Survival Factors for Subcontractors in Economic Downturns

Abstract

were carried out, resulting in the identification of eight factors for subcontractor survival: project 27 delivery method, demand, financial capital, relationship assets, managerial assets, human assets, 28 legal framework, and geographic scope. The project delivery method used by the owner and also by 29 the main contractor is mainly based on price. As a result, the subcontractors' bids get lower, making 30 them unsustainable in the long run. Furthermore, subcontractors do not get financial support from 31 banks easily in order to cover their additional financial costs. These facts push subcontractors to get 32 a guarantee of payment by the main contractor, while subcontracting companies may even ask for 33 payments in advance. Subcontractors also seek long-term relationships with the contractor. These 34 trusting relations are very often a prerequisite to qualify and bid for contracts. Subcontractors have 35 to continuously improve, plan ahead and adapt quickly to the new environment. Therefore, 36 subcontractors must remain flexible and maintain a lean hierarchical organization. Doing so makes it 37 is easier for subcontractors to compete in both their native markets, as well as abroad. To this end, 38 the most successful subcontractors have become international during the expansion phase of the 39 economic cycle; many of them went abroad with the help of a contractor from their home country. 40 41 42

Management of Time and Cost Contingencies in Construction Projects: A Contractor Perspective

“…Company B procures its contracts in competitive bids to build the facility. Company B generally works in a traditional design-bid-build delivery environment, which is the most common strategy in the Spanish construction industry (de la Cruz et al 2006;Pellicer, Victory 2006;Oviedo-Haito et al 2014;Pellicer et al 2016).…”

Scoring rules and abnormally low bids criteria in construction tenders: a taxonomic review

“…Despite its widespread use, however, the traditional lowest bid method is considered by many to be a recipe for trouble (Holt et al, 1994a;Williams, 2003), especially in an oversupplied market (Hatush and Skitmore, 1998;Oviedo-Haito et al, 2014). Factors such as shortage of contracts, difficulties in prescribing and measuring the quality of work, uncertainty of future costs and potential for claims, encourage a situation where the lowest bid is often not the best bid in terms of price (Hatush and Skitmore, 1998;Wong et al, 2001), time (Shr and Chen, 2003;Lambropoulos, 2007) and quality (Molenaar and Johnson, 2003;Asker and Cantillon, 2008).…”

Scoring Rules and Competitive Behavior in Best-Value Construction Auctions

“…The lowest bid auction method provides the best incentive for cost reduction (Bajari and Tadelis However, despite of its common use, the lowest bid auction method is considered by many to be a recipe for trouble (e.g. Holt et al 1994a;Latham 1994;Williams 2003), especially when there is little work around and bidders are shaving their bids (Hatush and Skitmore 1998;Ioannou and Leu 1993;Oviedo-Haito et al 2014). In fact, many previous studies point to the lowest bid often not being best bid in terms of final cost (Dawood 1994;Hatush and Skitmore 1998;Wong et al 2001), time (Lambropoulos 2007;Shen et al 2004;Shr and Chen 2003), quality (Asker and Cantillon 2008;Choi and Hartley 1996;Molenaar and Johnson 2003), or risk (Finch 2007).…”