How contractors price risk in bids: theory and practice

Formal and analytical models that contractors can use to assess and price project risk at the tender stage have proliferated in recent years. However, they are rarely used in practice. Introducing more models would, therefore, not necessarily help. A better understanding is needed of how contractors arrive at a bid price in practice, and how, and in what circumstances, risk apportionment actually influences pricing levels. More than 60 proposed risk models for contractors that are published in journals were examined and classified. Then exploratory interviews with five UK contractors and documentary analyses on how contractors price work generally and risk specifically were carried out to help in comparing the propositions from the literature to what contractors actually do. No comprehensive literature on the real bidding processes used in practice was found, and there is no evidence that pricing is systematic. Hence, systematic risk and pricing models for contractors may have no justifiable basis. Contractors process their bids through certain tendering gateways. They acknowledge the risk that they should price. However, the final settlement depends on a set of complex, micro-economic factors. Hence, risk accountability may be smaller than its true cost to the contractor. Risk apportionment occurs at three stages of the whole bid-pricing process. However, analytical approaches tend not to incorporate this, although they could.

Critical success factors for competitiveness of contractors: A China study

Gaining or maintaining a “contractor's” competitive advantage is not easy as it is determined by a large number of factors. Identification of critical success factors (CSFs) allows one to reduce the vast number of factors to some manageable few but vital ones. Based on the CSFs, contractors' limited resources such as money and manpower can be allocated and aligned appropriately for yielding a maximum outcome of overall competitiveness. This paper describes the CSFs identified from a survey study carried out in Mainland China. The ranking analysis of the survey results shows that 35 factors are rated as critical for determining the competitiveness of a contractor. Factor analysis reveals that the 35 CSFs identified can be grouped into eight clusters, namely, project management skills, organization structure, resources, competitive strategy, relationships, bidding, marketing, and technology. The CSFs in this study provide a vehicle for guiding a contractor in managing its resources in order to improve competitive advantage. The study also provides insights into the management of competitiveness for contractors that are operating in the particular context of the Chinese construction industry.

The evolution of indigenous contractors in Ghana

This paper provides some preliminary insights into the emergence and development of indigenous general contractors in Ghana. General contracting is the means by which an individual or organisation takes responsibility for supplying all of the materials, labour, equipment and services necessary for the construction of a project. Whereas the development of general contracting in places like the UK is well documented, the evolution of contractors in Ghana is not clearly articulated in the literature. Therefore, the main question in this paper is: How did indigenous contractors evolve in Ghana? To examine and analyze the research question, a literature review on similar developments elsewhere was first carried out. This was followed by discussions and unstructured interviews with experienced construction practitioners in Ghana most of whom were Quantity Surveyors. Most interviewees narrated their knowledge of contractor development in Ghana dating back to around 1945. From the explanations given, it was possible to develop a general understanding of the research question and to make a qualitative interpretation of the respondents’ comments and to draw some conclusions. General contractors emerged rapidly in the Gold Coast (now Ghana) shortly after World War II. Most were Italian master craftsmen in Ghana who were capitalized by the British colonial government to develop infrastructure in the Gold Coast following devastating effects of the war. Some of the indigenous people learned from the Italians and also established construction firms. Thus, general contracting in Ghana has a relatively short history in comparison to countries like Britain where the profession developed rapidly in the early part of the 19th century in response to the industrial revolution. Although they may possess sufficient technical expertise, many indigenous contractors in Ghana today lack the capacity to carry out major projects because of low capitalization and poor organisational structures. The current construction market in Ghana is dominated by foreign contractors. To become major players in the market, indigenous Ghanaian contractors should build strong organisational structures and pursue mergers and joint venturing to boost their financial, technical and managerial capacity.

Health and safety on construction sites in Ghana

The state of health and safety on construction sites in Ghana was investigated using first hand observation of fourteen (14) construction project sites in 2009 and 2010. At each site, the construction project, workers and the physical environment of the site were inspected and evaluated against health and safety indicators taken from the literature. The results reveal a poor state of health and safety on Ghanaian construction sites. The primary reasons are a lack of strong institutional framework for governing construction activities and poor enforcement of health and safety policies and procedures. Also, Ghanaian society does not place a high premium on health and safety of construction workers on site. Interviews with workers indicated that injuries and accidents are common on sites. However, compensation for injury is often at the discretion of the contractor although collective bargaining agreements between Labour unions and employers prescribe obligations for the contractor in the event of injury to a worker.

The price of risk in construction projects: contingency approximation model (CAM)

Little attention has been focussed on a precise definition and evaluation mechanism for project management risk specifically related to contractors. When bidding, contractors traditionally price risks using unsystematic approaches. The high business failure rate our industry records may indicate that the current unsystematic mechanisms contractors use for building up contingencies may be inadequate. The reluctance of some contractors to include a price for risk in their tenders when bidding for work competitively may also not be a useful approach. Here, instead, we first define the meaning of contractor contingency, and then we develop a facile quantitative technique that contractors can use to estimate a price for project risk. This model will help contractors analyse their exposure to project risks; and help them express the risk in monetary terms for management action. When bidding for work, they can decide how to allocate contingencies strategically in a way that balances risk and reward.

De-agrarianization, re-agrarianization and local economic development: re-orientating livelihoods in African artisanal mining communities

This article contributes to the debate on livelihood diversification in rural sub-Saharan Africa, focusing specifically on the growing economic importance of artisanal and small-scale mining (ASM) in the region. The precipitous decline in the value of many export crops and the removal of subsidies on crucial inputs such as fertilizers have made smallholder production unviable, forcing many farmers to ‘branch out’ into non-farm activities to supplement their incomes. One of the more popular destinations for poor farmers is the low-tech ASM sector which, because of its low barriers to entry, has absorbed millions of rural Africans over the past two decades, the majority of whom are engaged in the extraction of near-surface mineral deposits located on concessions that have been demarcated to multinational corporations. The efforts made hitherto to control this illegal mining activity, both through force and regulation, however, have had little effect, forcing many of the region’s governments and private sector partners to ‘re-think’ their approaches. One strategy that has gained considerable attention throughout the region is intensified support for agrarian-orientated activities, many of which, despite the problems plaguing smallholder agricultural sector and challenges with making it more economically sustainable, are being lauded as appropriate ‘alternative’ sources of employment to artisanal mining. After examining where artisanal mining fits into the de-agrarianization ‘puzzle’ in sub-Saharan Africa, the article critiques the efficacy of ‘re-agrarianization’ as a strategy for addressing the region’s illegal mining problem. A case study of Ghana is used to shed further light on these issues.

Brand protection and the globalization of British business

In expanding on earlier analyses of the evolution of multinational business that have drawn from concepts of competition and innovation, this study examines the strategies used by British multinationals, between 1870 and 1929, to protect the global reputation of their brands, which were crucial to their survival and success. Even after the passage of new trademark legislation in 1876, enforcement of trademarks remained expensive, and often firms preferred to negotiate, rather than to prosecute violations. Many trademark imitators were based in the newly industrializing countries of the time—the United States, Germany, and Japan—and were part of the British export supply chains as licensees, franchisees, or wholesalers. British firms responded to infringements by lobbying governments, appointing local agents to provide intelligence, and collaborating with other firms.