.

Hazard, which is progressively of import in a recession is being shifted off from the client and towards the contractor under Design & A ; Build and Private Finance Initiatives.

2.1.4 Decision to Tender

A contractor ‘s determination to tender can greatly impact their balance sheet at the terminal of a twelvemonth. Undertakings are going more expensive and clip devouring to tender for and the factors which need to be considered are highlighted in Figure 2.4 ( Cooke & A ; Willams, 2009, pp83-86 ) .

Hughes ( 2004 ) found that the mean contractor will pass 3 % of turnover on winning work. He besides suggets that traditional competitory tendering is much more expensive than design and physique as there is well more competition and a lower success rate.

Walwork ( 1999 ) argues that there is equal importance between “ right undertaking ” and “ right monetary value ” in order to do a net income. Kometa et Al, ( 1996, pp.273 ) evaluate the demand for the clients fiscal stableness to be discussed in greater item. They draw attending to the hazard of late payments or client insolvency.

This point is highlighted by Shepherd ( 2009 ) when he states in a correspondence that ;

“ Undertaking such big stamps, where procurance costs are north of & A ; lb ; 5m, takes a batch of idea and consideration. The client will hold to demo, for illustration, that they are organised and look to be an efficient procurance authorization. In a recession we will go a more discerning bidder as hard currency is tighter and undertakings more sought after. ”

Happy to discourse more as is fit.

Cheers,

Andrew.

2.1.5 Below Cost Tendering

Whitten ( 2009 ) composing for Construction News explained how The Civil Engineering Contractors Association has warned of an emerging tendency of houses pricing below cost.

They believe that for some organisations it is a affair of short term endurance but that if it continues there will be an addition in differences and a diminution in investing in preparation and engineering. Client and contractor dealingss have significantly improved in the last 10 old ages but ;

“ will be stretched to interrupting point if we see clients take advantage of the recession and of worsening work loads to force for deal base­ment monetary values. ”

Both Whitten ( 2009 ) and Scully ( 2009 ) argue the point that below cost tendering is unsustainable and will increase the hazard of contractors confronting insolvency. Decreases in stuff and works costs have been exceeded by the bead in stamp monetary values. Insolvencies are predicted to happen foremost among contractors who tender right but fail to win the contract and so among those who win the contract with unsustainably low commands ( Whitten, 2009 ) .

2.2 Impact of an Economic Recession on the Construction Industry

A recession impacts on every sector but none more so than the building industry as it is relies on big capital outgo for its lifeblood. This consequences in a decrease in the figure of undertakings along with an addition in the cost of borrowing to refund loans and wage rewards ( Ren & A ; Lin, 1996 ) .

RICS reported late on their web site ( 1st October 2009 ) that stamp monetary values for new building work will non lift until 2011 and that pre-recession degrees wont be seen in the following five old ages. It was noted that if public disbursement was cut it would hold a damaging consequence on the building industry.

2.2.1 Economic Recession in Construction

A recession can be caused by many factors but the implicit in ground is high rising prices. The building industry is labour intensive and owing to brotherhood ‘s demands for higher rewards through authorities understandings, rewards do non increase due to demand but societal factors and move in one way. This is the chief cause of rising prices in building costs. Ren & A ; Lin ( 1996 ) exemplify this relationship in Figure 3.1.1 for the last recession of the late 80 ‘s and early 90 ‘s.

The UK Government ‘s policy has been to supply a financial stimulation by increasing disbursement on big public undertakings so as to shoot money into the economic system which will filtrate down through all sectors ( McFall, 2008 ) . Green ( 2009 ) forecasted that the recession will fit up to the recession of the late 80 ‘s and early 90 ‘s but that it will retrieve quicker. Once once more public disbursement is the underlining ground for the upturn but it is questioned whether the uninterrupted disbursement can be sustained.

The logical relation between high rising prices which causes a rise in adoption costs and a decrease in building investing and therefore a autumn in the building rhythm is shown below in Figure 3.1.2 ( Ren & A ; Lin 1996 ) .

2.2.2 Lean Construction & A ; Supply Chain Integration

Thin building is an version of thin industry which is used sharply by big auto makers to great affect ( Emmitt & A ; Jorgensen 2008 ) . It is peculiarly relevant in a recession as it can be used at every phase and its chief focal point is to extinguish waste from the production life rhythm so that value is added to each procedure, taking to take down costs, shorter building periods and greater net incomes ( Cartlidge, 2002 ) .

It is shown below in Figure 3.2 how thin building can be applied to different sectors of the building industry ( Cooke & A ; Willams, 2009, pp.105 ) . Thin building benefits tendering as it promotes invention and off-site production which reduces over all costs and provides increased quality to the client.

Practices such as retrenchment, out-sourcing, de-layering and re-engineering have been widely used within both building company ‘s and specific undertakings ( Thorpe et. al. , 1998 ) . The usage of bomber contractors has increased as there is less operating expenses involved ( Langford & A ; Male, 1992 ) . The benefits of partnering can be applied to co-contracting ( chief contractor-sub contractor ) and supply concatenation integrating ( contractor-supplier ) , ( Edum-Fotwe & A ; McCaffer, 1999 ) . This allows greater flexibleness as both spouses are working for a common end and greater economic systems of graduated table can be achieved when tendering as contractors will hold their ain list of preferable providers or bomber contractors which allows them to monetary value new undertakings rapidly and expeditiously.

As providers account for such a high per centum of edifice costs their engagement at an early phase should be welcomed as they can lend new thoughts, merchandises or procedures ( Cartlidge, 2002 ) . Green & A ; May ( 2005 ) propose that three theoretical accounts can be applied to the acceptance of thin in building: a thin theoretical account of waste riddance, partnering and structuring the context.

2.2.3 Partnering in Tendering

Partnering has been widely adopted in tendering in the last figure of old ages as it offers the chance for bettering the undertaking result aswell as profiting the whole supply concatenation ( Dozzi et al. , 1996 ; Larson and Drexler, 1997 ) . It utilizes each participant ‘s expertness and resources so that the needed concern aims can be met or exceeded ( Bennett & A ; Jayes, 1998 ) .

Cooke & A ; Williams ( 2009, pp.45 ) highlight the important elements of partnering which are reproduced in Figure 3.3 and they note that without all these elements, it is non partnering but simply an confederation. Partnering follows on from the old subdivisions as uninterrupted betterment is achieved through thin building, invention and acquisition, job declaration is promoted through usage of the NEC3 contract and eventually common aims relates to a contractors determination to tender which is highly of import so that the appropiate parties are working together.

The benefits to building companies is that they can portion the hazard of tendering with another company who may otherwise be tendering against them and hold expertness in a certain country which would otherwise hold to be paid for. As highlighted antecedently, future disbursement in building is to a great extent reliant on the populace sector which following the Latham and Egan studies is seeking to follow a team-building attack which promotes partnering.

Due to the economic recession in UK building, companies have been utilizing partnering to spread out into planetary markets which have non been as widely affected. In a command to cut down hazard most companies form local partnerships so as to use local cognition every bit good as cut downing the costs associated with labour transportations ( Edum-Fotwe & A ; McCaffer, 1999 ) .

While a more unfastened relationship now exists between the different participants of a building undertaking Wood & A ; Ellis ( 2005, pp.324 ) estimation that it will still be some clip before a to the full echt relationship exists as there is an engrained civilization of misgiving and misrepresentation. Successful partnerships offer the chance for repetition work but the client must be assured that stamps remain competitory within the relationship of trust.

2.2.4 Strategic Tendering & A ; Project Mix

Strategic tendering and undertaking mix go even more important to a companies success during times of a recession. As the private sector feels the impact of a recession foremost and for a somewhat longer period it is in a company ‘s long term involvement to transport out a more aggressive command policy towards the populace sector ( Ren & A ; Lin, 1996 ) . Another advantage of the populace sector is its transparence and openness during the stamp phase. While the public sector may be susceptible to mal-practice, building companies know that they will be impartially assessed and receive feedback under new ordinances ( Statutotory Instrument, 2006 ) .

Strategic planning can be really good as it seeks to aline a company in a certain way. In todays clime contractors need to evalute the client when make up one’s minding to tender as many contractors have commenced work on a undertaking merely to instructed to retreat as the support has been restricted ( Edum-Fotwe & A ; McCaffer, 1999 ) . A figure of contractors have besides begun to take on occupations at cost or even a loss in an attempt to win work with the opportunity of repetition work. Besides this keeps the company name in circulation and besides to keep onto valued staff that might otherwise hold to be made redundant.

Shepherd, the command director for Building Schools for the Future ( BSF ) is of the sentiment that ;

“ Large procurance undertakings, such as BSF, lose some of the benefits of group procurance by being so expensive to secure. This creates a barrier to entry, which in some ways may impact the value in the procurance. The impudent side is that for a contractor, you know you will be involved in a procurance procedure where you have a realistic opportunity of winning and that your graduated table delivers value ” .

2.2.5 Innovation & A ; Learning in Construction

One of the most radical alterations in tendering has been the usage of e-tendering which has been used most notably on the multibillion lb development for the Olympic Games in London 2012. Invention in tendering can offer many advantages as it provide significant resource nest eggs to a major portion of the supply concatenation, with the cardinal benefits being enhanced communicating, clip nest eggs and decreased costs ( Stephenson & A ; Tindsley, 2008 ) . IT has aided smaller companies in leting them to vie with their larger opposite numbers in certain countries. Thorpe et. all ( 1998 ) argue that building has yet to have the full benefit of IT promotions compared to other industries.

Due to the competitory civilization in the building industry, up until late there has been a deficiency of “ organizational acquisition ” which promotes the sharing of cognition and experiences between companies ( Barlow & A ; Jashapara, 1998 ) . There has been really small research into organizational acquisition but Poyner and Powells ( 1995 ) study emphasised its importance in supplying competitory advantage which is particularly relevant in an economic recession.

3. Research Methodology

The research aim is to measure the impact of an economic recession on the current tendering patterns of UK contractors. In order to have a greater apprehension of the subject we are uniting qualitative and quantitative research methods. The attack employed is that qualitative research facilitates quantitative research by supplying a hypothesis or aids measuring by proposing inquiries ( Oyedele, 2009 ) .

The research hypothesis was established through reading relevant diaries and this was developed farther through transporting out two interviews with industry specializers which when mapped can so help in organizing a questionnaire. A pilot survey was conducted and upon having positive feedback the questionnaire study was completed.

Figure 3.1 Research Methodology.

The literature reappraisal was sourced in the Queens, university library from text editions, databases, diaries, magazines and the cyberspace. This beginning was peculiarly valuable as it allowed the writer addition instant entree to a huge array of web sites, online articles, publications, current intelligence etc.

3.1 Unstructured Interview

Following on from the old chapter, two unstructured interviews were completed by industry specializers. The chief purpose is to develop a greater apprehension of the topic in add-on to the literature reappraisal and to falter upon any differences between the two. This type of interview has no set format beyond the opening inquiry but the interviewer may hold some cardinal inquiries which they can utilize to maintain the interviewee on the subject. The interviewer is receptive to the interviewee ‘s responses and the interview follows a colloquial manner.

Both interviewees are employed by the largest in private owned building company in the UK with offices besides in India, Australia and the United Arab Emirates. The company has an integrated capableness therefore leting a holistic position of building.

The first interviewee is a undertaking director who has experience of tendering with Lagan and Farran building and is presently working aboard NIW on a big PFI undertaking valued at about & amp ; lb ; 130 million.

The 2nd interviewee is a command director for on the edifice schools for the hereafter model ( BSF ) . He is taking a squad on a undertaking worth over & As ; lb ; 1 billion with a budget of & A ; lb ; 5.6 million.

3.2 Qualitative Research – Cognitive Function

Yin ( 1989 ) observes that in qualitative research the broadest inquiry should be stated so that informations can be drawn from a figure of beginnings such as: archival records, direct observation, paperss, interviews, participant observation and physical artifacts. Qualitative research is any sort of research that produces findings non arrived at by agencies of statistical processs or other agencies of quantification ( Strauss and Corbin, 1990 ) . The interviews form the footing for the cognitive function and let a greater apprehension of the topic.

3.3 Quantitative Research – Questionnaire Survey

Creswell ( 2003 ) explained quantitative research methods are used to prove or verify theories or accounts identify variables to analyze, associate variables in inquiries or hypotheses use statistical criterions of cogency and dependability, and employ statistical processs for analysis. The following measure was to explicate a preliminary questionnaire based on the chief subjects raised in the literature reappraisal and interviews and this was used to carry on a pilot survey.

Little alterations were made following the pilot survey and a concluding questionnaire was produced which contains 30 eight factors that can be considered as important in impacting on the tendering patterns of UK contractors. In the questionnaire, the evaluation of the factors was done on a five point graduated table runing from 1 to 5, where 1 represents “ strongly disagree ” , and 5 represents “ strongly agree ” . Respondents who had no sentiment refering the factors could choose the reply of “ apathetic ” .

The 3rd subdivision of the questionnaire will be used in our arrested development analysis and it involves set uping a relationship between the different factors of our analysis. The concluding subdivision allows respondents to compose extra remarks on any outstanding issues which had non been brought up in the questionnaire but which they felt were of import.

A sum of 40 one respondents replied to the questionnaire and despite this being lower than was wished, due to clip restraints the statistical analysis had to be completed however. Shown below in Table 3.1 are the entire figure of respondents and a dislocation of their features.

4. Qualitative Consequences and Analysis – Cognitive Function

Cognitive function allows the analysis of big sums of qualitative information and can be used to construction messy or complex informations for job resolution. It is particularly utile as a note taking method during interviews and helping the procedure by increasing the apprehension of the topic ( Ackermann et al. , 1992 ) .

Decision adventurer is a tool which allows relationships to be pictured associating to a topic. Data entry is provided utilizing “ constructs ” , which capture the nucleus facets of a impression. The constructs are so linked to demo the relationship and factors of importance between thoughts ( Brightman, 2002 ) .

Figure 3.1 shows the three methods which can be used to oppugn where a construct is prima towards. For the intent of this analysis the method Action – Result was utilized as it was felt that it is best suited to researching the topic and detecting the goals/outcomes. Once completed, argument and contemplation can so follow on the most of import factors which have been established.

4.4 Analysis & A ; Discussion

Using the maps in the old subdivision the chief factors can be discussed and their influence on other constructs.

4.4.1 Cardinal Concepts Analysis

Cardinal analysis reveals the constructs that have been linked the most times with other constructs and means that the constructs listed at a lower place have the greatest influence on the analysis. A cardinal analysis was conducted and the undermentioned top five constructs were revealed:

  1. Change in Contractor & A ; Client Attitudes
  2. 20 from 39 Concepts.

  3. Contractors Using below Cost Tendering
  4. 19 from 35 Concepts.

  5. To Stay Thin and Competitive During the Recession
  6. 15 from 31 Concepts.

  7. Economic Recession
  8. 14 from 32 Concepts.

  9. Increased Likelihood of Repeat Work
  10. 14 from 29 Concepts

All these top five constructs are straight related as the economic recession and alteration in attitudes has resulted in contractors utilizing below cost tendering and thin building to stay competitory during the recession with the increased likeliness of repetition work.

The chief issue/driver mentioned in the interviews was the economic recession which as stated in my literature reappraisal impacts badly on the building industry as there is a decrease in the figure of undertakings along with the cost of borrowing to refund loans and wage rewards increasing ( Ren & A ; Lin, 1996 ) . This logical relation was explained in my literature reappraisal and is illustrated in Figure 4.1.

The alteration in attitudes from both the contractor and client was besides discussed with Latham ( 1994 ) seeking to follow a “ win-win ” outlook and Egan ( 1998 ) concentrating on bettering quality and efficiency and making a “ motion for alteration ” . This alteration from the 1960 ‘s outlook whereby private and public occupations were awarded entirely on competitory tendering to a state of affairs whereby a assortment of issues are evaluated ( Edum-Fotwe & A ; McCaffer, 1999 ) has put extra force per unit area on contractors coercing them to retain quality and undertaking clip but cut down their stamps to below cost if necessary.

Clients are holding a greater engagement and have requested a less disconnected attack which has resulted in a alteration of contracts to a more frequent usage of design and physique ( Yisa, Ndekugri and Ambrose, 1996 ) .

Interviewee No.2 feels that clients are pull stringsing the current clime in order to acquire the same quality of work done cheaper whereas Interviewee No.1 is of the sentiment that it is the contractors who are speedy to follow below cost tendering in an attempt to keep onto staff as other undertakings are completed.

The construct of staying thin and competitory during the recession is highly of import and is discussed in great item in my literature reappraisal. Cartlidge ( 2002 ) describes how thin building eliminates waste so that value is added to each procedure, taking to take down costs, shorter building periods and greater net incomes.

The construct of meagerness incorporates reduced bid frequence as operating expenses need to be reduced. Walwork ( 1999 ) and Interviewee No.1 both stress the demand for contractors to choose the “ right undertaking ” which will so give a greater opportunity of success. Invention can cut down costs through “ organisational acquisition ” ( Barlow and Jashapara, 1998 ) but both interviewees felt that as operating expenses need to be reduced invention should come from your supply concatenation which have budgets for research and development. As discussed in my literature reappraisal providers engagement should be welcomed at an early phase so that they can lend new thoughts, merchandises, or procedures ( Cartlidge, 2002 ) .

Increased likeliness of repetition work was felt by Interviewee No.1 to come through partnering which allows a greater result for the whole supply concatenation ( Dozzi et al. , 1996 ; Larson and Drexler, 1997 ) . A better result is achieved as the needed concern aims can be met or exceeded ( Bennett & A ; Jayes, 1998 ) . Interviewee No.2 felt that early engagement with the client allowed links to be established therefore taking onto repetition work.

4.4.2 Domain Concepts Analysis

The sphere analysis counts the highest figure of links in and out of a construct and establishes connexions with other issues within its immediate sphere. It analyses local complexness but fails to analyze the wider context of the topic. A sphere analysis was conducted and the undermentioned top five constructs were revealed:

  • 8 Linkss around
  • 1 Change in contractor & A ; client attitudes

    2 Contractors utilizing below cost tendering

  • 6 Linkss around

3 Increased public disbursement

4 Partnering and increased communicating

5 To stay thin and competitory during the recession

The old cardinal consequences determined the constructs with the greatest influence on the full map and therefore it follows that these should hold the highest figure of links.

Changes in attitudes, below cost tendering and thin building were cardinal to my literature reappraisal and interviews and this is why they have been highlighted here. The drivers for alteration are altering attitudes and below cost tendering with thin building supplying a figure of schemes to better through off-site fabrication, advanced design and assembly, pre-fabrication, supply concatenation integrating and pre-assembly ( Cooke and Williams, 2009 ) .

The authorities ‘s policy of increased public disbursement was noted by both interviewees and McFall ( 2008 ) in my literature reappraisal as offering a company scheme to last the economic recession. RICS ( 1st October 2009 ) reported that stamp monetary values for new building work will non lift until 2011 and that if the public disbursement was cut it would hold a damaging consequence on the building industry.

This is farther supported in my literature reappraisal which states that strategic tendering and undertaking mix is even more important during a recession. Ren and Lin ( 1996 ) justice that it is in a company ‘s long term involvement to transport out a more aggressive command policy towards the populace sector. The issue of measuring clients was emphasised by both interviewees as a figure of private clients have merely injure up their undertakings. Both see the public sector as a safe stake for investing both in a roar and even more so in a recession as they possess a three-base hit A evaluation by the evaluation bureaus.

Partnering was touched upon by both interviewees but they had a different point of view with Interviewee No.1 feeling that it has opened a forum for communicating and along with the new technology contract there is a “ win-win ” outlook established as encouraged by the Latham study ( 1994 ) .

Interviewee No.2 was doubting nevertheless and felt that clients and contractors were both returning to type with contractors utilizing below cost tendering and looking for fluctuations while client were pull stringsing the clime by disregarding models in order to tender of all time undertaking and have increased nest eggs.

Forests and Ellis ( 2005 ) as mentioned in my literature reappraisal accepted that a more unfastened relationship now exists but that it will take some clip before a to the full echt relationship will be in topographic point due to an engrained civilization of misgiving and misrepresentation.

4.4.3 Cluster Analysis No.1 ( Changes Resulting in Partnering & A ; Increased

Communication ) Communication )

As stressed in my literature reappraisal and illustrated below in Figure 4.2 the economic recession has caused an addition in public disbursement which along with a alteration in contractor and client attitudes has resulted in a “ win-win ” outlook, different procurance methods and hence the usage of partnering and increased communicating which relates back to the Latham and Egan studies.

Another consequence of the economic recession has been a decreased figure of contracts which causes increased competition and a decreased frequence of command due to higher tendering costs ( Cooke and Williams ) .

The concluding analysis revolves around contractors need to win work which along with the recession causes them to alter their attitude and utilize below cost tendering which reduces staff Numberss and increases the work load therefore impacting on quality, environmental and H & A ; S criterions.

4.4.4 Cluster Analysis No.2 ( Required Practices for Strong Company Position )

Both interviewees drew attending to increased exposure to put on the line which can do a contractor to travel belly-up due to a deficiency of hard currency. The demand to measure client fiscal stableness was established in my literature reappraisal ( Kometa et al. , 1996 ) .

Besides fiscal hazard exposure there is besides the hazard associated with H & A ; S, environmental and CSR which require investing so as to advance a favorable client and public perceptual experience which leads onto the end of a strong company place.

The other analysis involves using invention to derive a competitory advantage which can be accomplished through thin building and supercharging the supply concatenation which both interviewees feel have the research and development capablenesss and budgets to provide new merchandises therefore leting contractors to follow their procedures. Once once more, this allows the company to stay thin by following required patterns and to be in a strong place following the recession.

4.4.5 Cluster Analysis No.3 ( Increased Likelihood of Repeat Work )

The concluding bunch analysis focuses on the end of increased likeliness of repetition work and going the company of first pick which is portion of the interviewee ‘s company vision and both interviewees referred to it. It concentrates on the rule that building is continually germinating and that contractors need to innovative and follow so that stakeholders are satisfied.

It relates to a figure of factors such as endeavoring for a better result for both client and contractor and alining your company towards the most advantageous sector through strategic undertaking mix which many contractors see coming from PFI undertakings as they have a guaranteed beginning of income for a figure of old ages.

4.4.6 Questionnaire Design

The questionnaire design was completed following the cognitive function and due to the extended literature reappraisal most subjects were touched upon antecedently. The phases involved in building a questionnaire include ;

  1. Identifying the first thought inquiries.
  2. Explicating the concluding questionnaire.
  3. Give voicing of inquiries.

It was decided to utilize closed inquiries as they are speedy to reply and their analysis is straightforward ( Nachmias and Nachmias, 1996 ) . One drawback nevertheless is that they may present prejudice as they can either coerce a respondent to take answers which may non of otherwise have been selected. A sum of 40 inquiries were included in the questionnaires which were felt to offer an in depth analysis of the subject.

5. Quantitative Consequences and Analysis – Questionnaire Survey

Statistical Package for the Social Sciences ( SPSS ) is a popular statistical and data direction application for analysts and research workers used to show and analyze informations arranged in a individual construction. It is used in subjects every bit diverse as chemical science, sociology, economic sciences and psychological science. Mostly it is used to analyse questionnaires through the usage of correlativity, factor analysis, bunch analysis and arrested development modeling.

5.1 Average Testing

Shown below in Table 5.1 are the top five factors from our questionnaire with the highest mean with the complete tabular array for all the factors available in the appendices. These factors are what the respondents felt were the most important in impacting on tendering patterns of UK contractors.

These factors have been highlighted both in the literature reappraisal and the interviews. As discussed by Whitten ( 2009 ) and Scully ( 2009 ) houses are pricing contracts at degrees below cost in an attempt to guarantee short term endurance. Scully ( 2009 ) depict how competition has become so ferocious that contractors are offering for work up to 20 % below cost which is in understanding with interviewee No.2 who sees this as contractors “ purchasing work ” . The bulk of the respondents felt that this was the most important contractors are content with interrupting even during the recession.

The 2nd factor which the questionnaire highlighted was that the lowest monetary value non ever stand foring the best value for money ties in with Latham ( 1994 ) and Edum-Fotwe & A ; McCaffer ( 1999 ) who discuss how tendering has transformed from the 1960 ‘s whereby private and public occupations were awarded entirely on competitory tendering to a state of affairs whereby a assortment of issues are evaluated. There has been an industry broad displacement from “ lowest monetary value wins ” outlook to a “ multi standards choice ” .

Interviewee No.1 discussed how client ‘s have realised that the “ lowest stamp monetary value ” is non ever the cheapest in the long term as sometimes safety, quality and environmental facets are in short supply. This could go forth the client with a tarnished repute if something unanticipated occurs due to cut down staffing or controls.

The 3rd factor of the addition in exposure to put on the line for contractors is related to below cost tendering which both Whitten and Scully ( 2009 ) argue the point that it is unsustainable and will increase the hazard of contractors confronting insolvency.

Decreases in stuff and works costs have been exceeded by the bead in stamp monetary values. Insolvencies are predicted to happen foremost among contractors who tender right but fail to win the contract and so among those who win the contract with unsustainably low commands ( Whitten, 2009 ) . Interviewee No.2 discussed how the public organic structures which he works with have seen a 20 % autumn in stamp monetary values which they merrily go out and procure merely for the contractor to travel broke due insufficient hard currency flow.

There is an increased demand for contractors to analyse the issue of make up one’s minding to tender before any resources are allocated as undertakings are going highly dearly-won to tender for. Walwork ( 1999 ) argues that there is equal importance between “ right undertaking ” and “ right monetary value ” in order to do a net income. Kometa et Al, ( 1996, pp.273 ) evaluate the demand for the clients fiscal stableness to be discussed in greater item.

They draw attending to the hazard of late payments or client insolvency which both interviewees highlighted as being of import and that there house ever evaluates the client and where there funding is coming from. This is why they have seen a displacement towards public sector undertakings which have a high recognition evaluation.

The 4th factor was the addition in competition for the available contracts which as discussed in the literature reappraisal by RICS ( 2009 ) , stamp monetary values are continually falling due to the increased competition for the low degrees of undertakings. It was noted that if public disbursement was cut it would hold a damaging consequence on the building industry.

Both interviewees discussed how the economic recession has caused a decrease in available funding which has meant less work available with extra competition for contractors who antecedently would n’t hold tendered for such undertakings.

Finally the issue of squashing the supply concatenation was found by the respondents and interviewee No.2 as a manner of accomplishing a decrease in the stamp monetary value. As providers account for such a high per centum of edifice costs their engagement at an early phase should be encouraged as they can lend new thoughts, merchandises or procedures ( Cartlidge, 2002 ) . Suppliers can besides offer contractors advanced merchandises which allow them to follow old patterns so that money can be saved.

5.2 Factor Analysis

Factor analysis is a technique for placing groups or bunchs of variables ( Field, 2005 ) . Its chief utilizations include ;

  1. To understand the construction of a set of variables.
  2. To build a questionnaire to mensurate an implicit in variable.
  3. To cut down a information set to a more manageable size while retaining every bit much of the original information as possible.

Following the factor analysis on the informations, we will so prove the information for its suitableness for factor analysis, the extraction of the factors, the rotary motion of the factors and eventually label each group of factors that the factor analysis will give us.

5.2.1 The Trial for Suitability of Data for Factor Analysis

The trial for suitableness of the informations set for factor analysis involves finding the Kaiser-Meyer-Olkin ( KMO ) step of trying adequateness and Bartlett ‘s trial sphericalness. The trial indicates the strength of the relationship among variables and provides a minimal criterion that should be passed for a factor analysis. Shown below in Table 5.2 are the values and evaluations for the KMO.

The list of factors was inputted from excel into SPSS and the factor analysis was performed but failed to supply a KMO value or Bartlett ‘s trial of sphericalness. The undermentioned two factors which achieved the lowest average value were omitted.

The Bartlett ‘s trial of sphericalness examines the void hypothesis that the correlativity matrix is an individuality matrix which would bespeak that the factor theoretical account is unequal. The Bartlett ‘s trial has a significance value of 4.16e – 15 which is less than the maximal value of 0.05.

5.2.2 The Extraction of the Factors

For the factor analysis a restraint of characteristic root of a square matrixs holding to be greater than 1 was inputted. SPSS so uses Kaiser ‘s standard to pull out these factors. As shown in Table 5.3, eleven factors have been extracted after 17 loops which means that these 11 factors explain comparatively big sums of discrepancy over the remainder and that there will be 11 groups of factors. This figure besides compliments the Scree secret plan below shown in Figure 5.2 which shows the curve falling aggressively at the start and finally levelling out by the clip it reaches eleven.

5.2.3 The Rotation of the Factors

Rotation is performed so as better the interpretability of factors. It maximizes the burden of each variable on one of the extracted factors whilst minimising the burden on all the other factors ( Field, 2005 ) . It is good besides as it makes it much clearer which variables relate to which factors.

The Varimax method is an extraneous rotary motion method that minimizes the figure of variables that have high burdens on each factor ( Oyedele, 2009 ) .

As shown in the print out for the rotary motion of the factors, we are left with 11 groups made of up 30 three variables. All 30 three variables are supra 0.5 as one of the restraints was to stamp down any variable under 0.5. The list is besides listed in the order of size of their factor burdens because we asked for the end product to be sorted by size. Any variable that appears on more than one group is deleted as this can non be used.

5.2.4 The Labelling of Each Factor Group

Labeling the factor groups right is of import as allows a common subject to be developed among the extremely laden factors ( Field, 2005 ) . The 11 groups are broken down as follows with the group name as the header.

1. Increased Emphasis on Public Sector Contracts

  • Public sector/government stamps are being targeted by contractors.
  • Contractors looking to procure more long term contracts, i.e. PFI.
  • Supercharging supply concatenation for invention and cheaper monetary values.
  • 2. Adoption of New Practices Due to Reduced Tenders Available

  • Squashing the supply concatenation to guarantee best stamp monetary value.
  • There are less stamps available.
  • There is increased competition for these.
  • 3. Increase Emphasis on Client

  • There is an increased accent on the PQQ phase.
  • Increased importance of early client engagement.
  • Contractors tendering for smaller undertakings to guarantee fast cashflow.
  • 4. Price vs. Quality

  • Location of undertaking affects determination to offer.
  • There is an increased accent on value technology.
  • Monetary value has become more of import than quality.
  • 5. Overall Shift in Tendering Practices

  • Respect should be maintained for the other party at all times.
  • Once a contract is tendered for below cost it seldom finishes in net income.
  • Addition of client rating by contractors.
  • 6. Increased Pressure on Contractors

  • Clients demand same quality for a decreased monetary value.
  • Material monetary values have increased while stamp monetary values have decreased.
  • Increased company consciousness of importance of client & A ; public perceptual experience when tendering.
  • 7. Contractors Known for Low command will Not Win Tenders

  • Contractors trusting on fluctuations to reimburse low stamp costs.
  • Clients frequently ignore unrealistically low commands due to put on the line concerns.
  • 8. Contractors Sensitive to the Cost of Tendering

  • Can non afford to monetary value for direction fees in stamp command.
  • Contractors traveling into receivership as a consequence of reduced cashflow.
  • There has been an addition in selective tendering.
  • 9. Overall Trouble of Tendering has Increased

  • Geting onto pre approved stamp lists has become more hard.
  • Net income borders have been reduced when viing for stamps.
  • 10. Contractors Tendering to Maintain Core Staff

  • Contractors taking contracts below cost to keep concern.
  • Decreased staff Numberss ensuing in increased work load.
  • 11. Switch off from Traditional Procurement Methods

  • There is a alteration from traditional procurance to other signifiers

5.2.5 Discussion of Top Five Factor Groups

Using the characteristic root of a square matrix as a step of public presentation of the factor groups, it is evident that “ Increase in Public Sector Contracts ” is the most of import factor to which houses feel have impacted on tendering patterns. It has the highest value of 5.12 followed by “ Adoption of New Practices Due to Reduced Tenders Available ” at 4.15, “ Increase Emphasis on Client ” at 3.18, “ Price vs. Quality ” at 2.6 and “ Overall Shift in Tendering Practices ” at 2.13.

1. Increased Emphasis on Public Sector Contracts

Many contractors have experienced hapless traffics with private contractors who have found themselves in fiscal problem and can non pay their debts. Public sector contracts can offer companies a guaranteed beginning of income for upto twenty five old ages.

The bulk of contractors have adopted their undertaking mix as the private sector feels the impact of a recession foremost and for a somewhat longer period it is in a company ‘s long term involvement to transport out a more aggressive command policy towards the populace sector ( Ren & A ; Lin, 1996 ) . Besides the UK Government ‘s policy has been to supply a financial stimulation by increasing disbursement on big public undertakings so as to shoot money into the economic system which will filtrate down through all sectors ( McFall, 2008 ) .

Another advantage of the populace sector is its transparence and openness during the stamp phase. While the public sector may be susceptible to mal-practice, building companies know that they will be impartially assessed and receive feedback under new ordinances.

Both interviewees felt that supercharging the supply concatenation can offer the best chance for contractors to take down their stamp monetary value. Material costs and rewards have reduced and along with advanced merchandises which contractors can utilize to follow their patterns, improved stamp monetary values can be submitted for public sector contracts.

The largest client for the building industry at present is doubtless the populace sector and this is discussed by RICS in their 3rd one-fourth study for 2009 when they use the headline, “ Public sector work loads continue to back up building activity ” , ( RICS, 2009 ) .

2. Adoption of New Practices Due to Reduced Tenders Available

Contractors have realised the demand to accommodate, innovate and better due to less stamps being available and an increased competition for these. This corresponds to the research hypothesis of the building industry following and bettering in the last figure of decennaries and that it will go on to hold to make so.

Below cost tendering is being employed by contractors in an attempt to win contracts but both Whitten ( 2009 ) and Scully ( 2009 ) argue the point that this is unsustainable and will increase the hazard of contractors confronting insolvency which is why contractors have looked to do nest eggs through squashing their supply concatenation to guarantee the best stamp monetary value.

Both interviewees drew attending to the handiness of fewer stamps due to the reluctance of fiscal establishments to supply private clients with financess.

3. Increase Emphasis on Client

This factor can be traced back to Latham ( 1994 ) , where he sought to accomplish a “ win-win ” outlook between the client and contractor. Awareness and competition between contractors has allowed the client to go more advanced and to seek betterments within the industry to run into there demands ( Yisa, Ndekugri & A ; Ambrose 1996, pp.51 ) .

Many contractors have spent important clip and resources bettering their PQQ in order to make the following phase of a undertaking. Interviewee No.2 highlighted the importance of early client engagement which allows nest eggs for both the client and contractor. Clients typically look to preferable bidders who they know from old experience or through repute can present. Interviewee No.1 described how some contractors focus a portion of their undertaking mix on smaller undertakings which allows a fast cashflow and decreased hazard.

4. Price vs. Quality

The industry broad displacement from “ lowest monetary value wins ” outlook to “ multi standards choice ” has been slowed down with the oncoming of the economic recession. Edum-Fotwe & A ; McCaffer ( 1999 ) discussed how tendering transformed from the 1960 ‘s whereby private and public occupations were awarded entirely on competitory tendering to a state of affairs whereby a assortment of issues were evaluated.

However more late, both interviewees highlighted how below cost tendering has been adopted by many contractors as many clients have sought to utilize their laterality to get a better trade ( Woods & A ; Ellis, 2005, pp.321 ) .

There has been increased accent on determination to tender with the location of a undertaking an built-in factor. Where houses once earlier would of put up a new office in an attempt to win a contract they now concentrate on undertakings which are located nearby in an attempt to cut down overhead costs.

Value technology involves bettering value for money by guaranting that the concluding design meets demands without over-specification, at the lowest possible cost ( Cooke & A ; Williams, 2009 ) .

5. Overall Shift in Tendering Practices

Edum-Fotwe & A ; McCaffer ( 1999 ) discourse how tendering has transformed from the 1960 ‘s whereby private and public occupations were awarded entirely on competitory tendering to a state of affairs whereby a assortment of issues are evaluated. There has been an industry broad displacement from “ lowest monetary value wins ” outlook to a “ multi standards choice ” .

Naoum ( 2003, pp.72 ) goes into farther item by sketching the disadvantages of utilizing price-based competitory tendering. The traditional signifiers of contract have been adapted ( JCT 98 standard signifier – JCT 2005 ) to suit alteration in the industry but the Latham study regarded the NEC contract as holding the best potency for accomplishing a positive result for all the stakeholders, ( Cooke & A ; Willams, 2009, pp.7 ) .

Latham ( 1994 ) proposed that considerable nest eggs can be made by cut downing confrontations between contractors and clients so as to better the public presentation of the design and building stage.

Below cost tendering goes against this position as it encourages contractors to look for significant fluctuations so as to interrupt even or do a net income.

Kometa et Al, ( 1996, pp.273 ) evaluate the demand for the clients fiscal stableness to be discussed in greater item. They draw attending to the hazard of late payments or client insolvency. Interviewee No.1 remark ted that ;

“ The client will hold to demo, for illustration, that they are organised and look to be an efficient procurance authorization. In a recession we will go a more discerning bidder as hard currency is tighter and undertakings more sought after. ”

5.3 Regression Modelling

Multiple arrested development is an extension of simple arrested development as it allows several or more forecasters to be used ( Field, 2005 ) . For this analysis it was decided to make a sum of four arrested development theoretical accounts which are summarized overleaf.

The first theoretical account ( B ) used No.40 ; “ Your company will last the economic recession ” , as the dependant variable with the 11 factors which were extracted through the factor analysis as the independent variables.

The 2nd theoretical account ( degree Celsius ) used No.39 ; “ Overall the economic recession has had a negative impact on tendering your patterns ” , as the dependant variable with the 11 factors which were extracted through the factor analysis as the independent variables.

The 3rd theoretical account ( vitamin E ) used No.39 ; “ Overall the economic recession has had a negative impact on tendering your patterns ” , as the dependant variable with the 30 eight original factors as the independent variables.

The 4th theoretical account ( degree Fahrenheit ) used No.40 ; “ Your company will last the economic recession ” , as the dependant variable with the 30 eight original factors as the independent variables.

The consequences for theoretical account ( vitamin E ) and ( degree Fahrenheit ) will be explained in greater item as they produced the best consequences utilizing the original 30 eight factors as opposed to the 11 factors which were found through the factor analysis.

5.3.1 Regression Model ( vitamin E )

As shown in the old page and below in Table 5.5, four possible theoretical accounts were produced for theoretical account ( vitamin E ) . The coefficient of finding ( R­2 ) will be used to judge the prognostic suitableness of tantrum of the theoretical account. It gives the proportion that “ Overall the economic recession has had a negative impact on tendering your patterns ” , which is accounted for by the independent variables ( extracted factors ) , reflecting the overall truth of the anticipations.

The arrested development theoretical account five was chosen as it has the highest value for R­2 of 0.582. This means that the theoretical account can explicate 58 % of the discrepancy in the end product. The adjusted R­2 indicates how good the theoretical account generalizes and is equal being as it is 0.582 – 0.536 = 0.054.

The standard mistake of estimation with a value of 0.69713 shows that scattering for the arrested development theoretical account ‘s anticipation power is mean. The Durbin Watson informs us about whether the premise of independent mistake is well-founded and should be below and shut to two. As our value is somewhat over two at 2.252 it implies that there is a negative correlativity between next remainders.

The analysis of discrepancy ( ANOVA ) in Table 5.6 trials whether the theoretical account is a important tantrum of the informations overall and should be less than 0.05 significance degree. The F value represents the ratio of the betterment in anticipation that consequences from suiting the theoretical account, comparative to the inaccuracy that still exists in the theoretical account ( Field, 2005 ) . In this instance we have an F of 12.6 and at significance degree of 0.000.

5.3.2 Regression Model ( degree Fahrenheit )

As shown in the old page and below in Table 5.7, five possible theoretical accounts were produced for theoretical account ( f ) . The coefficient of finding ( R­2 ) will be used to judge the prognostic suitableness of tantrum of the theoretical account. It gives the proportion that “ Your company will last the economic recession ” , which is accounted for by the independent variables ( extracted factors ) , reflecting the overall truth of the anticipations.

The arrested development theoretical account figure five was chosen as it has the highest value for R­2 of 0.678. This means that the theoretical account can explicate 68 % of the discrepancy in the end product. The adjusted R­2 indicates how good the theoretical account generalizes and is equal being as it is 0.678 – 0.632 = 0.046.

The standard mistake of estimation with a value of 0.33362 shows that scattering for the arrested development theoretical account ‘s anticipation power is low. The Durbin Watson informs us about whether the premise of independent mistake is well-founded and should be below and shut to two.

As our value is somewhat over two at 2.023 it implies that there may be a negative correlativity between next remainders. The analysis of discrepancy ( ANOVA ) in Table 5.9 trials whether the theoretical account is a important tantrum of the informations overall and should be less than 0.05 significance degree.

The F value represents the ratio of the betterment in anticipation that consequences from suiting the theoretical account, comparative to the inaccuracy that still exists in the theoretical account ( Field, 2005 ) . In this instance we have an F of 14.74 and at significance degree of 0.000.

The tabular array overleaf shows the elaborate optimal arrested development consequences consisting the arrested development coefficients ( & A ; szlig ; ) , standard mistake, t-results and collinearity statistics. All the five factors were statistically important forecasters of whether the economic recession has had a negative impact on your tendering patterns ( less than 0.05 ) .

The VIF which indicates whether a forecaster has a strong additive relationship with other forecasters bespeaking multicollinearity, should be less than 1 for a good theoretical account while the tolerance statistic should be greater than 1. Analysis of the consequences in Table 5.7 indicate that multicollinearity may be biasing the arrested development theoretical account as none of the tolerances are above 1 and none of the VIF values are below 1.

6 Discussion

This chapter will incorporate a treatment of the critical factors which have emerged from the qualitative and quantitative consequences and informations. The overall deduction of the critical factors for the building industry will so measure.

6.1 Critical Factors

Arrested development theoretical account ( vitamin E ) and ( degree Fahrenheit ) produced the best consequences and tied in best with both the literature reappraisal and cognitive function.

6.1.1 Regression Model ( vitamin E )

Arrested development theoretical account ( vitamin E ) which used “ Overall the economic recession has had a negative impact on tendering your patterns ” as the dependant variable. Model No.4 produced the highest discrepancy value with 58 % and the four factors which it contained listed below ;

  1. Material monetary values have increased while stamp monetary values have decreased.
  2. Contractors tendering for smaller undertakings to guarantee fast cashflow.
  3. There is an increased exposure to put on the line for contractors.
  4. There is a alteration from traditional procurance to other signifiers.

These factors relate back to research inquiries Numberss 2 and 3 which raise the inquiry of what patterns contractors are using and how a alteration in procurance methods been used to better tendering patterns in building.

The first factor above was discussed by Whitten ( 2009 ) and Scully ( 2009 ) as they both raised the issue of decreases in stuff and works costs being exceeded by the bead in stamp monetary values.

In order to win contracts they must therefore usage below cost tendering which is unsustainable and will increase the hazard of contractors confronting insolvency. Insolvencies are predicted to happen foremost among contractors who tender right but fail to win the contract and so among those who win the contract with unsustainably low commands ( Whitten, 2009 ) . Interviewee No.2 described how contractors are measuring clients at length in order to determine the hazard involved in come ining a contract with them.

The issue of tendering for smaller undertakings to guarantee a fast cashflow is good founded as many contractors who are doing a net income are still registering for settlement as they do non hold adequate hard currency available to pay their debts as they fall due. By bettering the cashflow they have less money tied up in long term undertakings which may hold a keeping. Besides it allows contractors to keep onto valuable and experient staff who may otherwise hold to be made excess and allows the compa

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