Determining Guidelines for Lumper Option in Electricity Gang - Research Paper Example

DETERMINING CRITERIA FOR CONTRACTORS SELECTION IN ELECTRICITY COMPANY LITERATURE REVIEW By Name Course Instructor Institution City/State Date Determining Criteria for Contractors Selection in Electricity Company Literature Review Introduction Contractors in any engineering firm have an enormous impact on the successes of the projects; therefore, it is imperative to choose a qualified contractor. As argued by a number of scholars, a competent contractor should be part of the crucial conditions for a successful completion of any project. In view of this, a number of existing theoretical models or frameworks used in evaluating contractors have been reviewed. Basically, there are several practical criteria used in the selection of the suitable contractor, and the process of qualifying as well as investigating contractors is crucial in making sure that the projects are successful. As it will be evidenced in the literature review, prequalification process is considered a standard practice by the majority of companies because it makes sure that the capabilities and characteristics of the contractor meet the project requirements. The processes of objective and effective qualification serve the needs of both the contractors and the owners. This literature review focuses on how to determine criteria for contractors’ selection in an engineering firm. Literature Review Bid evaluation as discussed by Costa et al. (2007, 1) is a contractor selection process from numerous bidders. Using Rede Eléctrica Nacional (REN), a Portuguese Electric Transmission Company as the case study, Costa et al. (2007, 1) posit that the models for decision analysis presently utilised in the company for evaluating bids were created by means of decision conferencing process, which is backed by Measuring Attractiveness by a Categorical Based Evaluation Technique (MACBETH) software as well as multi-criteria approach. Basically, REN as the only Portuguese electricity transmission entity offers a number of contracts yearly; therefore Costa et al. (2007, 5) posit that models are always reused in related calls for tenders. For this reason, the criteria structuring needs significant care by concentrating on the created scales as well as developing models for value function rooted in qualitative pairwise evaluation decisions of desirability distinction. So as to achieve mission, REN normally awards contracts for different projects, supplies as well as external services, which adhere to European Union (EU) and national regulations associated with public calls for tenders. According to Costa et al. (2007, 7), the process of contracting starts with calls for tender, which is distributed only to pre-qualified suppliers or service providers; bid evaluation is defined as the process of selecting a contractor from numerous bidders. Investigating the bids attractiveness in comparison to the announced multiple- criteria during the call for tender is the main step during the contractor selection process. Costa et al. (2007, 5) in their study offered REN a socio-technical intervention that addresses the decision conferencing social aspects in combination with technical constituents for developing a model of multi-criteria bid evaluation by utilising MACBETH. In view of this, MACBETH has been described as an approach for interactive multi-criteria decision analysis utilised in building a numerical value model rooted in non-numerical) pairwise evaluation decisions. Calls for tender are always published by REN when upgrading the existing power lines, constructing new power lines as well as electrical facilities, procuring equipment, purchasing systems for power substations, or when undertaking engineering-related projects. All such forms of initiatives need that technical employee from various departments to be involved in the bids evaluation. For this reason, decision conferencing process that needs all relevant departments’ participants to be involved should be utilised in comprehensively analysing the present evaluation system with the intention of developing new models, given that it guarantees wider representation. In Costa et al. (2007, 3) study, a Working Group (WG) was created that included six executive managers of different departments chaired by Henrique Gomes. In this case, the discussions in the group were steered by a process consultant facilitator with the help of two decision analysts primarily in charge for running a software application known as M-MACBETH, which puts MACBETH approach into practice. Therefore, developing and using the new system for bid evaluation was supported by the M-MACBETH. According to Costa et al. (2007, 14), bids are evaluated with the main aim of identifying the bid that will offer the owner the best trade-off between benefit as well as cost. At REN, Costa et al. (2007, 21) observed that the Benefit criteria to every invitation for tenders were not common since five distinct models were utilised in investigating the probable types of tenders’ invitation. For this, reason, the model utilised in evaluating bids or new power lines construction was first remodelled in a two-day decision conference while that of the supply of equipment was built subsequently during a one-day decision conference. In this learning process, the WG got the decision analysis knowledge, which enabled them to construct other models that were remaining devoid of addition external assistance. Therefore, the model-structuring started with the analysis of the criteria facilitated group utilised at REN for evaluating bids for new power lines construction with the intention of finding out which had to be retained in the new model. Therefore, discussion focused on criteria utilised for pre-qualifying potential bidders, screening bids, as well as that utilised in evaluating bids. With regard to such results, Costa et al. (2007, 28) noted that the MACBETH methodology, after being utilised in the process of multi-criteria decision conferencing, not only improved not just the WG knowledge of the main problems, but as well swiftly generated models for formal bid evaluation, which were comprehended without difficulty by the REN suppliers, users as well as decision makers. Besides that, the developed models were made public to REN suppliers while information regarding weights as well as criteria is presently accessible online in the company website. This resulted in both external as well as internal transparency in the process of evaluating the bids at REN. Costa et al. (2007, 28) suggested methodology for developing bid evaluation models can be used in all organizations seeking to evaluate procurement bids, particularly when there is need to define criteria weights, value scales as well as performance descriptors in advance. Awal (2010, 24) in his study established that selecting a contractor is a key factor for major project success. In this case, the Owners with the help of streamlined guidelines can outline clearly their requirements as well as select a best qualified contractor so as to carry out the project. Awal (2010, 24) posits that this is crucially important in all industries since a qualified contractor can guarantee timely delivery, work within the required budget as well as match the expectations of the owner. A procurement method that is inefficient can lead to a number of challenges during and after the project. Besides that, the competencies factor of the contractors according to Awal (2010, 25) is very important, and the contractors’ financial abilities, successful espousal of project design and are important elements which the owners must be taken into account when selecting a contractor. Past experiences as well as technical abilities as observed by Awal (2010, 25) are as well important competencies elements of the contractor that must be considered in the process of evaluation. It is imperative that the selected contractor should have the required ability and knowledge for managing the project. Hatush and Skitmore (1997, 19) noted that the success as well as failure of any project is impacted by a number of decisions made by, or in the best interests of, the owner. Such decisions can be made at different project development stages; therefore, the prequalification of the contractor is a process of making decision by involving different decision criteria and scores of decision-making parties. The processes of the prequalification as well as bid evaluation as observed by Hatush and Skitmore (1997, 27) need sufficient and necessary criteria to be developed. In the last two decades, there has been an enormous development in the client's needs and project complexity, which has resulted in increased utilisation of other types of project delivery systems. During the contractors prequalification, the bidders are listed in the standing list that is proved for regular invitation to a tender. Hatush and Skitmore (1997, 27) established that the procedure used in calling for tenders vary from one owner to another since there are those who utilise a reputational system where the invited contractors are not more than six while others utilise a random base system. Besides that, there are those who utilise the points system wherein the approved contractors are asked to tender by means of advertising in the mainstream media. In the points system, selection of the contractors who are ready to tender as well as get the full package is done through points score, and the first six contractors with the highest scorers are allowed to tender. Bubshait and AI-GobaII (1996, 50) define prequalification is a process whereby the contractors are screened by owners of the project or those representing them, in line with the determined set of criteria considered essential for successful completion of the project. Contractors who are willing to compete at the international level must understand the existing procedures for prequalification, particularly in consideration of the fact that GATT agreement has been implemented in the construction industry. Bubshait and AI-GobaII (1996, 51) surveyed the then prequalification practices in big Saudi Arabian private and semi-public companies by identifying the criteria used in the process of prequalification and ranking such criteria. For this reason, nineteen prequalification procedures were reviewed, whereby it was noted that the work of the contractor as well as the approved requirements are often utilised in the c selection criteria. In this case, the criteria that are used included: the having enough workers as well as equipment; the capability of the management; financial stability; as well as organization structure. Bubshait and AI-GobaII (1996, 51) divided the selection criteria depending on their importance: the first group included financial stability and experience of the contractor; the second group included past performances, capabilities in project management, availability of their management employees, failure record, and ability; the third group included the organization of the contractor, the availability of their workforce, references, volume of work they can do, equipment resources, as well as the present workload; the last group included their home office and geographical experience. The criteria rankings were compared with United States results, whereby Bubshait and AI-GobaII (1996, 54) noted that the ranking difference were not significant. According to Puri and Tiwari (2014, 47), problem associated with selecting the contractor in nearly all cases is a multi-criteria problem. Citing a number of studies, Puri and Tiwari (2014, 47) posit that multi-criteria techniques have been applied to solve the problems related to evaluation of contractors. Basically, the Multi Criteria Bidding System has been suggested as a technique, which takes into account considers both the cost and the key attributes. In view of the Multi attributes system, Puri and Tiwari (2014, 47) assert that the process of selecting the contractors is rooted in a number of attributes like quality, time, cost, safety accountability by the management, sufficiency as well as competence of contractors. The Multi Attributes Bidding System key concept is that the process of selecting the contractors should focus on a number of attributes instead of only the cost, and that the selected bidder should be the one with the top combined bidding value of numerous attributes. The majority of such attributes are changed into values, which are added up so as to get the combined bidding value. A number of clients prefer using only one of the criteria in qualifying the bidder to the tendering procedure stage, and that is, the experience of the contractor. Most of the clients studied by Puri and Tiwari (2014, 48) argued that they assess the contractor companies subsequent to completing their cooperation; they store data and consult with other companies that had successful cooperation with the selected contractors. In view of this, it is without a doubt that most clients focus on the contractors’ competence and reliability. Therefore Puri and Tiwari (2014, 48) suggest that companies can experience project success if by prequalifying and selecting contractors who are totally experienced in performance and in consideration of other attributes such as safety. The Associated General Contractors of America (2009, 6) observed that Qualifications Based Selection in selecting contractors together with design team have a number of positive impacts on the involved parties and the project. By interviewing the contractors, designers and owners, Associated General Contractors of America (2009, 6) established attributes related to a team selected by Qualifications Based Selection (QBS) and was able to note the associated advantages as well as the benefits. Basically, QBS facilitate the project owners in defining their objectives as well as selection criteria in order that they can select the most competent contractor in a transparent process. In the Associated General Contractors of America (2009) discussion paper, the interviewed owners cited that failing to think about price has helped them manage the process of selecting as well as in focussing on qualifications. Observably, adversarial relations are replaced by collaboration and cooperation, and QBS offers both owners and contractors options that are definite, professional and which focus on results. This in consequence, shifts the mind-set from self-centredness to cooperation with focus on the common goal. As stated by Associated General Contractors of America (2009, 10), transparency offered by QBS eradicates unethical agendas while focussing on the professional services generates emphasis on relationship as well as service. Qualifications Based Selection reduces costs associated with design and construction leading to high-quality work. As mentioned by Alzober and Yaakub (2014, 233), the decision of selecting a contractor is made by clients/owners and the entire process has turned out to be a crucial issue in engineering projects. Scores of researchers have noticed contractors’ opportunistic behaviour in low-bids models, but the good quality as well as the best economic outcomes cannot be achieved by the lowest bidder. In public projects, the model or competitive bidding as observed by Alzober and Yaakub (2014, 233) is based on cost of bid evaluation, which is utilised across the globe. In most construction projects, the clients prefer the low-bid model as observed in a number of countries. Therefore, low-bid mode is considered a competitive method for bidding, whereby the lowest bidder is awarded the tender. Salama et al. (2006, 531) study focuses on the pre-qualification stage, wherein they argue that the construction industry in Egypt appears to agree with the existing literature with regard to criteria like the experience of the contractor, their available resources as well as financial stability are the main critical success factors that determine the success or failure of the project. A number of companies undertaking various projects have realised the benefits brought about by two-stage tendering system despite the fact that most small projects in Egypt use single stage tendering system. Besides that, the utilisation of the point system in contractors’ bids evaluation is extensive in both the stages of pre-qualifying and evaluating the bid. Still, Salama et al. (2006, 531) argue that the contractor’s company history of past claims, failures, arbitration as well as disputes are normally offered less attention during the pre-qualification stage. This is attributed mainly to inadequate formal records or information concerning the contractor’s company history of past failures within Egypt. In recommendation, Salama et al. (2006, 538) suggest that the construction industry in Egypt must introduce a code for project management that offers guidelines to creating a successful plan for project procurement. The code must as well offer a broad procedure that intends to improve the efficiency of the process of selecting the contractors. For this reason, companies need experience and knowledge from a project manager so as to utilise the suitable criteria that ensures the selected contractor is financially ad technically suitable for the project. Shena et al. (2003, 577) study provides a decision support system crucial for evaluating the total competitiveness of the contractor, especially with focus on the construction industry in China. Parameters for competitiveness as argued by Shena et al. (2003, 587) are designed in a three-level hierarchical system, facilitating the competitiveness evaluation to be carried out at various levels. In this case, the system was designed mainly for; self-evaluation of the contractor as well as to help clients/owners to make prequalification evaluation. The suggested system operates with a help of Windows-standard computing program, and its applicability was confirmed after carrying out two workshops. Even though the workshops occurred in a simulated construction industry environment in China, Shena et al. (2003, 587) posit that the system offers a practicable as well as valuable methodology for examining the total competitiveness of the contractor. Contractor selection as well as tender evaluation as mentioned by Watt, Kayis and Willey (2010, 51) has been an area of intensified debate as well as interest to companies tasked with delivering effective project outcomes. Undertakings at the early stages of the project life cycle, it undeniably the most important endeavours carried out by clients, their efficiency is directly associated with the success of the project as well as the realisation of defined objectives. Watt, Kayis and Willey (2010, 57) argue that, the environment for evaluating the suppliers as well as their capability to deliver is multifaceted, with high levels of uncertainty and ambiguity, which rival the values of the stakeholders and leading to complex relationships because of numerous inconsistent objectives. More intricacies are brought about relevant and suitable criteria as well as allocating suitable weights, most are inclined to vary. In view of this, Watt, Kayis and Willey (2010, 59) results offer a crucial contribution in the study of contractor evaluation by stressing the significance of common criteria utilised in the actual selection of the contractor, drawing in new methods utilised by other disciplines. According to Watt, Kayis and Willey (2010, 59), the specific significance values, in relation to all criteria may be utilised in guiding the weighting schemes development in systems of evaluation. In so doing, improved alignment is expected between the contractors and client expectations, especially with regard to performance, capability and experience. Summary The study has reviewed literature on different methods of selecting contractors with main focus on MACBETH methodology, Qualifications Based Selection, two-stage tendering system, among others. As indicated in the literature review, the fast developments as well as needs in various facets of human life, has forced number of companies to utilise other systems for project delivery; however, the systems for tendering and awarding are still used widely. There is need for contactors pre-qualification because inappropriateness as well as insufficiency of the contractor awarded the project can result in below average work, disputes or delays. As pointed out in the literature review, the process of selecting the contactor is a crucial undertaking for the clients seeking quality results and completion within the budged. Therefore, multi-criteria purpose of selecting contractor is to allow for the selection of the qualified contractor. Bibliography Alzober, Waled, and Abdul Razak Yaakub. "Integrated Model for Selection the Prequalification Criteria of Contractor." Lecture Notes on Software Engineering 2, no. 3 (2014): 233-237. Awal, Sidik Mohammed. "Contractor Selection in Ghana." Dissertation Proposal, Kwame Nkrumah University of Science and Technology, Kumasi, Ghana, 2010. Bubshait, Abdulazlz A., and Kamal Il. AI-GobaII. "Contractor Prequalification in Saudi Arabia." Journal of Management in Engineering 12, no. 2 (1996): 50-54. Costa, Carlos A. Bana e, João C Lourenço, Manuel P. Chagas, and João C. Bana e Costa. Development of reusable bid evaluation models for the Portugese Electric Transmission Company. Working Paper, London School of Economics and Political Science, London, UK: Operational Research Group, 2007. Hatush, Zedan, and Martin Skitmore. "Criteria for contractor selection." Construction Management and Economics 15, no. 1 (1997): 19-38. Puri, Dwarika, and S Tiwari. "Evaluating The Criteria for Contractors’ Selection and Bid Evaluation." International Journal of Engineering Science Invention 3, no. 7 (2014): 44-48. Salama, M., H. Abd El Aziz, H. El Sawah, and A. El Samadony. "Investigating the criteria for contractors' selection and bid evaluation in Egypt." Procs 22nd Annual ARCOM Conference. Birmingham, UK: Association of Researchers in Construction Management, 2006. 531-540. Shena, Liyin Y., Weisheng Lub, Qiping Shena, and Heng Li. "A computer-aided decision support system for assessing a contractor’s competitiveness." Automation in Construction 12 (2003): 577– 587. The Associated General Contractors of America. "Qualifications Based Selection of Contractors." Discussion Paper, QBS Working Group, 2009. Watt, D.J., B. Kayis, and K. Willey. "The relative importance of tender evaluation and contractor selection criteria." International Journal of Project Management 28 (2010): 51–60. Read More