Are Tier 1 Contractors Making Their Money Out of Wasteful Procurement Arrangements?

Saad Sarhan1, Christine Pasquire2, Emmanuel Manu3 & Andrew King4

1PhD candidate, School of Arch, Design and Built Env, Nottingham Trent University, Burton St, NG1 4 BU, UK +44 1159 418418 Sarhan_com@hotmail.com
2Professor, School of Arch, Design and Built Env, Nottingham Trent University, Burton St, NG1 4 BU, UK +44 1159 418418, Christine.pasquire@ntu.ac.uk
3Dr, School of Arch, Design and Built Env, Nottingham Trent University, Burton St, NG1 4 BU, UK +44 1159 418418 Emmanuel.manu@ntu.ac.uk
4Dr, School of Arch, Design and Built Env, Nottingham Trent University, Burton St, NG1 4 BU, UK +44 1159 418418 Andrew.king@ntu.ac.uk

Abstract

The UK Government challenged construction to achieve 50% faster delivery and a 33% reduction of clients' capital costs by 2025 – prevailing business models won't meet these targets. Eliminating waste from construction design and delivery as advocated by lean ideals is therefore a necessary step towards these goals. However, waste understood simply as the improvement of current processes rather than fundamental system redesign will not be enough. Obtaining a better understanding and conceptualisation of waste in construction is therefore becoming more crucial. One aspect of this is to challenge the apparent coherence of prevailing procurement practices generated by the institutional, organisational, and commercial environments that surround the design and delivery of construction projects. This paper contributes to this by examining Tier 1 contractors and presents examples of practices that open debate on how to challenge prevailing procurement models for construction. Through literature review and interviews, the study discusses the factors influencing the ‘Principal-Agent’ relationship demonstrating how procurement arrangements often mirror institutional forces. These forces do not necessarily guarantee better value services, they are more likely to serve the interests of large industry players with the bargaining power to create new rules (North, 1994). A radically different delivery model, where the client intends to eliminate the management fees and confrontational behaviours of their Tier 1 contractors is described.

Keywords

Waste, procurement, business models, Tier-1 contractors, agency theory.

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Reference

Sarhan, S. , Pasquire, C. , Manu, E. & King, A. 2016, 'Are Tier 1 Contractors Making Their Money Out of Wasteful Procurement Arrangements?' In:, 24th Annual Conference of the International Group for Lean Construction. Boston, USA, 20-22 Jul 2016.

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