Market structure of the construction industry in Hong Kong

This study examines the market structure of four different sectors within the construction industry in Hong Kong. Market concentrations, expressed in terms of Herfindahl-Hershamann indices (HHIs) and number equivalents (HNEs), are calibrated for the top five contractors and compared with those of the local property industry. The study reveals the following ascending order of market concentrations: private building, public building, property development, and civil engineering. Our explanation is that technological and capital requirements have imposed a strong barrier to entry into the civil engineering sector, resulting in a concentrated market. Conversely, the lack of technological demand and supply in the private building sector has led to easy market entry and exit. Building contractors thus compete intensely on cost reduction rather than technology improvement, leading to poor construction safety and product quality. The paper concludes that the Government, being a major client of construction works and regulator of the industry, can assume a more active role in promoting the overall competitiveness of indigenous local contractors in Hong Kong.     

Genetic algorithm model in optimizing the use of labour

The construction industry is characterized by the existence of multiple trades and crafts. With the existence of multiple-tiers of labour-only-subcontracting in Hong Kong, tradesmen are normally assigned to tasks of a narrowly defined skill. Lately, there has been a call for the adoption of a directly employed labour scheme by the Hong Kong Housing Authority and the public works departments in Hong Kong in order to improve both safety and quality. However, current industry practice has hindered the adoption of directly employed labour, which requires assigning tradesmen to broadly defined task groupings. In implementing the scheme, the first thing to be resolved is how to maximize the levels of use of workers, because that is the major financial incentive to encourage contractors to adopt the directly employed labour policy. This coupled with the shortage of some skilled craft workers call into question the traditionally accepted ‘single-skilled’ or ‘single-task’ approach in labour deployment. A genetic algorithm model is developed to optimize the labour deployment and practical examples are presented. The optimization results are very promising, confirming the practical application value of the model.     

The capital budgeting evaluation practices (2014) of contractors in the Hong Kong construction industry

Capital budget evaluation plays a crucial role in financial management. This places a firm in a competitive position. Recent development points to the need for implementing capital budgeting in construction organizations due to the capital-intensive nature of construction business. The aim here is to investigate the trends in the practice of capital budget evaluation among construction contractors operating in Hong Kong over a 20-year period. A longitudinal survey approach is used; four cross-sectional surveys were conducted between 1994 and 2014. The findings indicate that ‘formal financial evaluation’ is the most common technique used for capital budget evaluation. In addition, the practice of capital budget evaluation is more pronounced in the large-sized firms. A comparative analysis of the results of the four surveys reveals that there are variations in the degree and frequency of use of capital budget evaluation techniques over the study period. Further research is needed to understand the challenges associated with the use of sophisticated capital budget evaluation techniques in the construction industry of Hong Kong.     

Construction site safety in Hong Kong

The structural characteristics of the Hong Kong construction industry, most notably its elaborate system of subcontracting and the casual basis on which labour is employed, pose serious problems for safety managers. By international standards, Hong Kong's construction industry performs very badly in the area of safety. Recent work in the UK and Finland highlights the effectiveness of behavioural techniques to improve safety performance on construction sites. Work is currently under way to test these techniques in the Hong Kong construction setting. The structural properties of the Hong Kong construction industry have been taken into consideration and labour commitments to the group and to the organization have been identified for additional consideration in research. It is expected that these variables will intervene in the application of behavioural techniques to determine their effectiveness. This paper investigates the theoretical background to commitment at the group and organizational level and presents a site level research model which is illustrative of the possible effects that group and organization level commitment may be found to have on the use of behavioural techniques.     

Subcontracting and its ramifications: A survey of the building industry in Hong Kong

There has been increasing concern on excessive subcontracting. This study reviews the case of Hong Kong, in particular the consequence of high & growing rate of subcontracting and what project managers can do. Based on statistics and elemental cost analyses, we find that as much as 80% of the value of building works is undertaken by small subcontractors. Whilst subcontracting provides the industry with specialized services as well as organizational and managerial flexibility, it has also been attributed to the labour intensity and the lacklustre performance of the industry. It relies on project manages to make the best use of what subcontracting has to offer, whilst avoiding its pitfalls. An assessment of the extent and issues of subcontracting helps us understand how project management could enhance the performance of the projects and then the industry.     

Monitoring financial health of contractors at the aftermath of the Asian economic turmoil: a case study in Hong Kong

The whole construction industry (contractors, consultants and suppliers) is suffering from business shrinking under the prevailing deflationary economy in Hong Kong. Local contractors are facing tremendous financial problems. The financial situation of a typical local contractor has been analysed for the years since 1997 – the Asian Economic Crisis. By using the financial ratios together with one of Altman's distress models, it is possible to monitor and assess the financial health of contractors. Based on the results of the case study, the financial health of the contractor under study is found satisfactory. In addition to this quantitative analysis, it is advisable for local contractors to conduct a strategic review for their construction industry and their business environment so as to improve their financial performance in both the near future and longer term.     

Quest for continuous quality improvement for public housing construction in Hong Kong

With mandatory implementation of the ISO 9000 quality system by the Housing Authority in Hong Kong, most construction firms there now claim to have initiated quality systems in their processes as defined in their quality manuals. In addition, an objective quality measuring yardstick, the Performance Assessment Scoring Scheme (PASS), has been administered by the Housing Authority of Hong Kong to monitor the performance quality of contractors. These two measures, coupled with the two other contractual requirements stipulating the use of mechanized formwork and precast facade units, are directed towards achievement of a desired quality standard. However, the PASS analysis has revealed that the general level of quality has not improved significantly and the expected continuous improvement in construction quality has not been realized over a specific time period. Quality appears far better on paper than does the actual work on site. This suggests that quality management in the construction setting is far more difficult to achieve than it is in other industries. This paper explores possible reasons for failure in the quest for quality in public housing construction, and proposes changes needed before the vision of continuous quality improvement can be realized.     

Harvesting and Managing Knowledge in Construction

Foreign construction firms dominate the major projects in most developing countries as a result of deficiencies in indigenous construction capacity. A plethora of measures have been formulated and implemented to promote development of domestic contractors in these countries, but most attempts have achieved little success. This paper, arising from a larger study on management training needs of contractors in Nigeria, describes findings on constraints on indigenous contractors' performance in the Nigerian industry. Contractor-development programmes perceived as relevant and appropriate to improve their performance in the industry are also reported. The views of indigenous contractors and professionals were compared. There was a strong agreement between both groups on the major constraints in the industry and on the measures perceived as most important for the development of Nigerian contractors. Problems emanating from the business environment were generally perceived by both groups as the most severe constraints. Contractor-development programmes, perceived as very important by both groups, are also the measures required to ameliorate the most important constraints identified: obtaining interim payments, uncertainties in supplies and prices of materials, inadequate access to capital, plant and equipment. Contractor development is inevitably an integral part of a construction industry development programme, given the nature of constraints and development needs emphasized by both groups. The focus therefore should be on establishing a comprehensive programme for the development of the construction industry. More attention should be placed on contractor training to promote management development of trained construction professionals, now emerging as the new crop of construction entrepreneurs.     

城市跨界发展与融合——港深案例研究

探讨港深两地跨界城市发展与城市融合的进程。香港和深圳已建立了紧密的经济融合,制度层面上的融合也有一定的进展,但社会层面上的融合显著滞后。香港和深圳居民对边界另一边的对方缺乏充分认识。超过57%的香港和深圳居民不太熟悉或非常不熟悉另一个城市。超过四成的香港和深圳受访者认为价值观的差异是构建港深大都会的最主要的障碍。港深大都会的跨界社区尚未融合。香港和深圳在许多方面存在差异,造成两地之间难以实现完全的融合。港深两地有必要在"一国两制"的原则下,以提升两地城市竞争力与方便居民跨界居住与工作为出发点,推动城市跨界发展与融合。     

Remuneration and absenteeism on a large construction site

While scholarly consensus is that construction absenteeism is a serious and widespread problem, aggregate US and Canadian data show construction absenteeism rates substantially below cross-industry averages. While construction absenteeism research focuses on workplace culture and norms, contractors continue to manage absenteeism primarily as an individual problem. While remuneration and labour market conditions are generally acknowledged to influence construction absenteeism, little research has focused on these factors. High labour turnover in construction resolves the first two conundrums. Adapting to higher labour turnover by limiting investment in firm-specific human capital, contractors are quicker to fire absent workers reducing construction’s measured absentee rates. Higher labour turnover also constrains contractors’ ability to shape workplace culture while facilitating the individual treatment of absentee workers. The construction absentee literature’s methodological focus on workplace surveys explains the absence of research on labour market conditioning of construction absenteeism. This case study using payroll data from a large, unionized US industrial construction site shows not only that absenteeism leads to discharge, but also, that absenteeism is a precursor of both quits and discharges for reasons other than absenteeism. Furthermore, a 1 percentage point increase in the unemployment rate reduced the probability that a worker would be fired for absenteeism by 48%; a $100 increase in weekly overtime pay reduced a worker’s probability of being fired for absenteeism by 27% and a $100 increase in per diem or travel pay reduced a worker’s probability of being fired for absenteeism by 75%.     

A study of the factors affecting construction durations in Hong Kong

This is the second phase of an investigation into the significant factors influencing construction duration of projects in Hong Kong. The results of the first phase led to the conclusion that larger samples were justified to investigate further the discerned relationships. Expanded samples were obtained in this second phase by adding some reported data from Hong Kong projects to the original surveyed sample. The second phase of this study also further investigates the relationships between different project characteristic variables such as the construction duration, construction cost, total gross floor area and the number of storeys in the case of buildings. Moreover, a case study on plant utilization level and site labour productivity was carried out on a building site to explore the ‘micro-factors’ that affect construction durations. The findings are of importance to all construction industry participants as the derived models help to estimate the construction duration of a project on the basis of significant macro project parameters. Additionally, the results of the case study indicate the contribution of significantly variable site productivity levels to overall construction duration and suggest an agenda for future investigations. A third phase of this study is planned incorporating more detailed data collection and analysis of significant factors, as well as international comparisons where possible.     

COMMERCIAL BANK LENDING PRACTICES AND THE DEVELOPMENT OF BLACK OWNED CONSTRUCTION COMPANIES

ABSTRACT: Although the construction industry has been a tremendous growth industry for black entrepreneurs in recent years, black owned construction firms, on average, are less than half as large as those owned by nonminorities. Previous findings suggest that limited access to financial capital, particularly bank loans, has restricted the size of black owned businesses. Examination of nationwide random samples of construction companies reveals that black firms are treated differently by commercial banks than nonminority companies that have otherwise identical traits. Undercapitalization, in turn, is shown to increase the likelihood of firm discontinuance. Alleviation of undercapitalization problems would promote the development of black owned businesses in the construction industry.     

Towards an organizational culture framework in construction

Organizational culture gives identity to an organization. Notwithstanding the individuality of the staff members, their actions are collectively bound by the organizational culture. A review of the literature in this topic reveals that despite a number of organizational culture models have been developed, these are mainly for generic business settings and there has yet one developed for construction contracting organizations. This paper reports a study for this purpose conducted in Hong Kong. Firstly, artifacts of organizational culture were long-listed through a literature review. Construction professionals working for developers, consultant offices and contractors assessed the appropriateness of using these artifacts to identify organizational culture in construction. Through a principal component factor analysis, these artifacts are arranged into a seven-factor organizational culture framework. The seven factors are ‘Goal settings and accomplishment’, ‘Team orientation’, ‘Coordination and integration’, ‘Performance emphasis’, ‘Innovation orientation’, ‘Members’ participation’ and ‘Reward orientation’. The ANOVA result suggests no significant difference in the rankings across respondents working for developers, consultants and contractors. The relative importance rankings among these factors were also assessed according to their significance scores. The findings of the study suggest that the construction contracting organizations in Hong Kong favor culture of clear goals with stability. They are less externally focused with a relatively lower emphasis on innovation. These findings suggest construction maintains a local industry mentality.     

Clients’ needs,wants and expectations from contractors and approach to the concept of repetitive works in the Northern Cyprus construction market

Intense competition existing in the construction market creates an industry that is dominated by the client groups. This paper provides insights into private clients’ needs, wants and expectations from contractor firms in the Northern Cyprus building construction market, by presenting survey findings of 91 clients regarding this issue. Moreover, it presents their perspective related to doing repetitive works with the same contractors in possible future works. The study has clearly confirmed the fact that the clients in the specified market place high emphasis on a wide variety of factors. The importance assigned to these factors varies according to the categories or characteristics of the clients within the private building construction sector. Another striking finding was the responding clients’ willingness to do possible repetitive works with the same contractors assuming that they are fully satisfied with the existing or past projects. This opportunity, if used properly by the contractor firms in this market, may be the key to beating the competition and lead to the easy path to increase a contractor firm's market share. Furthermore, it was found that the responding clients expect much more than quality, finishing on time and within budget for full satisfaction and continuing to do repetitive works. The importance and hence the contribution of a set of criteria related to achieving full client satisfaction, and leading to possible repetitive works is presented. Although it would not be reasonable to determine general strategies on just a single study, the contractor firms in the Northern Cyprus construction market will benefit from the framework given within this paper by recognizing what is important and essential to private building construction clients in particular situations and hence present the capabilities of the contracting or potential contracting organizations in ways that meet this to best advantage. Although the results given are based on input from the Northern Cyprus construction market, we believe that the contractor firms in other countries, who specialize in building works for private sector may also benefit from the findings or at least the approach of this research as well.     

Capital budget planning practices of building contractors in Hong Kong

This paper explores the current practice of capital budget planning and control in the Hong Kong (HK) construction industry, based on two surveys undertaken in 1994 and 1999. The aims of these surveys were to uncover the financial planning, monitoring and control procedures used by building engineering contractors in HK. The results of the current survey reveal that less than half of the respondents undertook any form of capital budget planning. The most common form of capital budget planning was a review of the minimum rate of return. Despite the low prevalence of planning, most respondents adopted some method of capital budget control, especially by way of monitoring project performance. The 1999 study was compared with a similar survey conducted in 1994. The results indicate that there was no significant improvement in capital budget planning practices over the five year period. In addition to these findings, this paper concludes with a classification of firms, according to their capital budget planning behaviour, using discriminant function analysis.     

The effect of client and type and size of construction work on a contractor’s bidding strategy

This paper offers a bidding strategy model for use by contractors as part of a more informed approach in selecting which contracts to bid for, and as a basis for determining the most appropriate mark-up level for various types and sizes of construction work and client types. Regression analysis is used in measuring a contractor’s competitiveness between bids (by using the lowest bid/own bid ratio) and within bids (by using the lowest bid/cost estimate ratio) according to type and size of construction work and client type. The model was tested on a large and reputable Hong Kong contractor. This particular contractor’s bidding behaviour was found to be largely unaffected by the type of construction work, but significantly affected by the client type and the size of the construction work. Three quadratic models (regressing lowest bid/cost estimate on the size of the construction work) are also successfully developed for projects from the private sector, the Hong Kong Government and the Hong Kong Housing Authority, respectively.     

Study of attitude changes in people after the implementation of a new safety management system: the supervision plan

The construction industry of Hong Kong has a very poor site safety record. The overall accident rate has gone down a little during the last few years, but the number of fatalities has risen dramatically. In the past, the Hong Kong Government adopted a laissez-faire approach in managing construction safety, hoping that market forces would regulate the safety performance. However, the approach has proved to be ineffective. Since 1986, the Government has taken a proactive approach in combating construction site safety, and has introduced a series of safety programmes, which consist of encouraged and mandatory schemes aiming at nourishing a proper safety culture in the construction industry. Recently, the Government decided to criminalize site accident cases by introducing a so-called ‘Supervision Plan’, aiming at changing the safety attitude and culture of construction practitioners. This paper applies an attitude-changing model, ‘reinforcement theory’, to predict the changing attitude of people in the construction industry. The results show that the attitude of construction practitioners in Hong Kong will change to be more positive when they receive more messages to confirm that people really are put into jail for negligence under the Supervision Plan.     

Client satisfaction and quality management systems in contractor organizations

The construction industry is predominantly project based and quality is one of the client's prime concerns in their construction projects. Many clients, especially those in the Hong Kong public sector, require their contractors to have a Quality Management System (QMS) certified under ISO9000. Also, several contractors as well as clients themselves voluntarily implemented an ISO9000-based QMS in their respective organizations in order to target the various benefits perceived from such initiative. It was considered timely and worthwhile to explore the effectiveness of ISO9000-based QMSs in the Hong Kong. This paper portrays the key findings from a focused study that relate to the client satisfaction aspects from implementation of the ISO9000-based QMSs in the contractor organizations.     

Forecasting construction durations for public housing projects: a Hong Kong perspective

The past thirty years have seen a great surge of international attention and discussion in the domain of construction time performance of building projects. Demand for residential construction has been continually increasing in Hong Kong since the 1950s, while an accelerated demand has been envisaged in the next few years up to 2001. This paper is based on the findings of the third survey in an investigation which aimed at determining a group of critical factors that affect construction durations of building projects in Hong Kong. This stage of the study attempted to generate standards (norms) for overall completion periods of public housing blocks, by modelling the durations of the primary work packages in the building construction process, i.e. piling, pile caps/raft, superstructure, EandM services, finishes and their respective sequential start-start lag times, in terms of the identified sets of critical factors (significant variables). Data from 15 case studies of standard New Cruciform type housing blocks was collected from the client and contractors. Multiple Linear Regression was applied in analyzing the project data and formulating a construction duration model. The forecasting performance of the model was next evaluated using an independent (new) set of project information from the client, in terms of a relative measure known as the Percentage Error. Both the general applications and drawbacks of the model are briefly presented and examined herein. The low values of percentage error (less than about ±10%) for overall construction durations confirmed that the model can be a reliable tool for predicting the construction durations of public housing projects in Hong Kong; and the research methodology used could well be extended to similar studies and duration forecasts in other sub-sectors in Hong Kong, as well as in other countries.     

Management contracting in Hong Kong

Despite technological advancement in building techniques, new construction tools, equipment, and plant, and a greater variety and better quality of construction materials, the construction industry is generally regarded as one making slow progress in productivity. Here the potential of management contracting as a contracting method is considered in depth. Analysis includes assessment of its fundamental features, cost-benefit analysis and practical applications. The feasibility of its adoption in Hong Kong is evaluated.