Ten basic factors to identify suitable subcontractors for construction projects

With unpredictable workloads and a need for a multitude of specialized skills, many main contractors rely heavily on subcontracting to reduce their risks (Bresnen et al., 1985; Beardsworth et al., 1988). This is especially the case In Hong Kong, where the average direct labour content accounts for only around 1% of the total contract sum (Lai, 1987). Extensive usage of subcontracting is also reported in many other countries, including the UK (Gray and Flanagan, 1989) and Japan (Bennett et al., 1987). In addition, and depending upon the scale and complexity of works, it is not uncommon for subcontractors to further sublet their works to lower tier(s) subcontractors. Richter and Mitchell (1982) argued that main contractors can obtain a higher profit margin by reducing their performance costs by subcontracting work to those who have the necessary resources to perform the work more efficiently and economically. Subcontracting is also used strategically to allow firms to employ a minimum work force under fluctuating demand (Usdiken and Sözen, 1985). Through subcontracting, the risks of main contractors are also reduced, as errors in estimating or additional costs caused by delays or extra labour requirements can be absorbed by the subcontractors involved (Woon and Ofori, 2000). Despite these benefits, the quality of work can suffer when incapable or inexperienced subcontractors are employed. Additional problems also exist in the form of bid shopping, unclear accountability, and high fragmentation (Palaneeswaran et al., 2002). A recent CIB TG 23 International Conference, October 2003, Hong Kong report produced by the Hong Kong Construction Industry Review Committee (CIRC) points to development of a framework to help distinguish between capable and incapable subcontractors (Tang, 2001). This paper describes research aims at identifying and prioritising criteria for use in such a framework.