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The Use of IT in Commercial management of Construction Projects

M.Sarshar1, A.Connolly2

Abstract

The construction industry uses standard off the shelf software packages for

many of its major activities such as, drawing packages, accounting packages

and project management packages. Yet standard packages are not used for

commercial and commercial management aspects of operations, in a similar

manner.

The existing packages on the market are diverse and lack functional integrity.

Some implementations of new commercial software in major companies have

resulted in grave challenges and risks to the business.

In order to investigate the reasons, a literature search on the use of IT in the

construction industry was undertaken. It was found that commercial systems

have received very little attention and focus from the construction IT research

community.

This paper reviews some of the existing literature, in order to emphasise this

gap in research. It urges further research in this critical aspect of managing

major projects.

Key Words: Construction IT, commercial management software, construction

contract management

Background

Commercial management packages within the construction industry are wide-

ranging and complicated to use. The current packages do not support many

of the important aspects of the detailed commercial processes. The problem

1School of Built Environment, Liverpool John Moores University, Byrom Street, Liverpool L3 3AF.

Tel- 00 44 151 231 2871 Email M.Sarshar@ljmu.ac.uk2N.G. Bailey,

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magnifies when companies attempt to implement new systems, where

companies face significant challenges during the delivery phase of new

software. Commonly the requirements have been poorly understood and a

coherent plan for change over has not been devised.

Commercial management systems appear to vary in design from company to

company, with the absence of a commonly used IT package that is suitable

for use in the construction industry as a whole. For the administration of

construction contracts, much of the administration tasks are standard practice

with the basic contract administration being governed by The Housing Grants,

Construction and Regeneration Act 1996. Standard IT packages are greatly

used in many other industries. The construction industry has adopted some

standard off the shelf software successfully, such as drawing packages,

accounting packages and project management packages. Yet, is there

something significantly different about each construction firm that means IT

systems can not be developed for commercial management in a similar way?

Can the systems that are in use be improved further so that time and money

can be saved? Could the different construction professions and parties to the

contract integrate their IT systems to save time and money and reduce human

error? If these systems can be developed why has this not happened yet?

Faithful & Gould Ltd, a medium sized Quantity Surveying (QS) firm in the UK

attempted to implement a new commercial management software package for

the UK wide cost consultancy. A catalogue of errors occurred in the

implementation of this system leading to dramatic consequences. Faithful &

Gould Ltd rolled out a new management accounting IT system in circa 1999

that was to improve their commercial billing and commercial management

systems and bring about great change and benefits to the company and

clients alike but, the system roll out was a complete failure. The poor

implementation strategy that was to manage the change over to the new

system, meant huge amounts of data was lost and the company struggled to

bill clients and receive monies into the company accounts as a result. As a

direct consequence of the failed implementation, Faithful & Gould Ltd came

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close to bankruptcy. They were subsequently bought by WS Atkins group

which secured the companys future.

Walmsley (2007) reports on a catalogue of errors in developing and

implementing a tailor made commercial system for a major contractor in the

UK. These errors have led to significant financial impact on the company,

during the transition. Due to confidentiality issues, many of these problems

have not been widely reported.

A literature search into construction IT research reveals that there is little work

specifically on commercial contract management. This is perturbing as there

are enough difficulties and disputes in the UK construction industry without

further hindrance. Many disputes are documented as being caused by poor

commercial management and administration (Furmston 1996). Many of the

commercial processes required in construction companies are repetitive and

the processes are documented in the standard types of construction contracts

adopted in the UK (Sun 2003). Can basic failures in contract administration

such as: late payment to suppliers and sub-contractors, lack of payment

notices, poor change control and lack of final account information be improved

upon if the IT systems are improved?

This paper searches the existing literature for some direction and guidelines.

There are little guidelines. Furthermore some of the few existing suggestions

appear impracticable. The paper provides an elementary high level

requirements map for commercial management systems and appeals for

more research in this critical area.

ICT in the Construction Industry

Globalisation of economies brought about by the IT revolution has produced

large changes in most industries (Baldwin 1998)and led to advanced

industrial nations trading together is a virtual environment (Brandon 1995).

Many industries boomed, telecommunications for example, yet others have

stalled or contracted (Sun 2004).

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It has been stated that the UK construction industry is seriously lagging

behind the aerospace, finance and telecommunications industries in the

development and use of IT (Latham 1999). However, most of the business

processes and work that surround any construction projects now rely on IT

systems and tools to design, inform, manufacture, process and communicate

information and like any other industry where these processes are required, IT

appears to be utilised (Alshawi 1999).

In terms of future directions for ICT in the construction industry, Construct IT

in the UK developed a vision for the use of ICT in the next ten years(Sarshar

2000 and 2002). This vision was further adopted by CIB Working Commission

78 (Amor et al 2002). This vision was based on extensive literature search

and discussions amongst experts and academics. It consists of seven major

themes:

1. Model driven as opposed to document driven information management

on projects.

2. Life cycle thinking and seamless transition of information and

processes between life cycle phases.

3. Use of past project knowledge (/ information) in new developments.

4. Dramatic changes in procurement philosophies, as a result of the

internet.

5. Improved communications at all life cycle phases, through

visualisation.

6. Increased opportunities for simulation and what if analysis.

7. Increased capabilities for change management and process

improvement.

These themes do not include any intention to research into the key legal

aspects the standard contracts and the constraints these impose on the use

of IT in the construction industry (Amor et al2002). This clearly has a bearing

on the research directions of the construction ICT community.

Another key researcher in this area, Alshawai (1999), has provided a review

of the application and use of IT in the construction management of projects

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from an industry and research perspective. He gave an overview of major

functions and impact of IT to the general performance. It was recognized that

post contract functions are highly dependent on gathering and presenting

information; this is costly and time-consuming and the processes that are

undertaken to fill these functions are usually unstructured. Manipulation of

information can not be done manually it needs to be managed electronically

and presented with the correct level of detail. Alshawi (1999) mentions

producing reports in the study varied in structure from one site to another and

that information sent to head office was in different formats and he suggested

process re-engineering is required before successful implementing patient of

IT.

Alshawi (1999) suggests deregulation of professional roles and organisational

systems in order to increase competition between professions. The authors

question if this suggestion, as deregulation of professional roles and

organisational systems will result in people being unsure of their job roles

limits and where their boundaries are. Another suggestion was that clients

should demand a better service. The authors are in full support of this

proposal, however Alshawi (1999) continues to claim that the client should be

more aware of the industry's failings. The author questions if this is a positive

step. This study also stated that the industry must realise that they were

facing long-term recession and overcapacity. However RICS indicates that

quantity surveyors are in great demand (RICS 2000).

In short advances in ICT are not likely to be a key driver in imposing major

change in the current structures of the industry. ICT systems need to respond

support current structures and professions, reducing the barriers between

professional communication, rather than eliminating professions altogether.

Carter conducted an EU funded research (titled eLEGAL) on the use of ICT in

construction contracts. His findings demonstrate that Paper is still used in for

the use of large quantities for the administration of contracts but this is not

due to an unwilling construction industry, simply the failure to establish legal

qualification within contracts (Carter et al2001). Carter et all(2001)

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recognised that advances in IT could be used to enable the construction

industry to manage large construction and engineering projects by way of

assisting the co-ordination of the virtual enterprises that often are used.

Carter et al(2001) also recognised that that there were several areas of legal

uncertainty that threatened the adoption of such advances for the

management of contracts and undertook a study called eLEGAL. Carter et al

(2001) was aware that without some acceptance of and a move towards

defining IT as legally admissible then many areas that could benefit from the

use of IT would not be able to gain from such assistance. Legislation is now

able to support the use of IT in business throughout the EU but, the standard

forms of contract adopted in the UK Construction Industry do not make

provision for the use of IT as yet and therefore, the eLEGAL project concluded

that the use of IT to support contract practices may not be admissible (Carter

et al2001). According to Carter et al (2001) the construction industry is failing

to adopt IT for the management and administration of contracts.

Since Carter et al(2001) wrote the Industry failing to adopt IT for the

administration of documents the, JCT 2005 has been published and the new

suite of contracts does make some provision for IT to be included within the

contract (JCT 2005). Claus 18.1 allows the parties to agree the medium for

which communication and general administration of the contract can be

undertaken. However, in the guide notes to the JCT 2005 suite of contracts it

is mentioned that the contracts did not go further to adopt and supports the

use of IT for the management of contracts as there remains much

disagreement within the Construction Industry to its legality and authority.

Managing Change, Implementing New Systems

Another premise of this paper is that several construction companies have

faced critical challenges in implementing new commercial management

systems. For this reason some literature in change management during the

introduction of new systems were examined to establish if this problem is only

limited to commercial management systems. This was certainly not the case,

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and there is much to learn from change management literature.

In a study of a large project, the new Terminal 5 at Heathrow Airport, two

types of innovation were identified, bounded and unbounded (Harty 2005).

The research team aimed to explain an alternative way to understanding the

unbounded innovations within the construction industry using sociology of

technology concepts. The study was seen as an exciting opportunity as there

was to be 500 or more contractors on site and was known as one of the

biggest construction projects in the world at that time. Harty (2005) explains

that the employer (BAA) for the project was keen to role out a new system of

3D Auto CAD. The study was undertaken over an 18 month period on site.

One of the findings of the study was that the system to be implemented was

not actually capable of delivering the ideas or visions of BAA. The 3D

AutoCAD system did not have the functionality to carry out the tasks required

of the engineers and drafters and the system could not be used for drafting

design as well as manufacture (Harty 2005).

The system integration methods in the study of Heathrows Terminal 5

alienated some users and break out systems developed as the staff were

determined to carry out their duties and get the project completed successfully

(Harty 2005). The break off systems developed to enable actors to work

rather than wait for further development of the software systems (Harty 2005).

Harty (2005) did not investigate attitudes to change and adoption of the vision

and there were no references to the attitudes of the employees and sub-

contractors to the adoption of the vision. These factors are interdependent to

the success of any change (Hazzan 2004).

Harty (2005) Quotes:

The focus groups were an attempt at alignment. Efforts were being made to

engineer a built victory generously a system of 3-D CAD software and

practices but crucially with more than one system builder and with a number

of ideas and visions informing its assembly none of which had the ability to

override others or persuade them to change.

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Harty (2005) did not mention if the rank structure was in place, if any prior

discussions had been undertaken with the team members or if focus groups

were set up. Similar research was carried out to explore the problems with

introducing any form of management led change; aimed at understanding

change within project-based organisations (Bresnen 2005). Bresnen (2005)

explains that the research was conducted by applying a framework to two

case studies on two separate UK companies that were applying management

led change in the form of new IT Systems. The study also analysed the

reaction by the project centralised team to resist the change. The author

questions why they only investigated the resistance to change and not items

or issues that inhibited the change in order to understand any resistance

found. Bresnen (2005) also found that the diversity of the project managers

systems throughout each company, as well as their attitudes, had

considerable influence on whether the systems were accepted and therefore

successful adopted by the firm as a whole (Bresnen 2005).

The difference between project-based organisations compared with other de-

centralised organisations is the practices of each and, therefore the spread of

power of each are different (Bresnen 2005).

Bresnen (2005) states that this results in the implementation of change

throughout a company is more difficult as a result and will vary across the

regions.

There needs to be a sharing of interest between the project teams and head

office management (Bresnen 2005). Implementation is more successful when

management are selective to who can be included in planning and

implementing change within an organisation (Hazzan 2004). Those

considered as best of breed should be chosen to help implement the

changes they will have greater knowledge of what is required (Katranuschkov

2006). Least resistance is encountered from those who have the power and

knowledge of the new systems, if they are able to put this knowledge to use

(Hazzan 2004). Alpha project managers remained outside the system in a 'not

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broken doesn't need fixing' attitude to what was seen as a redundant system.

When involving project managers, those who were respected by their peers

the resistance to change was influenced by these individuals (Bresen 2005).

Project Managers that didn't meet regularly could not share their opinions or

knowledge to influence change positively. However; they also couldn't gain

solidarity to resist the changes being implemented (Fernie 2006). Successful

change reinforces and does not undermine existing systems (Hazzan 2004).

Project Managers have admitted fictitious reporting to show head office only

the successful results (Bresnen 2005). Bresnan (2005) identifies that it is

important for the senior management and the project managers at regional

level to have the same goals to overcome this. However, Bresnan (2005) did

not mention if that those who implemented the change first improved the

processes or if there was an incentive to succeed, such as the bonus scheme.

Woodward et al (1994) studied change management during the

implementation of a cost management system. The purpose of the study was

to describe the philosophy behind the need for change (Woodward et al

1994). However, there is no mention of whether the study was a success.

The findings of Woodwards study are inconclusive and the research

methodology questionable. Woodward et al(1994) claims that the traditional

role of a quantity surveyor cannot adequately cover the cost management

discipline in today's construction industry and that this adds to the cause of a

budget overspend. The authors questions this finding as the role of the

quantity surveyor is dependent upon the work given to the quantity surveyor

from the employer. It is too simplistic to rule out the role of the quantity

surveyor.

Procuring Commercial management Software

There are various software solutions on the UK market that are developed to

aid the management of contracts. Many software suppliers to the construction

industry now offer impressive solutions that are delivered as modules or

packages that can be bolted together to form a fully integrated business IT

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system. The quantity of suppliers that produce and sell such products and

services in the UK are so vast nowadays, it is not possible to list all of the

products on the open market. On the whole the IT suppliers advertise their

products as standard package software that is already designed and

developed specifically for the construction industry, which can be tailored

upon delivery to meet the customers individual requirements. This is a

credible way of ensuring their construction company customers are satisfied

with the product they have purchased and is aimed at delivering products that

will meet the individual business requirements of the construction orientated

customer at a cost much less than that of the bespoke software. (McConnell

1997).

It is therefore critical for construction companies to fully capture the

requirements of their systems before they embark on purchasing new

software, and test their software against these requirements. The range of

task within the management of contracts is extensive and contracts are

stipulated in many areas by the constraints of timetables and stipulated dates

within a contract. It is important that the procedures and tasks to be carried

out are done so in an efficient manner if the required documents and

information is to be presented and the tasks are to be completed satisfactorily

by these deadlines. Failure to meet these deadlines can incur financial

penalties imposed by the contract and, result in a breach of the law pertaining

to the administration and government of construction contracts (Brandon

1995).

The administration and management of the construction contracts are not the

only procedures and tasks a construction company has to undertake. There

are many other business management procedures that are required for the

firm to function successfully. These processes are required for a department

to function. Fig 1 illustrates an overview of the departments generally

required within a construction firm, although this can differ from company to

company. There is a need for some level of integration between the activities

of some of these departments.

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Fig 1 Typical departments within a construction company

Focusing only on the management of contracts, a summary of the common

processes involved is shown in Fig. 2. This figure highlights the range of

tasks expected as a minimum, although some variance to this is probable,

dependant on the stipulations within a particular contract.

CompanyDepartments

Marketing and Business

Development

HumanResources

ProjectManagement

QualityAssurance

Health and

Safety

IT Management

Accounts andFinance

CommercialManagement

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Fig 2 Range of tasks within a contract.

Each of the above procedures can consequently been expanded into more

detail. Figure 3 provides an example:

Receipt & LegallyChecking Documents

ReturningDocuments

Set UpOn System

PracticalCompletion

Purchasing

Sub-contracting

Cost ReportingCVR

Contract

Applications

Labour

Management

FinalAccounts

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Fig 3 Description of ideal variation management system

In order to capture the requirements adequately, and be able to test and

implement the eventual system effectively, there is a body of knowledge in the

software industry, termed the Systems Development Life Cycle. In this

approach the development of an IT system is divided into several stages

(Tomayko et al2004). These stages together called the development

lifecycle (Maher 2006). The management of an ideal development project is

extremely complicated and therefore the stages are broken down into

manageable chunks (Sommerville 2007).

The construction industry needs to utilize such approaches in order to reduce

the risk of introduction of new commercial management software within the

business.

Future Directions

MaterialDepartment

CostReporting

CVRSub-contractor costs

Labour info

VO costs

SOR info

Variation submissionVariation description

Material description

Material cost

QuantitySurveyor

ProjectManagement Files

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This paper explored set out to explore the construction IT literature, in order to

explore how to improve the procurement and implementation of commercial

management systems in the construction industry.

It became obvious that the main body of construction IT literature has paid

little attention to commercial and legal aspects of managing projects. When

there are references, on several occasions the role of the QS has been

questioned and dismissed. This is contrary to real-life evidence that there is a

shortage of QSs in the UK and the demand for this profession is increasing,

even though the role is becoming more strategic.

Many companies have had problems in implementing new commercial

management systems. Here the picture is different and there is a large body

of literature which the industry can learn form. In particular the literature on

change management and also in software development address similar

problems and can add value.

There are still many unresolved questions, which researchers need to

investigate. For example:

What does the construction industry require of a commercial

management system?

Do these requirements remain the same for each construction

company or can there be a standard solution?

Do the current commercial management systems used in large

construction firms deliver their key requirements?

How do construction companies monitor their systems effectiveness

and further develop their IT systems to meet the needs of the

company?

How will commercial management systems integrate with other key

construction applications, such as drawings and accounting?

There is a critical need to shift the focus of the construction IT research to

include this all important topic.

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