Civil Engineering Reference
In-Depth Information
projects of any size, where a main contractor engages a supply chain
consisting of a number of specialist fi rms to carry out the work.
The organisation of a construction programme is a complex arrange-
ment of businesses that form a team to deliver multiple contracts. Often
these contracts differ from tier 1 to tier 2; for example, a tier 1 contrac-
tor may be on an actual cost contract, while the tier 2 contractors are
more likely to be on a lump-sum type of subcontract. The team is
headed by the client body, which is responsible for deciding how the
project will be delivered.
Outsourcing and subcontracting
In virtually every industry, the outsourcing of non-core activities is
widespread. For example, McCarthy and Anagnostou (2004) view out-
sourcing as a common practice in manufacturing, where fi rms often
outsource a number of activities, including logistics, IT, accounting
functions and legal services. Where fi rms carry out upstream functions
they would otherwise have to purchase from lower tiers of the supply
chain, economists refer to it as vertical integration. Vertically integrated
fi rms are the exception in construction, owing to fragmentation and
specialisation even by main contractors. Much of the production process
is seen by specialist main contractors as outside their core activity, and
therefore the proportion of construction output that is outsourced in the
building industry by main contractors is very high.
Because there is perhaps less vertical integration in construction than
in most other industries, clients need to gain an appreciation of the
extent of outsourcing and the widespread use of subcontracting of the
many specialist fi rms in the building industry. Clients should there-
fore seek to have visibility and infl uence on these important aspects of
the value chain for delivery. The lack of vertical integration of fi rms has
led to the fragmentation of the construction production process. As a
result, many different and independent fi rms come together only at the
fi nal place of a product's delivery: the construction site, which is an
environment of ever-changing and uncontrollable conditions that add
to the variables of multi-organisational and multi-disciplinary inter-
face delivery. This disparate group of specialist fi rms is a signifi cant
part of the supply chain, which also includes the material and compo-
nent manufacturers and suppliers, who do not necessarily visit the
building site.
