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University of South Australia
School of Building and Planning
Total Quality Management in Construction
Thesis submitted as part fulfilment for the
Master of Applied Science in Project Management

By
Lal C. Jayakody
February 1995
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' ORARY
ABSTRACT
Construction industry presents some unique challenges and opportunities for Total
Quality Management ( TQM ). Construction process is non repetitive and generally the
workforce is not stable. A given project is dependent upon numerous parties and
influenced by social, political, legal and environmental conditions. Construction projects
are increasingly complex. Each project represents a unique design, where the location,
construction personnel, material, cost and time are variables.
Industry needs to fmd more efficient and effective ways to satisfy it's clients needs and
expectations. This report provides an overview of the construction industry and
promotes a discussion of real problems in the industry. Further it reviews Quality
Management principles and practices adopted by construction and other industries.
This study had been conducted by surveys of seven large and medium construction
companies and interviews with five project management consultants. Results showed
that nearly all companies received financial or some other benefits from QM programs,
and had recognized the need for a continuous improvement process. All consultants
emphasized the difficulty of applying TQM in construction. However one described a
possibility of applying TQM principles in a project specific level. Lack of commitment
and difficulty in cultural change were reported as main obstacles. Variations were seen
as the major reason for cost overruns and delays of projects. Apparently subcontracting
system also creates some problems.
Out of seven, five companies had experience with partnering projects. All companies
highlighted the better environment for continuous improvement process created by
partnering. However only two companies had "relatively" long term partnering
relationships, where characteristics of TQM were found. Other three relationships
studied were short term focused and limited to project by project basis, which had been
established following tender procedures. This reflects the necessity of changing the
structure and documents of project contracts to facilitate partnering. Nevertheless
partnering projects had shown impressive results, such as reduction of project costs,
schedules, increase of profits and so on. Two consultants positively commented about
partnering while other, three expressed their concerns.
More information and application experience is required to further evaluate the success
of partnering. It can be considered that a long term relationship provides maximum
benefits of partnering, while creating an ideal environment for continuous
improvement process, i.e. TQM.
ii
STATEMENT OF ORIGINALITY
I hereby declare that all the following work has been originated and compiled by the
undersigned, unless otherwise referenced.
Lal C. Jayakody
February 1995
ACKNOWLEDGMENTS
First of all I would like to thank to my supervisor, Mr. Barry Phillis who provided
guidance and gave helpful comments and encouragement throughout my work. My
gratitude is due to Prof A. C. Sidwell for generous support and for providing valuable
materials in the initial stage of the study.
Also I wish to thank to Mr. Denis Wilson, Director of Training of Master Builders
Association, the staff of Master Builders Association of SA, and Construction Policy
Steering Committee of NSW, for providing materials for the research.
I am also greatly indebted to the personnel interviewed and to the respondents to the
questionnaire for their support and valuable information.
iv
TABLE OF CONTENTS
Abstract
Statement of Originality
Acknowledgments
Table of Contents
List of Figures
List of Tables
CHAPTER 1: Introduction
1.0 Background of the Study 1
1.1 Scope of Study 5
1.2 Area of Study 6

1.3 Research Methodology 6
1.3.1 Literature Review 6
1.3.2 Company Survey 7
1.4 Structure of the Report 8
CHAPTER 2 : Background of Quality / Quality Management
2.0 Introduction 10
2.1 History of Quality 11
2.2 What is Quality ? 11
2.3 The Evolution of Quality Management 13
2.3.1 Inspection 14
2.3.2 Quality Control 14
2.3.3 Quality Assurance 15
2.3.4 Total Quality Management ( TQM ) 15
2.4 Quality Assurance 17
2.5 Quality Audit 19
2.6 Quality Manual, System and Plan 19
2.7 Quality Systems ( ISO 9000 Series ) 20
2.8 Starting TQM from ISO 9000 23
CHAPTER 3: Total Quality Management ( TQM )

3.0 Introduction 29
3.1 Continuous Improvement Process 29
3.1.1 Deming's Approach 30
3.1.2 Junes Approach 31
3.1.3 Crosby's Approach 31
3.1.4 Ishikawa's Approach 32
3.2 Comparison of Different Strategies 33
3.3 Philosophy of TQM 34
3.3.1 Model 1 - ( Brocka and Brocka 1992) 34
3.3.2 Model 2 - ( Kanji and Asher 1993) 37
3.4 Benefits and Disadvantages of TQM 40
3.5 NIES "How to" Approach 41
3.6 TQM Applications 43
3.6.1 Research Study 1 43
CHAPTER 4 : Nature / Complexity of Construction Industry

4.0 Introduction 48
4.1 Construction Industry and Economy 48
4.2 Nature of Construction Industry 49
4.2.1 Interdependence, Uncertainty and Risk 50
4.2.2 Communication 54
4.3 Construction Industry Claims and Disputes 56
4. 3.1 Contract Documentation 57
4.3.2 Variations 59
4.3.3 The Nominated Subcontract System 60
4.3.4 Ground Conditions 61
4.3.5 Role of Architect / Engineer 61
4.4 Dispute Resolution 62
4.5 Research Studies 64
CHAPTER 5 : Contract Strategies

5.0 Introduction 66
5.1 Forms of Contracts 67
5.2 Drawings, Specifications and Quantities 68
5.3 Project Procurement Systems 70
5.3.1 Traditional Contract Strategy 72
5.3.2 Alternative Contract Strategies 73
5.3.2.1 Detail Design and Construction 74
5.3.2.2 Design and Construction 75
5.3.2.3 Project Management 77
5.3.2.4 Construction Management 78
5.3.2.5 Novation 80
5.4 Characteristics of a Successful Project 82
CHAPTER 6 : Quality Management in Construction

6.0 Introduction 84
6.1 Quality in a Constructed Project 84
6.2 Quality Assurance and Quality Control 86
6.2.1 Quality of Design 87
6.2.2 Quality of Documentation 90
6.2.3 Quality of Construction 92
6.3 Cost of Quality 93
6.4 Some Clues for Quality Improvement 95
6.5 Quality Problems - Failures, Defects and Nonconformances 96
CHAPTER 7: Total Quality Management ( TQM ) in Construction

7.0 Introduction 104
7.1 Total Quality in Construction 104
7.2 Implementation of TQM 107
7.2.1 Model 1 - ( Chase 1993) 108
7.2.2 Model 2- ( Deffenbaugh 1993) 111
7.2.3 Model 3 - ( Burati and Oswald 1993) 114
7.3 Towards a Better Management System 121
CHAPTER 8: Partnering Concept

8.1 Background 122
8.2 The Need for Partnering 123
8.3 What is Partnering 126
8.4 Is Partnering a Contractual Agreement ? 129
8.5 Key Elements of Partnering 130
8.5.1 Partnering Model ( Partnering Task Force ) 130
8.5.2 Partnering model ( CPSC / MBA) 132
8.6 Difference Between the Models 133
CHAPTER 9 : Partnering process, Benefits and Challenges

9.1 Beginning of Partnering process 134
9.2 Partnering process 135
9.2.1 Partnering process ( Partnering Task Force ) 135
9.2.2 Partnering process ( CPSC / MBA) 136
9.3 Differences Between the Processes 139
9.4 Environment for TQM 140
9.5 Benefits and Concerns of Partnering - US Experience 142
9.6 Benefits and Concerns of Partnering - Australian Experience 145
9.7 Partnering Realignment process 147
CHAPTER 10 : Applications of Partnering ( Japan and US)

10. 1 The Japanese way 151
10.2 US Experience 153
10.3 Existing Partnering Relationships 154
10.3.1 Buyer - Seller Relationships 155
10.3.2 Competitor - Competitor Relationships 155
10.3.3 Diverse Relationships 155
10.4 Application of Partnering 155
10.4.1 Application to Small Businesses 156
10.4.2 Differences Between Small and Large Business Partnering 157
10.4.3 Application to Small Projects 158
10.4.4 Differences Between Small and Large Project Partnering 158
10.5 Research Studies 159
CHAPTER 11: Applications of Partnering ( Australia )

11.1 Background 167
11.2 NSW Government Policy on Partnering 168
11.3 MBA Initiative 169
11.3 Applications of Partnering 169
11.4.1 Partnering for Public Works in NSW 171
11.5 Some Concerns and Issues Related to Partnering 174
CHAPTER 12 : Research Findings and Discussion

12.1 Company Studies 177
12.1.1 Company Cl 178
12.1.2 Company C2 180
12.1.3 Company C3 182
12.1.4 Company C4 183
12.1.5 Company C5 185
12.1.6 Company C6 186
12.1.7 Company C7 188
12.2 Discussion on Findings from Questionnaire ( phases 1 and 2) 190
12.3 Discussion on Findings from Interviews ( phase 3) 194
General Conclusions 196

Recommendations for Further Research 198
References 199
Appendix 1 - Questionnaire
Appendix 2 - Statistical Process Control ( SPC ) - ( An Introduction )
Appendix 3 - T-Distribution ( An introduction )
ix
LIST OF FIGURES
Figure 1.0 Flow chart diagram of the report 9

Figure 2.1 Historical development from inspection to TQM 16
Figure 2.2 Evolution of TQM 17
Figure 2.3 The PDCA cycle - ( The Shewhart cycle and Deming cycle ) 26
Figure 2.4 Continuous incremental improvement 26
Figure 3.1 Pyramid principles of TQM 38
Figure 3.2 TQM "How to" approach 41
Figure 5.1 Allocation of risk 71
Figure 5.2 Traditional Contract with Architect as Superintendent 72
Figure 5.3 Design and Construction 76
Figure 5.4 Project Management 77
Figure 5.4 Construction Management 79
Figure 5.6 Novation 81
Figure 6.1 Effect of design input in project cost 90
Figure 6.2 Cost vs Quality 94
Figure 6.3 The cause of failure pie chart 96
Figure 7.1 Structure of TQM 108
Figure 7.2 Jobsite Quality Planning 111
Figure 7.3 Jobsite Quality Implementation 112
Figure 7.4 Legends of Symbols on Road Map 114
Figure 7.5 TQM Road Map, Exploration and Commitment phase 115
Figure 7.6 TQM Road Map, Planning and Preparation phase 116
Figure 7.7 TQM Road Map, Implementation phase 117
Figure 7.8 TQM Road Map, Sustaining phase 118
Figure 7.9 Approximate Durations for TQM histories 120
Figure 8.1 Partnering model 130
Figure 9.1 Project life cycle 134
Figure 9.2 Partnering realignment process 147
Figure 11.1 Partnering charter - Nepean hospital upgrade project 173
Figure in Appendix 3 : Comparison of "normal" and "t-distribution"

LIST OF TABLES
Table 2.1 International Quality Standards 21

Table 3.1 Juran's three step process in quality improvement 31
Table 3.2 Comparisons of Quality Management strategies 33
Table 6.1 Effect of extra design input 89
Table 6.2 Description of structural problems due to communication / coordination
failures 102
Table 8.1 Key partnering practices vs traditional 126
Table 9.1 Benefit : Improved ability to respond to changing business
conditions 142
Table 9.2 Benefit : Improved quality and safety 142
Table 9.3 Benefit : Reduced cost and schedule and improved profits 143
Table 9.4 Benefit : Effective utilization of resources 143
Table 9.5 Challenges and concerns of partnering ( An owner's view point ) 144
Table 9.6 Challenges and concerns of partnering ( A contractor's view point ) 145
Table 10.1 Project performance comparison 163
Table 10.2 Sample means 164
Table 10.3 Sample variances 164
Table 12.1 Company backgrounds 177
Table 12.2 Mutual benefits in partnering ( Company C4) 183
Table 12.3 Projects evaluation ( Company C6) 186
Table 12.4 Projects evaluation ( Company C7) 188
1
CHAPTER 1 : Introduction
1.0 Background of the Study

Construction is an investment goods industry, i.e. it's new products are wanted, not for
their own sake, but on account of the goods or services which they can create or help to
create ( Hillebrandt 1993). It is also a dynamic, exciting and productive industry. Yet
its productivity has not kept pace with its needs in recent years. Among the major
reasons for the productivity decline are the increased size and complexity projects with
resulting communication difficulties ( Stevens 1984).
Sir John Holland, Chairman of the John Holland Construction quoted the following
reasons for inefficiencies and poor productivity in construction industry.
Too low tender prices.
Incompetent management.
Hostile on-site relationships.
Poor quality of materials and workmanships.
Inadequate site investigation.
( Holland 1988)
Construction industry has experienced many problems in recent years. Construction

costs have risen, project durations have increased and many projects have overrun their
project schedules. Claims and disputes have become an endemic part of the industry.
These problems are worldwide in nature.
The findings of the NSW Royal Commission in to Productivity show a range of specific
problem areas such as : industrial disputes, substantial cost and time overruns, poor
employer-employee relationships and contractual disputes as having negative effect on
productivity in the industry.
According to Uher ( 1993 ) these are not the main causes of problems, rather that they
are the symptoms of "mismanagement" at all levels of the industry and the excessive
reliance on "subcontracting". Dombkins ( 1993 ) also contends that the Australian
subcontract system is over specialized and it is a major factor in limiting effective
communication. As fmdings of Uher ( 1993 ) provide an insight of the today's
industry, it is worthwhile to mention here briefly.
2
Issues related to mismanagement are :

In effective time / cost planning : Commonly, management techniques applied by
contractors to plan and control time and cost are inappropriate or used in appropriately.
An excessive use of Bar Charts instead of Critical Path Method ( CPM ) and reliance of
CPM "time schedules" rather than the "resource schedules" are examples.
Over-exuberance in using different procurement methods : Management oriented

procurement systems such as construction management and project management have
seen to provide the ultimate solution to the persistent problem of time and cost
overruns. However overall result has not been as positive as expected due to the
manner in which such methods have applied and manage.
Excessive risk transfer : Although construction activities are subject to a variety of risk
and uncertainties, little or no attempt has been made to manage such risks efficiently.
The lack of training : There are serious problems with recommitment and training,
especially at the tradesman level.
Poor industrial relations : The larger proportion of the industry is substantially free from
industrial conflicts. However serious industrial problems have been experienced on
large projects in the central business district of major cities.
The lack of investment in research and development : While there has been an increase
in privately funded research, there is no firm in the industry that maintains a permanent
research department.
Subcontractors may be seen as being responsible for the following issues :

The breakdown of the employer employee relationship: By loosing directly employed
labour, the contractors have lost the ability effectively to control and communicate with
workers, giving rise to industrial disputes.
Downgrading the importance of training of labour : As the need of the general

contractors to employ labour directly declined, so did their commitment to training. The
expectation that subcontractors would fill the gap and provide leadership in training has
not been realized, principally due to the lack of resources.
3
A reduced capacity of general contractors to grow : Without direct labour the potential
for the growth of the contractors has substantially been reduced as the contractors no
longer develop and retain important skills.
A reduced capacity to invest in research : This may be attributed to a number of factors

such as indifference to the need to search for better ways of doing things and the
limited capacity to invest by numerous but small contracting firms ( Uher 1993).
Keeping in mind these problem areas let us now examine, the requirements of clint's
and other project participant's of the industry. Time , cost and quality are the three
main constraints which determine the success of a project by clients. Irrespective of
size, nature or complexity of a project, the ultimate goal of any client is to achieve a
"quality constructed project" : a project completed within the budget and the schedule,
to the required quality standards and to the full satisfaction of the client. American
Society of Civil Engineer's Manual defmes the word of "quality" as 'quality is meeting
the agreed upon requirements' ( ASCE Manual ). In simple terms the "quality" is
meeting the owner's requirements. Then to say in other words "budget" and "schedule"
are also parameters of "quality".
Ensuring complete satisfaction of the customer with the goods or services provided by
the supplier is the ultimate purpose of the quality system ( Stebing 1993 ). Kanji and
Asher ( 1992 ) refer to this as "not only to satisfy but to delight the customer".
Customer only delights when his or her all requirements are satisfied. Then from a view
point of a customer it is a good job. What are the requirements of other project
participants ? Can they be satisfied until their objectives are achieved ?
US based FM! Consultancy Group tried to compare the answers to the question of
"What does a good job like ?" given by it's clients and developed a list of common
goals and objectives.
"A good job for most people is one that gets completed within budget, within
schedule and in conformance with the specs; it has a safe working
environment; workers on the site enjoy what they are doing; consultants make
profit ( Probably not only consultants, but also other project participants! ), and
the completed building meets the needs of its occupants" - Lou Bainbridge
(Director, FM! Consulting Group, US).
4
Most construction projects are developed by a project team consisting of owner, design
personnel, contractor and subcontractor. There are of course many other professionals
who play a more significant but more limited role within the overall project ( ASCE
Manual ). These various professionals aim to "satisfy" the basic requirements of
performance specifications. These are set by client needs, by laws or statutory
requirement and building codes. When individual requirements are satisfied, and a
consensus among participants reached, the process is assumed to have reached a
successful end ( Mathur and McGeorge 1991).
Satisfying the owner is only one part of quality performance, just as the owner is only
one member of the project team. Besides meeting the owner's requirement, quality
work must meet the requirements of the design professional, contractor, and regulatory
agencies or more correctly the public requirements for safe environment* conscious
and socially responsible projects ( Poirot 1990 ). This means a quality constructed
project should satisfy the requirement of all the project participants as well as public.
Quality Assurance ( QA) exists because of the degree of dissatisfaction experienced by

the industry's clients over a long period combined with a growing impatience by some
of their advisers to achieve "value for money". The Chartered Institute of Building of
UK defines QA as "an objective demonstration of the builder's ability to produce
building work in a cost effective way to meet the customer's requirements" ( Quality
Assurance in Building, UK).
Total Quality Management ( TQM ) goes well beyond the traditional limits of Quality
Control and Quality Assurance. TQM is both an operational philosophy and a
methodology in which there is a strong commitment to customers, employment and
improvement ( Chase 1993 ). There is no universally accepted method to the TQM
approach. It is an ongoing process with continuous improvement, without an end.
Burati ( 1993 ) and Oswald ( 1993 ) describe TQM as a "journey", not a destination.
Unlike .a manufactured product construction is a service. Past success is not predictor of

future results. In each project, project objectives, project team and project delivery
system, is unique to that particular project. These are some of the facts that create a
challenge to implement TQM in construction.
Peters ( 1987 ) comments that the quality can happen only if it is on behalf of client
and the people are committed to providing quality products and services. To be client
based and staying close requires, time, trust, caring and communication. The key
5
ingredient becoming client based is believing in and trusting the people who work with
you. Trust is required for open communication. Trust is also necessary to risk and risk
is necessary for innovation. Open communication is possible because the time invested
in relationship, because of trust and care about each other. With open communication it
is possible for each side of the relationship to ensure that the other side wins. This is the
philosophy of "partnering concept".
Much is said nowadays about the concept of partnering, between owner and contractor,
between contractor and supplier. The partnering concept is a way of overcoming the
traditional adversarial and litigious nature of the construction industry. It is a process of
improving relationships among those involved on a construction project to the benefit
of all .The essence of partnering is based on the fundamental human value concepts of
common sense, trust and commitment ( CPSC 1993 ). In establishing working
relationships through mutually developed strategies of commitment to the project and
communication within the team environment, partnering is attempting to create an
environment where trust and team work prevent disputes and conflicts for the benefit of
all stakeholders involved.
Brown and Beaton ( 1989 ) further iterate that anything that reduces the contentious
atmosphere or improves the adversarial relationships that develop during contracting is
well wort attention. This would be quality management in grand scale. Partnering
provides an ideal environment for TQM as it focuses on a long term approach of
improving ongoing processes rather than emphasizing individual projects or tasks (
1991).
1.1 Scope of Study

The scope of this study is :
To examine what is quality / quality management.
To study how to commit to quality management.
To analyse the complex nature of the construction industry.
To study different contract strategies.
To review quality management in relation to the construction industry.
To study the partnering concept, its application ( in US Japan and Australia),
benefits, concerns and challenges of partnering.
To study the relevance of partnering with TQM.
To examine how to gain most benefits from partnering.
6
1.2 Area of Study

One of the objectives of this research was to study the performances of partnering
projects and compare them with non partnering projects to identify whether the
partnering projects perform better than the average non partnering projects in respect of
"cost" and "schedule".
However this was not possible due to the following reasons :

1, Partnering is relatively a new concept to the Australian construction industry and
still in an unmature stage. Therefore not many contracting firms ( except few large
and medium size firms ) have established partnering relationships.
The rate of response to the questionnaire was very low. As a result only a limited
data was available for the analysis.
It was hard to find the detail information about completed projects. This was
evident from the fact that only two respondents had provided the details about
their completed projects.
Apart from these author also faced some difficulties in finding materials related to
partnering applications in Australia. Therefore the study had to be restricted to a general
review of partnering applications and its implications towards continuous improvement
process i.e. TQM.
1.3 Research Methodology

This research study can be broadly divided into two phases:
Literature review.
Company survey.
1.3.1 Literature Review

Various articles, journals, and reference books relevant to the topic were searched and
studied in order to form a sound basis for further research. The relevant reading
materials has been listed in the "References" of this report.
Although there is quite a lot of material in relation to partnering and its applications in
US, only a few found in respect to the construction industry in Australia. It was
observed that partnering can be used on a project by project basis ( common method in
Australia and public sector in US ) or as a long term relationship ( used by Japanese
contractors, private sector in US and probably very few Australian firms ). Accordingly
there are some differences found between these two approaches of "partnering" ( as
defmed by Partnering Task Force of US and The Construction Policy Steering
7
Committee of NSW / Master Builders Association of Australia ). A brief review of

these two methods are given in Sections 8.6 and 9.3.
1.3.2 Company Survey

The company survey can be divided into three phases. The objectives of first two
phases were to collect data from construction companies using a specifically developed
questionnaire ( Appendix 1 ).Overall the questionnaire was composed of 25 questions
and was divided into five parts.
A Company background.
Quality system.
C Project evaluation.
Partnering.
Overall comments.
Initially questionnaire was sent to 25 leading construction companies across Australia,

in July 1994. The companies were selected based on the following factors :
Size ( number of employees ).
Annual turnover of the company.
Fields of operation.
It was assumed that the experience and expertise of large and reputed companies
operate in number of fields are significant for the research study. Another assumption
was that the large companies would have had already experienced with partnering
projects.
The companies were chosen from the following sources :

The Business Who's Who of Australia -25 th Edition.
Australian Top 300 Public Companies - Mei Ling Perry, 1990.
Building Professional of Australia - 1988.
Companies case studies in some journals including "Business Review Weekly" and
"Australian Project Manager ".
Under the third phase, interviews were conducted with five Adelaide based project
management consultants with the objective of finding their views in respect to the
application of Quality Management principles and partnering to the construction
projects.
8
Phase!
Six replies were received; giving a response rate of 24%. Only 3 companies had
responded to the questionnaire. The balance three were unanswered.
One company had informed that they are in liquidation.
The second company expressed their inability to assist in research.
No remarks were found in the third questionnaire.
Phase 2:
In September 1994 same set of questionnaire was sent to some other 25 construction
companies in across the Australia, which were selected on the same basis and sources
as mentioned earlier.
At this time also six replies were received but two of them were unanswered
questionnaires.
One company expressed their inability to assist in research.
No remarks were found in the second questionnaire.
At the end of first two phases altogether seven answered questionnaires were available
for analysis. The details of findings are given in Section 12.1.
Phase 3
The comments given by project management consultants are reported in Section 12.3.
1.4 Structure of the Report

The whole report is divided into 12 Chapters. Comments and views of some experts in
relevant disciplines are highlighted in the text. Whenever possible, results of various
relevant research studies, conducted in USA. UK and Australia included to the report.
These findings will help to understand the practical implications of relevant methods,
concepts by providing some valuable clues. Further, it will justify the methods,
concepts described by different authors and comments, views expressed by different
experts.
The structure of the report is illustrated in a form of flow chart in Figure 1.0.
Structure of the Report
5 10
Contra- Applic
ct Strat- of Part.
egies Japan
USA
1 4 6 7 8 9 12
Introdu Nature/ Quality TQM Partner- Part. Res.
-ction Compl- Man. in in ing Process Find.
exity of Constr- Const- Conce- Bene. &
Con. uction. ruction pt Challa- Discus-
Ind. nges sion
2 3 11
Backgr- Total Applic.
ound of Quality of Part
Quality/ Man. Austra-
Quality (TQM ) lia.
Man.
Figure 1.0 : Flow chart diagram of the report.

10
CHAPTER 2: Background of Quality / Quality Management
2.0 Introduction
Quality is a familiar word to all of us. However it has a variety of uses and meanings.
"The attributes of a product and / or service which, as perceived by the customer, make
the product / service attractive to them and gives them satisfaction"- is perhaps the
simplest of definitions examined ( Dale and Cooper 1992). Deming ( 1986 ) quoted
that the quality should be aimed at the needs a the customer, present and future.
According to Wallace and Vallence (1993 ) complete definition of quality will define a
product or service in terms of a customer's stated needs, unstated needs and future
needs.
The enormous intensification of the world competition, social and technological

changes during the last thirty years have added new dimension to the quality challenge.
"Competition is a multi dimensional phenomenon which indicates not just the

price of the finished product but more essentially, quality of out put, reliability
of supply, accuracy of marketing and efficiency in delivery and the systems
and the people that are involved in the process" - Martin Ferguson ( cited in
Wallace and Vallence 1993).
Quality is now a global issue. As Feigenbaum ( 1987 ) noted:

"Quality operations in an increasing number of companies and governmental
programs today are becoming international in their out look and scope".
More and more companies are now organaized internationally. Operational, marketing,
product design and thus quality decisions are integrated internationally. Parts, materials
and services are now routinely sourced worldwide. Inter-governmental negotiations are
increasingly concerned with product liability and quality. The philosophies, systems,
and techniques of quality management are becoming common language of government
and international trade ( Macdonald and Piggot 1993 ).
In this chapter, the definitions of quality, its evolution, and brief explanations of quality
audits, quality manuals, systems and plans are discussed. Following this is a review of
ISO 9000 series and an approach to TQM using ISO as a starting point. In fact, a
quality system provides a sound basis for further development of TQM ( National
Industry Extension Service of Australia - NIES 1990).
11
2.1 History of Quality

Quality techniques were first used in ancient times. Four thousand years ago, the
Egyptians measured the rocks used in their pyramids. Then the Greeks and Romans
measured buildings and aqueducts to ensure they confirmed to requirements. Later craft
guilds in Renaissance Europe specified, measured, controlled and assured the quality of
paintings, cloth, tapestries, sculpture and architecture. To assume uniformity guild
students went through exhaustive apprenticeship programs over seen by accomplished
masters ( Hutchins 1991).
The group of scientist who developed quality control at AT&T in the first quarter are
often cited as the originators of quality. This may be true of 20th centaury US, but it is
not true world wide. The written history provides a grand procession of characters and
legends. Some of the known historical masters are:
Sun-Tzu lived sometimes during the warring states period ( 480-221 B.C.) in China
developed a set of principles that embodies the principles of Quality Management
(QM).
Aesop, a Greek slave who lived in the 6th century prepared a small sample of QM
related to the morale of people.
Number of QM concepts can be found in the various Socratic dialogues ( Socrates-
470BC to 399BC ) .
( Brocka and Brocka 1992).
To day Japanese are perhaps the most well known implementers of Quality
Management tools and techniques. Juran and Deming were the major contributors to
the Japanese revolution and the modem era of continuously improving quality.
2.2 What is Quality ?

In a linguistic sense "quality" originates from the Latin word "quarts" which means
"such as the thing really is ". In today's business world there is no single accepted
definition of quality. However, irrespective of the context in which it is used, it is
usually mean to distinguish one organization, event, product, service, process, person,
result, action, communication etc, from another ( Dale and Cooper 1992).
The word quality has number of meninges. Some widely used definitions are :
"Conformance to requirements" - which is measured by the cost of
nonconformance. Poor quality or high quality has no meaning, only
12
conformance and nonconformance ( Crosby - cited in Brocka and Brocka

1992, Macdonald and Piggot 1993, Schmidt and Finningen 1992, Fox 1993).
"A predictable degree of uniformity and dependability, at a low cost, suited to

the market" ( Deming 1986). In other words, quality is whatever the customer
needs and wants and since the customer needs and desires are always changing,
the solution to defming quality in terms of the customer is to redefme
requirements constantly ( cited in Brocka and Brocka 1992, Schmidt and
Finningen 1992).
"The total composite product and service characteristics of marketing,

engineering, manufacture and maintenance through which the product and
service in use will meet the expectations of the customer" (Feigenbaum, cited
in Macdonald and Piggott 1993, Fox 1993).
Juran defines quality as consisting of two different, though related concepts.
"One form of quality is income oriented, and consists of those features of the
product which meet customer needs and thereby produce income. In this sense
higher quality costs more.
A second form of quality is cost oriented and consists of freedom from failures
and deficiencies. In this sense higher quality usually costs less"( Juran, cited in
Brocka and Brocka 1992).
The standard definition of quality used by Juran and adopted and described in ISO
8402 is:
"Fitness for purpose or use" ( cited in Fox 1993, Schmidt and Finningen 1992,
Dale and Cooper 1992).
"The totality of features and characteristics of a product or service that bear

upon its ability to satisfy stated or implied needs" ( ISO 8402, Quality
Vocabulary, cited in Dale and Cooper 1992, Fox 1993).
A More comprehensive definition of quality is given by the American Society of Civil

Engineers :
"The totality of features attributes, and characteristics of a facility, product,
process, component, service, or workmanship that bear on its ability to satisfy a
13
given used : fitness for purpose. It is usually referenced to and measured by the
degree of conformance to a predetermined standard of performance".
The attributes of a product and / or service which, as perceived by the customer, make
the product / service attractive to them and gives them satisfaction is perhaps the
simplest defmition of quality. It focuses on adding value to the product /service.
From all these defmitions it is understood that the customer is the arbitrator of quality
of product or service. Most producers, customers and consumers consider quality is
more important than ever in their manufacturing, service and purchasing strategies.
In todays market customer requirements are becoming increasingly more rigorous and
their expectations of the product, service in terms of its conformance, reliability,
durability, interchangeability, performance, features, appearance, serviceability,
environment and user friendliness, safety etc, are also increasing. At the same time, it is
likely that the existing competition will be improving and new and lower cost
competitors, emerge in the market price; consequently the process of quality
improvement needs to be continuous and involve everyone in the company.
Quality is a way of organizational and everyday life, a way of doing business, living
and conducting one's personal affairs. What ever each of us does in what ever situation,
the task(s) must be undertaken in a quality conscious way. Quality is driven by our
internal mechanisms, our personal beliefs ( Dale and Cooper 1992).
2.3 The Evolution of Quality Management

ISO 8402 defines "Quality Management" as :
"That aspect of the overall management function that determines and
implements the quality policy".
Quality Management - QM ( or Total Quality Management - TQM ) is a way to

continuously improve performance at every level of operation in every functional area
of an organization, using all available human and capital resources. Improvement is
addressed toward satisfying broad goals such as cost, quality, market share, schedule
and growth. QM combines fundamental management techniques, existing and
innovative improving efforts, and specialised technical skills in a structure focused on
continuous/3, improving all processes. It demands commitment and discipline, and an
ongoing effort.
14
QM relies on people and involves everyone. QM is both a philosophy and a set of

guiding principles that represent the foundation of a continuously improving
organization, all the process within the organization, and the degree to which present
and future needs of the customers are met ( Brocka and Brocka 1992).
The quality functions in modern organizations have evolved through four stages.
Inspection
Quality Control
Quality Assurance
Total Quality Management
2.3.1. Inspection
ISO 8402 defines "inspection" as follows :
"Activities such as measuring, examining, testing, gauging, one or more
characteristics of a product or service and comparing these with specified
requirements to determine conformity" ( cited in Fox 1993).
In 1920's QM started with the simple inspection base systems where traditionally a
company would employ teams of inspectors to examine measure or test a product and
compare it with a product standard. The basis of the system was that poor quality
product found by the inspectors would be segregated from that of good quality. This
would then be scrapped, reworked or sold as lower quality.
The inspection often failed to find the poor quality items and the customers were left
with the consequences. Later it was realized that inspection based system was:
Costly : after all someone was paid to look for bad work and someone to repair it ;
Inefficient : it often simply was not successful;
Wrong headed : in that it tended to remove the responsibility for quality away from
inspectors towards inspection ( Kanji and Asher 1993).
2.3.2. Quality Control

ISO 8402 definition of "Quality Control" is :
"The operational techniques and activities that are used to fulfil requirements for
quality" ( cited in Fox 1993).
During the second world war when air craft technology became more complex and the
costs in both people and equipment of retying on inspection based system for such
15
things as military aircrafts were seen to be unacceptable. The change was to a system of
Quality Control ( QC).
Under such a system, control systems, product testing and documentation control
became the ways to ensure greater process control and reduced nonconformance. Also
typical of such systems were performance data collection, feed back to earlier stages in
the process and self inspection. Final inspection is still regarded as the customer's fmal
safe gn-H ( Kanji and Asher 1993).
2.3.3. Quality Assurance

According to ISO 8402 "Quality Assurance" means :
"All those planned and systematic actions necessary to provide inadequate
confidence that a product or service will satisfy given requirements for quality"
(cited in Fox 1993).
The third stage came with the change away with the product quality towards systems
quality. The company sets in a place a system for controlling what is done and the
system is audited to ensure that it is adequate both in design and use. Typical of this
stage were quality manuals, quality planning and advanced document control, i.e.
Quality Assurance ( QA ). The fundamental difference is that QA is prevention based
system while QC is inspection based ( Kanji and Asher 1993).
2.3.4. Total Quality Management
Quality is to satisfy agreed customer requirements continually.

Total Quality is to achieve quality at low cost.
TQM is to obtain total quality involving everyone's daily commitment.
The fourth stage of development remedied this by applying the concepts of Total
Quality Management ( TQM ) to all parts of the business. Typical of a company going
through a total quality process would be a clear and unambiguous vision, few
interdependent bathers, time spent on training, excellent customer relations and the
realization that quality was not just product quality but the quality of the company as a
whole i.e. TQM ( Kanji and Asher 1993).
NIES defines "TQM" as :

"A management approach that sustains a competitive advantage by consistently
exceeding the "current and future" expectations of customers based on
16
continuous improvement in all processes , goods and services through the

creative involvement of the people" ( cited in Wallace and Vallence 1993).
The US Department of defence uses the following definition of TQM :

"TQM is both a philosophy and a set of guiding principles that represent the
foundation of a continually improving organization. TQM is the application of
quantitative methods and human resources to improve the material and services
supplied to an organization, all the processes within the organization, and the
degree which the needs of the customer are met, now and in the future. TQM
integrates fundamental management techniques, existing improvement efforts,
and technical tools under disciplined approach focused on continuous
improvement " ( Brocka and Brocka 1992).
The following model ( developed from Dale & Plunkett ) shows one representation of
this development through the phases of inspection, Quality Control, Quality Assurance
& TQM QC embraces inspection, QA embraces QC and like wise, TQM embraces
.
QA - The Russian Doll analogy.
Total quality management

Focused vision, continuous improvement, internal
customer, performance measure, prevention,
company-wide application, management leadership,
interdepartmental barriers
Quality assurance
Third-party approvals, systems audits, quality
planning, quality manuals, quality cost, process
control, FMEA, non-production operations
Quality control
Quality manual, performance data, self-inspection,
product testing, quality planning, use of statistics,
paper work control
Inspection
Salvage, sorting, corrective action, identify sources
of non-conformance
Figure 2.1 Historical development from inspection to TQM. ( Source : Kanji and
:
Asher 1993)
17
A similar model ( developed from Dale and Plunkett ) shows the four levels in the
evolution of TQM.
Policy deployment
Involve suppliers and customers
Total Involve all operations
TOM quality Process management
management Performance measurement
Teamwork
1 Employee involvement
r Quality systems ri.v.oprn.nt
QA quality planning
Quality Comprehensive quality manuals
QC
z OA
TOM
assurance Use of quality costs
Involvement of non-production operations
Failure mode and effects analysis
IAdvanced
Statistical process control
Develop quality manual
QC Process performance data
Quality Self-inspection
Inspection control Product testing
Basic quality planning
Use of basic statistics
Paperwork controls
{ Salvage
Sorting, grading, reblending
Inspection Corrective actions
Identify sources of non-conformance
Figure 2.2 : Evolution of TQM. ( Source : Dale and Cooper 1992)
Principles of TQM and its applications are discussed in Chapters 3 and 7.
2.4 Quality Assurance

The background to Quality Assurance is the customer - supplier relationship. The
ultimate purpose of any quality system is to ensure complete satisfaction by the
customer with the goods or services provided by the supplier. Depending on the nature
of the product or service, either the customer will, or should, provide a full specification
of requirements, or the supplier, by market research and feed back from the market
place, will produce services or goods to presumed customer requirements
QA provides protection against quality problems through early warnings of trouble

ahead. Such early warnings play an important role in the prevention of both internal
and external problems. The assurance is provided by objective evidence, but the type of
evidence differs widely according to the persons requiring the assistance and the nature
of product ( Stebbing 1993).
For natural products, QA is attained through direct sensory examination of the product
( e.g. : freshness of the vegetables ). For manufactured product of a simple short lived
18
nature, the sensory evidence must usually be supplemented by laboratory testing. For
longer life products, more elaborate testing ( e.g. : environment, life ) is needed.
Assurance forms such as the manufacture's quality reputation, test by independent
laboratories or warrants are commonly used by manufactures.
For complex products, even data obtain from sophisticated environmental and life tests
do not provide full QA, since they fail to guard against inadequate product designs,
process designs and quality planning. They also fail to deal with those aspects of
quality performance which show up after fmal testing ( e.g. : packaging, transport,
storage, usage, and maintenance ).
To meet this added needs of QA, the manufacturer must not only produce the product
but also prepare and make available to the customer the proof that the product is fit for
use ( Juran and Gryna ).
QA needs to be integrated in to all processes and functions, from the conception of an

idea and throughout the life cycle of the product or service - determining customer
needs and requirements, planning and designing, production, delivery and after-sales
service.
Dale and Cooper ( 1992 ) emphasize, the objective of QA that should be for every
person to take personal responsibility for the QA of the processes for which he or she is
accountable. This includes treating later processes as customers and endeavouring to
transfer conforming products, services and documents to those customers, monitoring
quality performance, analysing nonconformance and taking corrective action to prevent
repetition of mistakes, and feeding data backward and forward. The emphasis should be
on pursuing thoroughly corrective action procedures and nonconformance investigation
with closed loop effectiveness. Tasks must be performed by as defined by the "quality
system".
The main objective of QA is to build quality in to the product / service during the
upstream design and planning processes. Quality Function Deployment ( QFD ),
Failure Mode and Effective Analysis ( FMEA ), design of experiments, design reviews,
design for manufacturability and quality audits are of considerable assistance in
pursuing this goal ( Dale and Cooper 1992).
19
2.5 Quality Audit

Quality audits are used mainly by companies to evaluate their own quality performance
and the performance of their suppliers, licensees, agents and others and by regulatory
agencies to evaluate the performance of organizations which they are assigned to
regulate.
The usual purposes of quality audits are to provide independent assurance that :
Plans for attaining quality are such that, if followed, the intended quality will, in fact
be attained.
Products are fit for use and safe for the user.
Laws and regulations are being followed.
There is conformance to specifications.
Procedures are adequate and are being followed.
The data system provides accurate and adequate information on quality to all
concerned.
Deficiencies are identified and corrective action is taken.
Opportunities for improvement are identified and the appropriate personnel are
alerted ( Juran and (hyna 1988).
Third party audit

Two parties are involved in the purchase of products : the purchaser and the supplier.
Purchases are using the concept of "third party" to evaluate supplier quality. The third
party performs the evaluation service for the purchaser but is independent of the
purchaser and supplier. This relieves the purchaser of maintaining a staff with the
necessary skills. A third party can either inspect the product, evaluate the quality system
or both.
Evaluation by a third party is often associated with formal "certification" ( accreditation)

and is sometimes coupled with a listing of approved sources, or the issuance of a
symbol or mark. Most third party audits are evaluations of product and or quality
systems to some given standard ( Juran and Gryna 1988).
2.6 Quality Manual, System and Plan

Referring to ISO 8402, "a quality system" is
"The organizational structure, responsibilities procedures, processes and
resources for implementing quality management".
20
The quality manual plus the supporting detailed procedures comprise the company's
quality system. A quality manual is a document, setting out the general quality policies,
procedures, and practices of an organization. Generally it contains a policy statement,
authority and responsibilities, organization, system element out lines and a procedure
index.
ISO 8402 defmes "quality plan" as :

"A document setting out the specific quality practices, resources and sequence
of activities relevant to a particular product, service, contract or project".
When the company's quality system is applied to a given project there is invariably the
requirement for some form of adjustment or modification ( either additions to, or
reductions in, the corporate system ) to suit that particular project. Manual plus the
supporting procedures becomes the project quality plan ( Stebbing 1993).
In evaluation of overall quality system, use is often made of reference standards issued
by regulatory bodies. Examples are MIL - Q - 9858 A ( quality program requirements),
BS 5750 ( quality systems ) and ISO 9000 / AS 3900 series ( quality systems ).
Such standards provide important benefits. They help to define the activities that are
needed to achieve quality objectives, provide criteria for evaluation and thereby increase
the objectivity of audits, and are useful during bidding on contacts by providing a
common understanding of the activities required of all bidders.
On the other hand, it has not been proved that surveys based on such standards are
good predictors of subsequent quality performance. Another caution is that some
standards omit such important elements as process capability, training, fitness for use
considerations, quality of previous products delivered etc, ( Juran and (hyna 1988).
2.7 Quality Systems ( ISO 9000 Series )

In 1987, the ISO 9000 series of International Standards on Quality Systems were
published by the International Organization of Standardaization ( ISO ). These
standards while reflecting various national approaches and international requirements,
are based largely on the 1979 version of BS 5750 and the eight or so years of UK user
experience, mainly in manufacturing industry ( Dale and Cooper 1992).
21
Many companies are or will be under pressure from their customers to show proof that
they have implemented management systems complying with one or another of the
current quality assurance standards or certification schemes. This approach is now
international, as the International Standards Organization chart illustrates.
Standard Quality Quality Quality Quality Quality

Body management Systems: el:dome. management
(country) and quality Model for Model for Model for and quality
assurance quality quality quality system
standards: assurance in assurance in assurance in elements:
Guidelines for design/ production final Guidelines
selection and development, and inspection
use production, installation and test
installation,
and servicing
ISO 150 9000: 1987 ISO 9001: 1987 ISO 9002: 1987 ISO 9003: 1987 ISO 9004: 1987
Australia A53900 AS 3901 AS 3902 AS 3903 AS 3904
Austria ö Norm 8 Norm ö Norm ö Norm ö Norm
ISO 9000 ISO 9001 ISO 9002 ISO 9003 ISO 9004
Belgium NBN X NBN X NBN X NBN X NBN X
50-002-1 50-003 50-004 50-005 50-002-2
Canada CSA Z2990-86 CSA Z299.1-85 CSA Z299.2-85 CSA Z299.4-85 CSA Q420-87
Denmark DS/ISO 9000 DS/ISO 9001 DS/ISO 9002 DS/ISO 9003 DS/ISO 9004
DS/EN 29000 DS/EN 29002 DS/EN 29002 DS/EN 29003 DS/EN 29004
Finland SFS-ISO 9000 SFS-ISO 9001 SFS-ISO 9002 SFS-ISO 9003 SFS-ISO 9004
France NF X 50-121 NF X 50-131 NF X 50-132 NF X 50-133 NF X 50-122
Germany (FR) DIN ISO 9000 DIN ISO 9001 DIN ISO 9002 DIN ISO 9003 DIN ISO 9004
India IS: 10201 IS: 10201 IS: 10201 IS: 10201 IS: 10201
Part 2 Part 4 Part 5 Part 6 Part 3
Ireland 15 300 Part 0/ IS 300 Part 1/ IS 300 Part 2/ IS 300 Part 3/ IS 300 Part 0/
ISO 9000 ISO 9001 ISO 9002 ISO 9003 ISO 9004
Netherlands NEN-ISO 9000 NEN-ISO 9001 NEN-ISO 9002 NEN-ISO 9003
Norway NS 5801 NS 5802 NS 5803
South Africa SABS 0157: SABS 0157: SABS 0157: SABS 0157: SABS 0157:
Part 0 Part I Part II Part III Part IV
Spain UNE 66 900 UNE 66 901 UNE 66 902 UNE 66 903 UNE 66 904
Switzerland SN-ISO 9000 SN-ISO 9001 SN-ISO 9002 SN-ISO 9003 SN-ISO 9004
United BS 5750: 1987: BS 5750: 1987: BS 5750: 1987: BS 5750: 1987: BS 5750: 1987:
Kingdom Pait 0:Section 0.1 Part 1: Part 2: Part 3: Part 0: Section 0.2
ISO 9000/ ISO 9001/ ISO 9002/ ISO 9003/ ISO 9004/
EN 29000 EN 29001 EN 29002 EN 29003 EN 29003
USA ANSI/ASQC ANSI/ ASQC ANSI /ASQC ANSI / ASQC ANSI / ASQC
Q90 Q91 Q92 Q93 Q94
Yugoslavia JUS A.K. 1.010 JUS A.K. 1.012 JUSA.K. 1.013 JUS A.K. 1.014 JUS A.K. 1.011
European EN 29000 EN 29001 EN 29002 EN 29003 EN 29004
Community
Table 2.1: International Quality Standards. ( Source : Macdonald and Piggot 1993)
22
The ISO 9000 series consists of five documents numbered ISO 9000 to ISO 9004
ISO 9000 : Quality Management and Quality Assurance Standards - Guide lines for
selection and use.
ISO 9001 Quality Systems - Model for Quality Assurance in design /
:
development, production, installation and servicing.

ISO 9002 : Quality Systems - Model for Quality Assurance in production and
installation.
ISO 9003 : Quality Systems - Model for Quality Assurance in final inspection and
test.
ISO 9004 : Quality Management and Quality System Elements - Guidelines.
(cited in Dale and Cooper 1992, Fox 1993, Oaklland 1989 ).
The standards have two main functions.

It defines the aspects to be covered by an organization's quality system and gives
evidence in QM and the application of the standards.
It defmes the features and characteristics of the system considered essential for the
purpose of QA in contractual situations.
( Dale and Cooper 1993).
Several authors have commented on benefits, limitations and some difficulties in

application of ISO 9000 series. Some of them are given below :
Benefits and the limitations of the ISO 9000 series of standards
A reduction in customer complaints and nonconforming products, services and
costs.
A reduction in the number of audits and assessments, leading to a saving in
resources needed for such activities.
Improved control, discipline, procedures, documentation and customer satisfaction.
Increased quality awareness, in particular from those departments and people who
traditionally did not see quality as their major concern.
A better working environment.
[ Dale and Cooper 1992, cited in Dale and Oakland, ( Long, Dale and Young),
Atkin 1987, Bulled 1987, Collyer 1987, Ford 1988, Hele 1988]
On the other hand number of difficulties and problems have been reported and
discussed
Whether to apply for ISO 9001 or 9002 registration, and whether it should be
sought for the whole company or just one unit / division / site.
Interpretations of various sections of the standard.
23
A lack of direction in relation to Statistical Process Control ( refer Appendix 2).

Time taken in writing procedures.
Terminology used.
Weakness in some of the requirements.
[ Dale and Cooper 1992, cited in Dale and Oakland, Oliver, ( Long, Dale & Young)
Sayle 1987, Owen 1987, Whittington 1989 1
ti qui:silty by sLein is a fundamental par

t ;X an orgar;-"^-'.
a
Thrvrwrs
awerl rs Tnx
N,C1. The
guidelines provided in ISO 9001 are aids in developing and maintaining the procedures
controls and disciplines required to TQM. The system should help to bring more people
in the organization in contact with quality and thus raise quality awareness. Dale and
Cooper ( 1992 ) observed that the ISO 9000 series tend to encourage the separation of
a business in to areas that complete the recording of requirements and those which do
not. Finance, management information systems and human resources are little affected,
except for training requirements. It is TQM that stimulates the business by creating the
understanding that all the component parts have customers.
The University of Manchester, Institute of Science and Technology, TQM research

experience indicates that in most companies it is not easy to involve every person taking
responsibility for their own QA and making quality improvements in their process
(Lascelles and Dale 1992).
The procedure suggested by Braddy ( 1994 ), illustrates how ISO 9000 series can
assist to approach to TQM.
2.8 Startine TOM from ISO 9000

TQM is a philosophy of the management of organizations and is thus a guide to travel
on a never ending journey. Braddy ( 1994 ) emphasizes the importance of
understanding the structure of ISO 9000 and relate its concepts to TQM concepts, in
order to start the TQM journey from ISO. 9000.
ISO 9000 starts with a requirement for a statement on the quality policy of the
organization. This can be interpreted as a requirement for management to state the aim
or purpose of its system. This is the first step in aligning ISO 9000 with TQM.
ISO 9000 requires everyone in the company to know and understand the quality policy
and his / her contribution towards achieving it. TQM goes further and requires
management to ensure that everyone shares the aim.
24
ISO 9000 is about achieving management's quality policy. It divides naturally, but not
explicitly into three sections.
Management's role.
Operation of major processes.
Control of processes.
Management's Role
Appoint a management representative : Management is not required to delegate quality,
but ISO 9000 requires many activities to be carried out that form part of the
management of the system. It is the responsibility of the management representative that
these are carried out in the manner specified in the written description of the system.
Establish and maintain a documented quality system : In TQM, the quality system is a
statement of the means by which the quality policy i.e. the system aim is to be achieved.
ISO 9000 says that the system is the means of ensuring that out put product confirms to
specified requirements. This is not sufficient today. The system must be the means for
ensuring those customer needs and expectations are achieved, or more that customers
are delighted ( Kanji and Asher 1993 ). ISO 9000 requires the system to be
documented and effectively implemented ( Standardaization ).
Defme responsibility of people who work and manage in the system : It is important
that everyone should know his or her responsibilities within the system.
Review the system regularly for suitability and effectiveness : Management needs to
exercise continual concern about the performance of its system and to realise that it
"owns" the system. That is, only it is empowered to change the system. Management
review of the system can be the formal process of enabling change. But it needs the
help of everyone to enable it to optimise its system to achieve its aim.
The key to the start of TQM lies in what management perceives its role to be. The
description of its role in its quality system defines the style of leadership to be used and
can encourage every one to seek pride in his or her work. Management needs to realize
that most of the problems are caused by the system and not by individuals (Deming
1986).
25
Operation of major process

Contract review : The purpose of this clause is to ensure that there can be no
misunderstandings between customer and supplier on what will be supplied and when.
In ISO 9000 this is the entry point in to the system. TQM requires that the sales process
which leads up to contract review, be included in to the system. It is particularly
important to include in the system the process that enables feed back to be obtained
from customers on how the product or services supplied met their needs and
expectations as this is the starting point for improvement of the system.
Purchasing : The purpose is to ensure that purchased product conforms to specified

requirements. The TQM objective must be establishing a deep partnership and
understanding with supplier to the company. Since this is time consuming and
expensive and of management resource, it cannot be achieved with large number of
suppliers. Hence there is a need to reduce the number of suppliers to as few as possible.
Design : The purpose is to ensure that the completed design meets and has been
verified to meet specified requirements. ISO 9000 has some good requirements to
ensure that the design process produces designs that confirm and have been verified to
conform to specification. There is no acknowledgment of the need to encourage
innovation. This is a vital issue in TQM and must be addressed in all operations. ISO
9000 does not require the marketing process to be described. TQM needs to include the
marketing process as part of the system.
Product and Installation : The purpose is to ensure that the production and installation
processes are "controlled" by what ISO 9000 calls work instructions and planned
arrangements. This is an excellent starting point for continual improvement. TQM
advises that the wealth of knowledge and experience of all those involved with these
processes should be used to improve them continually using the PDCA cycle thus
reducing variations.
PDCA cycle
Plan : to make decisions about what is required to be done : to set an objective and
standard.
Do : to act or to put the plan into effect using worker's input ( e.g. : knowledge, skills
and comments ).
Check : to see that the results of doing match what was planned i.e. to evaluate.
Act : to build on successful changes so that continuous improvement occurs.
26
The Shewhart cycle The Deming cycle
Figure 2.3 : PDCA cycle - The Shewhart cycle and Deming cycle. ( Source : Wallace
and Vallence 1993)
NIES ( 1990 ) observes that the QA can be used to underpin the Deming cycle to
provide continuous improvement. This means to improve in a series of small steps using
the company's quality systems to make sure that the standard of products or services is
maintained and does not go back wards ( cited in Wallace and Vallence 1993).
quality
assurance
continuous
imcremental improvement
Figure 2.4 : Continuous incremental improvement. ( Source : Wallace and Vallence

1993)
27
Inspection and Testing : ISO 9000 lays great emphasis on inspection and testing and
requires that all the planned tests have been completed before product is released.
Progress towards TQM begins when inspection is seen to be wasteful, since it adds cost
but not value. More important, the process itself is wasteful if it produces non
conforming products. The way ahead is to improve the process so that it will produce
progressively less non conforming product and eventually none. This is the objective of
continual improvement, which can be achieved by using PDCA cycle over and over
again.
Handling, Packaging, Storage, Delivery : the specific requirement of ISO 9000 is to

reduce waste by damage to product during these processes. TQM of course encourages
this.
Control of process
Corrective action : There are several requirements of this clause in ISO 9000.
Investigate cause of nonconforming product and the corrective action needed to
prevent recurrence - TQM uses PDCA cycle.
Analyse all processes, concessions, quality records, service reports and customer
complaints to detect and eliminate potential causes of nonconforming products - It
is the process for the collection of the feed back information on how effectively the
processes, making up the system, is working and is thus the start of TQM process
of continual improvement.
Initiate preventive action to deal with problems - TQM embraces this requirement.
Plan and undertake audits : ISO 9000 requires that audits be undertaken aimed at
establishing whether processes are being run in the way described in the written
procedures. TQM points out that most of the problems are due to the systems rather
than to individuals and therefore require management to work on the system to resolve
them.
Plan & provide training : ISO 9000 requires the company to ensure that people are
trained to undertake the tasks to which they are assigned. TQM points out that training
must be planned to meet both the needs of the company and the individual is developed
and the necessary skills are available to the company when needed. This implies long
term planning.
28
Calibrate inspection and test equipment : ISO 9000 requires that measuring equipment
be regularly calibrated. TQM endorses the implied needs for adequate accuracy of
measurement, but point out that the precautions listed by ISO 9000 may not be
exhaustive.
Statistical techniques : This clause is not mandatory. There is a little to point the
company in the direction of statistical process control, which is considered by Deming
1104K
kxt...... 1 to be a powerful tool in analysing the performance of the system and its
processes
In complying with ISO 9000 eventually a company can achieve :

A documented system.
Standardaization of the process ( Establish and maintains a documented quality
system ).
A start along the path of using the measured performance of its processes to
identify where improvement will be most effective.
Regular management reviews of its system, which can lead to better optimization of
the system.
A start to corrective action.
The performance of the system and its processes in achieving these aims of the system
has to be continually fed back and used to indicate where improvements are required.
The following recommendations are made by Bradely ( 1994 )
The ISO 9000 quality system must be extended to include the marketing and sales
process.
The measurement of process performance must be extended and a culture of
continual improvement established.
All employees must be encouraged to participate in improvement through project
groups, quality circles etc,.
29
CHAPTER 3: Total Quality Management ( TOM)
3.0 Introduction
TQM is a continuous improvement process which involves the cooperation of everyone
in an organization and associated business processes to furnish products and services
which meets the needs and expectations of customers.
TQM is becoming synonymous with successful companies - it is increasingly being

used as a public relation tool to persuade customers that the company can rely upon to
produce products and services that will meet customer requirements and therefore
provide satisfaction ( Spenley 1992).
"TQM is the single most important management methodology available today

to achieve and maintain a competitive edge against worldwide competition" -
Paul Spenley
The quality improvement processes as described by number of quality experts are

briefly outlined in this chapter. Further it describes the basic elements of TQM, benefits
and disadvantages and explains how to implement the TQM process. The out comes of
two research studies carried out in UK and Australia, are given at the end of the
chapter.
3.1 Continuous Improvement Process

A multitude of consultants offer solutions to the problems of achieving quality
improvement. Most of these solutions are based on the teachings of three American
experts of quality who have become known as "the gurus" - Philip Crosby, Dr.W.
Edwards Deming, and Dr. Joseph Juran.
A number of other experts also have contributed to the recent evolution of quality
management. Most notable among this is Armand Feigunbaum, who was the first to
start using the word "total' in relation to quality. Though the Japanese quality revolution
was originally based on the work of Deming and Juran, Japanese are adding their own
experts : Kaori Ishikawa, Genichi Taguichi, Musaalci Imai, and Shigru Mizuno
(Macdonald and Piggot 1990).
Deming is probably the most revolutionary quality master demanding a managerial

transformation. Crosby and Feigenbaum see quality fitting in more as a quality
promotion department that acts as a facilitator / consultant. Ishikawa works within an
30
existing organizational framework, but his ideas benefit from Japan's historically better
access to top management. Lately Juran has also called for top management.
3.1.1 Deming's Approach

According to Deming ( 1986 ) his 14 points apply anywhere, to small organizatioins as
well as to large ones, to service industry as well as to manufacturing.
Create constancy of purpose toward improvement of product and service, with the
aim to become competitive arid to stay in business, and to provide jobs.
Adopt the new philosophy. We are in a new economic age. ( Western )
Management must awaken to the challenge, must learn their responsibilities, and
take on leadership for change.
Cease dependence on inspection to achieve quality. Eliminate the need for
inspection on a mass basis by building quality into the product in the first place.
End the practice of awarding business on the basis of price tag. Instead, minimize
total cost. Move toward a single supplier for any one item, on a long term
relationship of loyalty and trust.
Improve constancy and forever the system of production and service, to improve
quality and productivity, and thus constantly decrease costs.
Institute training on the job.
Institute leadership. The aim of supervision should be to help people and machines
and gadgets to do a better job. Supervision of management is in need of overhaul,
as well as supervision of production workers.
Drive out fear, so that everyone may work effectively for the company.
Breakdown barriers between departments. People in research, design, sales, and
production must work as a team, to foresee problems of production and in use that
may be encountered with the product or service.
Eliminate slogans, exhortations, and targets for the work force asking for zero
defects and new levels of productivity. Such exhortations only create adversarial
relationships, as the bulk of the causes of low quality and low productivity belong to
the system and thus lie beyond the power of workforce.
1 1 a.Eliminate work standards ( quotas ) on the factory floor. Substitute leadership.
b.Eliminate management by objective. Eliminate management by numbers, numerical
goals. Substitute leadership.
12a.Remove bathers that rob the hourly worker of his right to pride of workmanship.
The responsibility of supervisors must be changed from sheer numbers to quality.
b.Remove barriers that rob people in management and in engineering of their right to
pride of workmanship. This means, inter alia , abolishment of the annual or merit
rating and of management by objective.
31
Institute a vigorous program of education and self improvement.

Put everybody in the company to work to accomplish the transformation. The
transformation is every body's job.
3.1.2 Juran's Approach

In Juran's priority list, quality improvement comes first. This approach includes a list of
nondelegable responsibilities for the upper managers.
Create awareness of the need and opportunity for improvement.
Mandate quality improvement; make it a part of every job description.
Create the infrastructure : establish a quality council; select projects for
improvement; appoint teams; provide facilitators.
Provide training in how to improve quality.
Review progress regularly.
Give recognition to the winning teams.
Propagandize the results.
Revise the reward system to enforce the rate of improvement.
Maintain momentum by enlarging the business plan to include goals for quality
improvement.
( cited in Brocka and Brocka 1992)
Further Juran proposed a three step process for continual quality improvement,
refereed to as Juran's trilogy.
Quality planning Quality control Quality improvement

This is a series of steps which This process depends on feed Again through identifying needs,
results in the development of back from customers and being diagnosing causes of problems
products and processes which prepared to respond and change, and dealing with change,
meet the customer's needs. performance constantly aims to

reach new levels of quality.
Table 3.1 : Juran's three-step process in quality improvement. ( Source : Wallace and
Vallence 1993)
3.1.3 Crosby's Approach

Crosby is most closely associated with the idea of zero defects. His 14 steps to quality
improvement is given below :
Make it clear that management is committed to quality.
From quality improvement teams with representatives from each department.
Determine how to measure where current and potential quality problems lie.
32
Evaluate the cost of quality and explain its use as a management tool.
Raise the quality awareness and personal concern of all employees.
Take formal actions to correct problems identified through previous steps.
Establish a committee for the zero defects program.
Train all employees to actively carry out their part of the quality improvement
program.
Hold a "zero defects day" to let all employees realize that there has been a change.
Encourage individuals to establish improvement goals for themselves and their
groups.
Encourage employees to communicate to management the obstacles they face in
attaining their improvement goals.
Recognize and appreciate those who participate.
Establish quality councils to communicate on a regular basis.
Do it all over again to emphasize that the quality improvement program never ends.
( cited in Brocka and Brocka 1992)
3.2.4 Ishikawa's Approach

Ishikawa was the foremost figure in Japan regarding quality control. He was the first to
use total quality control, and developed the "seven tools" ( Appendix 2 ) :
Pareto charts.
Cause-effect diagrams ( fishbone or Ishikawa diagrams).
Histograms.
Check sheets.
Scatter diagrams.
Flow charts.
Control charts.
Some basic tenets of Ishikawa's quality philosophy are:

Quality begins with education and ends with education.
The first step in quality is to know the requirements of customers.
The ideal state of quality control is when inspection is no longer necessary.
Remove the root cause, and not the symptoms.
Quality control is the responsibility of all workers and all divisions.
Do not confuse the means with the objectives.
Put quality first and set your sights on long term profits.
Marketing is the entrance and exit of the quality.
Top management must not show anger when facts are presented by subordinates.
33
Ninety five percent of the problems in a company can be solved by the seven tools
of quality control.
Data without dispersion information is false data ( e.g. stating an average without
supplying the standard deviation ) .
( Brocka and Brocka 1992 )
3.2 Comparison of Different Strategies

The following is a comparison of different quality management strategies.
Attribute Deming Juran Crosby Ishikawa

Role of top Leadership Varied Must stress zero Leadership
management participation defects participation
Scope All activities Product Product All activities
Program Long term Decrease cost of Decrease costs Long term

motivation competitive quality competitive
position position
Management style Participatory Varied Authoritarian Participatory
Use of incentives Nil Varied Individual Group recognition

recognition
Quality goal Zero defects Minimize cost of Zero defects Zero defects
quality
Definition of Uniformity about a Fitness for use Conformance to Uniformity about a

quality correct target specification correct target
Project selection Pareto error Cost analysis Cost analysis Cost analysis
analysis
How to measure Direct Cost of quality data COQ and direct Direct
improvement measurement measurement measurement
Role of quality Initially high Extremely high Moderate Low

control department eventually low
Role of workers Maintenance and Little Little Maintenance and

improvement improvements
Cost of quality Low Very high Moderate Low

emphasis
Statistical analysis High use by all For lower Mixed High use by all
management
Table 3.2 : Comparison of Quality Management strategies. ( Source : Vogel and Mills
1992, cited in Lu and Sohal 1993)
34
In all these strategies "management commitment" and "involvement" are the key issues
to quality improvement. According to Macdonald and Piggot ( 1993 ) the applicability
of different approaches is dependent on the "corporate culture" and nature of a business
judged on a national or location basis.
Schein ( 1985 ) defines culture as

A pattern of basic assumptions - invented, discovered, or developed by a given
group as it learns to cope with its problems of external adaptation and internal
integration - that has worked well enough to be considered valid and, therefore,
to be taught to new members as the correct way to perceive, think, and feel in
relation to those problems.
Deal and Kennedy (1982) described five elements of "corporate culture".

The organization's business environment.
The values or norms of behaviour shared by members of the organization.
The individuals identified and held up as heroes by the organization.
The rites and rituals employed by the organization to reinforce the values or norms
of behaviour.
Communications, the management of the cultural network that sustains the
organizational culture.
( cited in Maloney 1989)
3.3 Philosophy of Total Quality Management

The implementation of TQM is probably one of the most complex processes an
organization can undertake. Although the key elements and principles described by
various authors differ in content and emphasis, each has wisdom that can be included in
every organization's TQM process.
3.3.1 Model 1 - ( Brocka and Brocka 1992)

Brocka and Brocka ( 1992 ) introduced the following elements as the "pillars of TQM".
Organizational vision.
Barrier removal.
Communication.
Continuous evaluation.
Continuous improvement.
Customer / Vendor relationships.
Empowering the worker.
Training.
35
As organization advances, training, barrier removal, and communication can be

subsumed into empowering the worker. Continuous evaluation and continuous
improvement could perhaps be combined in to continuous analysis. Thus distilled, this
levels us with four essential ingredients from which the other concepts flow.
Top-down strategic vision demonstrated daily via leadership.
Continuous analysis and product /service improvement.
Empower and liberate employees
Listen and react to customers and vendors.
The key elements are

Organizational vision : This provides the frame work that guides the firm's beliefs
and values. It needs to be demonstrated by the actions of all the employees of the
company. Four keys to successful vision implementation are : total involvement;
communication, barrier removal and evaluation.
TQM recognizes the absolute necessity of developing a vision of a continually

improving organization committed to excellence in what it does and how it does
(Schmidt and Finningen 1992).
Gitlow and Gitlow ( 1987 ) suggest to disseminate this vision statement to management,
employees, vendors, customers and stakeholders to get their input for possible changes.
Barrier removal : Barriers are caused by many different things or combination of

things. Each organization has its own particular causes of barriers. The barriers
associated with the implementation of the continuous improvement process should be
removed. Here it is vital to address the root cause of problem not the symptoms..
Communication Communication is the glue that binds all of the techniques,

:
practices, philosophies and tools. In effective communication will doom the most clever
of Quality Management initiatives. Understanding and refining skills for written, verbal
or non verbal communication is an ongoing process for everyone.
Continuous evaluation : Feed back is essential to continuous improvement. These

feed back mechanisms may be simple oral or written reports, information systems or
complex automated statistical analysis integrated with the expert systems. The key is to
receive the information in time to allow initiating corrective action. as described earlier
the PDCA cycle provides a feedback mechanism and it is applicable to many
situations.
36
Continuous improvement Japanese have used the concept of continuous

:
improvement for some time. ( "Kaizan" ). This idea fits hand in hand with team
building approaches such as quality circles ( Brocka and Brocka 1993).
Circles are quality improvement and self improvement study groups. A primary
contribution of quality circles in Japan according to Juran, has been in improving
workers knowledge and skills and developing interest in the job by providing
opportunities for planning and decision making not present in the daily routine.
To reduce costs and increase productivity the focus has to be projected on process that
produces the product. Improving the process reduces or eliminates variation and
increases the uniformity of the product. This results in lower cost through reduction of
scrap, rework, and complexity ( Brocka and Brocka 1993).
Customer / Vendor relationships : The "hearing of the voice of the customer "has
become a key phrase in the past few years. Listening to the customer requires listening
throughout a product life cycle, from requirements definition to maintenance after sale.
Listening to the customer entails surveys, research, and the implementation of tools
such as Quality Function Development ( QFD ).
By viewing purchasing as a strategic function, procurement becomes an essential link in

the QM function. Most QM coaches advise reducing the number of suppliers, and
establishing long term partnerships with those that remain.( Brocka and Brocka 1993).
Deming ( 1986 ) also emphasizes the advantages of a single source and long term
relationships. A long term relationship between purchaser and supplier is necessary for
best economy. ( Deming 1986).
Empowering the worker : This means enabling a worker to achieve his or her highest
potential. A key strategy in empowering employees is to allow them ownership of a
tasking, project, or division. Ownership implies trust and it requires a delegation of
authority commensurate with the responsibility of the task. Ownership also demands
that the final resolution of the tasking be in the hands of the owner.
The underlying principle involved in fostering worker participation or empowering is

trust. Management must trust its employees and employees must trust management
(Brocka and Brocka 1993).
37
8. Training / Education : Employees need to be provided with the right level of

education and training to ensure that their general awareness of QM skills and attitudes
is appropriate and suited to the continuous improvement philosophy. Education and
training also provide a common language throughout the business. Training needs to be
planned and provided on a timely and regular basis to enable people to solve
increasingly complex problems ( Dale and Cooper 1992).
TQM provides a high priority training at all levels.

Top executives have to learn how to better articulate their vision, listen, delegate
and train.
Managers and supervisors have to learn how to more effectively involve and
empower subordinates.
Employees who are bottom at the traditional organizational chart have to learn how
to listen to customers, keep records, and solve problems.
( Schmidt and Finningen 1992).
Generally these principles can be applied to any organization, which commited to the
continuous improvement process. According to Brocka and Brocka ( 1992 ) this
method is particularly suitable for a organizations which are initially making the move to
a QM program.
3.3.2 Model 2 - ( Kanji and Asher 1993)

TQM is continuous performance improvement. To improve performance people need
to know what to do, how to do it, have the right tools to do it., to be able to measure
performance and to receive feedback on current levels of achievement. TQM provides
this by adhering to a set of general governing principles as depicted in the a four sided,
pyramid principles of TQM model with 8 core concepts( Kanji and Asher 1993 ).
These principles are
Delight the customer.
Management by fact.
People based management.
Continuous improvement.
Each of the principles can be used to drive the improvement process. To achieve this,
each principle is translated into practice by using two core concepts. The concepts show
how to make the principal happen. These concepts are :
Customer satisfaction.
Internal customers are real.
38
All work is a process.

Measurement.
Team work.
People make quality.
Continuous improvement cycle.
Prevention.
la
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oc :250 o
4-1
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q7 .e ,
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laC.
s',1>
1r
,
.,) 4.41,
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0 0 'MANAGEMENT ' BY FACT"

c .)C.-
; DELIGHT THE CUSTOMER:
Figure 3 .1: Pyramid principles of TQM. ( Source : Kanji and Asher 1993)
Four principles of TQM pyramid are briefly explained here.

1. Delight the customer : The first principle focuses on the external customers and asks
"what would delight them ?" This implies understanding the needs - both of product
and service, tangible and intangible, agreeing requirements and meeting them. Delight
means being best at what matters most to customers and this change over time. Being in
touch with these changes and delighting the customer now and in the future is an
integral part of the TQM.
Each individual employee or team plays two roles in the quality chain as an internal
customer and as a supplier. Each person in the quality chain has to ask him or herself
who their immediate suppliers and customers are and what they actually require.
39
The core concepts of TQM that relate to "delight the customer" are "customer
satisfaction" and "internal customers are real".
2 Management by fact : Having the facts necessary to manage the business at all levels
is the second principle of total quality. Giving that Information to people so that
decisions are based upon fact rather than "gut feeling" is essential for continuous
improvement. Another possible focus for improvement is reduce variations in business
process. A process is a combination of methods, materials, manpower and machinery
that taken together to produce a product or service.
Taylor ( 1911 ) believed that the major responsibility of management was to find the
best way to do a job and then train the worker to do it that way. TQM extends this
concept of finding the best way to do a job to the entire system.
Management By Objectives and Management By Results ( MBO and MBR ) are

incompatible in the Total Quality organizations because MBO and MBR place the
emphasis on individual or departmental control and achievements; TQM places the
attention on how well the customer is being served ( Schmidt and Finningen 1992).
The core concepts that relate to "management by fact" are "all work is a process" and
"measurement".
3. People based management : Knowing what to do, how to do it and getting feed back
on performance are all part of encouraging people to take responsibility for the quality
of their own work. Involvement and commitment to customer satisfaction are ways of
generating this. The third principle of TQM recognizes that systems, standards and
technology themselves will not mean quality. Therefore, the role of people is vital.
Likert ( 1967 ) proposed that a typical organization would operate more effectively if it
was thought of as a cluster of groups linked together with managers functioning as
"linking pins". Each manager in Likert's model could be a leader of one group and
member of a second group. In such a scheme, communication would flow more easily
and decisions across departmental lines would be made more realistically than in a
straight bureaucratic system. TQM incorporates this same philosophy. Hierarchal
relationships are minimized and team relationships are fostered ( Schmidt and
Finningen 1992 ).The core concepts that relate to "people based management" are
"team work" and "people make quality". .
40
4.Continuous improvement: The continuous cycle of establishing customer

requirements, measuring success and keeping on improving can be used both externally
and internally to fuel the engine of continuous improvement. Prevention which means
causing problems not to happen is another way to move towards continuous
improvement. The core concepts that relate to company "continuous improvement" are
il -
the "continuous improvement cycle" and the "prevention".
rut we allu Core cOliCepw, -1: ....I 1- -

apputa, -
icau tu COuutrillOUS
improvement of individuals, groups and organizations ( Kanji and Asher 1993).
--x-
3.4 Benefits and Disadvanta2es of TOM

The results of TQM cannot be measured just in monetary gains alone. The other
factors are the organizational culture, environment and morale, teamwork, people
development and participation. ( Dale and Cooper 1992). However critics of TQM
point out some disadvantages as well. Wallace and Valance ( 1993 ) noted the
following benefits and disadvantages.
Benefits
Employees feel that they are vulnerable and their motivation and commitment
increases as a result.
Improvement in the quality of goods and services.
Principles and processes can be applied to a wide range of organizations.
The organizations reputation increases and so does their profitability.
"Waste" reduction ( in both goods and services ).
Disadvantages
Any changes to the way things are done is a difficult and prolonged process.
Changes are hard to sustain.
May become dependent upon one or a small group of charismatic individuals.
TQM is not closely enough related to the implementation of suggestions that will
achieve competitiveness.
Seems to be a management - driven or top down system.
No implementation strategy has yet been developed so that everyone benefits
immediately from its introduction.
( Wallace and Vallence 1993)
41
3.5 NIES "How to" Approach

This approach is probably the most common one adopted by Australian companies
pursuing TQM. Each organization is different, its destination is unique, its people and
culture are special to that organization alone. The NIES ( 1990 ) approach recognizes
this individuality. According to this approach customer is the focal point and people,
variation and systems are the three interacting factors that affect the ability of supplier /
contractor to satisfy the customer expectations.
People - all people seive customers through and within a system.
Variation - variation impedes the ability of people in the system to satisfy customer
needs.
Systems - all systems are adversely affected by variation.
Awareness & Knowledge Development Application

Commitment Of How Of Skills
Initial Briefing Change Sequence -
Initial Review &

Diagnostic
CEO Briefing
Vision Setting Workshop
Planning Workshop
Additional Vision Setting Implementation Planning

and/or Awareness Workshop
irFirst Stage Projects

Regular Feedback on
Projects Progress
Review of First
Stage Projects
Consultant Mansii-ci-
Technique
Training
Advanced and
Specific
Annual Review
& Audit
Figure 3.2 : TQM "How to" approach. ( Source : NIES 1990 )

42
There are ten steps in the first stage of the TQM " How to "approach.
Initial review and diagnostic are conducted by a consultant to understand the
current situation and issues to be addressed. This step ends with the preparation of
consultant's report for discussion with CEO.
In a briefing session CEO and consultant develop a shared vision and decide the key
issues to be addressed in TQM program. Subsequently set the timetable for future
workshops and choose members of the Implementation Planning Team.
The next step is a senior management vision setting workshop. It aims at an
enhanced awareness of TQM, a shared commitment for its adoption and a
knowledge of how to proceed.
Followed by is a middle management vision setting workshop with similar contents
as to the senior management vision setting workshop.
A planning workshop is held for the Implementation Planning Team to identify the
specific actions required to facilitate the "cultural change" in the organization. Issues
( choices of projects ) focused in the planning workshop are :
Infrastructure development
QA and Accreditation
Process improvement
In the next step, basic techniques training workshops are held for those people in
the organization who attended vision setting workshops to train participants in the
basic techniques and tools of TQM, communication and team skills.
This is the first stage project. From here on, the programs aim at a process of
continuous improvement. Regular feed back and review sessions, under the
guidance of the Implementation Planning Team, will allow to monitor the progress.
The next step is supervisors and operative awareness workshop for all supervisors
and shopfloor people, which is similar to the vision setting workshop.
Here is the review of first stage project. After an appropriate time ( e.g. : 6 months,
depending upon the size of organization ) consultants undertake a formal review of
the first stage projects in process improvement, structural development and QA /
Accreditation. This review also creates a format for future annual management
reviews within the enterprise.
Upon completion of this stage, the Implementation Planning Team moves on to
identify and create second stage projects in both process improvement and
structural development. This step builds on the previous nine steps in enabling
TQM to proceed to a largely self managed phase.
The ultimate outcome is the development of a culture of continuous improvement in the

organization, with TQM becoming a way of life.
43
3.6 TOM Applications

Results of two research studied carried out in UK and Australia are as follows.
3.6.1 Research Study 1

A survey had been carried out by Wilkinson, Redman and Snape ( cited in a report
published by The Institute of Management 1993, "Quality and the Manager" ) among
the UK based companies in 1989 to find out " What is happening in Quality
management ? " Some of their major findings are as follows:
How widespread is the Quality Management moment ?

71% already have formal QM campaign and 11% planning to introduce one
QM appears to be better developed in manufacturing / production industries than
in construction industry.
Main difficulties encounted in the management of quality

The most important difficulties were concerned with:
- resource limitations
- cost constraints
- emphasis on short term goals
The recession was also seen as a problem particularly by smaller organizations
(The concern here is that recession intensifies resource limitations and the
emphasis on cost-containment, while also possibly undermining staff morale and
commitment to quality especially where there are fears of restructuring or
redundancies ).
Lack of commitment within the organization was seen as a barrier to the
implementation of QM.
Achievements of QM
Private sector companies tended to claim a higher degree of success than public
sector.
The main impact of QM is in raising staff awareness of quality issues.
Improvements in customer satisfaction, complaints and team work were among
other benefits.
Most of the organizations felt that quality management programs had achieved a
reasonable degree of success, but over 10% reported adverse effects, particularly
on productivity, cost efficiency, profitability and employee morale.
44
How does QM affect manager's job ?

QM appears to makes managerial jobs more demanding ( by requiring more
management and technical skills and manager's time ).
QM leads to more emphasis on team work and makes employees more
questioning of their decisions.
Most managers expressed a need for more training in quality tools and techniques
with fewer than quarter wanting more training in the people management skills of
communication, leadership, counselling and team building.

This study was undertaken by Lu and Sohal ( 1993 ) of Quality Management Research
Unit, Faculty of Business and Economics, Monash University with several Australian
organizations involved in TQM. The organizations range in size from less than 10
people to several thousand and involve several industries, including retail, finance,
service, and manufacturing. Some of these organizations have been involved in TQM
for number of years and have won national award of quality, whilst others are still in
the initial stages of TQM implementation.
Common factors to most of the organizations, likely to contribute to the success of

TQM program are as follows :
1. Identification of the strategic direction of the business
This element is fundamental to evaluating quality to higher level. For many
organizations, a TQM workshop may be the first time that senior management is
brought together to identify the mission, vision, and policies of the business. This has
the effect that senior management perceives quality planning as more than just an
activity of the quality people within the organization, but as the normal way of doing
business.
A TQM program that does not address this element runs several risks.
Lack of cohesive forces which drive quality throughout the organization.
Conveying the massage that quality is foreign to the business.
Missed opportunity to strengthen team work at senior level.
2. Determination of customer expectations and measurement of perceptions

Various methods may be used to determine customer expectations, such as market
research, surveys and focus groups. The common method is the use of customer
surveys and informal discussions with customers. However it is less common that
45
Performance measures within the organization are identified and measured against
customer expectations.
Data from surveys are communicated throughout the organization.
As a result, most people who have little interaction with external customers remain
relatively ignorant about customer expectations and perceptions.
3. Defined strategy for implementation of the program

In general, organizations which have committed to a defmed strategy for
implementation of TQM program realize the benefits faster. A typical strategy
addresses
Time-frame for implementation, including milestones and reviews.
Rigorous to provide leadership, support and measurement.
Training - how it will be provided, to whom and what depth.
The advantages of a planned approach are :

A sense of urgency, often lacking in programs which have no defmed dead line.
Increased chances of success, by anticipating potential barriers and understanding
the capability of the organization to deal with those barriers.
Improved visibility, through early realization of success and a defined action plan.
Formal structure to control, monitor and maintain improvement initiatives.

Various organizational theories ( Mintzberg 1979, Osborn 1980 ) have calculated that
the need for a formal structure increases with the size and complexity of the
organization. This is equally true for quality programs. A formal structure provides the
discipline, reporting medium and reward system necessary to sustain continuous
improvement activities.
Natural work teams

In recent times, there has been much debate as to the structure of the quality
involvement teams. Traditionally, improvement teams have consisted of cross
functional teams which form to tackle a particular project. The current trend, however
is towards natural work teams or cells, for several good reasons.
Team work continues beyond the formal quality improvement structure.
Internal supplier - customer relations are strengthened.
Leadership skills are learned and leaders established within each cell.
Healthy competitive spirit is fostered between cells.
Cell members are able to discuss problems common to the area.
46
Cross - functional teams remain useful for projects which require expertise from a
number of areas. These projects are typically of a technical or a business nature.
6. Train the trainer concept

The case studies show that the most successful TQM programs are those which require
participants to train their own staff eventually. There are several advantages in using this
method of teaching.
Managers and supervisors themselves become leaders of quality.
Respect is gained from subordinates.
Conveys the message that managers really are serious about quality.
Reduces the reliance of external expertise.
7. QA system
Most of the manufacturing organizations studied were accredited, or in the process of
gaining accreditation, to the ISO 9000 / AS 3900 standards. Among the benefits quoted
are
Disciplined approach to business administration.
Increased awareness of the quality moment.
Upto date and documented procedures.
Improved communications and team work within the organization.
Sense of achievement and confidence in project management.
Few service organizations believe there is a need for formal accreditation in their
industry, particularly as the final decision on quality is made by the end customer.
Several factors may contribute to this belief :
Perception that the standards are only appropriate to manufacturing.
Difficulty in defining measures for service performance.
No contractual requirement by customers for formal accreditation.
Belief that formalization introduces bureaucracy.
8. Use of external consultants

Most of the organization studied had at one point or employed external consultants. To
varying degrees, the typical roles of the consultants were :
Present the concept of TQM to senior management.
Introduce awareness to other staff through short presentations.
Formulate a strategy for program implementation.
Prepare detailed training material and conduct training.
Produce on-going guidance for maintenance for maintenance of TQM activities.
47
In general organizations which did choose a suitable consultant were able to achieve a
continuous improvement culture with fewer hiccups. Some advantages offered by
external consultants are :
Availability of experience.
Objective perspective by person external to the organization.
Knowledge of what not to do.
Change catalyst.
The choice of consultant, if the organization decides to employ one, is critical to the
success of the TQM program.
Opportunities for improvement

LU and Sohal ( 1993 ) emphasized the importance of using Statistical Process Control
(SPC ) methods ( Appendix 2). None of the organizations studied employed SPC in its
strict application. Typically the extent of SPC employed was limited to capability studies
and, at best plotting of upper and lower control limits on run charts. It appears that the
vast majority of organizations in Australia use SPC charts to show trends rather than to
control the process.
It was also observed that organizational theory is seldom included as part of training in
TQM. It is important to analyse the organizational climate before embracing on a TQM
program. There are other areas where improvement can be made to the quality moment
in Australia. Consultants and the industry leaders together need to strengthen their
knowledge of management strategy, organizational theory and the new quality
techniques. Knowledge in TQM alone is insufficient - the case studies show that the
most successful organizations are those able to manage several improvement programs
concurrently ( Lu and Sohal 1993).
48
CHAPTER 4: Nature / Complexity of Construction Industry
4.0 Introduction
Construction is the worlds largest and most challenging industry. A construction project
involves starting with nothing but an idea and creating a permanent and lasting facility
that meets aesthetic, quality, safety and functional requirements. It is the contracting
part of the industry which undertakes to organaize, move and assemble the various
materials and component parts so that they form a composite whole of a building or
other work. The product which the contracting industry is providing is basically the
service of moving earth and material, of assembling and managing the whole process.
This chapter provides an overview of the nature and the complexity of the construction
industry. Unlike manufacturing, construction industry inherent some special features
such as uncertainty, risk and the efficiency and effectiveness of communication among
the project participants throughout the building process which directly affect to the
success of the project. Misunderstandings, lack or poor communication between project
participants, use of incorrect or improper documents, drawing etc, often lead to
unnecessary claims and dispute which finally end up with arbitration or litigation. These
issues are briefly discussed in this chapter.
4.1 Construction Industry and Economy

Construction industry in Australia is accounting for 7% to 10 % of GDP. Hillebrandt
(1985) emphasizes the importance of construction in the economy, that stems from
three of its characteristics.
Size.
It provides predominantly investment goods.
Government ifs the client for large part of the work.
Size is important because changes in out put of the construction industry affect the size
of the national product both directly and indirectly, but it also means that what is
happening to the construction industry must be a matter of national concern.
Construction is an investment goods industry, i.e. its new products are wanted, not for
their own sake, but on account of the goods or services which they can create or help to
create. Construction is very subject to fluctuations in demand, for most of its products
will be required only if certain other factors are favourable.
49
The dependence of government as a client means that government is able to reduce the
demands on the industry by action on its own proposed projects, in addition to that
indirect control it is able to exert on overall investment through control of credits and
interest rates.
The effects of the construction industry on the economy and of the economy on the
industry occur at all levels and in virtually all aspects of economic life. According to
riiiiebrandt (1985) the four main ones are, however, the muluummp of the economy
and the industry
in demand an out put
in employment and incomes
in balance of payments
in the level of prices.
A change in out put, employment, incomes or demand automatically produces eventual

changes in the others. For example, a decrease in employment causes a fall in incomes
which causes a fall in demand which leads to a reduction in out put which in its turn
again causes a drop in employment, and so on. When the balance of payments is in
imbalance, the government usually reacted by restricting growth and damping down
demand.
It is unfortunate for construction industry that the ways in which it is easiest and least
painful for the government to injects new factor into the economic cycle have been
found to be raising the rate of interest and restricting credit, so that it becomes more
difficult and more expensive to borrow money; reducing purchasing power through an
increase in taxation; and reducing its own spending, especially capital spending which
easier to postpone than current expenditure. The construction industry is affected
directly or indirectly by all these measures ( Hillebrandt 1985).
4.2 Nature of Construction Industry

The construction industry has unique characteristics which seperatiwly, are shared by
other industries, but in combination appear in construction alone. Hillebrandt ( 1985 )
catogarizes these characteristics in to four main groups.
The physical nature of the product.
The structure of the industry together with the organization of the construction
process.
The determinants of demand.
The method of price determination.
50
The final product of the construction industry is large, heavy and expensive. It is
required over a wide geographical area and is for the most part made specially to the
requirements of the each individual customer. A large part of the components of the
product are manufactured elsewhere by other industries. It is largely these product
characteristics which determine the structure of the industry, including the large number
of dispersed contracting firms and the separation of design in professional offices from
construction firms, which has important repercussions. The nature of the product,
together with the structure of the industry it encourages, also means that each contract
often represents a large proportion of the work of a contractor in any year, causing
substantial discontinuitys in production functions. The work of the contracting part of
the industry involves the assembly of a large variety of materials and components with
implications for the relative importance of scare resources.
Size of contract is clearly determinant of the number of firms who can undertake work.
A large contract requires more of all inputs than a small contract. Capital is particularly
important in this connection. Complexity of contract is another determinant of the
potential competitors. A complicated building can be constructed only by firms having
control over the technical expertise required.
Generally the firms do not operate out side a certain geographical area of an operation
because the costs in terms of transport of materials, plant and men become excessive in
relation to total costs. If however the building is very complex, other things being equal,
the cost per sq. m. is likely to be large and the costs of the transport decrease in relation
to the total cost of the project.
Size also has an effect. For small projects some distance away it would not be
economical to set up a local recruitment office, because their fixed cost would be too
high in relation to the total cost of a project. For large projects, however the fixed costs
could be spread over a large turn over and the existence of a local office of the project
would enable the variable costs of transport and control to be substantially reduced
(Hillebrandt 1985).
4.2.1 Interdependence, Uncertainty and Risk

Members of the building team have become conditioned to work in an atmosphere of
"uncertainty". Nothing contributes to more to the construction industries inefficiencies
than uncertainty, since it provides the ideal environment for "conflict" Failures in
.
communications, impressions of confusion, error and conflicts create misunderstanding

51
among different parties and fmally lead to delays, stoppage and abortive work in the
construction industry.
"Risk" arises when the assessment of the probability of a certain event is statistically
possible. Risk is insurable. Uncertainty arises when the probability of the occurrence or
non occurrence of an event is indeterminate. Uncertainty is not insurable ( Knight
1921). There is no hard and fast line between risk and uncertainty. The occurrence of
some events may be moved from the category of uncertainty to that a risk by better
information.
Barrell, Nixon et al ( 1988 ) have recommended in their research report "Strategies for
the Reduction of Claims and Disputes in the Construction Industry" that the party best
equipped to control a particular risk should be allocated that risk.
Cost of undertaking a project cannot be judged accurately in advance. Hillebrandt

(1985) outlines the following possible reasons for variations. Most of the costs listed
below are uncertainties, i.e. not insurable but part or the whole of some of these may be
shifted on the client or other participators in the construction process.
Labour costs.
Material costs.
Subcontracting costs.
Bill of Quantities items.
Soil Conditions.
Management costs.
Weather and seasons.
Actions of designers.
Catastrophes.
Overrunning of time.
( Hillebrandt 1985 )
A study of the building industry undertaken by Higgin and Jessop ( 1966 ) of Tavistock
Institute, UK provides some useful thoughts about the nature of "interdependence and
uncertainty" of the industry. Findings from this study is summarized below :
Uncertainties can arise within the building process as a result of the interdependence
decisions. The essence of building in the building process is the relevance of different
streams of information to each other in particular contexts.
52
Uncertainties can arise from out side the building process as well. Higgin and Jessop
(1966) identified two sources of uncertainties.
There are uncertainties engineered by the action of those not directly involved in the
building process such as government departments, planning authorities, public
bodies, client organizations and even the general public.
There are uncertainties which stem from resources : labour, equipment and
materials. These uncertainties arise mainly because there are large number of
building processes competing for the same resources. Although these uncertainties
are out side any one building process, they do arise from within the building
industry.
Uncertainties within the building process

There are four distinct forms which uncertainty within the building team may take -
uncertainty stemming from the interactions of the various members within anyone
building team. They are uncertainty of the :
Client about members of the design team and vice versa.
Design team members about each other.
Client and design team about members of the construction team, and vice versa.
Members of the construction team about each other.
Attempts to lessen these uncertainties are made in various ways. For example, the
nomination of sub contractors, selective tendering, negotiated contracts, and the
package deal tend to reduce the uncertainties between the client I design team group
and the construction team. The package deal or design and construction contracts,
allows the builder to contribute to decisions on design, thereby reducing uncertainty in
the field.
Certain alternative contract strategies facilitate better communication between the

project participants thereby reducing uncertainties. But on the other hand nominated
sub contract system could cause claims, disputes, significant friction in relationships due
to the blurring of risk and responsibility inherent in these systems ( further discussed in
Section 4.3.3).
Uncertainty from out side the building process

When considering the diversity of interests involved among architects, quantity
surveyors, engineers, builders, sub contractors, suppliers and labour on the one hand
and clients with varying requirements, local authorities, building users, planners, the
53
public, and the government on the other hand, it is evident that there is not likely to be
single generally accepted criterion would have to take account of the costs and
incentives of all parties as well as of matters of time, security, amenity, functional
success, environment contribution, rateable value, prestige and so on.
Labour : It is well known that building labour is in short supply and that certain
specialist tradesmen are hard to come by in certain areas. Mass production and
technological advances in the material supply have combined with increased wage,
rates so that labour is now the most expensive and volatile resource affecting a project
success.
Equipment and material : The delay and disruption also caused by the availability,
storage of manufacture and supply of materials. It is not implied that only suppliers are
to blame. Orders placed too late, insufficient attention to detail, wrong schedules,
revised drawings, changed construction programs and incorrect bills all add to the
confusion. The root of the problem is the fact that high demand puts greater pressure
on supply system.
There is probably no single characteristic, such as time, cost function, amenity, which
will be appropriate to measure the efficiency of a building process. The ideal situation
would be a set of building operations managed as perfectly as possible in the interest of
the client / user / community complex. As suggested by Higgin and Jessop (1966) the
conditions would include :
Assembly of skills ( managerial, technological, and analytical ) if necessary drawn
from out side the industry.
Removal of artificial barriers in management. The designers would be a part of the
site management team.
Adequate management tools. Planning and progress data would be continuously
revised and made available to all parties.
Abolition of conflicting interests by a structure of incentives to minimize
"defensive" action.
Resources for obtaining off site information.
Insulation from external uncertainties, for example ,other projects.
Complete record for later analysis of all events and actions quite separate from any
management records.
Higgin and Jessop 1966)
54
4.2.2 Communication
A successful project is the result of a formation of an efficient an effective project team
where trust cooperation, mutual respect, mutual acceptance and open communication
among the team members are key characteristics. Communication is the glue that binds
all the project team members together.
In fact the root cause for most of the inefficiencies, claims and disputes in the
construction industry is due to the lack of coordination or communication among
project team members.
Generally Communication can be divided into two categories :

Formal communications are simply those that have some concrete form and
provide a record.
Informal techniques are those that do not automatically leave a record.
Apart from the basic two types of communications, non verbal communication ( body
language ) is also used in the negotiation process. According to Riggenbach (1986)
more than 60% of all communication is non verbal. The impact of the body language
during negotiations can be either positive or negative, depending on ones awareness of
gestures. The impact of presentation can be determined by observing the non verbal
communication of opponent. Through the observation of body language it can be
determined whether the opponent feels superior or concerned, or holding back,
doubting integrity, accepting presentation, thinking negatively but talking positively,
respecting, wanting to make all the decisions, domineering, seeking reassurance or
making decisions ( Riggenbach 1986).
All these forms of communication take place in the building process among various
participants in different levels. Major problem areas associated with communication in
the building industry had been identified in a pilot study undertaken by Higgin and
Jessop ( 1965 ) of Tavistock Institute, UK. These communication related problems are
relevant to the different professionals in the building process in varying degrees.
Higgin and Jessop ( 1965 ) noted that out of the five problems outlined, the first two
affect in some degree all members of the building team. The third mainly affects
architects and consultants. The fourth again affects all members, but mainly quantity
surveyors, while the fifth mainly affects builders, subcontractors and those on the
supply side.
55
Communication with perspective clients : Many perspective customers do not know

enough_ of the range of technical and professional services available them to decide their
orders satisfactorily, or to make the first approach to the industry which is appropriate
their needs.
Communications between clients and advisers : There is seldom a complete enough

exploration of all the client's needs and of the limitations he must accept - nor is he
sufficiently informed of all the possible means of meeting his needs. The matching of
needs and possibilities is seldom fully achieved, so the brief can rarely be adequate and
clearly understood by all. This can lead to difficulties and reduced efficiency of at all
subsequent stages of the project.
Communications within the design team : Sufficient thought and time does not seem
to be given to ensuring, either as a design team brief or during the designing processes,
that all who must contribute understand the common objective similarly and fully.
There is seldom a full awareness of all the steps necessary to realize an optimum overall
out come without loss of time, and the means of ensuring design co-ordination is often
not clear.
Communications related to contract : There is a very wide and very complex variety
of ways in which the members of the building team can be contractually related to each
other. The nature of relationships is defined afresh for everybody as any project
develops, at the price of delays and confusions. The frank sorting out of these
difficulties at the commencement of a contract is prevented by the silent reservations of
all parties about points of possible disadvantage each feels he must watch for.
4. Communications within the construction team : The basic decisions of construction

control are often incomplete or unduly rushed because necessary information is not
available sufficiently ahead of time, or is not complete enough. On many occasions
members of the construction team could, but do not, ease this problem by supplying the
data that would facilitate the preparation of fuller and most useful information by others
( Higgin and Jessop 1965).
However conflicts and disagreements can occur among project team members during
the project, regardless of members competence or the level of communication. Hensey
( 1987 ) emphasizes the greatest need in pursuing the resolution, or even the
understanding of disagreements as "patience" and "goodwill" which overcome the
natural tendencies toward haste, sarcasm or blame - placing in oneself and others.
56
4.3 Construction Industry Claims and Disputes

Contractual claims and disputes have become a part of the construction industry. This
is witnessed by the development of construction law as a defined area of practice, the
proliferation of construction law conferences and publications and thriving disputes
industry which includes lawyers, claims consultants and those involved in the dispute
resolution process, including arbitrators, mediators and experts.
The causes of problems are widespread and relate to the attitudes, policies, practices,
actions and errors of clients, consultants and contractors. There is no single source of
problems which generate claims and disputes. The following general sources of claims
and disputes have been identified by Barrell, Nixon et al. ( 1988 ).
Lack of coordination and quality of contract documents.
Adversarial relationships.
Going to tender with inadequate documentation for a traditional lump sum fixed
price contract.
Attempting to fast track construction on a traditional lump sum fixed price contract.
Problems in contract formation.
Problems arising from late supply or errors, omissions and ambiguities in contract
documentation.
Delays by the client or those for whom the client is responsible.
Variations.
Bills of Quantities.
Nominated sub contractors.
Latent conditions.
The role of architect / engineer in contract administration.
The role of architect / engineer in dispute resolution.
Untimely presentation of claims.
Poor quality claims.
Poor management of claims and disputes.
Inadequacies of dispute resolution systems.
The problems of claims and disputes in the construction industry are a worldwide
phenomenon. However it is considered that many of the problems experienced in
Australia arise from the traditional English system of contracting, which can lead to
adversarial relationships.
It is not within the scope of this study to describe each of the sources of claims and
disputes in detail. However some of the selected issues are discussed here.
57
4.3.1 Contract Documentation

The comment was made repeatedly around the world that the greatest cause of claims
and disputes in the construction industry is related to problems in contract
documentation, including errors, contradiction, ambiguity and late supply of documents
which give rise to delays and inefficiencies and hence claims.
The rules of "Do's" and "Dont's" of specification writing contained in the Institution of
Engineers, Australia ( 1988 ) publication is worthwhile to mention here ( cited in
Turner 1990).
Don't use archaic specifications - update them frequently. Do make them adequate,
clear and concise with minimum ambiguity.
Don't force the contractor to accept extreme, unreasonable or hidden risks.
Ensure that anticipated contingencies are addressed.
Don't amend drawings without checking for discrepancies between individual
drawings and between drawings and specifications.
Computer Aided Drafting and other modern aids will ensure fast and accurate
amendments to plans and specifications.
Don't include computer print outs without checking to ensure that they are
compatible with the intent of design.
Give all relevant reports and information and state the standards and quality controls
to be used, together with clear statements of the extent to which they can be relied
upon.
Don't expect contacts to be completed in impossible time spans and don't provide
unrealistic escalation clauses.
Clearly define any special items of plant or equipment to be used or particular
operator skills required.
The role and powers of the superintendent must be clearly defined but he should
not have wider powers than that are necessary.
Clearly set out the controls to be exercised by other authorities.
Define the limits of each subcontract clearly, its relationship with the others and
with the head contract. Careful consideration must be given to the position of
nominated subcontractors.
Don't ignore weather conditions and their effect on costs and extensions of time.
The question of access and the provision of other services must be covered.
Barren, Nixon et al ( 1988 ) also noted that the errors or ambiguities in contract
documentation and its late delivery as the greatest cause of claims, disputes and
litigation.
58
Quick ( 1991 ) further iterates the importance of "getting the documentation right", as
the most important step to avoid claims and litigations. Getting the documentation right
means, among other things such as :
Ensuring that the principal's commercial objectives and performance requirements
for the project are adequately defmed in a brief to design consultants.
Paying design consultants realistic fees for the work which they are required to
undertake, and allowing them sufficient time to undertake the work.
Getting design consultants to agree to redline their fees if there are cost increases
during the construction period for which they are responsible.
Co-ordinating the work as a whole of the design consultant so that ambiguities in
the documents they prepare are eliminated. A related aim should be to ensure that
design is co-ordinated with construction.
Making the allocation required of contractual obligations and risks and ensuring the
contract documentation accurately records this allocation.
Avoid routine use of Bills of Quantities in tendering, and making sure such bills are
measured from completed tender documents in accordance with an agreed method
of measurement.
Minimizing or an avoiding the use of nominated subcontract system. Options to the
system include providing a list of acceptable specialist subcontractors to the
contractor or engaging the subcontractor seperatively and putting an obligation for
co-ordination of both the subcontractor and builder, or entering into one of the
alternative contracts such as construction management or project management
(described in Chapter 5).
Trying to anticipate and quantify delay and delay costs.
Avoiding standard form general conditions of contract in "fast-track" projects and
making clients aware of the implications of varying work.
Considering how disputes are best resolved. In particular this means considering
possibilities such as providing for mediation as a preliminary step in the resolution
of any disputes, providing for contract adjudicator rather than the superintendent
administering the contract to resolve disputes during the construction process, or
providing for procedures such as non-binding expert appraisal to ensure a
negotiated settlement ( further explained in Section 4.4 ) ( Quick 1991).
59
4.3.2 Variations
The major source of claims and disputes relate to variations. There are variations which
are required to overcome unforseen problems. There are variations which result from
errors in and late supply of documents in relation to both "fast track" and normal
projects. Variations also arise as a result of changes in client requirements.
Attempts to use traditional lump sum contracts in relation to "fast track" projects, where
the design is not fmalised and fully documented at tender time, are likely to be
disastrous with respect to variations. It is unreasonable to expect that "fast tracking" can
be done under a traditional contract without claims and disputes over variations..
Therefore greater focus needs to be placed on the quality of documentation to avoid
variations ( Barrell, Nixon et al. 1988 ).
A vital factor in the successful control of variations is the timing of price negotiations.
Only too often because the pressure for physical progress with the work and the
complexities in assessing the price change, instructions are given to the contractor to
make the change, with the alternation in price to be negotiated later.
Marsh ( 1988 ) suggests to adopt the following sequence of events in relation to control
variations.
Client decides that a particular variation would be desirable.
Contractor is instructed to assess the effect of the proposal variation in terms of :
- price
- time
- performance
Contractor submits his proposal under the above three headings.
Clint decides whether he can afford the variation taking all factors in to account.
If client decides to proceed with the variations, then he negotiates amendments to
price, time for completion and specification.
Client issues formal variation order in writing.
Contractor proceeds with the work.
60
4.3.3 The Nominated Sub Contract System

The Nominated Sub Contract ( NSC ) system results in considerable complication in
Australian contracts in the provisions necessary to deal with the system and causes
conflict and dispute. It also causes significant friction in relationships, problems, claims
and disputes.
Clints are often faced with difficult arrangements to resolve between the contractor and
the nominated sub contractor with respect to practical, contractual and commercial
matters. These include objections by the head contractor to the nominated
subcontractor, disputes between both the head contractor and the nominated sub
contractor as to incompatibilities in their respective proposed programs, disputes over
the quantum of security, liquidated damages etc,.
However the client and its consultants may gain the advantage of design input from the
nominated subcontractor, at no cost, during the design development and documentation
phase. The client maintains control over the quality of important aspect of the work,
through selection and nomination of competent specialists contractors. In consideration
of nomination, specialists contractors often provide input into the development of
feasibility studies, estimates and budgets for the project.
NSC system inherents lot of problems. There would be advantages in a clearer

assignment of responsibility to the head contractor; at present there is some "blurring"
of responsibility and risk allocation inherent in the system. Baffell, Nixon et al. ( 1988)
suggest the following alternatives to nomination ( also cited in Quick 1991).
Provision to the head contractor of lists of acceptable specialist contractors ( or
approval of lists submitted by the head contractor ) from which the head contractor
can select and negotiate price, conditions, program etc,.
Joint selection by the head contractor and client / consultant of specialist
contractors, with ultimate appointment by the head contractor as an ordinary
subcontractor.
Separate engagement by the client of the specialist contractor, with a co-ordination
and integration responsibility placed on the separate contractor and head contractor.
The use of alternative contract strategies to the traditional head contract system.
(Barrell, Nixon et al 1988 ).
61
4.3.4 Ground Conditions

Disputes over latent conditions are common in relation to major construction works.
Underground construction is particularly problematic, due to the sensitivity of the
process to ground conditions and the difficulty of obtaining accurate geotechnical
information.
In relation to major projects, clients often undertake site investigations and testing
programs for the purpose of designing the project. When undertaking and evaluating
the results of such investigations, it is vital to address the issue of risk management for
both the design and construction phases, in the interests of the project and the client
(Baffell, Nixon et al 1988, Hillebrandt 1985, Turner 1990 ).
The Institution of Engineers, Australia, publication "Guide lines for the provision of
geotechnical information in construction contracts" ( 1987 ) recommend a balanced
approach to risk allocation between the parties, in the event that latent condition
problems are encountered. The guidelines make number of suggestions to minimize
such risks.
4.3.5 Role of Architect / EnEineer

The conflict of interest involves the designer making decisions to grant the contractor
relief for errors and omissions in documents and for late supply of documents for
departures from the tender documents and for late supply of documents, where such
relief involves the designer's client in additional time, cost expensive and time. The
involvement of designers in contract administration contains the potential for conflict of
interest and results in dispute.
In countries such as Japan, where the traditional English system has not been used,
there is a considerable opposition to the role of the architect / engineer in contract
administration. The architect / engineer are seen as an independent to negotiations with
the client to resolve problems which arise in construction and as a source of both the
creation and prolongation of disputes.
Barren, Nixon et al ( 1988 ) recommend that the contract administrator should not be
responsible for the resolution of disputes. This role should be performed by an
independent contract "Adjudicator" ( Barrell, Nixon et al 1988).
62
4.4 Dispute Resolution

The wide spread use of arbitration clauses in construction contracts and the dispute
prone nature of the industry results in a greater use of commercial arbitration in the
construction industry than any other industry in Australia.
"Clearly, the best dispute resolution is dispute prevention. Acting to prevent

disputes before they occur is the key to building new co-operative
rppthrlichipe Ry taking tho ryt tha gtfirt rf a prniact In identify common
goals, common interests, lines of communication, and a commitment to
cooperative problem solving, we encourage the will to resolve disputes and
achieve project goals." - LTG H J Hatch, Commander, US army Corps of
Engineers Policy Memorandum 11, August 1990
As far as the parties to building contracts are concerned, disputes are best avoided or
resolved amicably between the parties.
"The most desirable way of resolving any dispute is that it should enjoy the
confidence of the parties as a method likely to arrive at a just answer The
most desirable way of resolving any dispute is for the parties themselves to
reach a mutually acceptable compromise. This is likely to be quicker and
cheaper; no third party may be involved or even in form of the dispute; and
future business relations can be maintained. " - Norman Royce
Barren, Nixon et al ( 1988 ) view the fundamental problem with arbitration in the
industry as the nature of disputes refereed to arbitration. The increasing extent of
arbitrations which involve a determination of the parties legal rights and obligations,
rather than a determination of matters such as quality is an important factor in the
deterioration of the efficiency of the arbitral process in the industry.
A frequent criticism of the arbitration is that arbitrators do not decide the rights of the
parties, but incorrectly reach compromise decisions, which satisfy no one. The
problems of litigation and arbitration in terms of costs, delays and disruption have lead
many to consider "alternative dispute resolution techniques" prior to and in lieu of
arbitration or litigation.
NPWC/NBCC Report ( 1990 ) provides guidelines for dispute resolution

Encourage, facilitate and expedite genuine negotiation.
Avoid legal representation.
63
Avoid arbitration and litigation processes.

Specify compulsory conferences of senior management of both parties before
embarking on formal third party processes.
Concentration on cost mitigation of the problem area, rather than procrastination
about negotiating and resolving the dispute.
Be cost-conscious, contemplating and fmancial implications of resolution processes
once genuine negotiation has failed.
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Banal, Nixon et al ( 1988 ) recommend the following alternative methods :

Contract Adjudicator : A person other than the person administering the contract
should be appointed in the contract as an adjudicator to ensure that no conflicts of
interest arise and that disputes are dealt with on their merits, prior to referral to
arbitration or litigation.
Binding Interim Decisions : Industry contracts of all types should provide for
binding interim decisions by an independent third party, with the potential for this
decision to be overturned after the stage of practical completion by an arbitral or
court decision, if either party chooses to challenge it.
Mediation : The industry should make greater use of mediation, due to its cost
effectiveness. Industry contracts of all types should contain provision for mediation
as a preliminary step in the dispute resolution process.
Expert Appraisal : Greater industry use should be made of non-binding expert
appraisal, due to the success to date in use of this system, particularly where there is
a management need for a written third party assessment to underpin negotiated
settlement. The use of a combined mediation - expert appraisal system should be
used, where appropriate.
Dispute Board of Review : Consideration should be given to the establishment of a
board of review for major projects and for contracts involving considerable
complexity or potential for dispute.
64
4.5 Research Studies

The following two research studies are related to the problems and disputes in
construction industry US. Nevertheless the outcomes of these studies are relevant to the
Australian construction industry up to a certain extent.

T- uua
1 nu ConstructionConstructioninuy 1.113111.141.3., Austin, Texas, US, surveyed its member
companies to fmd out the "contract clauses most frequently involved in problems and
disputes". It was found that the most problematic clauses fell into three categories :
Work Scope Definition Clauses : Those which describe the physical work to be
completed, the minimum standards of acceptability, and procedural guide lines for
completing the work, along with supporting drawings and specifications. Most
problems with these clauses stemmed from omissions, ambiguities and
inconsistencies.
Change Clauses : Those which deal with additions or deletions, and with variations
or omissions in design, construction, and management efforts. These clauses
provide a method for dealing with an event that was not anticipated in the original
contract. Disputes involving change clauses were found to affect negatively the
project performance parameters of cost, schedule, quality and safety. Problems
most often encountered with construction change clauses involved definition and
negotiation of costs, dispute resolution, and time required for approvals. A lack of
well defined procedures often compound the problem.
Project Control Clauses : those which involve mechanisms to monitor and approve
project performance, to confirm acceptability, and to correct unacceptable
variations. Failure to reach a mutual understanding on these matters in pre-
construction negotiations was a frequent source of disputes ( cited in Band, Nixon
et al 1988).

Jahren and Danuneier ( 1990 ) personally interviewed ten contractors, ten design
professionals and ten attorneys in the Puget Sound Area of the State of Washington,
US during the investigation. Personnel interviews were chosen as the information
gathering method because of the flexibility allowed in pursuing detailed responses to
questions and adapting questions to fit the unique situation of each respondent.
65
The results of the study of professional opinion within the construction industry
regarding the causes of disputes, the types of owners that are most often involved in
disputes, roles of the attorneys in disputes resolution, are as follows :
Many construction disputes arise because society is adverse to accepting the results of
risky situations. Instead of accepting these bad results, citizens often file law suits.
Bccaus- construction is zi risky business, disputes arise frequently.
Private owners are usually preferred over public owners. However in many cases, the
experience and competence of the owner's staff with regard to construction may be
more important than public or private status. Owners with experienced competent
construction staffs are preferred over those with inexperienced and incompetent staffs.
Similarly, construction experience is a desirable qualification for an attorney who is
involved in construction disputes.
Contractors and design professional prefer "arbitration" as formal means of settling

construction disputes, while attorneys are split in their preferences between "litigation"
and "arbitration". To avoid construction disputes, implementing good management
techniques with regard to people, policy and communication is more effective than
attempting to shift risk to other parties by using exculpatory clauses in contracts or
narrowing the scope of services.
Based on the trading% Jahren and Dammeier ( 1990 ) made he following

recommendations to avoid disputes.
If possible, involvement in high risk projects should be avoided ( such as "fast tracked"
projects or those with poor specifications or field investigations - many disputes result
from changed conditions in these. two categories). Involvement with owners
experiencing problems with payment or employing an inexperienced construction staff
is also undesirable. Firms should be staffed with experienced people who communicate
well and treat others with respect. Also, it is important to develop contracts that share
risk in a fair manner among all parties. The possibility of retaining an attorney to
develop problems solutions before disputes arise should be considered. Finally, if it is
necessary to retain an attorney to resolve a dispute, it is important to choose one who
has construction experience.
66
CHAPTER 5: Contract Strategies
5.0 Introduction
As the construction industry is an evolutionary stage concerning management concepts
and project delivery systems many of the clients needs have not been properly
considered. Innovative planning will be required to survive, to grow, and to meet the
needs of clients of construction projects ( Kirschenman 1986).
Different types of project delivery systems are used around the world. As observed by
Barrel!, Nixon et al ( 1988 ) some practices in the industry which are historical and
cultural, rather than based on the most efficient method of dealing with the particular
issue. Each system inherent it's own advantages and disadvantages. The traditional
English system is the most widely used contracting system in Australia.
Masterman ( 1992 ) catogarizes most wide/37 used procurement systems into three
groups.
Separated and co-operative procurement systems: where the responsibility for the
design and construction aspects of the project are the responsibility of separate
organizations. This category contains one main procurement system : the conventional
method ( traditional ). Variants of the conventional system include : two stage selective
tendering, negotiation, continuity contracts, serial contracts and cost - reimbursable
contracts. In most cases these variants have been devised, or have evolved over the
years, as means of mitigating the short comings of the basic system.
Integrated procurement systems where design and construction become the

responsibility of one organization, usually a contractor and the client have only one
organization to deal with. The main member of this contract is : design and build
(design and construct ). The principal variants are : package deals, turnkey and
develop and construct ( detail design and construct)
Management oriented procurement systems, where the emphasis is placed upon

overall management of the design and construction of the project with the letter element
works or package contractors and the management contractor having the status and
responsibilities of a consultant. This method comprises : management contracting,
construction management ( project management) and design and manage contracts.
The other systems include : British Property System ( BPF System ), novation and
partnering.
67
Mainly this chapter deals with different ( most common ) types of contract strategies
and their advantages and disadvantages. Characteristics of a successful project is
reported at the end of the chapter.
5.1 Forms of Contracts

Like any other commercial contract a building contract is made on the basis of an offer
and an acceptance for a consideration to be paid from one to the other party. The
lArGbb uf making the contract, of what ever r,;-,e, nvy to thre.P pArtg.
The decision on the type of contract and the particular contract conditions and
documentation under which the work will be carried out.
Selection of the contractor.
The establishment of the contract price or how the price will be arrived at.
The type of contract and the actual conditions to be used must be defmed before the
contractor can be selected and before the contract price or method of calculating it can
be settled ( Bagnall 1992).
One of the basic criteria for determining the type of contract best suited to the clients
needs is the information that is available or that can be made available, for tendering in
the time scale dictated by client's brief Traditionally, information to enable a contractor
to construct a project is set out in drawings and specifications, with the administrative
details relative to the contract being set out in Bills Of Quantities ( BOQ ). All are
essential as part of the tender documents in traditional procedures.
There are several standard forms of building contracts currently use in Australia.
Whatever these forms are used, the contractor undertakes to carry out the works in
accordance with the contract documents. Mohyla ( 1992 ) points out some of the
commonly used ones :
NPWC 3 ( National Public Works Conference, General Conditions of Contract,
Edition 3, 1981).
AS 2124 ( Australian Standards 2124 - 1986, General Conditions of Contract,
1985).
JCC A & B ( Joint Contracts Committee Building Works, 1985).
SBW2 ( Lump-Sum Contract for Simple Building Works, Edition 2, 1992).
E5b ( Lump-Sum Contract Edition 5 b).
( Mohyla 1992 )
68
Other standard forms are

AS 2987 - 1987 ( General conditions of the contract for the supply of equipment
with or without installation ).
AS 3557 - 1988 ( General conditions of contract for the supply of equipment ).
Some of the standard forms of subcontracts such as : SCJCC, SCNPWC3 and AS
2545 - 1987
( Quick 1991)
There are advantages of using standard forms of contract instead of composing a

contract document afresh for a each project. Ramus ( 1993 ) highlights the following
advantages :
Because they are written by legal experts, ambiguities and inconsistencies are
reduced to a minimum.
The rights and obligations of both parties are set out clearly and to the required
degree of detail.
Because of standardization , frequent users are familiar with the provisions in a
particular form, resulting in a greater degree of consistency in their application.
The time and expense which would other wise be incurred in preparing a fresh
document for each occasion is avoided.
5.2 Drawings, Specifications and Quantities

One of the most significant factors to affect the documentation is the decision on
whether or not the work should be measured in a BOQ for the contractor in the
tendering documentation. If the work is not to be quantified, usually the written part of
the contract documentation shall be provided by other means. Bagnall ( 1992 )
describes the following advantages and disadvantages of quantities systems.
The advantages of the quantities systems

With quantities the estimating risk is considerably lower for the contractor.
With quantities provided, the competition is much fairer to as all contractors are
tendering on the same basis.
It is more economical for the contractors tendering, and therefore for the whole
building industry, thus lowering overheads.
The quantities system automatically allows the total price to be analysed in great
detail, thus providing cost feed back on the job which in turn can be used
statistically to, help in cost planning other work.
Quantities provide one of the best means of cost control for variations on the
contract.
69
Although at present is neither the standard form of contract nor standard method of
measurement is to envisaged that quantities will be used for management
purposes,(e.g. : for ordering ), they do in fact provide documents which are a great
help on the site for this purpose. Furthermore, it is likely that new methods of
measurement, coupled with computer application, will lead to their far greater use
for management purpose in future.
The process of quantification before tender is one of the severest tests as to whether
what has been drawn and specified can in fact be built. Examine the drawings and
analyse the construction in detail is a substantial help in foreseeing problems not
apparent at first sight.
The disadvantages of the quantities systems

There may be situations where the contractor has a contribution to make to design
in such cases quantification must at least be amended.
For small jobs quantification can be tedious and expensive in relation to the size of
the job.
Quantification that appears to be complete holds dangers if it is in fact partially
speculative but sufficient to allow a tender to be obtained and a contract to be
signed before design work has been adequately done. All too often, in both private
and public sectors, the pressure to sign a contract by a certain date initiates against
proper completion of the detailed design work. The use of quantification as means
of overcoming this difficulty may place the contractor at continuous risk and result
in dispute.
The provision of BOQ's to tenderers is not a universal practice. Basically the system is
used where the English approach to contracting has been adopted. It is not common
practice in Europe, US, some countries in Asia or Japan.
However, the common practice in Australia of providing BOQ to tenderers for building
projects involves a shift in the contractor's responsibility which opens up the potential
for claim and dispute. Instead of the contractor's obligation being to construct the
project in accordance with the drawings and specification for the price tendered, the
obligation becomes to construct the project in accordance with the drawings and
specifications as described in the BOQ. Claims and disputes then frequently arise as to
errors and omissions in the Bill when compared to the drawings and specification and
the method of measurement by which the Bill was prepared. There is a relatively high
level of claim and disputation in Australia in relation to the BOQs ( Barrell, Nixon et al
1988).
70
5.3 Project Procurement Systems

There is no one contract strategy that suits all projects and all principals. The contract
strategy selected for a particular project should be the strategy most likely to facilitate
the efficient and effective performance of the project.
In order to ensure a successful choice of procurement system, the client's brief has to
be clear and comprehensive and contain not only the aesthetic, technical and
perfomiancec.:fireria for .rterrt;
Fa Pr,*
1..0 vu, ;^-1port2nce, his nrim arv anti
secominry objectives in terms of functionality, quality, time and cost.
Achieving adequate functional performance and the right level of quality is usually the
dominant primary objective in most construction projects. Unless the completed facility
is suitable for its purpose and intended use , the client's needs will not have been
satisfied and value for money will not have been achieved ( Mastennan 1992).
Many authors ( Marsh 1988, Mastertman 1992, Bagnall 1993, Ramus 1993 ) describe
advantages and disadvantages of different procurement systems and provide guide lines
to select the most appropriate contract strategy.
However the allocation of risk between client and contractor is not independent of the
contractual arrangements, as can be seen from Figure 5.1. The impact on price of the
different contractual arrangements is awkward to specify since this impact is not
independent of the competitive environment. As the industry has become more
competitive in recent years there has been a move to management fee and design - build
forms of contract, with demand for a guaranteed maximum price. Nevertheless it can
be stated that the greater the risk imposed on the contractor, the greater the price the
client must accept. In other words, the client has to trade off price and risk in the choice
of contractual arrangements ( Hillebrandt and Cannon 1989).
71
Client Contractor
1. Design - build
(package deal, turnkey) RISK
2. Design - bid with contractor I

completing part of the
design - build RISK
I
3. Lump sum fixed price RISK
4. Lump sum fluctuating

RISK
price
TT
5. Schedule of rates,
remeasured on RISK
completion
6. Management fee
contracting with
guarantee maximum RISK.
price and a fixed
management fee
7. Management fee
contracting with a target
price and a fixed RISK
management fee
8. Management fee
contracting with a target
price and a fluctuating RISK
managment fee
9. Cost reimbursement
daywork basis RISK
10. Construction management

separate trade contracts
(contractor or
RISK
professional consultant)
with trades bid upon a
fixed lump sum
11. Construction management

separate trade contracts,
with trades on cost RISK
reimbursement
Figure 5.1 : Allocation of risk. ( Source : Hillebrandt and Cannon 1989)

72
5.3.1 Traditional Contract Strategy

The traditional contract system has been used by the majority of clients of the industry
for at least the past 150 years and still the most widely used system in Australia.
Under the traditional contract strategy the principal engages professional consultants to
prepare the concept design, the detail design and the contract documentation for the
works. The Principal then enters into a contract with a general contractor to construct
the whole of the works. Such a contract may be on the basis of a lump-sum, pr,wisir,n21
BOQ or schedule of rates. During the construction the consultants are normally
engaged to provide advice to the principal and to act as a certifier.
Project
Finance Contract
Financier Principal
Head Contract for project design and contract

Contract administration
Certifica- Architect Design Contracts Design 8c

Builder Superint Specialist
ion endent Consulta
nts
Subcontracts
Subcontractors Suppliers
Figure 5.2 : Traditional Contract with Architect as Superintendent. ( Source : Teys

1989)
A traditional contract strategy may be the optimum strategy for projects where the
following requirements are satisfied or substantially satisfied :
Where the optimum design can be established without involving the prospective
builder or specialist subcontractor.
Where the principal prefers to manage the interface between the detailed design and
documentation and construction, and to select and engage the consultants and have
them directly responsible to the principal.
Where the principal requires the consultants to provide advice and monitoring of the
project through the design, documentation and construction phases.
73
Where the time available for the project is such that detailed design of the project is
complete or may be substantially completed before construction commences.
Few variations to the project design are anticipated to be required during
construction.
( NPWC/NBCC Report May 1990)
In general contract forms traditionally used on construction projects do not provide for
effective communication between the construction tcam and design team and the
principal matters such as buildability, variations and the timely supply of information.
Collins ( 1991 ) comments that the traditional contract strategy is inappropriate for
"fast track" projects, because the traditional "arms length" relationship between the
design team and the construction team is inappropriate when the detailed design is
carried out concurrently with the construction of the project. The use of traditional
contract strategy on "fast track" projects is a significant cause of delay, disruption and
additional cost ( Collins 1991).
5.3.2 Alternative Contract Strategies

Since the early 1960's various alternative ways of promoting and carrying out
construction projects have been devised with varying degrees of success. The reasons
why many building owners and developers consider that the traditional procedures no
longer satisfactory :
Te rapidly spiralling cost of construction meant that large sums of money had to be
borrowed to finance projects.
High interest rates means that the time occupied by the traditional procedures
resulted in substantial additions to the construction cost.
Clients were becoming more knowledgeable on construction matters and were
demanding better value for money and an earlier return on their investment.
High technology installation required a higher quality of construction.
Attention has focused on reducing the time traditionally occupied in producing a design
and preparing tender documentation, thus enabling construction work to begin sooner.
Another important fact has been bringing the contractor in at an early stage in the
design of a project. Under the traditional procedures, the contractor rarely played any
part until the tender stage was reached, after virtual completion of the design ( Ramus
1993).
74
Certain alternative contract strategies facilitate better communication between the design
team and the construction team, such as :
- Detail design and construction
- Design and construction
Project management
- Construction management
Novation
Collins ( 1991 ) further iterates that when such alternative strategies are used in
appropriate circumstances, significant project efficiencies can be achieved that benefit
all members of the project team.
5.3.2.1 Detail Design and Construction

Under a detail design and construction strategy, the principal engages design
consultants to prepare a concept design and performance specifications. The principal
then enters into a contract with a contractor to prepare the detail design and
documentation in accordance with the concept design to satisfy the performance
specification, and to cany out the construction and commissioning of the project. The
contract is usually for a lumpsum or guaranteed maximum price that may be subject to
adjustment for various neutral risk factors.
Detail design and construction strategy may be the optimum strategy when the
following requirements are satisfied :
The principal wishes to develop the concept design as well as the performance
specification for the project.
The principal requires the Contractor to be responsible for the detail design and
documentation of the project and the construction and commissioning of the
project.
In a detail design and construction contract, construction can start, at the contractor's
risk, prior to the finalisation of the detail design, thereby reducing the project time to a
minimum. This occurrence of detail design, documentation and construction is possible
because the design team and the construction team work closely together and avoid the
formality necessary between the design team and the construction team when design is
carried out at "anus length" to construction.
NPWC/NBCC Report suggests to take care to ensure the concept design and
performance specifications prepared by the principal's consultants are stated in clear,
75
objective performance terms, because failure to do this may cause disputes as tho
whether the contractor's detail design satisfies the requirements of the "concept design
and performance specifications" ( NPWC/NBCC Report, May 1990).
The contractor is not entitled to extensions of time or increases in the contract sum for
variations to the detail design caused by the progressive development of the design
during the construction phase, or for late supply of design information, lack of
coordination between documents and errors in the BOQ's, except where these are
caused by the principal directing variations to the principals specified quality and
performance requirements.
There is an incentive for the detail design and documentation to be fine tuned by the
use of buildability studies and value management to ensure that the adopted detail
design and construction methodology minimizes time and costs whilst complying with
the principal's specified quality and performance requirements ( Collins 1991).
The assertion was made that 95% of construction activity under this system is claims
free and that problems only arise in relation to huge, one-off, technically complex
projects. It was also asserted that the system results in the most efficient engineering
design possible. The system will accommodate "fast tracking" ( Barrell, Nixon et al
1988).
5.3.2.2 Design and Construction

In this project delivery system the principal contracts directly with an organization
which is responsible for providing the design, documentation, construction and
commissioning of a project to satisfy the principal's specified performance and quality
requirements. The contract is ustially for a lumpsum or guaranteed maximum price
which may be subject to adjustments for changes initiated by principal and may be
subjected to adjustments for various neutral risk factors.
The most significant advantage of full design and construct is the sole responsibility for
delivery. The system solves the interface problems of design and construction.
Contractor is responsible for the full design and as a consequence, places more focus
than is usually in the case on cost implications of design including the assessment of
buildability and alternatives, coordination of design and timely provision of design
documentation ( Nixon, Barell et al 1988).
76
Project Finance Contract

Financier Principal]
Head
Contract
Design Design &

rt,,; Aer c"..e.;Not
Contracts Consultants
Subcontracts
1
Subcontract Suppliers
ors
Figure 5.3 : Design and Construction. ( Source : Teys 1989)
Design and construction contract strategy may be the optimum strategy when the
following requirements are satisfied:
The principal's brief for the project can be properly identified and expressed in
objective, performance terms.
The principal requires tenderers or the contractor to develop concept design(s) to
satisfy the Principal performance brief for the project.
NPWC/NBCC Report, suggests to take care to ensure the principal's brief is stated in
clear, objective, performance terms, because failure to do this may cause disputes as to
whether the contractor's design satisfies the requirements of the concept design and
performance specifications provided by the principal. ( NPWC/NBCC Report May
1990).
Bagnall ( 1992 ), Chappell and Powell ( 1993 ) observed the following disadvantages
inherent in the design and build contract strategy :
Design and build by its very nature a rigid system, which does not allow the client,
the benefit of developing his requirements and ideas.
Where several tenders are invited, comparison of these can be difficult as the end
production in each case will be different and subjective judgement will apply.
Any variations required by the client after signing a contract can prove expensive
and difficult to evaluate.
There is always a risk with regard to the quality of the work. If the original brief is
not precise and the specification offered by the contractor equally vague there is a
temptation for the contractor to reduce standards.
77
Most design and build contracts are qualified in some respect ( e.g. ground
conditions, the inclusion of provisional sums ) which to a certain extent negates the
clients ideal of a known commitment.
5.3.2.3 Project Management

There seems to be as many approaches in Australia to project management as there are
clients. Project management is not a procurement system it self but only its general
superv;-ion. It has been defined :
"The overall planning, control and coordination of a project from inception to

completion aimed at meeting a client's requirements and ensuring completion on
time, within cost and to the required standards." ( RICS 1986, cited in Ramus
1993).
In this project delivery system the principal engages an agent, ( a Project Manager ), to
provide a management service for all phases of a project from inception to completion
and who, in particular, undertakes for a fee the management of the consultants and
trade contractors for the project within the parameters defmed by the principal. Project
manager does not assume time and cost risks. The risk allocation depends upon the
particular requirements of the principal and the project.

Financier Principal
Project Management Contract
Project Design Design &

Manager Specialist
Contracts Consultants
Building Contracts
Contractor Contractor
Subcontracts
Subcontract Suppliers
ors
Figure 5.4 : Project Management. ( Source : Teys 1989)

78
The project management strategy may be the optimum strategy :

When the project has a budget which may necessitate additions or deletions that
would not be economic or efficient in a lump sum tendered situation.
Where the project warrants continuing review and / or refmement because of its
magnitude, complexity or prestige.
Where the Principal's requirements are not adequately defmed or may be redefined
during the design and construction process.
Where the principal requires a continuing involvement with the day to day running
of the project.
Where funding allocation for the project requires the principal's detailed
involvement in the cost management of the project and/or the stage by stage
approval of the project.
Where unacceptable risk would be placed upon a single contractor.
Where there are complex staging requirements such as the maintenance of user
processes during construction.
( NPWC/NBCC Report )
The major benefits of project management lie in management of both the design and
construction phases of the project and the flexibility to fast track and change
requirements, without significant claims and cost consequences.
Barren, Nixon et al ( 1988 ) recommend to prepare a standard project management

contract for use in both public and private sector construction throughout Australia. To
allow for the diversity of projects and client requirements, this agreement may need to
take the form of core provisions with additional optional provisions or schedule item to
be completed ( Barren, Nixon et al 1988).
5.3.2.4 Construction Management

In this project delivery system the principal engages an agent ( a Construction Manager,
usually a general contractor ) to provide a service for the construction phase normally
provided by a general contractor particularly related to the control, management and co-
ordination of the construction of the project. The principal engages the design
consultants and specialist consultants for design and documentation.
With this project delivery system the construction manager is responsible to the
principal for the control, management and coordination of the construction of the
project.
79
This system is appropriate :

When the project has a budget which may necessitate additions or deletions that
would not be economic or efficient in a lump sum tendered situation.
Where the project warrants continuing review and/or refinement because of its
magnitude, complexity or prestige.
Where the Principal's requirements are not adequately defmed or may be redefmed
during the design and construction processes.
Where funding allocation for the project requires the principal's detailed
involvement in the management of the cash flows or the stage by stage approval of
the project.
Where unacceptable risk would be placed upon a single contractor.
Where there are complex staging requirements such as the maintenance of user
operations during construction.
Where there is a possibility of disruption during construction which it would be
unreasonable to expect the contractor to bear.
On default of a contractor under a traditional contracting system.
Where control over expenditure is required.
Where construction cost savings can be achieved in a falling market.
Where the Principal has the in-house skills and resources to manage the interface
between the design manager and the construction manager.
( NPWC/NBCC Report May 1990)

Financier Principal
Construction Management Design Management

Contract Contract
Construction Manager Design Manager
Building Contracts Design Contracts
Contractor I Contractor Design & Specialist

Consultants
Figure 5.5 : Construction Management. ( Source : Teys 1989)
The problem of construction management is the uncertainty of the end cost of

construction, due large), to the sensitivity of the process to design and the construction
80
manager's lack of control over and input into the design process. There may be
solutions to this problem in providing for the construction manager to have an input
into the buildability and cost of design and the inclusion of cost control objectives in the
terms of construction management contract ( e.g. : the inclusion of a guaranteed
maximum price requirement on the construction manager) ( Barrell, Nixon et al 1988).
5.3.2.5 Novation
The use of novafion system within the Australian building industry has been relatively
limited and it is not until recent years that novation has gained recognition and
acceptance as an independent project delivery system. In relation to the building
industry novation involves the transfer of consultants responsibility, conditions of
engagement and professional duty of care from the proprietor to the builder, at
specified point of time, usually upon the letting of the tender.
Reasons why a proprietor may elect to employ a method of novation include :

The need and desire to produce a building within reduced time frame.
Maintain a greater level of control, over design matters.
Guarantee a standard of design and a physical product which corresponds with the
initial intentions, designs and needs of the client.
Achievement of quality commensurate with money expended.
Maintain a minimal, preferably a single line of responsibility inclusive of
consolidated risk transfer and managerial control.
Desire to employ competitive tendering procedures.
Maintain some degree of flexibility within contractual structure to allow for changes
or alterations to be made by the builder provided the integrity of the design is
maintained.
Negate variations unless expressly requested or caused by the proprietor.
Negate extensions of claims.
The novation system of project delivery is particularly suited to buildings which do not
entail complex architectural design / or structural concepts, but do employ repetitive or
modular elements and components. This is particularly due to the fact that under such a
system, design and documentation is incomplete at the tender stage. It is difficult
therefore, for tenders to accurately assess requirements under these conditions. Like
wise unresolved design issues relating to complicated elements have the potential to
create problems post novation ( Mohyla 1992).
81
Develop base
design brief
Select design Consider

consultants suitable
contractors
If going to
ricr-rfe
consultant
discuss
Appoint design
consultants
Select Progress Develop

tenderers concept design detailed design
brief for tender
Involve Design
selected deve opment
tenderers in
design
Deve op
specification
Combine final
tender
documents
Tender / bid
project
Analyse
tenders/award
Assign design
responsibilities
to successful
contractor
Construct base Carry out final

Works detailed design
Construct
outstanding
project
Figure 5.6 : Novation. ( Source : The Australian Project Manager, 1992)

82
5.4 Characteristics of a Successful Project

There is no one strategy that suits all projects and all principals. The various specialist
roles provided by design consultants, financiers, specialist consultants and specialist
subcontractors are always required for any particular project, regardless as to the
contract strategy adopted for that project. The differences between the various contract
strategies relate to the manner in which the various specialist roles are coordinated and
the risks carried by those members of the project team responsible for the coordination
and the integration of the various specialist activities.
The increasing sophistication and complexity of building and construction projects and
the increasing need to complete projects in the minimum practical time demand ever-
increasing professionalism from every member of the project team ( NPWC/NBCC
Report, May 1990).
As observed by Collins ( 1991 ) typically, the cost of performing a project can be

anywhere in the range from about 75% to 80% of the reasonable estimated cost for
projects carried out particularly efficiently, to more than double the reasonable
estimated cost for inefficiently performed projects that are delayed and disrupted.
Relatively minor project inefficiency, delay or disruption can cause construction costs to
increase by 10% or more. Research studies also show that the factors that cause project
inefficiency, delay and disruption are also a cause for poor quality work.
Given the enormous discrepancy between the time and cost of apparently similar
projects , there is a very real incentive for all members of the project team to work
together to achieve an efficient project environment.
Successful building and construction projects - projects that are completed to the
required quality, ahead of time and below estimated costs - occur as a result of team
work and professionalism from all members of the project team. Successful project
creates a "win- win" result for all members of the project team. Better quality work,
lower construction costs, shorter construction times, and more predictable project out
comes create additional opportunities as more projects become viable and industry
becomes more internationally competitive.
The efficient performance of construction project facilitates the timely completion of

projects to the required quality within the budget. All claims and disputes reflect
arguments as to which party should pay for project cost overruns, delays and poor
quality work, it follows that claims and disputes are largely avoided on efficiently
performed projects.
83
Factors that promote efficient project delivery and contribute to a successful "win win"
project include:
Appropriate allocation of obligation and risks.
Selection of an appropriate contract strategy.
Clear objective performance statement of the principal's requirements.
Minimum variations to the project specifications.
Careful selection of the project team.
Comprehensive planning of all aspects of project - time, cost, quality.
Effective communication between the members of the project team.
Effective time and cost management.
QA of both design and construction.
Avoidance of claim situations.
Effective and prompt remedial action if a team member defaults.
( Collins 1991)
84
CHAPTER 6: Quality Management in Construction
6.0 Introduction
Construction industry does not have a series of products that can be tested, measured,
judged, or evaluated objectively, like a manufactured product. However the fmal
outcome of the construction process is a large, heavy and relatively expensive product,
made to suit to the requirements of particular owner.
It is well known that manufacturing industry is far ahead than construction industry in
respect of achieving quality products. Brown and Beaton ( 1990 ) contend that
whether the construction shares any of the characteristics that bring quality result to
manufactures.
Quality planning ?
Statistical Analysis ?
Employee involvement in reward ?
Customer feedback ?
These terms are well understood by other industries, but they have little meaning to
most construction organizations. Then how do you measure the quality in a constructed
project ?
This chapter describes the quality management tools, techniques and it's applications to
construction. The results of number of research studies given at the end of the chapter
illustrate problem areas in construction industry.
6.1 Quality in a Constructed Project

American Society of Civil Engineers( ASCE ) Manual define the term quality as "the
conformance to predetermined requirements". In simple terms quality is meeting the
owner's requirements.
The Characterizations of the quality in design and construction are :

Meeting the requirements of the owner as to functional adequacy, completion on
time and within budget, life-cycle costs, and operation and maintenance.
Meeting the requirements of the design professional as to provision of well-defined
scope of work; budget to assemble and use a qualified, trained and experienced
staff; budget to obtain adequate field information prior to design; provisions for
timely decisions by owner and design professional; and contract to perform
necessary work at a fair fee with adequate time allowance.
85
Meeting the requirements of the constructor as to provision of contract plans,

specifications and other documents prepared in sufficient detail to permit the
constructor to prepare priced proposals or competitive bids; timely decisions by the
owner and design professional on authorization and processing of change orders;
fair and timely interpretation of contract requirements from field design and
inspection staff; and contract for performance of work on a reasonable schedule
which permits a reasonable profit.
ivieeting the requirements of regulatory agencies ( the public ) to public safety
and health; environmental considerations; protection of public property including
utilities; and conformance with applicable laws, regulations, codes and policies.
Quality in the constructed project is also characterized by complete and open

communication among all project parties; selection of qualified organizations and
personnel by the owner for all phases of the project; change orders in publicly bid
projects within a predetermined budget ( except in cases of change of scope or changed
construction conditions ); rapid resolution of conflicts and disagreements; and absence
of litigations.
Successful construction projects are conceived planned, designed and built by a project
team consisting of the owner, design professional and constructor (major participants ).
There are, offcourse, many other professionals who play a significant but more limited
role within the overall project. Within this context, quality is produced when each team
member completely and, in a timely fashion, fulfils his obligation in cooperation with
the other members.
Clearly communicating information such as requirements, expectations, scope, costs,

schedules, and technical data are vital elements in producing quality in the constructed
project. A coordinated effort among the various team members is required to achieve
an integrated program which, in turn, is necessary to complete a quality project.
Coordination requires effective and frequent communication among project team
members and their staffs.
Providing quality in the design, construction and operation of a project cost less, is safer
to the public and site personnel, and minimizes disagreements and subsequent litigation.
Quality in design and construction results in significant benefits for the owner, design
professional and constructor ( ASCE Manual 1988).
86
6.2 Quality Assurance and Quality Control

Quality in the constructed project results when the project team applies sound principles
of Quality Assurance ( QA) and Quality Control ( QC). QA is a program covering
activities necessary to provide quality in the work to meet the project's requirements.
QA involves establishing project related policies, procedures, standards, training,
guidelines, and systems necessary to produce quality. QC is the specific implementation
of the QA program and includes checking and reviewing design and construction
related activities. Effective QC reduces the possibility of changes, mistakes and
omissions, which in turn results in fewer conflicts and disputes ( ASCE Manual 1988).
Fritz ( 1990 ) suggests to undertake the following major tasks in order to implement
QA which confum to ISO 9000 / AS 3900 series.
Establish contract documentation QC, and specification of quality requirements for
the works.
Establish, or clarify, the lines of responsibility and authority with respect to quality.
Appoint quality representatives and support staff.
Enunciate the organization's quality policy.
Develop QA systems and documentation.
Develop and implement training programs.
Develop in-house skills to assess QC.
Retain construction supervisory personnel.
Improve briefing procedures to ensure quality requirements are clearly stated in the
contract documents in measurable terms and fully understood by all parties to the
construction process.
Review and if necessary, modify existing checking and review procedures.
Apply formal QA to builder selection and design and documentation, as well as to
the actual construction process.
Recognize the need for longer establishment periods for each new project to allow
builders to develop and implement QA systems.
Carry out regular audits of builder's, subcontractor's, consultant's and owner's QA
performance.
Respond as necessary to Quality Audits by owners.
87
6.2.1 Quality of Design

In the literature, one of the major complaints by Australian contractors operating under
QA contracts, is that the quality of construction is dependent on quality in design and
documentation. Construction is only one segment of a continuous process - project
conception, investigation, design, documentation, construction operation and
maintenance. Quality can be achieved at the end if it is built in to all stages.
J. M. Fenwick [ Principal Manager (Quality Management) of Department of Transport,

Queensland ] says :
"While an experienced contractor may be able to "fast-track" a normal
construction process without significantly effecting quality, in my experience
"fast-tracking" of project investigation and design will invariably lead to
quality problems. If higher quality is required, careful planning is essential. In
particular, fast tracking that upsets the normal sequencing of planning, data
gathering, investigation, design and documentation can be vary disruptive of
quality."
In recent years guide lines and recommendations to improve the quality of design has
been developed. As this effort evolved from drawing control in to other aspects of
"good engineering practice", the methodology become known as "Design Control or
Design Assurance ".
Burgess ( 1988 ) defines "Design Assurance" as those planned and systematic actions
taken to provide confidence that the completed design will satisfy the requirements of
its intended use. A typical Design Assurance program covers all phases of engineering
associated with the project, including the identification of requirements, drawing and
specification control, verification of design accuracy, control of changes and supporting
documentation. Time and energy spent in developing a clear and complete set of
requirements up front has a high rate of return later in avoiding problems and satisfying
customers.
There are two commonly used methods to verify the adequacy of a project design:
design calculation and design review. Although these can be used individually, it is quite
common to use one in conjunction with the other.
88
Design Analysis
Calculations are used routinely to size components, predict performances, determine
limits etc,. However, for many projects, the calculation methods, assumptions, and
results are virtually invisible to everyone except the person who performed the
calculation. Also calculation records tend to be surprisingly unstructured, abbreviated,
and frequently inaccessible for later reference. One caution about engineering
calculations - problems seldom come from mathematical inaccuracies. The real culprits
are the use of improper methods, invalid assumptions, or incorrect modelling
techniques. For this reason, it is a good practice to require a second - party technical
review of calculations as an independent check on the analysis for decision - making
purposes.
Engineering software also presents many new challenges. Often, the construction and
content of the programs have low visibility, coupled with limited use documentation.
This especially true when using software which was developed out side the company.
Yet a strong tendency for engineers is to give the software developers the benefit of the
doubt and to use the software somewhat blindly. Again it is quite easy to misplay
computer software, to use it beyond its proven limits, or to make assumptions about it
that differ from those made by the software developers. So it is vital to study the
software documentation carefully and apply it with cautious.
Design review
A design review is simply a critical but objective review of the design before it is
released for construction. It is an opportunity to expose the design to knowledgeable
and experienced personnel to avoid errors and omissions. A list of questions to consider
when calculating a design review as follows.
Does the design satisfy the requirements ?
Do the assumptions used in the design seem reasonable ?
Are there areas where the risks appear to be higher than normal ?
Are there items of significance that have not been addressed ?
Are the design methods used appropriate for this project?
What problems remain to be solved?
Is there adequate assurance that the problems remaining can be solved in a
reasonable manner and appropriate time frame ?
( Burgess 1988)
89
The cost of design is generally considered to be roughly between 2% and 10% of the
total costs ( Institution of Civil Engineers, UK). Since design costs represent only a
small proportion of total costs, it becomes worthwhile to increase design effort
significantly in order to achieve comparatively small reductions in construction costs.
McGeorge ( 1989 ) explains this concept with a simple example ( Costs are given in $
thousands in the following Table 6.1).
Item Original design cost Revised design cost

Design cost 50 75 ( + 50%)
Construction cost 950 855 ( -10% )
Total cost 1000 930
Overall saving 70 ( 7%)
Table 6.1: Effect of extra design input. ( Source : McGeorge 1988)
Design cost is taken 5%. In this case it has been assumed that a 50% increase in design
input yields a 10% saving in construction cost. The net result is a 7% reduction in total
cost, or a saving almost 3 times the cost of the extra design work. Research carried out
on constructibility and value engineering reviews typically yield construction cost
savings of 10 to 20 times the cost of the extra design input ( Business Round Table
1982, cited in McGeorge 1988 ). Even these figures understate the true potential for
improvements, as constructibility exercises, by definition, aim at reducing only
construction costs, and the picture is dramatically improved by including operating and
maintenance costs.
Naturally, improvements cannot continue to be made indefinitely. At some point an

increase in design effort will yield an insignificant saving on construction, and the total
cost will be higher.
Plotting design input against total yields the curve shown in Figure 6.2. The rational
policy then would be to aim at the optimum design effort "o", but most engineering
projects fall well to the left, at some point "a".
90
0 = Optimum design input

a = Typical project level
TOTAL
COST
a
DESIGN INPUT
Figure 6.1: Effect of design input in project cost. ( Source : McGeorge 1988)
The topic of constnictibility leads to the idea of design quality - a good design will be
effective ( i.e. serve the purpose for which it was intended ) and constructible with the
best possible economy and safety. Vlatas points out that design deficiencies are a major
cause of contract disputes and changes during construction, and notes several causes for
the increase in design deficiencies. ( Vlatas 1986). However the question of producing
better quality designs is obviously a complex one, with implications affecting the whole
construction industry. The issues are hostly debated ( Richards 1983, Cassano 1983,
Zweig 1984 ) which is an indication of the perceived need for solutions (cited in
McGeorge 1988 ).
/6.2.2 Quality of Documentation

Drawings and specifications are the two sets of documents given to the constructor that
provide necessary technical information. Specifications generally contain information
on materials, performance necessary, and quality requirements. Drawings are the only
documents given to the constructor that show the design concept, size and scope of the
job, number and size of materials or items, and how they are assembled into a fmal
project. It is critical that drawings be clear, concise and uniform ( ASCE Manual 1988)
91
Proper control of drawings and specifications is fundamental to any engineering project.

Burgess ( 1988 ) comments about the drawing and specification control as follows:
"Experience shows that the preparation, review/approval, and distribution of
drawings is generally well controlled However, this is not always the case
with specifications. For unknown reasons, specifications are frequently
allowed to become outdated and do not reflect current practices. Do your
drawings and specifications have a unique identifier ( alpha - numeric) and is
the current revision status readily visible ? Are the acceptance criteria defined
as measurable terms and tolerances ? Are you getting the benefit of
independent review by one or two knowledgable persons in addition to the
person(s) who prepared the document? Do your drawings and specifications
accurately represent your preferred practices ? Do changes in your drawings
and specifications receive a level of review and approval consistent with the
original release with these documents ?
Cornick ( 1991 ) emphasizes the need to manage quality in the briefing, designing and
specification phases of a building project, rather than trying to merely control quality in
the construction phase. The latter approach will only solve the problems that come to
light during construction and not those that remain latent, appearing during the life of
the building.
Logically, the requirements for a building can only begin during the briefing phase of a
project, be further developed during the scheme and detail design phases, and be finally
refmed for the physical production of the building during the specfing phases. The
subsequent tendering and constructing phases should add nothing to the fundamental
requirements of the building's design. The management of the processes involved in
those four early project phases is vital, if the likely causes of quality problems are to be
identified and prevented. This is the only cost effective way that quality can be achieved
in the later constructing and maintaining phases of a building project ( Cornick 1991).
The Royal Commission Report into Productivity in the Building Industry in New South
Wales ( 1992 ) observed that poor project documentations are the major causes of
inefficiencies, claims and disputes in the building industries.
92
6.2.3 Quality of Construction

The primary goal of the project team is to build a quality project within budget, on time
and without litigation. For the project team concept to realize a quality project, all
participants have to work together as a team. Every member should be conscious and
understanding of problem of others. Extreme self interest is often disruptive, could
lower quality, and lead to litigation. Team members should be completely aware of their
responsibility and the limitations of their authority.
The Chartered Institute of Building ( UK ) publication "Quality Assurance in the

Building Process" describes the primary elements in the construction phase under the
heading of "Site Activity" ( site activity is the building project's production phase in
which the contractor has possession of the site to carry out the works planned during
the briefmg, design and procurement phases ) and provide following recommendations:
/Materials
Deliveries : Deliveries to site must be monitored to ensure compliance with
specifications.
Storage, protection and distribution : All materials and components must be stored in
accordance with locations and conditions agreed with the site manager. The storage
methods for any materials supplied by specialist sub-contractors are agreed in detail
with the sub-contractor prior to his commencement on site and the agreed procedure is
clearly recorded.
Rejection or awaiting acceptance for incorporation : The materials falling into this
category must be stored in a location or manner which clearly identifies and prevents
the material being used until the necessary authority has been given. A procedure for
establishing this must be clearly set out and followed.
Compliance with specified requirements

Workmanship : The underlying philosophy of Quality Management is to provide
documentary evidence that the specified quality has been achieved at the first attempt.
QA introduces a series of checks identifying the stages at it is possible to verify that the
works comply with the specified requirements. This may be documented by using an
agreed list of criteria written down on check list
The checklist is completed first by the operative carrying out the work and then checked
by his immediate supervisor. The next stage of the work should not take place until
93
each checklist has been agreed and signed by both parties. By adopting this approach,
potential problems are identified at the earliest opportunity and solved before they
become major defects.
The completed checklists also provide a record of the defects that have occurred
throughout the project and the ways in which each problem has been solved. This
experience is fed back to the system. Data are now available identifying the frequency
of defects and common solutions so that investigations can be focused on those
problems which require the most urgent attention.
Program : It is recommended for QA procedures that a master program is produced in

which the activities of the client, his advisers, contractor and sub-contractors are co-
ordinated. The "Combined Quality Plan" must ensure that the requirements for
programming on the project are clearly defined in terms of the methods to be used, the
level of detail, the time of production, the method of monitoring and the procedures to
be followed with regard to updating.
During the course of construction, QA procedures should ensure that the program is
prepared at an appropriate time, that it is in compliance with the contract requirements,
that it is effectively monitored, that the effects of the monitoring are assessed and that a
completion date is forecast. In the event that some activities fall behind program, it
should be agreed what action should be taken to avoid the delay and who should take
such action. If required, the construction sequence should be revised.
Cost : The QA procedures for cost control ensure compliance with the client's
requirements for comparison against the cost plan. The procedures define who has the
authority to issue instructions under the contract, the limits of financial authority for
each party and the manner in which proposals are to be costed and assessed alongside
other options before a financial commitment is made. They also define the method and
frequency of cost reporting to the client.
6.3 Cost of Quality

Quality is relative to cost. There is a level of cost in relation to accommodation below
which a building of quality just cannot be provided ( Ferry 1985, cited in Mathur and
McGeorge 1990 / 1991 ). At the same time spending more money on a project may be
encouraging waste and inefficiency rather than quality. This implies that cost and
quality relationship is not linear or necessarily negative.
94
COST
Figure 6.2 : Cost vs Quality. ( Source : Mathur and McGeorge 1990 / 1991)
It has been assumed in the graph, that each level of cost is allocated optimally among
various demands. This is because cost allocation is a difficult balancing act if there are
budget restrictions ( Mathur and McGeorge 1990 / 1991 ).
On the other hand lack of quality invariably results in a higher total cost. Though the
initial cost may be less through the use of minimal design functions, substandard
materials, or unskilled workmanship, the total cost to the user or owner over the life of
the project will be greater due to frequent repairs, breakdowns and shorter useful life.
( ASCE Manual 1988)
Some of the items which contribute to the costs of poor quality are: repair of defective
work; purchase of replacement materials; delays or disruption while repairs are carried
out or replacements obtained; handling of customer complaints; after sales remedial
work; wastage of marketing effort; legal representation; court costs; and compensation
payments.
Companies which have seriously attempted to quantify these costs usually arrive at
totals varying between 10% and 40% of turnover. By comparison, the typical cost of
95
quality system for conventional construction work is likely to lie a fraction of 1%. Even
in extreme cases, such as offshore or nuclear construction, it is unlikely to exceed 5%.
So even if the quality system can prevent only a small proportion of the costs of the non
quality, the potential for savings is enormous ( Ashford 1989).
6.4 Some Clues for Quality Improvement

There are many opportunities for improvement in design and construction. The
Steering Committee and participants of the ASCE workshop on Quality in thc
Constructed Project ( QCP ) provided some helpful thoughts ( Fox and Cornell 1985
cited in Hensey 1987). These contribute to communication effectiveness during design,
or facilitate the discovery of problems before they are "set in concrete". Workshop
fmdings may be summarized as follows:
The importance of procedures for communicating the owner's objectives to the
entire project team.
The value of careful selection of design team leaders with the respect and
confidence of their associates.
The necessity of technical interfacing by all engineering disciplines and elements.
The synergism for quality possible from multi-discipline design reviews of projects.
The importance of constructibility reviews during project design by those with
construction know-how.
Graves ( 1993 ) suggests the following ideas for quality improvement in design and
construction.
Concurrent engineering involving all specialists and project participants on a team
during all phases.
Quality Function Deployment ( QFD ), a disciplined technique of designing to meet
customer requirements.
Better planning and managing of the design process to avoid rework and waste
satisfaction.
Factual information, not just opinion.
Client supplier partnerships ( partnering ).
High level of client staff participation in the design process.
Quality teams to address specific design issues, both product and process.
Documents review by specialists for constructibility, buildability, operatability, and
value engineering.
A client report card to monitor client satisfaction and identify improvement
opportunities
( Graves 1993).
96
6.5 Quality Problems - Failures, Defects and Nonconformances

It is important to clearly describe the required quality in measurable terms in project
specifications. This will require the inclusion of acceptable tolerances, in order to
provide a basis for identifying nonconforrnances.
Nonconformance is defined in AS 1057 ( 1985 ) as :

"A deficiency in characteristics, documentation or process implementation
which renders thA cpiality nf an item ;-vieterry"lateor mai I ;41.1.11 GU oy
the relevant specification, contract or regulation".
Following is a review of the results of some research studies undertaken in UK, USA
and Australia. These studies show the quality related problems in the industry.

A research study carried out by the Building Research Establishment ( BRE ) of UK
recently, identified the cause of building defects as primarily being in the design and
construction processes rather than in the building products.
Original BRE survey Later ABCM survey
Design faults
Product faults
Construction faults
Figure 6.3 : The cause of failure pie chart. ( Source : Comick 1991)
97

Another detail study based on the interviews of 14 relatively small building service
companies in UK showed the majority of quality related problems occur due to poor
allocation of time and resources, poor communication and design errors. Research
findings are as follows ( Cornick 1991).
Allocation of time and resources : Few companies in the survey used anything more
sophisticated than hand-drawn bar charts to plan time and some were of the view that
problems with time, in particular, were inevitable in the construction industry and that
little could be done to improve the situation. The constraints on time were most felt by
the designers in the early stages of a project caused by either the client or the designers
being unwilling or unable to freeze the design at particular point and then restricting the
time for the sub contracted designers such as structural and service engineers.
Poor communications : The second largest category is poor communications. This

problem of communications is exacerbated by the fact that often, particularly for sub
contractors, there is no on-site supervision and site meetings may be held only once a
month. In essence, many of the other problems listed here are basically communication
problems.
Design errors : These were mainly omissions with a few miscalculations, all of which
could be avoided.
Poor workmanship : This was mainly caused by poor supervision or, in many cases the
complete lack of it. Many sub-contractors employing a few people on each site find it
impossible to justify a continual site presence and roving supervisors are used.
Poor management : The problems here are of a more general nature - organization of
who does what and when on site.
Technical problems with materials : The largest group in this category is goods arriving
on-site not matching the specification that was ordered. Poor handling of materials was
another problem, with the most difficult problems being those of handling materials
new to the industry.
Poor specifications These are inadequate specifications by architect or quantity

:
surveyor - or one specifying one item and the other something different.
98
Site conditions : All these instances were of public authorities failing to do surveys of
land or buildings before commencing and then discovering that there were unforseen
problems.
Inexperienced staff : Unsupervised inexperienced staff caused a few problems.
Contractual : Theses -problems occur when different forms of contract are used. For
example, a client changed from nominated to domestic subcontractors and yet still
thought that he had the right to deal with them directly.
Buildability : Buildability problems arise where a contractor is not on hand at the design
stage to advise on easier or more economical methods of construction.
Inadequate training It would appear that inadequate training is often a scapegoat for
:
poor communications or management

The Building Research Centre of the University of New South Wales conducted a
research in 1988 about the quality of construction in domestic sector. This study has
shown that action needs to be taken by sub-contractors, builders, educators, regulators
and industry organisations in a concerted effort to improve the industry's performance
( Forsythe and Marosszelcy 1988).
The study showed that the most common defects were following:
Set-out of form work, frame carpentry on-site and the factory production of frames
and trusses.
Inadequate appreciation of structural elements ( e.g. : carpentry in relation to
building regulations; steel fixing in relation to concrete cover ; excavation in relation
to the function of the foundations, as a structural base for building ).
Performance of building systems ( e.g. : cavity wall construction ).
Incomplete work.
The main factors which contribute to the occurrence of these defects are :
Inadequate knowledge of construction.
A careless approach to quality control.
Insufficient awareness of building regulations and correct trade practices.
99
In order to improve quality, it is essential to encourage the employment of technically

educated trade labour by ensuring that the training and licensing laws accommodate
common sub-contract work practice.
Based on the findings of research Forsythe and Marosszeky ( 1988 ) made the
following observations and recommendations.
Trade training :The study showed that the education of tradesmen, supervisors and
builders needs to be modified in order to better reflect the current industry structure and
its needs. It is necessary to emphasize all aspects of work relating to the achievement of
better quality.
Support for sub-contractors : The study found that the sub contractors in the domestic
sector have no support in the form of continuing education about technical and
management issues. Their primary source of information is through manufacturer's
trade rights.
/ The supervisor : The study showed that the building supervisor is in the best position to
improve quality control in construction. In summary the study indicated that :
Insufficient time is spent on assessing the quality of construction.
Few supervisors adhere to an organised quality program.
Many supervisors worked to the regime of inspections adopted by council
inspectors to identify quality problems and accepted a passed inspection as an
indication of satisfactory work.
There is a shortage of skilled supervisors.
There is a clear need for a supervisor training course.
1 The builder : Essentially, the builder is responsible for the supervision of the quality of
all work that is under his control. Consequently it is the builder who must develop
management policies that ensure supervisors can effectively monitor quality and that
provide tradesmen with the information they need to do their work adequately. To
achieve this end the research team has recommended that the management policies
must focus in four main areas:
A clear definition of responsibility. Responsibility for ensuring quality achievement
must be clean), defined, lines of communication must be clear and achievements
must be regularly reviewed.
Assessment of standards. Objective standards must be used wherever possible to
define acceptable quality. These should be clearly set out so that they can provide
100
tradesmen with the information they need to assess their own work. In addition they
will provide supervisors with consistent standards to work to.
Practical contract documents. Contract documentation must be developed to be a
useful communication tool clearly specifying commitments, construction
information and standards rather than being merely formal documents.
Design documentation. It is necessary to review the use of documentation as a
communication tool in order to help sub-contractors improve their own construction
and quality control.

A similar research, form of a survey based on interviews with 63 trade contractors in 14
different trades in Melbourne was undertaken by Woodhead and Ball ( 1991 )
between March and September 1990 to fmd out what they perceive as being the major
factors contributing to job quality.
Clearly the quality of end product is believed to be dependent primarily on the workers
doing the job and it was noted that experience and skill was regarded marginally higher
than is training and education. Emphasis was also placed on the supervision under
which the work was carried out. It was notable that frequent comment was made,
particularly in respect to the higher skilled areas such as the mechanical engineering and
services, that the tradesmen are often their own supervisors as the work cannot be
checked on a continuous basis.
Accuracy of drawings is a high priority and criticism was made of frequent inaccuracies
in drawings and that they often become out of trade by the time work is carried out.
Drawings are given a higher overall priority than are specifications. Quality of material
is given as an important source of quality fall down, as is dimensional inaccuracy
resulting from errors by previous trades. Coordination between different trades is also
rated highly as a determinant of quality which can be impaired if misunderstandings
arise of work is not carried out in a desirable sequence.
Comments provided by interviewers

"Fast tracking" of projects came in for criticism as tenders have to be placed without
full knowledge of all the detail. When details become available unforseen detail or
awkwardness of design may cause difficulties in practice so that estimates of time turn
out to be underestimates. This puts pressure on quality through the need to work faster.
101
A strong point made by many respondents is the impact on quality brought about by the
overall competence and attitude of the head contractor. If the management is competent
and well organised, if there is a good communication and activities flow as planned then
job quality is enhanced.
Criticism was frequently made of the quality of specifications, on the basis that they
seem often to be general ones reproduced on a word processor and fail to recognize the
particular characteristics of the job in question. Criticism was also made of consultants
drawings which were said to have more inaccuracies than one is entitled to expect.
These features either impact on quality directly or add to difficulty and take time, thus
putting cost pressure on the time available.
Another significant area of concern, expressed particularly by the finishing trades whose
work is exposed to view, is the abuse by other trades after the work has been
completed. Plasters, roofers and painters are particularly susceptible.
Many respondents made a comment, and indeed expressed their deep concern, as to the
current extreme of competition in the industry, whereby attempts to quote on the basis
of adequate attention to quality, fail to win contracts. Most clients are said to be
accepting the lowest bids ( Woodhead and Ball 1991).

A large US industrial firm examined a trend of troublesome structural problems with its
various constructed facilities including warehouses, process plants, and administration
buildings of several kinds in many locations in US. The facilities involved in such
problems included metal stacks, structural concrete floors and roofs, precast concrete
elements, masonry and concrete walls, canopies, pilasters, structural steel and joists,
structural foundations, wind bracing, support frame for equipment, and bridge cable
supports ( cited in Hensey 1987).
Of the forty problems studied, about 25% were due to at least in part to communication
- coordination failures. These failures in communication / coordination occurred
variously between owner and designer, various design disciplines, designer and
vendor(s), designer and constructor, constructor and subcontractor, owner and
constructor.
102
The 25% of structural problems due in part to communication / coordination problems

are outlined in Table 6.2. Nine of these ten structural problems could have resulted in
serious, life threatening structural failures under different conditions of loading, or had
they gone unnoticed for a longer time. For the most part these problems were not the
result of new technology technical incompetence, or truly unknown loadings, but
,
rather of a communication / coordination breakdown.
Location Type of problem Projected Technical cause Basic cause

consequences/
remedial actions
Grate Lakes Cracking & failure of Could have resulted in Inadequate Switch of designers in
pilasters supporting roof collapse; rebuilt reinforcement for midstream, without
roof girders girder supports girder support orientation of new
designer to status of
work
Southeast Masonry walls of Could have collapsed Failure to design for Lack of
HVAC room which inward; reconstructed internal lateral communication
cracked & moved reinforced masonry pressure between mechanical &
when system structural/architects
pressurized
Southeast Walls not designed for Would have failed at Intended function of Lack of
blast pressures as design blast pressure; walls not understood communication
required for process reconstructed by designer between owner's
safety reinforced concrete process engineer and
structural designer
Northeast Rapid corrosion of Near collapse of root Unrecognized Lack of site visit by
roof bar joistsand rebuilt with protected corrosive atmospheric designer Or
tower supports by structural members conditions of plant communication with
chlorine fumes plant management
Midwest Severe oscillation of Could have resulted in Von Karmen vortex Failure to
tall process stack stack collapse in high shedding not communicate a
during periods of winds; changed considered in stack chronic, known
moderately high winds bracings, added design problem to a new
strakes designer
West Ineffective wind Could have resulted in Bracing point altered Lack of
bracing, as constructed frame failure; redesign by field for needed communication
on tall steel frame and rebuilt bracing equipment clearance between designers and
field/design
Midwest Precast double T Could have failed Column improperly Lack of understanding
supporting stub under load; provided located by field by field; poor
column which cracked reinforcement of erection forces communication with
and moved double T designers.
Northeast Distress of roof due to Near collapse of root Drilling effect of Failure to
snow loading installed new, stronger parapets on snow, Not communicate a
girders and joists recognised by cords & chronic, known
design practices problem
East Central New steel between 6th Reset steel & Steel misfabricated Lack of cooperation in
, 7th , and 8th floors modified the based on poor field getting field
which produced a connections to adjust measurements measurements for
leaning effect on to I in. difference structural members
building
South Central Cracks in elevated Collapse was a Platform designed for Lack of
structural floor slab of possibility; performed hancbrucics; fork lifts communication
packing room epoxy treatment of actually used between owner's
cracks and added representative and
structural steel designer
Table 6.2 : Description of structural problems due to communication / coordination

failures. ( Source :.Hensey 1987)
103
The structural problems reviewed indicate that quality in the constructed project is not
simply a function of the skills and diligence of the various parties involved. It is also a
function of their ability to communicate needed information about scope, costs,
schedules, technical information and changes.
A coordinated effort among the various contributors on the team will be required in
order to achieve an integrated program, design and completed project - one that is
functional and meets the client's needs. This includes the various communication
processes by which needed information is exchanged among individual team members.
Formal and Informal communication ( verbal, nonverbal, written, graphic, and

electronic communication ) is needed to assure that project activities are coordinated
properly ( Hensey 1987).
104
CHAPTER 7: Total Quality Management ( TQM ) in Construction
7.0 Introduction
The business world changes from traditional management practices to TQM.
Construction industry has followed manufacturing and service industries in beginning to
implement TQM. Implementation of TQM can be viewed under two scenarios.
Considering each project as a separate business unit and applying TQM principles
to accomplish project mission ( TQM / None TQ1'vl organization construct projects
applying TQM principles on project by project basis ).
Organizations who have already progressed well into their TQM journey, apply
TQM principles for projects ( TQM organization may construct all projects in
accordance with TQM principles ).
One can assume that, both of these methods could be used to produce a Total Quality
project. However it is understood that applying TQM to construction is a challenging
and complex task. As observed by Deffenbaugh ( 1993 ) construction companies that
embrace TQM would prefer all repeat clients with the same cooperative design team
and sole - source subcontractor and supplier partners. This may be not the case in most
of the countries.
Deffenbaugh ( 1993 ) suggested to view the project team like a small business it self,
the project team also can practice the same approach to empower people, satisfy both
internal and external customers and continually improve. When this is done total project
success is inevitable. This chapter briefly reviews application of TQM principles to the
construction. Three different TQM models are described in this chapter.
7.1 Total Quality in Construction

Total Quality in construction industry can be defmed as a measurable process of
continuous improvement that is focused on the needs and expectations of customer.
Success requires a partnership characterized by input, involvement, commitment, and
action from owners, contractors, architects, engineers, subcontractors, and suppliers.
The challenge for the construction industry in realizing that defmition is due to the
unique characteristics found in each project.
For years TQM has been readily applied to manufacturing, in which work is repetitious
and the workforce is generally stable. construction however offers much more
variability ; each project represents a unique formula of design, location, personnel,
materials, weather, cost and time. According to Deffenbaugh ( 1993 ) the major
105
challenge in implementing TQM in the design and construction industry is applying its
principles to jobsite.( Deffenbaugh 1993).
Strange and Vaughan (1993 ) commented about the complexity and unique nature of
construction and challengers to implement TQM as follows.
"It is the point of view, or paradigm, that many construction leaders have
about their industry. Thai view, which c4muunts to a belief that construction
management is art, not science, and that project success is almost impossible,
because of the natural entropy in the system, can be summarized by what we
call the "can'ts":
You can't apply industrial management solutions to construction,
because of the unique nature of the construction industry.
You can't do statistical analysis of construction processes, because
they are unique and nonrepetetive.
You can't invest in training at the job level, because individual
employment is short-term, the people have no company loyalty, and the
environment is too difficult.
You can't spend money on management programs, because there is too
much competition and the margins won't allow it.
You can't take time away from doing the work for seminars, retreats or
symposia" - Strange and Vaughan.
According to Strange and Vaughan ( 1993 ) the challenge of applying TQM or other
forward thinking management philosophies to construction stems from the definition of
two words, "product" and "success". Product is currently defmed as the fmished
building, or project. Success is defined as meeting company goals for profit, growth
and so on. In TQM product must be redefined to be the management service provided
in planning and executing construction, and that success must be redefined as meeting
the goals of customers of that product. ( Strange and Vaughan 1993).
In 1990 Iowa State University researches held a national workshop for owners
designers, contractors, and sub contractors to address TQM in the design and building
process. The participants identified many problems that faced the industry in the US,
but the first three were noted as lack of team work, poor communication and
inadequate planning and scheduling
106
The causes of these problems identified as :

No team building exercises at the inception of project.
Lack of understanding of team member's expectations.
Little or no team oriented planning and scheduling.
( Chase and Manning 1990, cited in Deffenbaugh 1993)
The ASCE Manual also highlights the importance of a team effort in producing a
quality project. A team effort is based on mutual trust and understanding among all
parties. Mutual trust and understanding can only occur when integrity exists. Honesty
and integrity are critical in developing mutual trust and understanding among the
individuals of the project team. Though it is difficult to do at times, participants must
state facts regardless of the consequences. Honest and open communications among the
project team members will largely determine the success of the project ( ASCE Manual
1988).
107
7.2 Implementation of TOM

There is no universal method to implement TQM principles. Three models of TQM
are outlined below. Models 1 and 3 are applicable to the design, construction
companies, while model 3 is suitable for construction job sites.
Model 1 ( Chase 1993 ) : The ten elements model described here, is based on the input
of contractors who have developed formalized QM processes. According to Chase
(1993 ) this method is being applied successfully by the design and construction firms
in US.
Model 2 ( Deffenbaugh 1993 ) : This process focuses on recognition, quality teams,

quality indicators and training and development. This approach has been used to
implement TQM at job site and already shown promising results in US. Accordingly
Deffenbaugh ( 1993 ) contends that the TQM at the construction jobsite is not only
possible but has proven be a success.
Model 3 : ( Burati and Oswald 1993) : This model had been developed, by using the
data collected from the interviews with engineering and construction companies who
have successfully accomplished TQM. Findings of this study indicate that there is a
general sequence of four implementation phases that produce the best results. These
phases include : exploration and commitment, planning and preparation,
implementation and sustaining. According to Burati and Oswald (1993 ) this
approach is helpful to companies making new starts at TQM or those wishing to make
modifications to their ongoing TQM implementation efforts.
108
7.2.1 Model 1 - ( Chase 1993)

Chase ( 1993 ) presents a 10 elements TQM model based on three work shops
conducted by Iowa State University, US and based on his continuous studies of design
and construction companies practicing TQM.
Upper-management involvement, commitment, and leadership.

Vision, mission, and guiding principles developed in concert with the employees of
an organization.
A significant amount of training in quality awareness, communication, leadership,
team work, process improvement, and job related skills.
Improved communications.
Team work.
A focus on satisfying the customer.
A focus on improving the work environment, helping employees improve, and
involving them in the improvement efforts of the organization.
The use of formalized process improvement techniques.
Helping suppliers and subcontractors improve.
Striving for continuous improvement.
uOUS IMPROVE
SUPPLIER PROCESS
IMPROVEMENT IMPROVEMENT
CUSTOMER FOCUS ON
SATISFACTION EMPLOYEES
TEAMWORK
IMPROVED COMMUNICATIONS
VISION. UPPER
MISSION. MANAGEMENT
TRAINING INVOLVEMENT,
GUIDING COMMITMENT,
PRINCIPLES LEADERSHIP
Figure 7.1 : Structure of TQM. ( Source : Chase 1993)

109
Several foundation members are required to support the structure. These are training
(and education ) , vision, mission, goals and guiding principles, and upper- management
involvement, commitment and leadership.
The ten elements are as follows.

1.Training : Training is necessary because TQM uses a participative, disciplined, and
organised approach to problem identification and problem solution. To do this there is
also a requirement for the collection and evaluation of quantitative information.
2.Vision, mission, goals, and guiding principles : The vision is a written statement
starting with the company ultimately intends to become. The mission states what a
company is in business to do. Goals are broad targets that stem from the vision and
mission. There can be goals for many areas, such as safety, customer satisfaction,
business growth, and worker satisfaction. Guiding principles are general statements that
reflect in broad terms the company's value system and approach to quality.
3.Upper management involvement, commitment, and leadership : In its recent study of

application of TQM to the construction industry, the Construction Industry Institute
found that the role of senior management is absolutely vital to the success of TQM.
4.Improved communications : Improved communication occupies the subfl000r of the

structure and it is a key element in achieving the four elements above it. Within
companies, these improvements occur largely through a combination of awareness,
instruction an interpersonal communication, leadership instruction, and an increased
emphasis on team work. When "partnering" is used on construction projects, there is a
marked improvement in communication.
5.Teamwork: TQM recognizes that people working together in teams toward mutual
goals are generally more effective than individuals working alone. On individual
construction projects the parties may establish a team environment. Sometimes this is
the result of TQM; other times it is the result of "partnering" process. Sometimes it is
both.
7.Customer satisfaction ( external and internal customer ) : In the design and

construction of facilities, more emphasis is placed on defining the customer's needs and
wants, translating these needs and wants into accurate plans and specifications, and then
performing construction in such a manner that customer's expectations are met.
110
8.Process improvement : Problem identification and solution focus on the processes

involved. Process improvement is approached in a deliberate and a professional manner
using trained teams. Measurement and the analysis of data ( SPC ) are important parts
of the process improvement
9.Focus on Employees : TQM recognizes that every employee has significant potential
to make improvements not only in his or her own function, but to see and make known
needs for improvements in other areas. This potential is tapped through a combination
of :
Motivating.
Instilling the internal customer concept.
Training as mentioned earlier.
Providing a meaningful orientation for new employees on the company, its
customers, and the company's quality policies.
Providing a safe, clean, stimulating and satisfying work environment.
Encouraging two way communication and employee suggestions.
Breaking down communications bathers inside and outside of the organization.
Allowing and encouraging employee participation in planning, problem solving, and
decision making.
Providing individual and team recognition for quality improvement.
10.Continuous Improvement The upper part of the structure is continuous

:
improvement. This feature distinguishes TQM from short tenn management fixes. With
TQM, everybody within the organization is looking constantly for ways to improve
(Chase 1993 ) .
111
7.2.2 Model 2- ( Deffenbaugh 1993)

Another model for TQM implementation on the job site had been developed by
Deffenbaugh ( 1993 ) based on the results of national workshop conducted by Iowa
State University, US.
Jobsite Quality
Planning Session
One Day
Meeting
Mission
Key Tasks
Duration
of Project
Duality
Indlcators
Recognition j
Quality Lead Team
Training and Duality Improvemer_tt

Development Teams
Total Project
Success.
Figure 7.2 : Jobsite Quality Planning. ( Source : Deffenbaugh 1993)
The process start with job site quality planning session at which representatives of the
project team meet to develop a mission for their workshop. They also determine initial
key tasks that will help them accomplish the mission. The team become a quality lead
team for the project.
It addresses the initial and subsequent key tasks identified under one of the four specific
headings shown. Recognition reflects that all the individuals on the project are
respected for the part they play in making the job a success. Quality Indicators are
used to manage key processes using facts. Training and Development help
112
management and workers alike grow and contribute to their fullest extent. Quality
Improvement Teams standardize processes and solve problems to assure overall
customer satisfaction. As work proceeds, the Quality Lead Teams meet regularly to
oversee the total - quality effort and progress toward accomplishing the mission. When
the mission is accomplished there is a total project success. The PDCA cycle forms
the basis outline for continuous improvement and as such is key to the Jobsite Quality
Planning Process.
Quality
Recognition
Indicators
Examples: Examples:
Precast Production Quality Crew of the
Month
Window Installation
Shop Drawing Quality Quote of the
Week
Turnaround
Worker Suggestions Training Certificates
Quality Lead Team Safety Awards
Training and Quality Improvement

Development Teams
Examples: Examples:
TOM Orientation Design Submittal Team
Elevator Basics Utility Coordination Team
Safety/First Aid Embed Placement Team
Fire Alarm System Clean-Up Team
Total Project
Success
Figure 7.3 : Jobsite Quality Implementation. ( Source : Deffenbaugh 1993)
Figure 7.3 illustrates how the diagram might look as the project continuous through
construction. Due to the unique characteristics of each project, the specific items
change. Thus the list needs to be flexible.
113
Recognition items promote teamwork on the job and pride in one's work. There are
three primary types of Quality Teams that may be used on a project.
1. Coordination teams have been effectively used both during the submittal process
and when work is progressing. Rather than one group doing their work on an item
and passing it on, groups come together to discuss and negotiate their requirements
for the project to satisfy everyone involved. This approach eliminates rework both
in design and construction.
Stanclardimtion teams meet at the beginning of a process, whether it be paper work
or field installation, and agree on the steps and method of measurement As the
work proceeds, team members measure themselves against the requirements they
established.
3. Finally problem solving teams are formed to address problems that arise on the
project. These teams use a fast track approach to eliminate the problem quickly with
minimal negative effect on productivity.
Quality Lead Teams closely monitor all teams on the job site so that designer and
worker time are effectively used for positive results. Quality Indicators measure
progress toward accomplishing the mission. These measurements are openly displayed
on the project to create awareness and team accountability. The final focus on the
Quality Lead Team is on Training and Development.
As work progresses Quality Lead Team reviews the quality progress regularly. It is also
important for the Quality Lead Team to look out side of its group for improvement
ideas. Projects also need ongoing feed back from the ultimate customer, the owner
(Deffenbaugh 1993).
114
7.2.3 Model 3 - ( Burati and Oswald 1993)

More comprehensive detail research study was carried out by Burati and Oswald
(1992) with the collaboration of Construction Industry Institute's TQM Task Force to
collect and describe the proven best practices in TQM implementation in the
engineering and construction industry. Seventeen major companies involved in the
engineering and construction industries ( eight owners and nine contractors ) were
interviewed. The companies were selected based on their known successful
implementation of TrIM
A general sequence of four implementation phases namely

Exploration and commitment phase.
Planning and preparation phase.
Implementation phase.
Sustaining phase.
emerged as offering the best opportunity for successful implementation of TQM.
TQM often termed a journey, not a destination. This is because of its nature as a
collection of improvement-centred processes and techniques that are performed in a
transformed management environment. The concept of continuous improvement holds
that this environment must prevail for the life of the enterprise, and that the methods
will become routine/3r used on a regular, recurring basis. The improvement process
never ends, therefore no true destination is ever reached.
The metaphor of a road map was selected to illustrate the TQM journey. The road map
is a composite of the experiences of 15 out of 17 companies interviewed that have
comparable TQM processes.
Participant, helper
Decision
Activity, task
Multiple activities
Meeting
Figure 7.4 : Legend of Symbols on Road Map. ( Source : Burati and Oswald 1993)
115
1.Exploration and commitment phase

The exploration and commitment phase characterised by :
Top management becoming aware of a need for change in the way the organization
is run, to achieve increased profitability of owners, contractors, and suppliers, on a
win-win basis.
Top management investigating modern Quality Improvement ( QI ) philosophies.
Engaging a consultant to provide basic education concerning the selected QI
approach.
Appointing an in-house coordinator.
Developing a plan for organization wide training.
Basic training of the uppermost tier of management.
Chief Internal
Senior Middle Work External
Executive TOM
Managers Managers Force Consultant
Officer Coordio taw,
deed. to No
END
Change?
Yes
No
Is TO
END
the way?
Yes
Evaluate basic _C)

Quality philosophies
I
Define expectations
I
Select
approach 8
consultant
O Appoint
TOM
Coord.
1
0 I
0 Develop
training
plan
i
Receive TOM
awareness training
eaffirm No
00
END
Figure 7.5 : TQM Road Map : Exploration and Commitment phase. ( Source : Burati
and Oswald 1993)
116
The work of this phase is essentially concluded when top management, having had the
benefit of training of quality awareness, and having understood its implications and
requirements, formally commits to major change in the philosophical and operational
conduct of the enterprise.
2.Planning and preparation phase

The planning and preparation phase is characterized by :
Developing a strategic quality deployment process and the basic infrastructure
within which the TQM process will be pursued.
Continuing top management's training, into QI tools.
Extending training to middle managers and the work force, in that order, with
quality awareness training given first at each level, followed by QI tools.
Developing a network of "champions".
Chief Internal
Executive TOM
Officer Coordinator
Develop strategic
quality
deplo rnent process
Receive training:
Top Mgmt-Ot tools
Middle Mgmt - Awareness
1
III
I
Receive training:
. Middle Mgrs - 01 tools
i
i
Receive selected
training as:
Facititalors
Instructors
leaders
a
0
Develop in rastructure
8 process
to coordinate learns
Establish
team
process
model(s)
I
Figure 7.6 : TQM Road Map : Planning and Preparation phase. ( Source : Burati and
Oswald 1993)
117
The work of this phase can be considered to be concluded only when the necessary
planning, including commitment of resources, and basic training are in place.
3. Implementation phase
The implementation phase is that period of time in which the commitment, planning,
and preparation of the two initial phases are translated into action.
Chief Internal
Executive TOM
Managers Managers Force Coordinator Consultant
Officer
Form standing teams

for TOM oversight 0
0
.
Continue to realign
the rewa d system
Charter initial teams
1
J
Receive J- -T training as learns
Team skills
01 tools refresher (as needed) -
I I I
Receive training in advanced
1:11 methods for selected
resource peoile"
I
Run pilot projects to
a
gain experience &
generate success
stories
Implement pilot project
results & publish
success stories
Formally celebrate 01 success

f
-HO
a- -o-o
-o-o
,
o--
Figure 7.7 : TQM Road Map : Implementation phase. ( Source : Burati and Oswald
1993)
The major activities are :
Extending the infrastructure by creating and chartering teams at various levels,
including high - level oversight teams, and action teams to perform a few
strategically chosen pilot QI projects.
Continuing to realign the reward system to support the desired behaviours.
118
Training teams, as teams, in the skills and techniques needed to perform their
assigned QI projects.
Top management rolling out the TQM process, by implementing the results of the
pilot project teams, publishing the attendant success stories, and extending the QI
effort to teams and projects throughout the organization.
Formally celebrating the implementation results to date.
Extending the TQM process to vendors and suppliers once the in-house program is
considered to be progressing satis.factorily
The end of the implementation phase is less clearly definable than the ends of the two
initial phases. ( Even those boundaries are inexact ) Implementation should never cease.
Rather it transitions gradually into the period of sustaining activity, that of continuous
improvement.
4. Sustaining phase
Chief Internal
Executive TOM
Officer Coordinator
ISimultaneous, ongoing activities: I
Absorb TOM into

regular management
structure o
-o
Conduct long-range
planning for continuous
improvement
Direct major effort to
work process
improvement &
increased customer
satisfaction
-0
Demonstrate commitment to &
support of the TOM effort
1 1
Continue to pursue process at all levels:

specialized training
team accomplishment of 01 projects
empowerment & participation of all personnel
1 1 1
Obtain advanced, specialized

training in leadership skills
Oversight teams monitor &

continuously improve the quality
process in areas of responsibility
Never-ending, company-wide process
Figure 7.8 : TQM Road Map : Sustaining phase. ( Source : Burati and Oswald 1993)
119
Following this initial push, there is a gradual transition into the sustaining phase. This
part of the endless journey is characterized more by prevailing conditions than by a
progression of discrete events. Some of the conditions prevailing in the sustaining phase
are
Integrating the specially created TQM infrastructure features ( or organizational
elements, processes etc,. ) into the normal management processes of the business.
Continuing planning for long term quality improvement.
Continuing and intensifying focus on the improvement of the work processes of the
organization, with the objective of increasing customer satisfaction.
Continuing management commitment to the internal workings of the process, as
clearly evidenced by its ( management's ) attitudes and its behaviour.
Continuing action in the training, team work, empowerment, and participation of
the work force across the full spectrum of TQM activities.
Continuing study and implementation of advanced training and leadership practices.
Continuing active oversight by management of the TQM process, as opposed to
"just letting it run itself ".
In the buildup to full implementation, planning is aimed at discrete activities such as

accomplishing training, designing QI work processes, etc. In the sustaining phase,
planning in these relatively visible areas continues, but should eventually be integrated
into the routine operational planning of the organization.
The sustaining phase brings with it the possibility that long term TQM planning will
gradually lose its identity and therefore its momentum. Therefore Burati and Oswald
(1993) recommend that the management should exert conscious effort to establishing
guarantees that planning for continuous improvement will retain its high profile and be
pursued with as much or more discipline as in the earlier phases.
Approximate duration of phases

Figure 7.9 illustrates approximately, the chronologies of 14 companies over the first
three phases of the TQM implementation journey and the early stages of the fourth
stage ( the sustaining phase ).The longer phase duration's for the companies having the
longest TQM histories reflect the lack of knowledge of TQM that existed, and the
experimentation and / or false starts that occur, as engineering and construction
companies first became aware of TQM possibilities.
Only four of the six owners and five of the eight contractors are considered to be
approaching a sustaining posture. Their individual degrees of attainment vary widely.
120
1982 83 1 84
1 85 1 86 1 871 88 1 89 1 90
6 Owners
2MM= raTtnal VWVZ:11'ZKSIT212 111111111111111MINiell r'711ENII OW= liNEW53
11111111111111=1
110/t."'^ff -2`J IIMOSSIMMINME IMIESEMEI
111111.111111111. ---
--
031/41',;:ehlIMMIVIKX412=23021169=21151=11111119=1=
Explor. & Commit.

IMPERIN Planning & Prepar.
Implementation
nffilinfla
(Early) Sustaining
Figure 7.9 : Approximate durations for TQM histories. ( Source : Burati and Oswald
1993)
121
7.3 Towards a Better Management System

The TQM philosophy, its principles and applications have already been discussed. The
basics of TQM philosophy and process can be summarized simply, "to design and
manage a process that satisfies the customer in an increasingly effective way". In many
ways TQM gets back to the basics of good business and good management: know your
customer and your customer needs . Find the best way to create and deliver your
product or service ( Vail 1989, cited in Schmidt and Finningen 1992).
Also we have examined the nature and complexity of construction industry, current
adversarial style and dispute prone nature of the project environment coupled with the
common contract strategies adopted by the industry.
A positive management structure which will facilitate to develop cooperative and

friendly relationships among all project participants with a view to achieve common
objectives, ( to say in other words a quality constructed project ) by creating a "win-
win" situation for all project participants, while creating an environment for continuous
improvement process ( cultural change ) would be "the ideal system" to achieve TQM .
Referring to the NIES "How to" model ( Section 3.5 ), "people", "variations" and
"systems" are the interacting factors that affect the ability of supplier / contractor to
satisfy the customer needs. All people serve customers through and within people.
Therefore the "ideal management system" should to be based on the fundamental
values ideas of common sense, trust, commitment, openness ( open conununication ) to
foster a better understanding environment with enhanced cooperation. This is the
essence of partnering. The following Chapters 8, 9, 10, and 11 address the partnering
concept, it's benefits, concerns, challenges and its application in detail.
122
CHAPTER 8: Partnering Concept
8.0 Introduction
In the early 1970's the business environment for engineering and construction changed
sharply. Faced with ever increasing inflation, oil embargoes, and other economic
factors, the industry was forced to develop new strategies to handle these challenges.
The industry is again faced with new challenges and must respond with new and
innovative strategies. New technologies, hostile take overs, foreign competition. Profit
pressures, changing regulations, and high investment risks are forcing the industry to
shift away from traditional approaches and seek new ways of doing business ; seek new
ways to lower costs and differentiate themselves to gain competitive advantage; break
from old patterns and prepare for change. The concept of partnering is one such
approach to conduct business that confronts the economic and technological challenges
in 1990's ( CII 1989).
The essence of partnering is based on the fundamental human value concepts of

common sense, trust, commitment. History has shown that human nature prevails when
"good faith and fair dealing" expected. Hence there is no reason that the construction
industry ( ie. project environment ) to response to this positive and risk sharing
management system negatively. This chapter examines the need of partnering, its
evolution and key elements closely.
8.1 Background
Global competition, the increasing cost of product development, and the accent on
product quality are forcing construction owners to seek more cost effective and timely
methods for obtaining design and construction services for their capital projects.
Owners are also seeking methods to reduce the high cost of fixed resources in their own
organizations. Constructors and engineers are seeking ways to grow and to maintain
competitiveness. These firms are finding that traditional contracting relationships may
be too slow and too expensive and result in too many adversarial relationships to meet
the time, cost, and quality constraints in the new environment ( Goldbaum 1988,
Hancher 1989, cited in Cook and Hancher 1990).
Partnering can be used as a contracting strategy between owners, contractors, and

engineering companies to attain mutually desirable goals, to satisfy long term needs, and
to achieve future competitive advantage ( Stralkowski et al 1988, cited in Cook and
Hancher 1990).
123
This approach focuses on malcing the goals of the owner, contractor, designer, and
supplier better understood and easier to manage. Partnering is a type of contractual
agreement that out lines mutually attainable goals, satisfies long term needs, and assigns
risk among all the parties involved ( CII 1989 ). However partnering is not a legal
contract.
"True partnering" is based on meeting mutual needs and interests, exhibiting sincere
trust and allowing time to uninature and de-v-elop the relationship. Partneririg also mearbs
sharing the rewards and recognition derived from the relationship ( CII 1991).
For partnering to become an effective business tool in the construction industry, the
owner - constructor - engineer relationships must be reshaped so that partners to seek to
identify common goals, not slightly different sets of priorities. The objective of a
partnering agreement should be to achieve mutual profit and mutual success for each
company. The partnering agreement must reduce or eliminate adversarial relationships
and replace them with a long term relationship based on mutual trust and mutual benefit
( Rubin and Lawson 1988, Provost and Lipscomb 1989, cited in Cook and Hancher
1990).
8.2 The Need for Partnering

Dombkins ( 1993 ) emphasizes the importance of "cultural change", required in the
organizations to survive and sustain in the business. High performance for
organizations, depend on organizations being flexible and responsive to a rapidly
changing environment. This means that managerially driven bureaucratic organizations
that were performing organizations in the stable and growth environment of the 60's
and 70's are now out of fit with the new environment. In the growth markets of the 60's
and 70's customers were plentiful and the emphasis was principally focused on
stabilising the production process, not on customer needs or employees.
The matrix organizations in the 80's provided a half way solution between functional
and flexible organizations. Matrix organizations rely on negotiation ( win- lose ) and
standardisation of the process ( particularly legal process ) to control the large number
of stake holders in a project - matrix organizations are driven by structure, not culture.
As observed by Dombkins ( 1993 ) matrix organizations have by their nature conflict
built into the structure. Trust and open communication were not considered critical
factors to organizational high performance. To remain high performing organization in
the 90's and beyond, organizations need to change to be stakeholder focuses and
flexible. The challenge is for today's organizations to change their cultures to fit with the
124
new environment and then to constantly keep changing to maintain fit with the ever
changing environment.
The emphasis on coordinating work through documentation has resulted in their being
little contact - other than contractual - between designers and contractors and effectively
no contact between clients and contractors. This reliance on documentation to
coordinate work has meant that there was no perceived need for shared objectives and
open communication. All issues resolved through the contract documentation. This
process establishes and maintains a win-lose mentality. Each of the stake holders in this
process focused on it self and not on the overall project. The contract, drawings,
specifications and direct supervision were assumed adequate to coordinate the work -
there were no perceived need for shared objectives and open communication.
Over the past thirty years there has been a significant increase in overall output per
person due to technological change, while there has been a drop in individual
productivity. Reliance on technology is no longer sufficient to keep pace with
international competition. When flexibility is required in an organization, open
communication is the high leverage organizational design factor. In order to minimise
response time and maximise effectiveness of communication, Dombkins ( 1993 )
suggests that organizations should be designed to :
Empower and multi skill its workers.
Resolve the maximum number of interdependencies within the individual groups.
Provide effective inter and intra group communication ( liaison devises).
Where problems occur on projects that require coordination across subcontract

boundaries that can not be provided through the contract, liaison devices between sub
contractors are required. The construction industry has used matrix structures and
project managers as a mechanism to deal with coordination between stakeholders in an
increasingly complex environment.
Construction industry has relied on contracts, detailed specifications and technical

experts to coordinate the work and to provide quality - the emphasis has been on
technical and structural considerations, not people related issues ( culture ). The basis
for selection of suppliers and sub contractors is cost - organizational culture and inter
organizational communication are not selection criteria - the contract is assumed to align
the objectives of the stakeholders.
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Industry has focused on structural solutions to increase its productivity and quality. The
emphasis has been on restructing to increase multi skilling and reduce demarcations.
There has also been a move towards letting larger subcontract packages significantly
improve communication, reduce the need for cross - sub contractor communication and
provide a frame work for multi skilling and long term employment with larger, stronger
and more skilled sub contract organizations.
Dombkins ( 1993 ) further iterates that restructing programs have todate ignore the
industries culture. Without a trust based, shared objectives culture all of these cultural
changes will have very limited long term effect. The existing culture will simply reshape
the new structural changes to remain the same - "win-loose". Partnering is a cultural
process for organizations It is a bridge for organizations to change from machine
bureaucracies to stakeholder focused flexible learning organizations. The key to
organizational change is the organization's culture.
Partnering takes the key elements required for cultural change and combines them into
a simply process that is easily understood and emotionally accepted by all organization
members. Partnering focuses on cultural change rather than structural change. It is a
strategic change process that deals with a small number of high leverage points initially
while laying the foundations for an ongoing change process. ( Dombkitts 1993 ).
126
The following Table 8.1 identifies key partnering relationship practices and compares
them with traditional practices of most organizations and individuals :
Key Practices in Partnering Traditional Practices

Relationships
Mutual Trust forms the basis for strong working Suspicion and distrust; each party wary of the
relationships motives of actions by the other
Shared goals and Objectives ensure common Each party's goals and objectives, while similar,
direction geared to what is best for them
Open Communications avoids misdirection and Communications structures and guarded
bolsters effective working relationships
Long-Term Commitment provides the Single project contracting
opportunity to attain continuous improvement
Objective Critique geared to candid assessment Objectively limited due to fear of reprisal and
of performance lack of continuous improvement opportunity
Access to each other's organization; sharing of Limited access with structured procedures and
resources self preservation taking priority over total
optimization
Total Company Involvement Commitment from Normally limited to project level personnel
CEO to team members.
Sharing ofBusiness Plans and strategies Sharing limited by lack of trust and different
objectives
Absence or minimization of Contract Terms that Routine adversarial relationships for self
create an adversarial environment protection
Integration of administrative systems and Duplication and / or translation with attendant
equipment costs and delays
Table 8.1 : Key partnering practices vs. traditional. ( Source : CH 1991 )
8.3 What is Partnering?

Partnering is not a particularly new concept but it was given new life in the US by
Colonel Charles Cowan, first as Commander of the Portland District, US Army Corps
of Engineers and then as Director of the Arizona Department of Transportation. In
1992 Colonel Cowan conducted a number of partnering workshops in generating
interest in the concept which in turn led to it being adopted by contractors in Australia.
"I am occasionally asked if Partnering works. My answer is, even if there

were to be no financial or performance advantages, it's clearly the ethical way
of doing business." - Charles Cowan ( cited in MBA 1992 )i
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Partnering is a management structure applied to construction projects. It is created ( and

customised ) by the parties who will be involved in the project, including the principal,
head contractor, sub-contractors, suppliers and consultants ( The Australian legal
group).
"Partnering provides an opportunity to work effectively with the contractor

and a forum where we can discuss issues and develop mutually acceptable
solutions. On a variety of projects, some of them quite large, we have seen
impressive benefits in cost containment, on schedule completion, value
engineering savings, safety records and organizational morale" - Howard B.
Jones, Chief, Construction Division, ASCE Construction Congress, 15 April
1991, ( cited in MBA 1992)
Partnering brings together many of today's organizational design, human resources

management, organizational change, continuous improvement, conflict management
and interpersonal skills theories and combines them in to a simple process. It deals with
tangible problems rather than theories ( Dombkins 1993).
Partnering is going back to the way people used to do business when a person's word
was their bond and people accepted responsibility. Partnering not a contract, but a
recognition that every contract includes at the convenant of "good faith and fair
dealing". While the contract establishes the legal relationships among the parties
(stakeholders ) through a mutually developed, formal strategy of commitment and
communication. It attempts to create an environment where trust and team work
prevent disputes, foster a co-operative bond to everyone's benefit, and facilitate the
completion of a successful project.
"Partnering is much more than a buzzword, a philosophy or an attitude. It is

structured management process that is effective on overall sizes of
construction projects to focus the attention of all the parties on problem
resolution, without prolonged disputes or litigation. An experienced contractor
realizes that good working relationships are essential for successful, profitable
projects. I am committed to the partnering process - it works I " - Richard A
Lewis, Vice President, Granite Construction Company, ( cited in CPSC 1993)
Partnering is a management strategy which- offers a new paradigm for owner /

contractor relationships. Under partnering, all parties agree from the beginning, in a
formal structure, to focus on creative cooperation and work to avoid adversarial
128
confrontation. Working relationships are carefully and deliberatively built, based on

mutual respect, trust and integrity. Partnering provides participants with a win-win
orientation toward problem resolution and fosters synergistic team work ( MBA 1992).
CII Task Force defines partnering as follows :

"Partnering is a long term commitment between two or more organizations for
the purpose of achieving specific business objectives by maximising the
effectiveness of each participant's resources. This requites changing traditional
relationships to a shared culture without regard to organizational boundaries.
The relationship is based upon trust, dedication to common goals, and an
understanding of each other's individual expectations and values. Expected
benefits include improved efficiency and cost effectiveness, increased
opportunity for innovation, and the continuous improvement of quality products
and services." ( CII 1991 ).
Partnering Task Force summarizes the following characteristics in a successful

partnering relationship, where in :
All seek win - win solutions.
Values are placed on long term relationships.
Trust and openness are norms.
An environment for long term profitability exists.
All are encouraged to openly address any problem.
All understand that neither benefits from exploitation of the other.
Innovation is encouraged.
Each partner is aware of the other's needs, concerns and objectives.
Interested in helping their partner achieve such.
Overall performance is improved.
( CII 1991).
129
8.4 Is Partnering a Contractual Agreement ?

From a pursuit standpoint, the contract is not an important part of the partnering
process. However, the reality of today's world of legalities coupled with the fact that
this type of cultural alteration comes in step changes dictate a formal agreement be
establishment between all parties. Partnering Task Force comments that the key is
understanding the partnering process so that the contract promotes partnering and
complements the philosophy of the concept rather than contributes an adversarial
relationship.
The success of the contract as a working document depends on the commitment to

fulfilling the "mission statement" and the "charter" supporting that statement, as well as
a statement of expectations and objectives. All of these are mutually developed and
agreed to prior to developing the contract. This will provide continuity to the ongoing
partnering process itself. In addition, flexibility should be built into the contract to allow
for change that may be a result of the continual improvement or review process (CH
1991).
Partnering is not a contractual agreement nor does it create any legally enforceable
rights or duties. It is the contract that provides the legal relationship, with partnering
establishing the working relationships among the stakeholders through a mutually -
developed, formal strategy of communication and commitment.
However partnering has a great potential to affect the legal relationship of the parties,
particularly at the issue resolution stage where the parties are to enter into discussions
with each other and be frank and open with the communication. Therefore to avoid the
contractual being inconsistent with the actual relationship between parties, The
Australian Legal Group recommends that the contracts should be drafted to reflect the
partnering relationship developed by the parties. ( The Australian Legal Group 1993).
In summary, Partnering is a process of establishing a moral agreement between the

project team members along with a formal frame work to assist in its successful
implementation. The charter morally binds each stake holder to act in the best interests
of the project and project team members with the aim of achieving their common
project objectives.
130
8.5 Key Elements of Partnering

Partnering Task Force of US and Construction Policy Steering Committee of NSW /
Master Builders, Australia describe the key elements of partnering in slightly different
ways. Both methods are outlined below :
8.5.1 Partnering Model ( Partnering Task Force )
- -
Figure 8.1: Partnering model. ( Source : CH 1991)
According to the definition of partnering given by Task Force, the key elements of any
partnering relationship are : trust, long-term commitment, and shared vision. As these
key elements are developed in a relationship, other sub elements are achieved and the
benefits to all parties are maximized. Both the customer and the supplier can profit
from reduced overhead and workload stability. Competitive advantage in their
respective markets is enhanced through improved cost, quality and schedule. Most
importantly, TQM and continuous improvement are achieved.
The key elements of partnering are :

Long- term Commitment : Experience has shown that the benefits of partnering are not
achieved quickly. Problems enabling companies to achieve a competitive advantage
usually require extensive time to solve or require constant improvement. A long-term
commitment to the partnering agreement generates the atmosphere needed to address
these issues, frees each partner from constant reassessment and permits "lessons
learned" to be passed from initial projects to later projects.
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Trust : Trust enables combining the resources and knowledge of each partner in a
fashion to eliminate adversarial relationships. Partners are then be able to share
information, tolerate contact with others and accept diminished control resulting in
enhanced capabilities for the partnering relationship.
Shared Vision : Each of the partnering organizations must understand the need for a
shared vision and common mission for the partnering relationship. To achieve this there
nee-1- to be a innt-.1 exchange of ideas and an agreement of expectations. Shared
vision will be achieved when an atmosphere of openness and candidness has been
established.
Other important aspects of partnering are :

Equity : The strength of partnering is derived from the synergy of the two organizations
permitted through a relationship based on equity and parity. Both parties become
mutually motivated when "win-win" solutions are sought rather than the "win - lose"
solutions of traditional relationships.
Investment : All parties invest in partnering; each invests the strengths uniquely
possessed that can contribute to success. Investment in new business systems also may
be required.
Synergism : A synergistic environment will promote the open exchange and

consideration of ideas. The "not invented here" syndrome is avoided. The relationship
will combine the resources and knowledge of partners.
Shared Risk : All parties take appropriate risk commensurate with their rewards and the
concepts unique to their partnering relationship.
Rewards : There must be advantages and opportunities. All parties should expect more
than is available in other relationships commensurate with their investments and risks.
Systemic : The partnering relationship will be systemic in nature. It cannot depend

solely on individuals.
Competitive edge : All parties seek new ways to lower costs and differentiate
themselves to gain competitive advantage.
( CH 1991).
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8.5.2 Partnering Model ( CPSC / MBA)

Construction Policy Steering Committee ( CPSC ) of New South Wales describes two
distinct categories of partnering elements :
Non-structural human value elements which embody the moral philosophy of
partnering.
Structural elements which provide the formal mechanisms for successful
implementation of a partnering agreement.
Non-structural elements
Commitment : There must be a real commitment to partnering at all management levels
within each stakeholder's organization.
Equity : Each stakeholder's interests, needs, expectations, constraints and risks must be
given fair and proper consideration by the other stakeholders. Where possible, both the
beneficial and adverse outcomes of risks should be shared among the stakeholders on
an equitable basis.
Trust : Teamwork is not possible where there is cynicism about other stakeholder's
motives. Through equity comes understanding which leads to trust and hence the ability
of the stakeholders to function as a team.
Structural elements
Partnering charter : Stakeholders identify all respective objectives for the project in
which their interests overlap. They then jointly develop a set of mutually agreed
objectives which becomes the shared objectives of the project within the partnering
relationship. The shared objectives may be set down in a "partnering charter" along
with a jointly formulated mission statement.
Communication framework The stakeholders jointly define the communication

:
structure and roles for the on-site and off-site management teams together with a
timetable for partnering meetings.
Evaluation procedure : An evaluation procedure is also jointly formulated by the stake

holders for regular monitoring and evaluation of how well the mutual project objectives
are being achieved ( and hence the success of the partnering relationship ).
Conflict avoidance procedure : The stakeholders develop a mutually agreed procedure

for speedy resolution of issues or conflicts at the lowest possible management level.
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This includes a structured "elevation process" to pass issues to successive management

levels if they cannot be resolved within a specified time.
8.6 Differences Between the Models

Long term commitment is one of the key elements of the Task Force model.
Maximum benefits of partnering are not achieved quickly and extensive time is required
to achieve a competitive advantage. As per the definition of partnering given by the
can U.. classified as
Task Force, only a relationship with all key elements of partnering, "...b..
a "true partnering".
Accordingly most of the partnering relationships in Australia are "near partnering"

relationships, because the application of partnering is generally short term focused and
restricted to a project by project basis. When implementing projects followed by tender
procedures, there is not enough time available to mature relationships. Partner also may
vary from project to project. ( lowest bidder is the partner ).
Nevertheless US Army Corps of Engineers has used partnering on a project by project

basis with great success. As a regulatory requirement for public agencies US Corps of
Engineers are unable to establish the sort of long term relationships ( Weston and
Gibson 1993). Construction Policy Steering Committee and Master Builders, Australia
also accept the fact that there are obvious advantages of long term strategic partnering
relationships.
The other difference is that the CPSC / MBA model seems to be readily applicable for
construction industry while US model is general in nature. Both of these methods are
being used in public and private sectors in US and Australia. Partnering is relatively
new concept to Australia and most of the relationships are still not mature enough to
provide maximum benefits..
It can be assumed that the elements of both models have some relationships with
social, cultural and legal issues in respective countries. In spite of that both methods
aim at the same goals. That is to create a "win-win" situation for all the parties within a
harmonious project environment, while providing maximum benefits to all.
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CHAPTER 9: Partnering process, Benefits and Challenges
9.0 Introduction
The partnering process is a set of guidelines for establishing and maintaining a
partnering relationship. Because every project is unique and the particular stakeholder's
for each project will vary, the process should be tailored by and for these stakeholders
for the project. A partnering process can be developed for any type project and any size
project.
This chapter describes the partnering processes ( as defined by the Partnering Task
Force of US and Construction Policy Steering Committee of NSW / Master Builders
Association ) its benefits and, concerns. Following is a partnering realignment process,
a corrective process that can be implemented to save the troubled projects.
9.1 Beginning of Partnering process

MBA recommends to start partnering, before work begin just prior to construction. On
jobs where owner selects all key players early on, such as in construction management,
partnering can 'offer its greatest rewards if implemented in the pre-planning phase
(MBA 1992).
Optimal crisis
prevention
period
Figure 9.1: Project life cycle. ( Source : Harback, Basham, Buhts 1994)
The life cycle of a project can be shown as a downward sloping curve when the impact
one has on the project is compared with specific points of time during the project's
135
construction. Prior to actual construction, the dollar benefits of changes compared to

costs are greater than when construction is underway ( Figure 9.1 ). Likewise, as we
progress into the project, it becomes more costly to make changes. Yet crises
traditionally start to bubble up on the downward slope, where our positive impact is
diminishing. It just makes sense to find a way to push this process back up the slope to
a point where our impact gets the biggest bang for the dollar. The further to the right,
the more down the slope, and the greater are the costs to initiate changes in the project (
Harback, Basham, Buhts, 1994).
"!,4 project cost is most influenced by what happens in the pre-project planning
phases. Team members communicating at this point can avoid mistakes, thus
saving real capital dollars and real schedule completion time"- Jack Whitney,
Project Director of CUH2A, Inc., Princeton, New Jersey ( cited in FMI
publication 1993).
Harback, Basham, Buhts, (1994 ) view partnering as it is the recognition of this

dilemma and a conscious decision to move from a crisis period to a crisis prevention
time on the slope. Whitney ( 1993 ) also contends that the best time to avoid mistakes
and save money within the project life cycle is in the pre planning stage of a project.
9.2 Partnering process

As already mentioned in the previous Chapter 8 both models ( Partnering Task Force
and CPSC / MBA) are not exactly the same. The differences between processes
are summarized in Section. 9.3. Both methods are briefly explained here.
9.2.1 Partnering process (Partnering Task Force )

Partnering Task Force, US describes four sequential steps of partnering process :
Strategy development.
Partner selection.
Contract negotiations.
Implementation.
The strategy development step involves a partnering feasibility study and defining the
objectives and rationale for entering a partnering relationship. The partner selection step
includes analysing a potential partner's strengths and weaknesses, and preparing
appropriate selection criteria. The contract negotiations step includes the process of
writing the contract to meet the objectives of both parties. The implementation step
136
includes preparations of all parties involved to initiate and maintain the new partnering
relationship ( CH 1989).
Partnering Task Force has developed set of guidelines on selecting a partner. The
process, usually initiated by the owner, includes an in-depth self evaluation of the needs
and objectives to be served by a partnering approach. After the internal assessment is
concluded and decision is made to pursue partnering, the owner then needs to identify a
team, develop a plan and proceed with selecting partner.
Potential partners are selected from a long list. The process of moving from a long to a
short list of potential partners can be accomplished either through personnel interviews
or by requesting written responses to an inquiry document.
The partner selection process takes longer time than the traditional contractor selection
schedule. The experience of companies that currently have partnering arrangements
indicate that generally from 6 to 18 months were required from the time of
management approval to pursue their first partnering relationship until start of the work
under the partnering agreement began. Reasons for this relatively long time requirement
may include :
The need for greater involvement of their total organization in developing the
selection criteria and evaluation.
The need to ensure a philosophical / cultural match between the two companies.
The need to obtain top management approval of the partner selection.
The need to develop a new method of doing business where traditional procedures
and documents do not apply.
The length of time required appears to be most influenced by the owner's readiness to
enter into a partnering agreement and whether a well-thought-out partner selection
process has been utilized In some cases, the schedule was heavily influenced by the
availability ( or lack ) of work ( CII 1991).
9.2.2 Partnerine process ( CPSC / MBA)

The partnering process describe by CPSC of NSW and MBA comprises the following
three stages
Preparing for partnering.
The partnering workshop.
Implementation.
137
There are certain prerequisites that must be met before the commencement of
partnering process. CPSC ( 1993 ) consider these prerequisites are essential because it
will provide a sound basis for the successful implementation.
Education of stakeholder organizations : All potential stakeholders must educate their

organizations about partnering.
Commitment from top management : Commitment from the highest levels of

management in each stakeholders organization is essential for partnering to achieve its
potential.
Make partnering intensions clear : The owners intention to encourage partnering can be
mentioned in the tender document. The provision would emphasize the voluntary
nature of partnering and that the costs associated with implementing it would be shared
equally but with no additional change in the contract price.
Identification of off-site partners : Each partnering project has a "partnering champion"

who encourages communication, promotes early problem solving and generally assists
in maintaining the focus on the project objectives ( CPSC 1993 and MBA.1992 ).
Stages of the process as follows :
Preparing for Partnering

The first step in developing a partnering relationship on a project involves notification
of intentions to establish partnering and preparing for the partnering workshop.
Statement of intent : As mentioned earlier, the intention to use partnering must be

advised when tenders are called. Harback, Basham, Buhts ( 1994 ) use the following
general statement of intent in their contracts. [ US Army Corps of Engineers,
Louisville, (Ky) ]
" In order to effectively and efficiently accomplish the work provided for in this
contract, the government is encouraging formation of a cohesive, mutually
beneficial partnership with the contractor and its subcontractors. This
partnership would strive to draw on strengths, skills and knowledge of each
organization to achieve a quality project done right the first time, within budget,
safely and schedule. The focus of partnering is to build cooperative
relationships, avoid or minimize disputes, and actively pursue the attainment of
138
common goals by the contracting parties. Success will dependent upon

teamwork characterized by open and effective communication while always
adhering to the highest of professional standards. The partnership would be
bilateral in makeup and participation will be totally voluntary. Any cost
associated with effectuation of this partnership would be shared equally with no
change in the contract price".
Partnering workshop and implementation

The partnering workshop will generally extend over a one to three day period
depending on the size and complexity of the project. Workshop is conducted at a
location away from the project site or offices of the participants. Holding it away from
the workplace contributes to team development; there are few distractions and
participants can focus on building team relationships. It is here at the workshop where
the key elements of partnering described previously are developed ( CPSC1993, also
cited in Abydayyeh 1994 and Harback, Basham, Buhts 1994).
The non-structural human value elements of commitment, equity and trusts are
established through open communications and the development of team spirit. This is
achieved by all stakeholders identifying and discussing their respective issues, problems,
opportunities and constraints along with their interests, expectations, goals and
objectives.
These are used as the basis for development of the structural elements in which shared
objectives and a mission statement are defined that together form the partnering charter
This leads to the formulation of the "communication frame work" along with the
evaluation and conflict avoidance procedures to assist in the achievement of the stated
shared objectives ( CPSC 1993).
Normally the workshop is led by a facilitator who explains the goals of the session and
serves as a moderator during the ensuring group discussions. He or she must be
reasonably neutral on the subject under discussion and has a primary goal of reaching
consensus among the team. Choosing a facilitator is important because each one has a
unique that needs to be matched to the focus and personalities of the partners
(Abydayyeh 1994, Harback, Basham, Buhts 1994).
139
While not essential, CPSC also recommend that a professional facilitator be used in
these early development stages of partnering. The workshop concludes with the signing
of the partnering charter by each participant, including off-site partners, as a formal
commitment to the partnering relationship ( CPSC 1993 ).
These workshops may be periodically repeated ( every two or three months ), if

needed, to re-emphersize the partnering relationship and remind the participants of
teamwork advantages. The follow up workshops are especially needed on projects
where the staff of any party to the agreement has changed. They may also be needed
when poor communications develop with time, particularly on long-term projects
(Abydayyeh 1994).
9.3 Differences Between the Processes

Already we have discussed the differences between the key elements of both methods.
The application processes are also varied accordingly.
Partnering Task Force method

According to this process, it is necessary to select the partner first and subsequently
negotiate contract. This process is more appropriate for negotiated contracts ( cost-
reimbursable or lump sum contracts ) rather than competitive open tendering, where the
contractor is selected generally on the basis of lowest bid. This is a long term focused,
lengthy process, where the partners will continue to develop their relationships through
future contracts. MBA also recommends to use partnering particularly in negotiated or
design build contracts to achieve more benefits because such a system provides an
opportunity to have closer personnel contacts among the parties.
Under this process contract is drafted after selecting the partner to meet the objectives
of both parties. Contractor can provide input to the buildability of the project and
advice client on various aspects before commencement of the work. Another
advantage is the contractual relationship will not be inconsistent with the actual
relationship between parties.
However the US Army Corps of Engineers has used the partnering for full and open
competitive strategy for construction projects successfully ( project by project basis by
following a similar method like CPSC / MBA method ) The central objective of
partnering here is to encourage contracting parties to change their traditional adversarial
relationship to a more team based approach ( Weston and Gibson 1993).
140
CPSC / MBA method

This is sort of a short term focused process and can be applied in the situations of open
tendering, after awarding the contract to the successful bidder. Partner selection
procedure does not involve here, hence the time taken to select the partner can be
saved. On the other hand there is no choice for selection and it is difficult to assess the
suitability or capability of the partner ( i.e. lowest bidder ) in advance.
Government construction contracts are awarded on a competitive basis where

accountability of public money is of paramount importance in order to protect the
public interest. For government contracts in Australia partnering is used on a project by
project basis like US Army Corps of Engineers. In this way government agencies can
establish partnering relationships with the private sector within the necessary levels of
objectivity and propriety. ( CPSC 1993)
Under this process it does not require contractors to enter into a partnering agreement
as part of the contract. It is totally a voluntary decision. When tenders are calling a
general statement of intent is included to convey the client's intention to use partnering
at the earlier stages of project inception. This process appears to be popular in US and
Australia.
9.4 Environment for TOM

Partnering is a teamwork approach to achieving success. It is a way of doing business
that embodies the principles of TQM and seeks to change traditional project
relationships to a shared culture where all can win ( Harback, Bashatn, Buhts 1994).
Dombkins ( 1993 ) comments on partnering as it is the TQM applied to projects.

Woodrich (1993 ) introduces partnering as a second generation TQM tool with process
evaluation occurring externally between firms. Many other authors including Partnering
Task Force, CPSC, and MBA emphersize that partnering is clearly the way to adopt
to achieve quality projects on time and within budget.
Harback, Basham, Buhts ( 1994 ) expressed their concern, about the difficult in
establishing a successful partnering without first instituting a Total Quality process
within the organization. And before Total Quality can take root, there has to be a clear
corporate vision that has been communicated to all employees. First vision, then focus
on Total Quality. It is in this paradigm that the customer, continuous improvement and
team work are paramount.
141
Partnering provides the ideal environment for TQM as it focuses on a long term
approach of improving ongoing processes rather than emphasizing individual projects
or tasks ( CH 1991 ). It is evident that such environment is only created by "true
partnering" with long term commitment. The overall success of the business objectives
and the participants will be achieved through effective resource utilization and the
continuous improvement of the quality of the products and services.
racteristics of TQM in most successful

Partnering Task Force fritizi the following characteristics
partnering arrangements :
Culture of continuous improvement throughout the partnering organization.
Constancy of purpose for performance improvement.
Environment and recognition systems which will encourage employees individually
and in teams, to contribute their intellects and energies toward improving the work
they perform.
Ongoing program of education and training in the techniques for continuous
improvement.
Elimination of bathers to continuous improvement.
Methods of performance measurement applied to work processes.
Continuous flow of goal-directed actions that improve the performances of all work
processes.
Everyone working with each other in customer / supplier relationships.
Enhanced teamwork amongst locations, functions and departments.
Trust and confidence developed through participative involvement.
( CH 1991)
142
9.5 Benefits and Concerns of Partnering - US Experience

The Partnering Task Force identified several potential benefits of "true" partnering
relationships based on discussions with participants, with existing partners, case studies,
survey data and the collective experience of its members. It is believed that partnering
will significantly improve the owner's competitive advantage, plus provide many
benefits to other participants. Theses benefits are summarized in the four primary areas,
and given below : ( Source : CII 1991).
Improved ability to respond to changing business conditions ( Table 9.1).
Improved quality and safety ( Table 9.2 ).
Reduced cost, schedule and improved profit ( Table 9.3 ).
More effective utilization of resources ( Table 9.4 ).
Table 9.1: Benefit : Improved ability to respond to changing business conditions

Item Contractor's Perspective Owner's perspective
Knowledge The knowledge of the owners The contractor will make better
business plans will allow the decisions if the owner's business
contractor to improve the type of needs are better understood.
and use of resources in changing
business climate.
Confidentiality The long term relationship should By reducing the numbers of
reduce potential problems outside contracts, the security of
associated with traditional confidential information should
approaches be enhanced.
Relationships
Joint Perspective
Adversarial relationships will be reduced which will allow focus on
mutual goals to the benefit of both organizations.
Responsiveness A partner will be more responsive to the short-term emergency,
changing project or business needs.
Survey results
Less Adversarial 85% Increased openness 82 %
Improved res. planning 85% Increased trust 78%
Table 9.2 : Benefit : Improved quality and safety

Item Joint Perspective
Rework Rework should be reduced as the owner's requirements become clearer to the
contractor and the partners work together earlier to resolve questions.
Standards The contractor will better understand the owner's standards and therefore increase
compliance to them. Combined staffs will develop more cost effective standards.
Consistency The knowledge of quality expectations of the owner will improve consistency
between projects.
Communication As the partners gain experience with each other, they will develop a common
language which will allow a better understanding of requirements.
Safety Actual safety performance should improve as partners better understand each other
and as the knowledge of process and systems improve.
Continuous With the long term focus on commitment to quality service, continuous
improvement improvement will result. Partnerships enhance a Total Quality environment.
Survey Results
Improved Safety 90% Fewer errors 82% Improved quality 96%
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Table 9.3 : Benefit : Reduced cost and schedule and improved profit ( value )
In-House Cost A long term commitment is made A capable partner will allow
to support the contractor's owners to reduce in-house fixed
overhead costs associated with the staff and minimize oversight of
core group. contractor.
Selection The cost associated with bidding The costs associated with
on a project basis will be contractor selection on a project
eliminated, basis is eliminated.
Administration The cost to negotiate and administer contracts will be decreased as
partners become knowledgeable of their counterparts legal and
litigation concerns.
Learning curve The costs associated with kickoff and indoctrination of a project will
be significantly reduced as partners move down the learning curve and
better understand requirements. In addition the time to initiate a project
will be reduced.
Innovation The partners will be able to discuss innovation and associated risks in
an open manner, and share risks and rewards fairly.
Constructibility The early involvement by the contractor can assist in constructability
input and maximizing value engineering, thus improving both cost and
schedule.
Commitment The long term trust relationship will contribute to all parties focusing
on the project goals and result in improved cost and schedule
performance.
Survey Results
Total project cost reduced 8 %
Improved contractor profitability 10 %
Improvement in schedule 7 %
Table 9.4 : Benefit : Effective utilization of resources

In-House Cost Provides a known baseload of Allows for owner to concentrate
work. technical work force on
operations and maintenance
support, avoiding the demanding
swings of project support.
Selection Allows for better planning of Allows for ready access to
resources during the development resources during project
of a project development.
The improved relationship should Provides an entry to contractor

provide a better means to respond resources to respond to owner
to owner emergencies. emergencies.
Can provide access to owner Can provide access to specialist

specialist who can enhance resources not otherwise available
contractor capabilities. to owner.
The owner's personnel and The contractor's personnel will

desires become known to the become better known to the
contractor, who is better able to owner and a better, earlier match
supply quality service. of assignment and resource
should occur.
Item Joint Perspective
Claims/Disputes Disputes can be resolved in a more efficient manner without the
adversarial relationship, and are not unduly expended in this effort.
Checkout/Startup The continuity of resources during the latter project phases of checkout
and startup are better accomplished with a partnering relationship.
Continuity Partnering allows for the continuity of personnel from project to
project, thus reducing the learning curve.
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Survey results
Engineering cost reduction 10 %
Administrative cost reduction 6 %
Improved Communications and teamwork 82 % of
respondents
A Partnering relationship also presents some challenges and concerns to both owners
and contractors. Some of the major opinions of the industry participants contacted by
partnering Task Force are summarized in thc Tables 9.5 and 9.6 ( An owners view
point and a contractor's view point respectively ), along with suggested actions to avoid
or minimize the listed challenge or concern ( Source : CH 1991).
Table 9.5 : Challenges and concerns of partnering : An owner's viewpoint

Challenges and How to avoid or minimize
concerns
Obtaining and maintaining 1. Top management must demonstrate their commitment to the remainder
organizational commitment of the organization.
Education using CII and other information.
Involvement to remove mystique and create trust.
Celebrate success.
Commitment must transcend management changes.
Threat to careers of staff 1. Early communication of partnering objectives.
Identify/demonstrate any reassignments early and openly.
Release to higher by partners.
Owner's staff roles change to more supervisory/educational.
Communication ! Communication !
Integration of cultures and 1. Design and communicate integration intent.
skills 2. Focus organizational on benefits while attending to people's needs.
Protecting proprietary 1. Secrecy and restrictively terms.
information 2. Physical separation.
3. Reduced and controlled turnover.
Fairly sharing risks/rewards 1. Openly exchange expectations.
Use an incentive ( + and - system ).
Risk assigned to partner best able to handle it.
Creates a dependency 1. Develop an expectation of success, reducing dependency concern.
Consider a second partner if justified by work level.
Assuring competitive 1. Tie rates before incentives to alternatives.
services 2. Measure quantifiable elements of results.
Dedication to continuous improvement.
Partnering under 1. Owner engineering organizational components must coordinate to
decentralized owner maximise value.
engineering
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Table 9.6 : Challenges and concerns of partnering : A contractor's view point

Challenges and How to avoid or minimize
concern
Development and 1. Obtain commitment of contractor's top management.
communication of the 2. Share expectations of both partners and continually reinforce the
concept of partnering to the partnering agreement's mission and vision.
contractor's organization 3. Consider interdivisional loaning of personnel to acquaint a larger group
of the contractor's staff with the partnering agreement.
4. Review roles and responsibilities brought about by the partnering
agreement.
Maintain continual 1. Utilize a shared TQM program.
improvement 2. Require periodic evaluations of the partnership. Both owner and
contractor must participate as equals.
3. Implement a personnel development and training program.
Eventual clash of corporate 1. Obtain commitment of both parties top management to the success of
cultures partnership.
2. Contractor's management needs to anticipate the culture clash and
develop an understanding of the owner's corporate values.
3. Involve the contractor, as broadly as possible, in the owner's business
plans.
Maintaining a focus on the 1. Maintain a "win-win" perspective. It must be understood that if the
owner's business objectives owner is successful, the contractor will be rewarded accordingly.
2. The owner can provide assistance by sharing with the contractor, to the
greatest extent possible, business objectives, and also permit
involvement by the contractor in early conceptual phases.
3. The contractor must view each project in its entirety and not simply a
position of the portion of the project.
Creation of too strong of a 1. Contractor must limit amount of work performed for one owner /
dependency on one owner partner.
2. Partnering agreements with multiple owners can be developed.
9.6 Benefits and Concerns of Partnering - Australian Experience

Considerable numbers of partnering projects have been completed during past few
years in Australia with a great success. The short term benefits are immense in giving
the best possible chance of finishing on time and within budget ( described in Sections
11.3 and 11.4 ).
For all stakeholders involved in the delivery of a project, partnering requires effort. It
may require increased staff and management time initially, but benefits will accrue due
to a more harmonious, less confrontational process, and by completion of a successful
project without litigation claims.
Partnering empowers stakeholders with the freedom and authority to accept

responsibility to do their jobs by encouraging decision making and problem solving at
the lowest possible management level. It encourages everyone to take pride in their
efforts and provides a mechanism for cooperation ( CPSC 1993).
MBA ( 1992 ) identified the following list of benefits to the stakeholders in partnering
projects. All stakeholders benefit by an increased opportunity for a financial successful
project because of non adversarial "win - win" attitude.
146
Benefits to project owner

Reduced exposure to litigation through communication and resolution strategies.
Lower risk of cost overruns and delays because of better time and cost control over
project.
Better quality product because energies are focused on the ultimate goal.
Potential to expedite project through efficient implementation of the contract.
Lower administrative costs because of elimination of defensive case building.
increased opportunity for innovation, especially in the development of value
engineering changes and constructability improvements.
Benefits to project contractor

Increased productivity because of elimination of defensive case building.
Expedited decision making with issue resolution strategies.
Better time and cost control over project.
Lower risk of cost overruns and delays because of better time and cost control.
Benefits to the project architect, engineer or consultants.

Minimized exposure to liability for document deficiencies through early
identification of problems.
Enhanced role in decision-making process, as an active team member in providing
interpretation of design intent and solutions to problems.
Reduced administrative costs because of elimination of defensive case building.
Benefits to the project subcontractors and suppliers

Equity involvement in project increases opportunity for innovation and
implementation of value engineering.
Potential to improve cash flow due to fewer disputes and withheld payments.
Improved decision making avoids costly claims and saves time and money.
Enhanced role in decision making process as an active team member.
( MBA 1992)
Current financial and corporate culture limitations existing in the Australian market
places at risk this positive initiative reaching its full potential. Some of the concerns,
challenges and legal issues prevailing in Australia are reported in Section 11.5.
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9.7 Partnering Realignment process

Traditional partnering is implemented at the beginning of a project to prevent disputes
and adversarial relationships from occurring. Partnering realignment is a corrective
process implemented during the project to help organizations to resolve issues, set a
new course and maximize the remaining potential for success. Brown ( 1994 ) describes
a way how to use partnering concept to save troubled projects. This realignment
process is explained here.
Partnering realignment comes before and goes beyond the dispute resolution steps of
negotiation, arbitration, mediation, and litigation. It is an attempt to regain and retain
control of the project and plan ways to avoid future problems. The minimum
requirements for successful implementation are
Executive sponsors from each of the participating organizations must champion the
recovery effort;
Each stakeholder organization must acknowledge that they are a part of the problem
and must be a part of the solution;
Adequate resources must be allocated; a one time team-building event won't end the
trouble.
Situation Executive Partnering

Appraisal and Debriefing and Realignment
Perception Planning Session
Interview Session ro ect M
Roll Down
Follow- Up Inter company Field / Work

and Team Teams
Coaching Building Realignment
Figure 9.2 : Partnering realignment process. ( Source : Brown 1994)
The partnering realignment process involves six steps as shown in the Figure 9.2. The
level of effort and activities undertaken depend on the needs of the project.
1. Situation appraisal and perception interviews : Interviews are conducted with project
executives and key members identified by the executives, coveting each persons
perspective of the issues, concerns, opportunities and threats presented by the project.
148
These interviews serve three important purposes

They signal to everyone that a recovery effort is being made and that stake holders
will have to change how they approach the project.
The interviews allow people to acknowledge their frustration and share their
perspective of what has occurred.
Data from interviews are summarized into a composite report that serves as a
springboard for getting the issues out on the table and uncovering the problems that
have to be addressed before the project stakeholders can move forward as
recovery team.
Executive debriefing and planning session :Since the project executives are pivotal
for the realignment and recovery effort they must be debriefed on the composite report
and agree to champion change. The facilitator records the work of the executives in a
focus document and sends it back to the participants to aid communications and follows
through.
Each session is unique because each project and the problems to be dealt with are
different. The session ended with a group dinner at which the executives shared this
information with key project personnel. Project goals were shared along with
expectations for the remainder of the project.
Initial partnering realignment session : Key members of the project team are brought
together for a two day work session. During the session, a structured process is used to
focus existing issues and answer the remaining process questions :
Where do we want to go ?
How will we get there together ?
How can we ensure success ?
How can we measure our progress?
Since the session is based on perception interview data and the executive debriefmg out
come, each is unique. Within a week after this session, a realignment focus report is
distributed to all participants and project executives outlining what was agreed to.
4. Field - or work team alignment : On some projects it is necessary to involved field or

work teams in the realignment effort. The executives, with advice from their project
managers, make this decision based on their perception of the trouble and how deeply it
goes. Realignment sessions for work teams normally include ways to improve field
communications and coordination among work teams and team members.
149
5 Intercompany team building : Just because teams may work for the same organization
does not mean that they have the same goals. The most common example of this
involves the client's organization. Within the client's organization, problems frequently
occur among functional departments that do not have the same project objectives.
Intercompany conflict creates problems for the other contracting organizations and
results in more work unless properly addressed and managed. Team building sessions
typically address these issues, as well as the cost of making changes during c,oristractiori
and a process to manage the scope of the project.
6. Follow-up coaching : The importance of following up on the initial realignment

sessions cannot be over emphasized. The realignment effort starts to lose steam as some
of the issues start to be resolved. Troubled projects typically have a problem taking the
rest of the medicine after fewer disappears.
Follow-up sessions are required to reinforce the lessons learned and the agreements
made during the initial workshops. At this session the team formally evaluates their
progress, address remaining and emerging concerns, and identifies any readjustment
that must be made.
Benefits of partnering realignment

Partnering realignment is a management tool for deal with the barriers to project and
stake holder success rather than letting the project runs it course and taking a head
count after it's over. It involves choosing to act vs. react and planning vs. abdicating
responsibility. It also involves acknowledging that there is greater benefit in resolving
the problem than placing the blame.
With partnering realignment the project focuses on existing opportunities that benefit all
stake holders. By contrast, someone always roses in post project litigation. Litigation
cannot turn the project or help realize potential savings.
Successful realignment benefits everyone. The owner gains better control of project
costs and a better product because less energy is being spent on misdirected adversarial
concerns and case building. Other project stake holders benefit from more timely owner
decisions and improved cash flow due to fewer disputes and with held payments. The
less tangible benefits include improved communication and morale.
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Barriers to realignment
Realignment can be achieved if the organizations and their project representatives want
to be successful. If the desire for success is not there, no realignment process will work
completely. Some typical problems include :
The inability to get together often becomes the largest barrier to addressing the
problems and determining the way out;
Realignment must continue even which things seems to improve. The engineering
process is not halted just because construction appears to be going well.
Commitment has to be for the remainder of the project;
The phenomenon of frustrated progress needs to be understand. Frustrated progress
is the dynamic created when recognized problems increase although actual
problems may be decreasing. Although progress being made, frustration can occur.
( Brown 1994)
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CHAPTER 10 : Applications of Partnering ( Japan and US)
10.0 Introduction
Partnering for the projects was initiated by the US Army Corps of Engineers in the late
80's when it was used on large civil engineering projects. The partnering process has
been spread rapidly across US and now widely used by both private and public
organizations on a broad spectrum of project types.
Partnering has been successfully used on building, civil engineering, mechanical
engineering, structural technology implementation, maintenance and organizational
change projects.
Partnering has been successfully used on negotiated, open tender, selective tender,
novation, and design and construct projects.
( Dombkins 1993)
Partnering Task Force has found many business affiances in other countries, specially
in Japan and Europe, but are not called partnering. According to the findings of Task
Force Japanese and European companies are far ahead of US companies when it
comes to the number of alliances formed.
Apart from a brief review of the Japanese way of doing businesses, mainly this
chapter describes the US experience with partnering applications and provides case
histories.
10.1 The Japanese way

Culture and society have a huge impact on the way Japanese firms conduct their
business. Trust, respect, honesty and long term relationships are qualities of the
Japanese culture. As a result, firms can establish better relationships with their
customers by being able to understand and by tailoring their operations to fulfil the
customer requirements ( al 1991).
Japan has been prohibited by their constitution from creating nothing more than a
national defence force. So the government has spent very little on defence and been
able to focus its full attention and resources on economic growth. In Japan there is one
general contractor for every third of a square mile 75% of who are capitalized for less
than US$ 37,000, but where there area half a dozen companies Kajima, Shimizu,
Takenaka, Taisei, Ohbayashi, and Kumagai Gumi known as the "Big Six" who have
yearly sales totalling US$ 35 - 40 billion (Levy 1990).
152
These six major companies have long term relationships with many owners in Japan,
extending to overseas projects for those companies. Such close relationships in the US
would be difficult to develop and maintain due to US anti-trust laws. The relationship
between owner and contractor is based on mutual trust and commitment. Businesses in
Japan prefer to make verbal commitments rather than written ones. The owner trusts
that the contractor will finish on time ; the contractor has faith that the owner will
compensate for any justifiable expenses that are suffered when trying to enhance the
('IT 1991 ).
The Japanese concept of contracts

In Japan the reliance upon good faith and the long term relationships that have
developed over the years between parties to the contract takes precedence over the
written agreements. This mutual trust concept ( shinyo torihiki ) evolved from the
merchants who conducted business in the 1700's, when trade guilds were being
organised in and around the major cities of Japan.
The good faith concept in construction contracts is exhibited by purposely leaving the
details vague so that they can be filled in as construction progress and the previous
understandings between the parties start to unfold.
The harmony that pervades Japanese daily life is alive and well in construction
contracts, and the relative ease with which these contracts are executed in mainly the
result of a builder - client relationship that has existed over many years, in some cases
over 100 years. During that time contractor and client have grown to know each other
and the relationship is some cases has passed from generation to generation. In many
cases, the builder has already completed similar buildings for his client and very familiar
with the owner's requirements, quality levels and preferred choice of materials and
equipment. By making minor changes in a new building program and updating project
costs, a new project concept and budget can be prepared with minimal additional owner
input. The client on the other hand, is aware of construction costs and general building
and construction details from previous projects with his contractor, so that the meeting
of the minds of a new structure can be simply and quickly attained ( Levy 1990).
153
10.2 US Experience
Partnering on construction projects was pioneered by the Portland District of the US
Army Corps of Engineers and they have derived substantial benefits from its
application.
The US$ 34 million Bonneville Navlock Diaphragm Wall was the first large project in
the Portland District to use the partnering process. It was completed in February 1992
as part of the US$ 330 million Borunneville Navigation Lock Dam project on the
Colombia River with the following out comes :
No outstanding claims or litigation.
Value management savings of US$ 1.8 million, exceeding the goal of US$ 1.0
million.
Cost growth contained to 3.3% compared with a typical 10% for a major
construction project.
On schedule completion.
No lost time due to injuries.
Two thirds reduction in paper work.
The US$ 5 million Hatchery Wells project was also part of the Bonneville Navigation
Lock and Dam project and one on which partnering was used. All goals were met and
the project was completed one month early with no lost time accidents. It was 4.38%
under budget and returned US$ 72,000 in value management savings.
In Arizona, the Department of Transport ( DOT ) has been utilizing partnering for the
last two years. As of March 1992, partnering had been adopted on 12 projects ranging
from US$ 900,000 to US$ 18 million and worth a total of US$ 87 million in all. The
first seven projects reaped US$ 635,000 in value management savings. They were
completed a total of 16 months early, yielding another US$ 500,000 in construction /
engineering savings ( cited in CPSC 1993).
The California Department of Transportation ( Caltrans ) has adopted partnering for

Caltrans Sound Wall project on Interstate 880 in Fremont, California. The project
duration was two years and the bid price was US$ 4,500,000. The partnering approach
was successful in this project. No potential claims were filed on this project.
Additionally, problems were identified before they occurred and solutions were
provided in advance. This helped the number of change orders as well as the dollar
value of change orders. Furthermore, on a number of occasions the contractor
154
proposed and implemented innovative construction methods that benefit him and
Caltrans ( cited in Abudayyeh 1994).
"Currently, Louisville ( Ky ) District Army Corps of Engineers is participating

in 38 formal partnerships - all started within the past 18 months. Their cost
range from no dollar value to more than US$ 53 million. They include internal
district civic commitments as well as design and construction projects. Two
partnerships concern designing facilities with costs approximately US$ 80
million, and 28 partnerships involves construction projects with a combined
value of almost US$ 250 million. Several have progressed to a point where we
can identi& more than US$ 900,000 in savings to the district alone. Add to
this more than a month of days saved and better relationships than ever
before" - Harback, Bascham and Buhts, US Army Corps of Engineers,
Lousville ( Ky) District, ( cited in Harback, Bascham and Buhts 1994).
10.3 Existing Partnering Relationships

As identified by the partnering Task Force certain needs and commitments are normally
required in order to establish successful partnering relationships. From the owner's side
there may be a need to improve quality, reduce cost, respond to fluctuating resource
availability and overcome lack of skills and information in the organization. Also the
owner must be willing to change procedures of operations, open up to outsiders, and
share goals, strengths and weaknesses. Finally the owner must focus on the overall
results of the relationship, not on a single aspect such as engineering or procurement.
From the supplier's and the contractor's side, there may be a need for a stable workload
and enhanced business opportunities. Partnering requires that contractors participate
with the owner in the project planning and estimating phases to minimize both cost and
schedule. In addition it requires that contractors and suppliers be involved in the
procurement of needed materials, be able to carry the extra work load and provide the
quality of work required. Moreover, they should be open to learning owner's
procedures, adopting their goals and being prepared to spend time and money in order
to accomplish these requirements ( CU 1991 ).
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10.3.1 Buyer- Seller Relationships

Partnering has become an increasingly important strategy for suppliers and customers
looking for a means to improve their relationship and to satisfy mutual needs. The
optimum partnering relationship between a supplier and a customer is specific to the
circumstances between the two and depends on many factors. However, the ideal
relationship is one that is unique that buyer gets supplier support that cannot be
duplicated by his competition, and the supplier gets a relationship that any other
supplier would have difficulty duplicating. The expected result of the relationship is to
replace an adversarial atmosphere with one of trust and commitment so that costs can
be reduced by solving problems together ( Kennedy 1988, cited in Cook and Hancher
1990).
10.3.2 Competitor - Competitor Relationships

Partnering often entails alliances between present and future competitors. Although not
as common as buyer-seller relationships, competitor - competitor relationships are
becoming common in the automobile and the computer industries. In these
relationships, the goals of partnering arrangements are to leverage critical capabilities, to
increase the flow of innovation, and to improve flexibility in responding to market and
technological changes. The relationship involves the timeliness, self interest, and mutual
dependence of both companies. The agreement is designed with a limited life span and
depends on the day-to-day satisfaction of both companies ( Teece 1988, Kearney 1987,
cited in Cook and Hancher 1990).
10.3.3 Diverse Relationships

Companies are using partnering to achieve benefits of seemingly obscure synergies.
These relationships commonly involve joint marketing efforts or joint cost reduction
efforts between companies and occur whenever customers and suppliers are
synergy.(Cook and Hancher 1990).
10.4 Applications of Partnering

Interviews conducted by CII partnering Task Force indicates that most of the current
relationships focus on engineering, perhaps because the relationships are in the early
years and have not developed to the construction phase as yet. Also several long-
standing owner-constructor continuing relationships are already in existence with these
same firms.
The application of partnering within owner organizations varies considerably. In some

owner organizations it was initiated, and is only being applied, by a single business unit.
156
In other owner organizations it is applied in all businesses. The utilization depends on

the structure of the owner's organization relative to the decentralaization and
independence of business units. In the area of public works, for example, many of the
partnering principles are being applied on an individual project basis depending on the
nature and size of the project and the interest of the two parties.
Partnering is also being applied on small projects. In this instance the relationship covers
many small projects for the same owner, thus creating a largc volume of work.
Partnering does not appear applicable to small, stand alone single projects because the
size of such projects does not support there effort to develop the relationship. A series
of small projects evenly spread over time, however would be a candidate application.
Partnering also applicable to small businesses.
There is a tremendous potential for much broader beneficial applications. Two key
factors may stimulate such applications.
Existing relationships must continue to be successful and show measurable benefits.
A method of measuring the benefits of the broader application must be developed.
( CH 1991).
10.4.1 Application to Small Businesses

Partnering Task Force found the relationships similar to and evolving toward partnering
are also quite prevalent in the small contractor and business arena. Although partnering
is a new experience for most large contractors and owners long-term business
relationships between small owners ( or business units ) and small contractors are quite
common.
The focus of the small owner / contractor relationships are beginning to focus on long -
term improvements.
Partnering Task Force define "small owner" and "small contractor" as follows :
"Small owner is a manufacturing processing, or service business whose yearly
volume does not gain entry in to the Fortune 500 listings".
"Small contractor is an architect, engineer or constructor whose business is
regional or local in nature".
The opportunity for partnering is at least as great for the small owner and small
contractor as for their large counterparts. Many continuous, but low volume services
are required at small owner's manufacturing and processing facilities that lend them
157
selves to longterm agreements with engineer, speciality contractors and general

contractors.
For many small owners, a continuous stream of small capital and / or maintenance
projects also provide an opportunity for partnering for engineering and / or
construction. Only those owners who are so small where there is no continuous or
frequent need for out side services do not have a viable opportunity to partner.
The great diversity of services needed by the small owner community described above
offers a varied field or small contractors. Speciality design, specialty construction,
general engineering, general construction, and engineer - procure - construct are all
services provided by small contractors in a near partnering or partnering mode ( CII
1991).
10.4.2 Differences Between the Small and Large Business Partnering

Differences exist between the application of partnering to small businesses versus large
businesses. Several of the major differences identified by the Task Force are :
Services based on the convenience : An obvious difference between Small Business

Partnering ( SBP ) and Large Business Partnering ( LBP ) is related to the services
provided by the arrangement. SBP often is used to provide a skill or service available
from many competitive sources. The partnering arrangement provides that the most
convenient resource is assessed by the owner. The prevalent perception of LBP is that
the owner requires a unique customized service that few if any contractors can provide
without significant internal modifications.
Lack of formality : In SBP arrangements the focus is on a lean, efficient project group
that maximizes short-term execution benefits. The long term is not managed other than
as an extension of the short-term focus to succeeding projects. LBP participants have
found it necessary to formalize the partnering culture. The search for a partner,
commercial negotiations for the partnering work ( including contract format ), and
development of internal structures are significant activities.
Resource detailed to partnering : Typically the small contractor dedicates a high

percentage of workforce to the partnering arrangement. Alternatively some LB P's apply
conscious guidelines to restrict their work volume in partnering relationships to
maximum level of their work load. This comparison is a reflection of different
158
approaches to risk management for what is perceived as a large volume, unique service
versus a low volume, readily available service.
Contractual arrangements : Commercial terms and conditions, liabilities, and warranties

receive little specific attention in SBP arrangements. LBP contracts on the other hand,
generally are cost-plus arrangements with incentives, carefully crafted limited liabilities,
and few warranty provisions. The LBP principles typically exert considerable effort to
remove adversarial terms and conditions from contracts Whci, SP,P principles pay
little added attention to them and are comfortable with industry standards.
Project Execution : Project execution by SBP generally differs from that of LBP simply
because the services performed are different, and the small contractor's personnel
generally have different skills. These differences are based on contractor function rather
than on partnering aspects ( CH 1991).
10.4.3 Application to Small Projects

According to the definition given by partnering Task Force:
"Small projects is approximately US $ 2 million or less".
The partnering Task Force has confirmed several instances of partnering between
owners and contractors for small projects. Irrespective of the participant size, partnering
relationships have been formed to execute small projects.
Most opportunities for small projects include small capital projects and maintenance.
Work may include design, specialty construction, general construction, maintenance,
start up and operation assistance, and construction management. Small project
partnering appears to favour construction companies rather than engineering firms since
much of the small of capital work are not design- intensive and can be engineered by a
small plant ( owner ) engineering staff( al 1991 ).
10.4.4 Differences Between the Small and Large Project Partnering

The following differences had been observed by the partnering Task Force :
Organizational differences : The organizational structure of both the owner and

contractor often is significantly different between large and small project partnering
relationships. The engineering contractor may be organised on a matrix basis rather
than a task force to facilitate the concurrent execution of several projects at possibly
different plant sites. Additionally, for small projects the engineering contractor often
159
locates the design team in a regional office or at the owner's plant site. The construction
contractor will typically have a reduced field organization reflecting the smaller scope of
work. However, the ability to properly interface owner and contractor personnel is also
critical to the successful execution of small project partnering.
The selection process : Due to the small scale of work , the potential contractor's
familiarity with the plant and operations is often a greater concern to the owner than in
the case of large project relationships. Geographic proximity is often a key criterion.
Additionally the movement by an owner to a small project partnering relationship is part

of a natural evolution towards cost effectiveness at the plant level. In response to
increasing workloads, an owner may progress through the following increasingly cost
effectively alternatives : add permanent employees; add contract employees; annual
service arrangements; evergreen contracts; and finally, partnering arrangements.
Enhanced potential for partnering on small projects : Partnering between owners,

contractors and suppliers on small projects has the potential to be even more cost-
effective and beneficial than its application on large projects. By the correct application
of pure partnering concepts, many of the costs associated with other contracting
methods ( evergreen, bid ) could be eliminated, thus significantly reducing the costs of
small project execution.( CII 1991).
10.5 Research Studies

The results of following studies / surveys further highlight the success of partnering
projects in US.

The Task Force has surveyed 18 "true partnering relationships" and 9 "near partnering
relationships" ( as they do not have all the basic elements of partnering as defmed by
the task force ).
Initiation of the partnering arrangement : 90% of the respondents to the second Task
Force survey indicate that the owner is responsible for initiating the partnering
arrangement, with a few initiated by contractors. Most companies have chosen the
negotiation process to establish their arrangements. In the second Task Force 68% of
the relationships responding were established through negotiations, while 32% were
established through a bidding procedure.
160
Commercial basis and size of projects studied

In the second Task Force survey found 68% of the respondents have done projects on
a cost - reimbursaable basis and 11% on a lump - sum basis, while 21% have done
projects on both basis during their relationships. Many feel that projects done on a cost
- reimbursable basis allow parties to establish a much better working relationship at the
beginning of the partnering arrangement.
Information reported indicates that projects have ranged from US$ 10,000 to US$ 1
billion, a large spectrum of project sizes The average project size was US$ 3.4 million
for "small" projects, US$ 35 million for "medium" size projects, and US$ 119 million
for "large" projects. Typically the sizes of the of projects performed are directly related
to the sizes of the parties involved.
Management concerns about partnering

Contractors and owners have recognized the primary importance of cooperation and
common goals within a partnering relationship and within the partnering team. There is
some inference that owners are more concerned with organization ( and perhaps control
while contractors emphasis communication more, however the differences between
both parties are small, except for the need for innovative technology.
Results from project case histories

The information obtained from case histories noted the following benefits and
difficulties :
Benefits noted in project case histories

Early involvement in design :
Helps in avoiding redesign problems.
Assures design will be buildable and affordable early in process.
Decreases the duration of the project.
Produces more active engineering efforts.
Providing enough resources by the partner :

Reduces the owner's work force requirements to oversee projects.
Reduces total staff required by both parties.
161
Improved communication .
Provides good influx of ideas to resolve project-related problems.

Enhances teamwork to complete project in an effective manner.
Enables faster processing and resolution of disputes / claims.
Improves field cooperation on requests for information.
Improvement in quality, cost and schedule :

nvrtrnrtrvr becomes -.fsr;I;or with owners cyqte-111 available without startup or
learning curve, thus decreasing cost.
Reduction in the rework percentage is possible due to enhancing quality.
Reduced inspection / checking makes team work more efficient and reduces cost.
Higher quality engineering cost estimates decrease the cost and enhance the quality
of fmal product.
Partnering shortens the performance period by early delivery of materials and
services.
Continuous improvement of techniques utilized raises the quality of the drawings,
the specifications and the purchase orders.
Partnering allows redirection of the project with minimum change in project
schedule.
Partnering allows a fixed and a fair cost to the owner with a chance for a contractor
to make a larger profit than normal.
Partnering allows the parties to decrease the usage of warranties and their associated
costs.
Difficulties noted in project case histories

Difficulty in agreeing on issues initially :
Not enough time devoted to establishing relationship.
Developing common project team objectives, plus convincing the employees to
believe in the relationship and the objectives, is difficult.
Establishment of project - related procedures to be used creates a major barrier at
the beginning of relationship.
Rigidity in the design team might threaten the relationship and the final product
built.
Cultural differences :
Overcoming cultural and procedural differences between the two organizations is
essential and difficult.
162
Acceptance of mixed-team leadership and taking orders from the other company's
representative are important, but difficult.
Creating a cultural shift at the working levels of the contract is difficult at the
beginning of a relationship.
Continuity of workload :
Uncertain workload makes planning difficult in the beginning.
Results
Overall results cannot be measured until a series of projects is completed.
Unexpected weaknesses in each other's organization could be discovered that are
detertninantal to the relationship.

A survey had been conducted by Weston and Gibson ( 1992 ) in August and
September of 1992 to assess the status of partnering relationships in their 37 domestic
districts of the US Army Corps of Engineers and presented an analysis of project
performance for partnering projects compared with a similar sample of non partnering
projects.
Regulatory requirements for public agencies, such as the Corps of Engineers, require
(with few exceptions ) the use of a full and open, competitive low bid contracting
strategy for construction projects. Therefore they are unable to establish there sort of
long term relationships that are essential to partnering in the private sector. However,
Corps of Engineers districts have completed 19 projects since 1988 using project
partnering agreements with an additional 85 projects ongoing or scheduled to start.
Research methodology
Those districts with completed partnering projects were asked to provide project data
for those projects. Additionally, data for similar non partnering projects were requested
for use as a comparison sample. These data ( cost, cost of change orders, cost of
claims, value engineering savings and schedule ) were then normalized as a percentage
of total original construction award cost or duration. A "t test" of sample means ( an
introduction to "t-distribution" is given in Appendix 3 ) was performed to show that the
partnering project sample was statistically different from the sample of non partnering
projects.
163
Presentation of data
Partnering projects : The survey of districts revealed that 19 partnering have been
completed in 9 districts. Weston and Gibson ( 1993 ) were able to obtain data for 16 of
the 19 partnering completed projects. Of the 16 projects, 12 ( 75%) were civil-works
construction projects, while four ( 25% ) were military construction projects. The
contract award price for partnering projects ranged from a low of US$ 1,551,340 to a
high of US$ 33,900,000. The average contract award price for the partnering projects
as US$10,368,643.
Non partnering projects : Eight districts contributed project data for 39 non partnering
projects, 28 were selected for use as comparison projects. Of those 28 projects, 13
were selected because they came from the same districts as the partnering projects. The
remaining 15 projects were selected because they fell within a range of US$ 1 to 33
million. Of the non partnering projects, 16 ( 57% ) were civil works construction
projects and 12 ( 43% ) were military construction projects. The contract award price
for non partnering projects ranges from a low of US$ 321,696 to a high of US$
56,490,000. The average contract award price was US$11,448,745.
Analysis of data
The following Table 10.1 summarizes the average performance for both partnering
projects and non partnering projects. The results tend to show that partnering projects
performed better on average than the sample of non partnering projects in the
categories of cost, schedule, change - order cost, claims cost, and value engineering
samples for the samples used in the study.
Comparison variable Partnered Non partnered Difference

N = 16 N = 28
Mean cost change ( %) 2.72 8.75 - 6.03
Mean schedule change ( % ) . 9.07 15.53 -6.46
Mean change orders ( % ) 3.89 7.74 - 3.85
Mean claims cost ( %) 0.67 5.01 - 4.34
Mean value eng. savings ( % ) 0.73 0.05 + 0.68
Mean contract award price (US$) 10,368,643 11,448,745 -1,080,102
Table 10.1: Project performance comparison. ( Source : Weston and Gibson 1993)
164
The results of the "t test", applied to the sample means for the average contract award
price, cost change, duration change, and change order cost are given in Table 10.2.
Criteria Partnering Non partnering P ( T< = t)

mean mean two tail
Mean contract award price (US$) 10,368,643 11,448,745 0.7581
Cost change ( %) 2.72 8.75 0. 0118
Duration change ( % ) 9.07 15.53 0.3499
Change - order cost ( %) 3.89 7.74 0.0651
Table 10.2: Sample means. ( Source :Weston and Gibson 1993)
The sample variances of the cost change, duration change, and change order costs for
partnering and non partnering projects are shown in Table 10.3.
Category Cost change Duration Change-

(%) change ( %) order cost
(% )
Partnering project sample variance 30.88 160.30 19.36
Non partnering project sample 88.94 1,011.46 79.09
variance
Table 10.3 : Sample variances. ( Source : Weston and Gibson 1993)
Although it is not possible to determine if the sample of non partnering projects

accurately reflects the performance of the average Corps of Engineers project, the
results shown in this study are indicative of the positive performance that can be
expected on a project where the owner and contractor work together as a team, with
fewer barriers to communication or problem resolution. The data used in this study
seem to indicate that partnering has a positive impact on project performance in terms
of cost growth, schedule growth, change order cost, claims cost, and value engineering
savings for these projects ( Weston and Gibson 1993).
165

Woodrich ( 1993 ) describes the way how partnering agreement effectively and
successfully controls J-6 project in the US Air Force's J-6 Rocket Engine Test Facility
at Arnold Engineering Development Centre in Tennessee.
Project controls are the techniques, methods, tools, and style of implementation used to
control the time, cost, and quality of a project. According to Thamhain ( 1991 )
"effective project control is the ability to manage a project according to an established
plan ( time, budget, resources ) producing agreed upon results ( time, budget, expected
deliverables ) "
People are the most valuable asset of an organization, and it follows that the control of
a project starts with the team development. It is the team involved in a project that can
ultimately produce success or failure. Motivation and commitment of people on a
project are critical to the successful control of that project. Leadership, among other
things, strives to achieve commitment from the people involved, i.e. commitment
towards the project and its efficient completion. The metrics ( which refers to
measurable quantities, management style, and effectiveness ) of a project are the
deliverables and the plans to achieve them, as compared to the results finally obtained
(Thamhain 1991, cited in Woodrich 1993).
Partnering at J - 6 provides the environment for people to meet on the same grounds
(without hidden agendas ), work out a detailed plan, reach agreement between the
teams, obtain commitment from the team and management, defme measurable
milestones, detect problems early, communicate the true project status, and meet
milestones ( including the delivery of final product ).
J -6 has experienced a negative US$ 1,000,000 cost growth. ( As of

November 1991, a savings of US$ 1,000,000 - ) For the US$ 226,000,000
construction project, when J - 6 was 50% complete, US$ 100,000,000 has
been spent" - Demoret 1991 ( cited in Woodrich 1993).
Performance value indexing those figures, one has an estimated cost at completion of
US$ 200,000,000 that equates to 113% efficiency. Although J - 6 personnel claim that
the entire US$ 226,000,000 will be utilized due to the government's program funding
restrictions.
166
"By using J - 6 as a test bed for not only rocket motors, but the implementation
of partnering within the Air Force, we have created the true success stoiy" -
Woodrich
Woodrich ( 1993 ) introduces partnering as a possible second generation TQM tool and
further suggests that the entire Department of Defence procurement system should
entertain the thought of implementation.
167
CHAPTER 11 : Applications of Partnering ( Australia )
11.0 Introduction
According to Domblcins ( 1993 ) the construction industry in Australia is characterized
by lack of trust between all stakeholders. The party in the best bargaining position takes
advantage of the position. The disadvantage parties bide their time and wait for the
cycle to change for their turn to take advantage ( Dombkins 1993). In general this may
be true.
However the results of partnering projects in Australia have been very encouraging
with projects coming in under budget and under time, with no claims or litigation,
achieving a higher quality and the projects are being undertaken in a wonderful spirit of
cooperation and teamwork which has not been the experience in the last few decades
(MBA of SA 1994).
This chapter describes the achievements of partnering projects in Australia. Some

concerns and issues related to the application of partnering are reported at the end of
the chapter.
11.1 Background
One of the conclusions of the NSW Royal Commission into Productivity in the
Building Industry research was that project outcomes were heavily influenced by the
relationships between the parties involved in the industry.
In general, Commission found that relationships had severely degraded into a

destructive and costly adversarial approach characterized by mistrust, lack of respect
and the ever present threat of litigation.
This adversarial approach has evolved over many years. It often has it roots in the
earliest stages of project inception with each party developing their own management
team. Each team then independent/ formulates its own goals and decision frameworks
for the project without regard for the other parties interests or expectations. As a
consequence, communication is limited and often non-existent - with the result that
conflicts are inevitable as paths diverge and expectations are not met.
This adversarial climate has severely reduced the productivity of the construction
industry and consequently its ability to achieve the primary goal of producing quality
projects on time and within budget.
168
Roger Gyles, QC set up a pilot project to experiment with "partnering" in 1992,

when he presided over the NSW Royal Commission on productivity in the building
industry ( cited in Rowbotham 1993).
Clearly, there is a need for a change to a more cooperative approach - in essence a

return to the old way of doing business based more on trust, respect and good faith
rather than suspicion, contempt and scepticism.
A concept termed "partnering" is a move towards such a cultural change. It has been
adopted by the NSW government as part of its integrated reform philosophy for the
industry ( CPSC 1993).
11.2 NSW Government Policy on Partnering

Construction Policy Steering Committee publication Capital Project Manual describes
the NSW government policy on partnering. Partnering has been adopted as a key
element of the Government's strategy for developing a non-adversarial culture. It is one
of the several initiatives including :
Alternative dispute resolution.
Contract provisions.
which together provide the impetus for a shift from the current adversarial approach to
one of commitment and cooperation.
The objective is to establish partnering as a management tool embraced by both the

public and private sectors in relation to dealings with the construction industry and for
the procurement of both private and public infrastructures.
It is recognized however, that it is inappropriate to simply import a management tool

from overseas, without firstly adapting it to some degree to better suit the needs of
Australian business. Therefore its introduction will be staged following trialling and
adaptation ( CPSC 1993).
Initially, Partnering will be trialled on projects which have a value of $5.0 million and
above. A target has been set with the Government's overall capital program that 20 %
of all projects which meet the criteria will be partnered in 1994. Should the partnering
process achieve, within that range of capital investment, similar levels of return on
investment to that experienced elsewhere in the world, it will be progressively applied to
a wider range of capital projects
169
The CPSC will co-ordinate the trialling process to achieve the 20% target. The CPSC
will then assess the worth of the process prior to its consideration of wider application
to the State's capital investment program from 1 July 1995 ( CPSC 1993).
11.3 MBA Initiative

The application of the Partnering process was brought to the attention of MBA through
discussions with it's US counterparts where they were experiencing similar problems. A
series of seminars sponsored by the MBA in 1 CII-V)
1.7.7L again in 1991 featured
presentations from Charles Cowan, a pioneer of the concept in the US. Since his visits
projects valued in excess of $2 billion have embraced the concept in Australia ( cited in
MBA of SA 1994).
'Master Builder's - Construction and Housing Association Australia is

committed to promoting the partnering concept throughout the building and
construction industry. This is because partnering is about a change in attitude.
The word may be new but the concept is not. We believe that we must play our
role in promoting the cooperative attitude and commitment needed to drive
this concept Our members want to complete quality projects, safely, on time
and within budget. There are risks in adopting a new strategy such as
partnering, but the risk of not changing practices is even greater.- John
Murray, Executive Director, Master Builder's ( cited in MBA 1992).
Master Builders Australia continues to foster the concept through its Director of
Training, Denis Wilson who has facilitated many of these projects that have embraced
the concept of partnering ( MBA of SA 1994).
"It has spread like wildfire. I guess we have partnered $ 600 million of
projects. Productivity has increased and people are comfortable they are
managing project better" - Denis Wilson ( cited in Rowbotham 1993)
11.4 Applications of Partnering

The coverage of projects using the partnering concept in Australia is impressive -
townhouse developments, office complexes, hospitals, schools, highways, airports,
research facilities, dams, hydro electric power systems, detention centres, shopping
centres, universities and TAFE's ( MBA of SA 1994 ). An engineer and building
industry consultant, Ron Wthington, states
"A building construction involves a very large sum of money being transacted
over quite a long period, with an enormous number of players "
170
Wthington had done research for the Commission into attitudes and behaviour on
building sites, became the facilitator of the partnering between Macquarie University,
Leighton Contractors and the architectural firm Devine, Erby Mazlin Australia in the
construction of the $ 12 million science and technology building on the campus.
Partnering has been favourably received in other circles : The New South Wales
University of Technology law faculty has included it in the curriculum as part of the
alternate dispute - resolution masters program, and anuQantasnr.1_,
. A AL"
partnering in their maintenance contracts.
Two partnering projects are now underway in Melbourne :

BP head office refurbishment in the Melbourne Central building
Partnering is particularly useful as a lead-in to short term jobs such as the $ 18 million
head office project, which is on a tight schedule. The workshop is a good way to reduce
the "getting to know - you" time, a crucial advantage. Victorian State Manager for
Hooker Cockram ( contractor ), David Judd comments :
"Overnight, these people have to get close enough to work as an effective
team."
Construction of youth training centre
The $ 9 million youth correctional facility, which will house 60 people, is ahead of
schedule, says its principal, the Victorian Department of Planning and Development.
Menno Henneveld, Manager ( project management and construction ) at the Water

Authority of Western Australia, says this strategy is paying off in the construction of the
$ 65 million North Dandalup Dam project, 70 km. south east of Perth. The contractor
is Macmahon Constructions. He describes the success of partnering as follows :
"It is working far better than we had hoped. We are at the end of the first
season now, and with previous dams we have built I'd be sitting on at least a
dozen unresolved claims, but I have none."
Delaying dispute resolution is a common danger in building projects says Graham

Reilly, Managing Director of John Haskins and Staff, which is building the $10 million
Yerrabi Pond projects north of Canberra, under contract to the ACT Public Works and
Services Department. He comments:
"One of the biggest problems in construction projects is issues that do not get
resolved, which act time bombs."
The Yerrabi Pond project was partnered from the start and a two day workshop
involved 15 people, representing a wide range of interests, including the ACT
171
Department of Environment, Land and Planning and a private consultant, Willing and
Partners as well as the principal and the contractor. According to Reilly there are
savings of tens of thousands of dollars from Yerrabi Pond project.
Queensland based Thiess Contractors discovered partnering about the same time as the
MBA and is using it on 15 projects valued at more than $ 120 million. Thiess
Contractors interest in the idea grew out of a change in internal culture through TQM.
Russell Todd, National Contracts Manager of Thiess Contractors describes :
"This partnering concept is not something that happens overnight, it needs
commitment and dedication to make it work because you are looking at
environmental change within the industry."
( cited in Rowbotham 1993)
11.4 Partnering for Public Works in NSW

Ron Christie, Director General of NSW Public Works comments :
"Public Works will seek to do business in the future with those who adopt a
cooperative approach to the contract management to the ultimate benefit of the
client " ( cited in The Australian Project Manager 1994 ).
In NSW, Public Works has been using partnering approach for more than $ 160
million worth of projects over the past year ( 1993 ), including six hospitals as far afield
as Penrith, Albury and Maitland. On NSW health projects, Public Works partners
include :
Nepean Hospital Main building - Barclay Mowlem Construction
Nepean Hospital Theatres - Stuart Bros.
Albury Hospital - Leighton Contractors
Sydney Hospital - Fletcher Construction
Maitland Hospital - Fletcher construction
The cooperative partnering approach adopted for these and other NSW Public Works
projects has been an outstanding success : in 1993 Public Works won the two national
partnering awards from MBA, one of them going to the Nepean Hospital Project team.
( cited in The Australian Project Manager 1994).
Ne Dean Hospital upgrade Project

Nepean Hospital main building was a $ 24 million project that involves the construction
of six level building for major clinical departments and 120 new hospital beds giving the
hospital a total of 480 beds. This was the first and to date largest partnering project
undertaken in the public sector.
172
Barclay Mowlem Construction Limited was awarded a design development and

construct contract for the main building at Nepean in July 1992. This was the first
contract for a public hospital in NSW. Contract involves the building bringing together
a design development team to realize and document the design concept prepared by
State Projects. The Public Works Department approached the contractor shortly after
awarding the contract and Barclay Mowlem welcomed this opportunity. Chris Milne,
Project Manager of Barclay Mowlem describes the successful application of partnering
concept to this project ( Milne 1994).
The first step was to bring the participants together at a two day workshop, to focus on
the individual and project objectives to formulate a project mission statement. The
participants are the Wentworth Area Health Service and Nepean Hospital ( client ), the
Public Works Department of NSW ( project managers ). Barclay Mowlem ( builders )
design development consultants ( headed by the architects Brown Brewer and Gregory
Pty Ltd. ) and contractors.
The workshop enabled all parties to get to know each other and breakdown the barriers
that can exist in any project activities at the workshop included team building, conflict
resolution and establishment of a communication matrix. General discussion on the
goals of each organization and how this related to the goals of the project was also
encouraged. At this stage, the client and builder relationship was established on a
partnering basis with all parties committed to maintaining a harmonious and fruitful
effort.
The subcontractors were invited to attend a workshop on site to discuss the principles
of partnering. This allowed them to communicate to each other their goals for the
project. Many subcontractors had commented that it was refreshing to have an
opportunity to influence their own future, rather than to be told of the main contractors
decisions, made in isolation that often cost them vast sums. Continuing commitment to
the partnering process was maintained through a regular series of project forums. These
meetings enabled subcontractors to discuss issues with each other and with the main
contractor.
A positive relationship had been established with many of the workers, which had
reinforced the attitude of teamwork and mutual commitment to the project. The team
had taken ownership of problems and jointly resolved them to the benefit of the
project and to all its partners.
173
"Client's satisfaction" is a high priority in any project, without this, the project cannot
be regarded as a success. Milne ( 1994 ) explains that the partnering allows to
understand fully the client's needs and motivation for the project.. Further he iterates
that partnering allows the contractor and the client to share and minimize "risks" and to
create an environment of "fairness to all" - recognize the rights of all parties to fair and
equitable treatment.
BARCLAY MOWLEM
The Neoean Hosoaal
Penntn
N
WENT WORTH AREA
HEALTH SERVICE
PARTNERING CHARTER
NEPEAN HOSPITAL UPGRADE PROJECT
Main Building
MISSION STATEMENT
Our Mission is to manage the project as a team to achieve a common gaol bcsect
on the concept of partners, ensuring the team strives for excellence in the areas of
co-operation, trust and understanding, minimising project tisk by supporting irriParltolIV
each partners efforts for improvement to reach the following objectives.
PARTNERING OBJECTIVES
1. BUDGET All stakeholders realise their financial goals.
2. TIME Achieve agreed milestones with final hanclover by 30th June, 1994.
3. QUALITY AND FUNCTIONAUTY Meets or exceeds specified quality standards.
4. HOSPITAL FUNCTIONING Maintain hospital activities through effective co-ordination
of construction activities, with sensitMly to hospital staff, patients and visitors.
S. SAFETY Ensure a safe working environment for all people associated with the project.
6. CONFLICT RESOLUTION Ensure effective resolution of grievances and
claims within agreed time period.
7. ENJOYABLE PROJECT Provide an atmosphere conducive to hign morale and
productivity and where all participants achieve job satisfaction.
a. FAIRNESS TO ALL Recognise the rights of all parties to fair and equitable treatment.
9. EXTERNAL RELATIONS Meet all obligations to the community and government.
so. INDUSTRY MODEL Create a new industry model which can be
a benchmark for future protects.
Signed at h n Hospital Site 19th day of February, 1993.
Figure 11.1: Partnering charter - Nepean hospital upgrade project. ( Source : CPSC
1993)
174
11.5 Some Concerns and Issues Related to Partnering

Chandler ( 1994 ) observes the reason of moving partnering forward in US as it
relates to the nature of financial certainty in US. Contractors are protected by adequate
lining provisions for non - payment and customers assured of performance by bonding
structures which apply particularly in the case of public projects in US. Those
governing parameters create a much greater basis for the parties to get on as escape is
much more limited in the US contracting scene.
Apparently Australia has not achieved a similar position. Issues such as capital adequacy
testing and the recently introduced ODA Code of Performance criteria go some way to
establishing a more predictable playing field. According to Chandler's (1994 ) openion
the resolution subject will only occur when self interested customer groups become
prepared to fully expose their real performances and stop hiding behind the lack of
competition argument.
The Australian Legal Group ( 1993 ) noted that there is a great potential to affect the
legal relationships of the parties, particularly at the issue resolution stage where the
parties are to enter into discussions with each other and be frank and open with their
communication. To avoid the contractual relationships being inconsistent with the actual
relationship between parties, the Australian Legal group ( 1993 ) recommend to draft
the contracts to reflect the partnering relationship developed by the parties. For
example:
The objectives in the partnering charter should be reflected in the contracts.
Representations made in the workshop which have been relied upon should be
incorporated in the contracts.
Review procedures in contracts should be consistent with the joint evaluation
process.
Disputes resolution clause in contracts should be consistent with the issue resolution
process.
( The Australian Legal Group - April 1993)
Hibbert ( 1994 ) raises some legal issues related to the partnering application. The
essence of partnering is a cooperative management style of work, intent upon
overcoming traditional adversarial and litigious relationships and directed to achieving
the project objectives of all parties.
But because in practice partnering may involve principal and contractor jointly assessing
actual or potential non conformances, it can give rise to significant legal issues for
175
project managers in areas such as authority, delegation of powers and the establishment
and documentation of on-site procedures.
Apparently most partnering projects to date used relatively unamended standard forms
of contract, supplemented by an agreed set of partnering procedures and the necessary
partnering charter. Hibbert ( 1994 ) further questioned whether would it not be better
for the construction contract to attempt to express better the aims of and objectives of
the partnering parties ? Should not those responsible for the preparation of the key
project documentation try to ensure that not only represents, but importantly facilitates,
all the various partnering procedures ?
Therefore the industry need to structure and document project contracts better, not only
to accommodate, but more importantly facilitate the partnering principles and their
associated procedures.
More and more "key people" in both contractors and principal's organizations are being
declared for projects. This is specially important on a partnered project, because the
emphasis on constant frank communications. So the concern in here is that if principal
or contractor nominate key personnel who are, or at least appear to be, inappropriate to
participate honestly and openly in the partnering procedures, the project manager will
have to work with those people and "re-train" them in the ways of partnering or
otherwise suggest that they be replaced.
Most modern contracts now recognize the need for an advantage of an early warning of
alerting process. The objective is to encourage the contractor, or other parties if need
be, to raise issues with the other which may affect performance adversely but which,
constructively, should be addressed by both parties to the project. The essence of alerts
or warnings is early, constructive communication. It is difficult to imagine a partnering
project being successful without a willingness on both sides to discuss events which
may effect time, cost or quality or either party's ability to carry out obligations ( Hibbert
1994).
There are certain issues that may place the positive side of partnering at risk. Some of
them are:
The industry has not shown a broad CEO to CEO commitment to the process either
internally or externally to their organization.
Partnering is being used for short term gain in some instances which leaves a trial of
disillusioned customers or project partners. Hibbert ( 1994 ) has observed that many
176
of the users of partnering fear that the process leaves some established contractual
rights and remedies uncertain.
Measurement needs to be substantially refmed and project performance measured
against some real benchmarks so that long term competitive outcomes can be
maintained ( Chandler 1994).
177
CHAPTER 12 : Research Findings and Discussion
12.0 Introduction
As mentioned in the research methodology, under the phases 1 and 2, received seven
completed questionnaires giving an overall response rate of 14%. The sizes ( number
of employees ) and the range of project sizes in terms of contract sums undertaking by
each company C 1, C2, C3, C4, C5, C6 and C7 are summarized in the Table 12.1. The
responses given by companies CG and C7 arc related to South LI 1.1.40...11.1l sae., --L..,
only.
Construction Company Number of employees Project sizes ( in Million $)

Cl 1540 5 M - 600 M
C2 1000 10M- 100M
C3 890 0.5M - 50 M
C4 600 1M - 50 M
C5 260 1M - 40 M
C6 110 in South Australia 1M - 50 M
C7 100 in South Australia 0.02M-80M
Table 12.1: Company backgrounds.
All seven companies are following As 3900 / ISO 9000 quality system. Company Cl
has already achieved accreditation to AS 3901. Majority of these are leading
construction companies in Australia with offices in most of the states and even
overseas. The business operation of these companies covered a broad area including,
civil engineering, mining, marine engineering, environmental engineering, and so many
on. Companies Cl, C2, C4 C6 and C7 are experienced with partnering projects.
Responses given to the questionnaire by each company are reported in Section 12.1.
Discussions based on findings from the questionnaire ( phases 1 and 2), and interviews
with project management consultants ( phase 3 ) are given in Sections 12.2 and 12.3
respectively.
12.1 Company Studies

Findings from each company have been categorized under the headings of quality
system, project evaluation, partnering and overall comments
178
12.1.1 Company Cl
Quality system : Construction company C 1 has already got the accreditation to AS
3901. "Quality" training programs are conducted for most of the company staff, from
General Manager, Construction Managers, Project Managers, Design Managers,
Project Engineers to Foremen, Superintendents and secretaries. Two day work shops,
modules ( specifically targeted at elements of quality system i.e. inspection and test
plans, procurements etc, ) and Quality Audits are also being carried out periodically as
required.
Even though company has not quantified the amounts of increase of business, savings
from rework or increases in profit after application of quality system, noted many other
benefits, such as :
Standardization in documentation and practices.
Planning prior to execution of construction activities.
Ability to audit against documented actions / criteria.
Evaluate / target problem areas quicker.
Provide feed back for continuous improvement in systems and processes.
Integrate and coordinate existing systems into one standardized management system
structure.
Project evaluation : Company has around 80 projects running at any time, duration of
6 months to 2 years. No details were given about completed projects in respect to
costs, schedules or procurement systems.
Company found the main reasons for the project cost overruns as "variations" and
"change of durations". Therefore as a policy company attempts to complete projects
early in order to minimize time related costs.
Other than small disputes with some* subcontractors no any major disputes had been
reported during the last three years.
Partnering : Company established it's first partnering relationship in 1991, which was
initiated by a client ( a private company ). Apparently it was not difficult to introduce
partnering initially due to the following contributing factors.
The client wanted partnering.
Partnering fits the style of operating the company.
Partnering enhances trust and the opportunity for repeat business.
179
Company describes the current partnering relationship as a successful and mutually

benefited relationship. However there are more opportunities available to further
improve the relationship. Company emphasizes that it is not the case of always
expecting profit increases from partnering projects. Because the mutual benefits of
partnering cannot be measured only in monetary terms. It considers that "risk sharing"
in partnering projects is such an advantage for both parties. Other mutual benefits
observed are the reduction of overall cost and schedule by 10 % - 15 %.
Company also noted the culture of continuous improvement process facilitates by

partnering. However maximum benefits can be achieved only when both parties have a
full understanding of TQM. This would very much be the exception at present time.
Overall comments : The quality system is successful. The company intends to approach
to TQM through following practices :
Quality system certification to AS 3901 - achieved.
Quality Improvement Process - progressive formulation of existing systems into the
quality system on a function by function basis.
Development and application of a quality - cost system. This means application of
bench marking and best practice techniques.
Continuous improvement techniques applied on project by project basis as opposed
to quality circles in manufacturing.
Company has also observed some critical factors, that will facilitate to TQM approach.
Commitment from the Managing Director and Senior Management.
To develop a strategy using various Quality Management techniques tailored to the
needs of the company ( ie. avoid off the shelf methods ).
Involvement by all levels.
Control over the process and adequate provision of resources.
Training.
As noted by the company, lack of commitment from top management is the main
obstacle to TQM approach.
180
12.1.2 Company C2
Quality system : The quality system adopted by the construction company C2 is ISO
9000 / AS 3900. Basically "quality" training is provided in two levels:
Foremen and above - Quality Assurance and company procedures.
Below foremen - Quality control and job instructions.
Company has achieved 20% increase of business after the application of quality
system. Savings from reduction of rework and increase in profits are also significant
factors. The other benefits reported by the company are :
Standardized system across all states.
Audit reveals best practices ( as well as deficiencies ).
Project evaluation : No comments were made regarding their completed projects.

However company has identified following reasons for increase / decrease of project
costs :
Lack of project definition in brief on documents ( increase cost ).
Good construction plan and schedule ( decrease cost ).
Poor client communication ( increase cost ).
Partnering : Company established a partnering relationship in 1992 followed by a

tendering procedure. However company faces a difficulty in introducing partnering,
due to the fact that most of the customers are not prepared to accept partnering.
The following factors have initiated company to introduce partnering concept:

Improved customer and associate relationships through communication lines being
opened.
Understanding of other parties concerns and objectives.
Requests for information classification turned around quickly.
Company has observed significant benefits in the partnering projects. Not only client
and contractor, but also consultants, subcontractors and suppliers getting benefited
from partnering. It had been roughly estimated that up to 5 % of overall reduction of
cost, schedule and profit gained from partnering projects. Company further iterates
that there are more opportunities available to further improve the present partnering
relationship.
181
It has also noted some disadvantages in partnering projects. One such occasion is that
when partnering relationship rely on all parties putting the contract to one side and
pressing the project goals. Obviously this is never completely possible as commercial
and contractual situations will always present problems for one or more of the parties.
According to the experience of company partnering creates an environment for TQM

approach. Some of the contributing factors are :
Frank discussion on quality objectives and therefore better understanding
requirements.
Improved process for dealing with specific quality problems.
Atmosphere conducive to improvement.
Overall comments : The quality system of the company is successful but it has to be
further improved. Company intends to approach to TQM through fulfilling the
following goals :
First goal is to achieve Quality Assurance accreditation.
Incorporate best practice in management system.
Encourage employees to find waste and inefficiencies and measure them. Help
them and management can find real causes, solutions and subsequently implement
and monitor improvements.
Company identified some critical factors, that will facilitate to such an approach.
Change of overall culture.
Change management's attitudes to empower employees.
Implement, manage and monitor change.
182
12.1.3 Company C3
Quality system : Construction company C3 also follows ISO 9000 / As 3900 quality
system. "Quality" training is in a classroom format with staff instructed on the
procedures generally and within specific reference to how it relates to their work.
Training is provided to all the staff.
After the application of quality system company gained savings from reduction of
rework up to 5 %. But there were no such increases in business, noted after the
application of quality system. Company has not quantified the amounts of profit
increases either. However there are some other obvious benefits.
Better understanding of the job by employees.
Greater project controls.
Project evaluation : No project details were given. Company indicates engineering

underestimation as a reason for project cost increases. Good weather, good
management and good staff will facilitate to lower the project costs.
During the last three years there were no such delays in completing projects. However
company has stated that there were certain disputes occurred during this period, but
no reasons were given for such disputes.
Partnering : Company has not got any experience with partnering.
Overall comments : The quality system is required to be improved. Company is not

yet fully convinced whether the TQM approach is the appropriate way to go at the
moment. Also company wishes to see more evidences from the industry, in regard to
TQM, whether it provides any clear benefits ( e.g. : more satisfied and effective
employees, control of waste and rework etc, ).
183
12.1.4 Company C4
Quality system ; Company C4 also follows ISO 9000 / AS 3900 quality system.
"Quality" training is provided in the forms of inductions, courses. Management's
involvement and reviews are considered important, by the company when providing
training to it's staff.
Company has achieved business increase of 30 % and savings of 10 % from reduction

of rework after application of quality the system. Profit increases also has been noted.
Among other benefits noted are :
Better communication.
Better team coordination.
Project evaluation : No details about the completed projects were given by the
company. Last three projects undertaken., completed on time and to budget. As
commented by the company this is attributed to good client relationships, management
practices and approval to Quality Assurance on the job. No major disputes were
reported during last three years.
Partnering : Company has started a partnering relationship in 1992. Company fmds it

difficult to understand the concept and the way how it works. Partner was selected by a
joint arrangement. It had been initiated by both parties. The major factors that have
initiated the company to introduce partnering concept are :
Increased profits.
Increased workload / turnover.
Better client / contractor relationships.
Mutual benefits achieved by both parties are as follows.
Cost change % Cost change %

Description Company Partner
Reduction of overall cost 10 20
Increase profitability 10 10
Reduction in schedule 10 10
Table 12.2 : Mutual benefits m partnering

184
Company also noted certain disadvantages in partnering projects. Some of them are:
Issue resolution process is not clear.
Lack of trust.
The current partnering relationship is required to be improved.. Team work and
enhanced communication in partnering projects are contributing factors those facilitate
the continuous improvement process.
Overall comments : The quality system is successful. Company is planning to

introduce TQM gradually within next few years. The critical factors that will facilitate
for such an approach are
Upper management acceptance.
Client approach of projects.
Partnering.
Lack of trust and egos would obstruct the TQM approach.

185
12.1.5 Company C 5
Quality system : Construction company C5 is following the ISO 9000 / AS 3900 quality
system. "Quality" training is provided to all staff.
After application of quality system, company achieved substantial benefits in following

areas:
Increase in business.
Savings from reductions ()I iwoir.
Increase in profits.
Project evaluation : No comments were given.
Partnering : Company has reported that it started the first partnering relationship in
1910. Company is considering to apply partnering for future projects as well. When
introduced partnering, company faced some difficulties. The reasons for such
difficulties quoted by the company "depends on definition on partnering".
Company also highlighted that "client is always right if he is paying". According to the
experience of company, there are mutual benefits in partnering projects, but no
disadvantages. Partnering provides a better environment for TQM. The contributing
factor for such an environment is quoted as "you are honour bound to perform". It
further states that the current partnering relationship needs improvements.
Overall comments : Company intends to approach to TQM through :

Continuous improvement at all levels.
Education.
By giving opportunities.
Company has expressed concern whether it can afford the cost involved with TQM
implementation.
NOTE: Some of the responses given by company are not clear and misleading.
Therefore so called "relationship" cannot be considered as a "partnering"
relationship.
186
12.1.6 Company C 6
Quality System : Company C6 adopts ISO 9000 / AS 3900 series. "Quality" training
causes are conducted for top, middle and lower management and for technical staff, in
different levels.
QM certificate course - QA Manager, QA Coordinator, Operation Manager.
Introduction to QA course ( two days ) - Project Managers, Administrators and
Foremen.
Auditor training course ( two days ) - Foremen.
Subcontract compliance verification course ( one day ) - Foremen.
By following the quality system, company has been able to gain increase in business
and saving,s from reworks. Other benefits noted are :
Able to provide documented verification of compliance with client's requirements.
Improves project planning during initial stages of project.
Reduces rework - makes subcontractors more accountable for the work they do.
Project evaluation
Description Project 1 Project 2 Project 3

Project delivery system Des. & Con. Cons. Man. Traditional
Cost change +2.5 % + 5.7 % 5%
Project completion 3 months delay 1 month delay On time
Table 12.3: Projects evaluation
"Client variations" are the main reasons for increase of costs. "Inclement weather" and
"poor performances of trade contractors" caused delays.
Partnering : As described by the company, over the last 7 - 8 years, it's policy had
been to adopt so called "team relationships" with clients. Company outlines the
following factors that have initiated to establish such relationships.
Heavy involvement in construction and project management.
Policy of creating a harmonious relationship and avoiding confrontational
reputations.
To build long term relationship to facilitate repeat business.
The characteristics of company's partners are

Clients - Those who wish to form a long term relationship and with whom the
company can achieve "win-win" situation.
187
Trade contractors - Those who are reputed, progressive and having enough
resources.
Company observed mutual benefits in such relationships, but not been able to
generalize such benefits, because they vary with project to project. It has also noted
the better environment for continuous improvement that created by such relationships.
Overall comments: The quality system adopted by the company is successful. In TQM
approach company is planning to
Implementation of a system.
Provide further training.
Continual improvement.
Factors facilitate to such an approach are :

Desire to improve.
Willingness to change.
Critical factors that will obstruct TQM approach are :

Negativity among staff.
Negativity among trade contractors.
188
12.1.7 Company C 7
Quality system : Company has only implemented ISO 9000 / AS 3900 quality system
for approximately four months. The training programs provided for employees include:
Skills training.
Auditor training.
ISO 9000 application training.
Due to the unmature stage, it is too early to assess the long term benefits of the quality
system. However company has already noted the following benefits.
Ongoing improvement of procedures.
Increased understanding of roles and responsibilities.
Project evaluation:

Project delivery system Traditional. Traditional. Cons. Man.
Cost change +9.5 % + 15.2% - 2.3 %
Project completion 3 weeks delay on time 3 days delay
Table 12.4 : Projects evaluation
"Major variations" to the contract works are the main the reasons for cost increases.
The third project which adopted construction management contract strategy had shown
positive results in respect of cost savings and schedule because the budget was strictly
controlled.
A dispute has been reported between a subcontractor and company which has lead to
arbitration. According to the company the reason for such dispute is underprice of
project Apparently now subcontractor is keenly pursuing all means to reclaim costs.
Partnering : In December 1993, company started a partnering relationship. The factors

that have initiated to introduce partnering were :
Dispute resolution.
Improve project performance.
Improve co-operation with project team.
Usually Partner is selected project by project basis, depending on clint's attitudes.

Significant benefits had been observed in partnering projects. However company has
189
not quantified in such benefits in amounts. Company also noted the better environment
created by partnering for TQM. Some of the contributing factors are:
Shared objectives.
Common goals.
Team work.
Overall comments : As mentioned earlier it is too early to evaluate the quality system of
..Ii
On its way to continuous improvement process, company has already introduced an

"enterprise agreement" with wages personnel. Another step towards TQM is to provide
a system of operating that encourages input from all parts of the organization. Company
believes on a sort of a mechanism which will allow to flow the information and ideas
between all areas of the business, might facilitate continuous improvement process.
Company further contends that when management does not give enough information
and education to employees regarding the reasons and necessity for change, it is not
possible to create an environment for continuous improvement process.
190
12.2 Discussion on Findings from Questionnaire ( phases 1 and 2)
Quality systems
All the construction companies surveyed adopt ISO 9000 / As 3900 quality system.
This is a positive indication of the industry, which reflects that the industry has realized
the importance and necessity to complying to a standard quality system. More and
more clients are demanding quality constructed projects, completed to a standard
quality system. Accordingly construction companies are compelled to follow such
systems, to survive and sustain in the business.
"Quality "training is an essential part of any quality system. All the companies provide
suitable training to employees in various levels. However it has been observed that only
few companies evaluate and monitor the progress of training programs. The efficiency
and effectiveness of training programs are depend on the "level of training" i.e.
contents, standard of training, relevance of the training to each individual etc,.
Apparently Quality Audits are also not much in used.
After the application quality systems all the companies surveyed, have achieved
substantial benefits. Company C2 has gained nearly 20% business increases and also
noted increase of profits and reduction of costs from reworks. Company C3 was able to
save approximately 5% from reworks. Company C4 has observed it's increase of
business up to 10%. Company C6 also has noted increase in business and savings from
reduction of rework. Among other benefits noted in a quality system are :
Standardization in documentation and practices.
Opportunities for better planning.
Ability to audit and evaluate.
Provide feedback for continued improvement in systems and processes.
Better understanding of work.
Greater project control.
Better communication and team coordination.
Increased understanding of roles and responsibilities.
Ability to make subcontractors more accountable for their work.
It can be concluded that not only clients of the industry, but also construction
companies can achieve significant benefits through a properly implemented quality
system. Most important of all these is that the quality system provides a feed back for a
continuous improvement process, i.e. TQM.
191
Project evaluation
Available data was not sufficient to perform an analysis of project performances. Most
companies have identified "variations", as the main reasons for cost overruns. In order
to control variations Marsh ( 1988 ) suggested a sequence of events, which is outlined
in Section 4.3.2. As a result of "change of duration" also cost of a project may
increases or decreases. Other factors are:
Clarity of project definition in brief.
Effectiveness of communication.
Plan and Schedule.
Weather conditions.
Management practices.
Relationships among project participants.
Underestimation.
Performance of trade contractors.
Only two cases of disputes with subcontractors have been reported.
Partnering
Out of seven companies surveyed, five companies Cl, C2, C4, C6 and C7 are
experienced with partnering projects. As mentioned earlier the responses given by
company C5 regarding it's partnering is not very clear. Company C5 had
overemphasized one sided "monetary gains" from partnering relationship. This indicates
that the concept of partnering is still new and unknown to some construction
companies.
According to the definition given by partnering Task Force "long term commitment" is
one of the key elements in "true partnering" relationships. None of the relationships
studied are comply with this definition. However companies C 1 and C6 have
highlighted the benefits of "long term commitment" and the opportunity for "repeat
business". Although their relationships are still in urunature stages, there are reasons to
believe that these companies have realized the essence of "true partnering". Other
companies C2, C4 and C7 performed partnering project by project basis, followed by a
tendering procedure. Generally, contractor is selected by client as discussed in Section
9.3. Statement of intent is sent along with the tender documents. Subsequently,
partnering is implemented through a mutual arrangement with the lowest bidder.
Company C2 has observed the resistance from customers to accept partnering.

Company C4 fmds it difficult to understand the concept fully and the way how it
works. On the other hand company C 1 does not face difficulties mainly due to the
192
reason that the style of operating the company fits with partnering. To say more
precisely the "corporate culture" of the company matches with partnering.
Some common factors that have initiated companies to introduce partnering are
Partnering enhances trust and provide opportunity for repeat business.
Improved customer and associate relationships through communication lines
opened.
Understanding of other parties concerns and objectives.
Increased profits.
Increased workload / turnover.
To build long term relationships.
Dispute resolution ( harmonious relationship which avoid confrontational
situations).
All the companies have highlighted the mutual benefits that can be achieved by
partnering. Companies Cl and C2 have observed reductions in cost and schedule up to
5% for both the company and the partner. Company C2 has also gained profit increase
by 5%. Company C 1 considers the "risk sharing" nature in partnering as another
significant advantage for both parties. Company C4 has achieved 10% reduction of cost
and schedule while profitability has been increased by 10%. The partner of company
C4 has observed 20% reduction of overall cost, 10% increase profitability and 10%
reduction in schedule. Generally speaking partnering helps to improve project
performances.
On the other hand companies C2 and C4 have noted some disadvantages in partnering.
According to the experience of company C2 in a partnering relationship where there is
a considerable imbalance in contract ( i.e. one party is in a more favourable and
advantageous position having significant benefits over the other party ) such
relationship will not work well. In fact partnering should provide a fair and equitable
environment to all project participants. This is implemented through partnering charter.
Company C4 has identified the issues such as "lack of trust" and "unclear issue
resolution process " might create difficulties to the participants. The Australian legal
Group ( 1994 ), Chandler ( 1994 ) and Hibbert ( 1994 ) also expressed concern over
these issues.
All the companies with partnering experience are positive about the culture of
continuous improvement, i.e. TQM environment that created by partnering. According
to company C I, the level of understanding of TQM principles by both parties will
determine the progress towards TQM. Companies C2 and C4 have indicated the
193
contributing factors for TQM as team work, improved open communication, and
atmosphere conducive to improvement. Company C7 also quoted the issues such as
shared objectives, common goals, and team work in partnering facilitate TQM
approach.
Apparently most of the companies used partnering only for short term goals. As
mentioned earlier, only long term relationships provide maximum benefits from
partnering. However in summarizing a", it can be stated that partnering creates and
enhances continuous improvement culture.
Overall comments
Achievement of quality accreditation to a standard quality system ( ISO 9000 / AS
3900) is probably the first most important step towards TQM approach. Company Cl
has already achieved this status and company C2 is on the way to get accreditation. The
method described by Bradely ( 1994 ) reported in Section 2.8 illustrates how to
approach to TQM starting from ISO 9000.
Company C 1 intends to introduce continuous improvement techniques on project by

project basis. A similar method of applying TQM principles to jobsite, is outlined in
Section 7.2.2. According to Deffenbaugh ( 1993 ) TQM at the construction job site is
not only possible but has proven to be a success. Gradual formulations of existing
systems into the quality system on a function by function basis and the development
and application of a quality cost system are the subsequent steps that will be taken by
company Cl, on it's TQM program.
Through employee contribution and participation, getting feed back from them to
minimize waste and inefficiencies is an another strategy suggested by company C2 in
it's TQM journey. Company C5 intends to educate employees, give them opportunities
and encourage continuous improvement at all levels. Company C6 has realized the
importance of implementing a system, further training and continual improvement in
TQM approach. Company C7 also has suggested to provide a system that encourages
input from all the parts of the organization. Further it has already introduced an
enterprise agreement.
However currently not all the companies are prepared to accept TQM. For instance,
company C3 is sceptical about the TQM approach. Company C4 is planning to
introduce TQM gradually within next years. Company C5 also has expressed concern
about the possible cost involvements in such an approach.
194
Change of overall culture of the organization is probably the most difficult and time
consuming issue in TQM approach. This has been observed by companies C2, C6 and
C7.
As noted by company C2, change management attitudes to empower employees and

implement, manage and monitor changes are other critical factors. Companies C 1 and
C4 have indicated that the lack of commitment or acceptance by top management is
the main critical factor that will obstruct to TQM approach. It can be concluded that
corporate culture and level the of top management commitment in an organization are
the key issues that need to be considered, when introducing any quality management
strategy. Most of the factors relate to TQM, quoted by companies, had been identified
by many authors ( Dale and Cooper 1992, Macdonald and Piggot 1993, Brocka and
Brocka 1992, Kanji and Asher 1993 ) included in this report. Results of various
research studies included in this report provide more clues and further establish the
facts quoted by companies in implementation of QM ( TQM ).
12.3 Discussion on Findings from Interviews ( phase 3)

Interviews with five project management consultants were conducted to get some
practical information to support the findings. Four consultants were positive about the
QM in the industry, while the fifth had a sort of a negative attitude towards QM. Too
much paper work, time constraints of projects and cost involved with QM etc, were
seen as barriers to QM..
It was revealed that the following factors contribute to gain most benefits from QM.
Total commitment from top management.
Implementation of a project specific quality plan ( not the generic system ).
Correct attitude and commitment from other project participants.
Ensuring the quality standards.
Better monitored projects ( good monitoring and checking system ).
Communication - information flow among project participants.
Regular induction training at appropriate levels.
The main barriers for QM are :

Using nonconforming materials, components etc,.
Lack of commitment and resistance from top.
Cost involvements ( including fees of a quality consultant ).
Lack of knowledge ( both the clients and project participants ).
Sometimes interpretations are not clear.
195
All the consultants stated that it is extremely difficult to introduce TQM to

construction. Some of the reasons commented were:
Change of the attitudes and culture.
Expensive to follow TQM.
Empower the employees.
Hard to measure the improvements.
According to one consultant TQM could be introduced in a project specific level.

However in order to implement TQM, number of conditions, such as availability of
time, planning ( identify all the phases of project clearly and plan accordingly ), culture
of the team players, ability of the client to pay for services etc., must be satisfied.
Out of five consultants interviewed three expressed their concerns about partnering.
One consultant describes partnering as only a form of contract strategy, which has no
relation with TQM. Other two have not heard much about partnering applications in
Australia. According to them it is difficult to implement in Australia due to the fact that
the concept is still new to the industry and most clients are unaware about it. They also
believe that partnering involves extremely high risk. The reason given was that
partnering cannot be implemented legally.
Other two consultants positively commented about partnering. They further clarified
that the common goals and shared culture observed in partnering create a better
environment for TQM. It was also revealed that the success of partnering depends on
the facilitator and willingness of team players to change their traditional attitudes for a
more corporate culture. Different agendas by different players, personal problems
(personality ), lack of commitment etc. were seen as barriers to partnering.
196
General Conclusions
Significant benefits can be achieved from a properly implemented quality system. In

project environment it is vital to implement a "project specific quality system" while
ensuring to the "quality standards" in order to achieve a quality constructed project.
"Variations" were seen as the main reason for project cost overruns and delays.
"Change of project durations" ( increase the construction period ) alen invarilbly result
cost increases. The subcontracting system create considerable difficulties. This is
evident from the fact that most of the disputes were reported with subcontractors.
Large and medium size construction firms are aiming at getting accreditation to ISO
9000 / AS 3900 quality system. This provides a basis for continuous improvement
process, i.e. Total Quality Management ( TQM ) which is a never ending journey. Due
to the nature and complexity of the industry it is a challenging task to introduce TQM
principles to the construction. Unlike manufacturing, construction offers much more
variability; each project represents a unique design, location, personnel, material,
weather, cost and time. Some of the barriers for TQM implementation that were found
from the study are
Difficulty in changing the organizational culture ( change the attitude of people ).
Lack of commitment from top management.
Lack of commitment and involvement of others.
Lack of trust.
Lack of resources.
Lack of knowledge.
Change management attitude to empower employees.
Negativity among the trade contractors.
Misunderstandings / Misinterpretations of Quality Management principles.
Partnering creates a better environment for TQM. The reason is that long term
commitment provides an opportunity for continuous improvement. It was also observed
that the characteristics of TQM can be found in successful partnering relationships.
Partnering is a new concept to the Australian construction industry. All the partnering
relationships studied were still in unmature stages. Out of five relationships only two
companies had "relatively" long term relationships that incorporated the intention of
doing "repeat business" in future. Other relationships were restricted to project by
project basis and established following tender procedures.
197
Nevertheless partnering projects had already shown promising results. This includes
mutual benefits such as reduction of project costs, schedules, increase profits and so on.
It was also observed that partnering is primarily used for short term goals. ( as a
cooperative non adversarial procurement system ). "True partnering" based on trust,
shared vision and long term commitment will provide maximum benefits. However this
requires a considerable long time, total commitment, and willingness to change attitudes
to a more corporate culture.
Currently there are some difficulties in introducing partnering. This study found
following obstacles for implementation of partnering.
Reluctance of the client to accept partnering.
Lack of knowledge about partnering ( particularly clients, and also contractors,
consultants )
Lack of trust.
Lack of commitment.
Unclear issue resolution process.
Difficulty in changing the attitudes ( cultural change ).
As noted by Hibbert ( 1994 ) the industry need to structure and document project
contracts better not only to accommodate, but more importantly facilitate the partnering
principles and associated procedures. Further success of partnering is depends on the
resolution of these issues.
Finally it would be worthwhile to recall the statement made by Charles Cowan -

Pioneer of partnering.
"I am occasionally asked i f partnering works. My answer is even if there were
no financial or performance advantages, it's clearly the ethical way of doing
business" - Charles Cowan ( cited in MBA 1992).
198
Recommendations for Further Research
TQM in construction industry is at a conceptual stage in Australia. Therefore more

information on TQM specific to construction industry application experience is required
for further studies. In this respect it would be worthwhile to study the best practices
adopted by construction companies, particularly those who already achieved quality
accreditation.
Main objective of TQM in construction is to provide Total Quality constructed projects

to clients of the industry. Deffenbaugh ( 1993 ) proposed a method to apply TQM
principles to individual projects, by considering such projects as separate businesses.
This method has proven to be a success in US. However this may not imply that it's
success can be repeated elsewhere. It is recommended to study on the applicability of
this method to the Australia.
Partnering concept is now getting popular within the industry. In spite of it's short term
focused limited applications, partnering has shown impressive results. However there is
a tremendous potential for much broader application. As observed by Construction
Industry Institute of US two factors stimulate such applications.
Existing relationships must continue to be successful and show measurable benefits.
A method of measuring the benefits of the broader application must be developed.
It is further recommended to perform detail studies in existing partnering relationships,

benefits, concerns, challenges in partnering and study the continuos improvement
process that facilitated by such relationships. The potential benefits of partnering have
already seen from the project histories in Japan, US and Australia and been
recognized. The question remains is to find the solutions for "How the construction
industry in Australia can get maximum benefits from partnering ?"
199
REFERENCES
Abudayyeh, Osma ( 1994 ), "Partnering : A team building approach to quality

construction management", Journal of Management in Engineering, Vol. 10, No. 6,
November / December 1994, pp 26, 27
ASCE ( 1988 ), Manual of professional practice - Quality in the Constructed Project -

A guideline for owners, designers and constructors, Vol. I, American Society of Civil
Engineers, 1988, pp 1 - 3, 18, 19.
Ashford, John L. ( 1989 ), The Management of Quality in Construction, T.J. press

Ltd., Padstow, Cornwell, UK, 1989, p 185.
Bagnall, Brian ( 1992 ), The AQUA Group - Tenders and Contracts for Building,
Oxford Blackwell Scientific Publications, UK, 1992, pp 33 - 35.
Barrell, Trevor and Nixon, Trevor et al. ( 1988 ), Strategies for the Reduction of
Claims and Disputes in the Construction Industry, A research report by some
Australian experts, November 1988, pp 15 - 28, 37 - 39, 47 - 53.
Bates, D. Garry, "Editor's letter", Journal of Management in Engineering, Editor of

the Journal of Management in Engineering.
Bradely, Michael ( 1994 ), "Starting Total Quality Management from ISO 9000", The
TQM Magazine, Vol. 6, No. 1, 1994, pp 50 - 54.
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1
APPENDIX 1: Questionnaire
A Study of "Total Quality Management in Construction"
PART A: Company Background

Name of company :
Total number of employees :
Range of project sizes in terms of contract sum : From To
PART B : Quality System

Quality system adopted by company :
ISO 9000/AS 3900 [ ] Others ( please specify ) [
Is there any quality training to your staff?
Yes [ ] No[ ]
* If " yes " to what level / type of staff. ? Please describe briefly particulars of the
training program.
Are there any substantial benefits to the company in following areas after the
application of quality system.?
* if" yes " please estimate the average percentages:
Description Yes No No idea %

Increase in business
Savings from reduction of rework
Increase in profit
2
What are the other benefits in application of quality system.?
PART C: Project Evaluation

Please provide the following details pertaining to the last three projects undertaken by
the com an., Note - Please include details of partnering protects if an

.
Type of construction
Project delivery system
Original estimated cost
Total cost at completion
Scheduled date of completion
Actual date of completion
Please state the main reasons for increase / decrease of the total cost of project at
completion :
Please state the main reasons for delaying in completion / early completion :
3
11. Were there any claims or disputes which have lead to an arbitration (or litigation)
during the last three years.?

Yes [ ] No[ ]
* If "yes "please state main reasons for such disputes:
PART D: Partnering
Do you intend to adopt the concept of "partnering" for your future projects.?
Yes [ ] No[ ] No idea [ ]
Does the company face any difficulties in introducing partnering concept for the
projects.?
Yes [ ] No[ ] No idea [ ]
* If" yes "please describe briefly the reasons for such difficulties :
Has the company already established any partnering relationship.( s ) ?
Yes [ ] No[ ]
( * If the answer is " No" please go to "question 22 "in PART E)

4
When the company started partnering relationship. (
Please state three main factors that have initiated your company to introduce
partnering concept. ?
(a)
(b)
(c)
Please describe briefly that how you selected the partner. ( s ) ?
Are there any significant mutual benefits ( such as reduction of costs, increase the
profitability or reduction of schedules ) in the partnering projects. ?
Yes [ No{ ] No idea [ ]
* If "yes" please estimate the average percentages of such benefits for the company and
to the partner ( s) { client ( s ) / owner ( s) }:
Cost change °A Cost change %

Reduction of overall cost
Increase profitability
Reduction in schedule
5
If possible please give a break down of such cost reductions :
Cost change % Cost change %

Engineering costs
Costs of rework
Administrative costs
Other costs I
Are there any disadvantages when applying partnering concept to the projects. ?
Yes [ No[ ] No idea [
* If" yes "please describe briefly:
Does the partnering relationship provide an environment for Total Quality

Management ?
Yes [ ] No[ ] No idea [
If "yes "please state the contributing factors for such an environment :
How do you evaluate the current partnering relationship ( s ) of the company. ?
Successful
Unsuccessful [
To be improved
6
PART E: Overall Comments

How do you evaluate the Quality system in your company. ?
Successful [ ]
Unsuccessful [ ]
To be improved [ 1
Please describe briefly the way how the company intend to approach to Total
Quality Management.?
What are the critical factors that will facilitate to such an approach. ?
What are the critical factors that will obstruct to such an approach. ?
APPENDIX 2: Statistical Process Control ( SPC )
Prevention of failure in any transformation is possible only if the process definition,

inputs and out puts are properly documented and agreed. The documentation of
procedures will allow reliable data about the process itself to be collected, analysis to be
performed, and action to be taken to improve the process and prevent failure or
nonconformance with the requirements. The target in the operation of any process is
- LIJ Lai a v trIS.3411 tse f.,i111rf.
All processes can be monitored and brought "under control" by gathering and using
data. This refers to measurement of the performance of the process and the feed back
required for corrective action, where necessary. Statistical Process Control ( SPC )
methods, backed by management commitment and good organization, provide
objective means of controlling quality in any transformation process.
SPC is not only a tool kit. It is a strategy for reducing variability, the cause of most
quality problems : variation in products, in times of deliveries, in ways of doing things,
in materials, in peoples attitudes, in equipment and its use, in maintenance practices, in
everything. Control by it self is not sufficient. TQM requires that the process should be
improved continually by reducing its variability. This is brought about by studying all
aspects of the process using the basic question. "Could we do this job more consistently
and on target ?". The answering of which drives the search for improvements. This
significant features of SPC means that it is not constrained to measuring conformance,
and that it is intended to lead to action on processes which are operating within the
"specification" to minimize variability.
In addition to the basic elements of quality system, which will provide a frame work for
recording, there exists a set of tools which Ishikawa has called the sewn basic tools.
These tools provide answers for the following questions.
Process flow charting - What is done ?
Check sheets I Tally charts - How often is done ?
Histograms - What overall variations look like ?
Pareto analysis - Which are the big problems ?
Cause and effect analysis and Brain storming - What causes the problem ?
Scatter diagrams - What are the relationships between factors ?
Control charts - Which variations to control and how ?
( Oakland -1989 )
APPENDIX 3 : T - Distribution
When the normal distribution is not the appropriate sample distribution; "t-distribution"
is used. The t-distribution is also called by "student's t distribution" and, or simply
"students distribution". Since it is used when the sample size is 30 or less, statisticians
often associate the t-distribution with small sample statistics. The second condition is
that the population standard deviation must be unknown. Therefore, use of t-
distribution for estimating is required whenever the sample size is 30 or less and the
population standard deviation is not known. Furthermore, in using the t-distribution, it
is assumed that the population is normal or approximately normal.
Normal distribution and t-distribution, both are symmetrical. In general the t-

distribution flatter than the normal distribution, and there is a different t-distribution for
every possible sample size. Even so, as the sample size gets larger, the shape of the t-
distribution loses its flatness and becomes approximately equal to the normal
distribution. In fact, for sample sizes of more than 30, the t-distribution is so closed to
the normal distribution.
Normal distribution
t distribution for
sample size n = 15 t distribution for
sample size n = 2
Figure : Comparison of normal and t-distributions. ( Source : Levin 1981)
The above figure compares one normal distribution with two t-distributions of different
sample sizes. This figure shows two characteristics of t-distributions.
T-distribution is lower at the mean and high at the tails than a normal distribution.
T-distribution proportionally more area in its tails than the normal distribution.
There is a different t-distribution for each of the possible "degrees of freedom".

Degrees of freedom are the number of values can be chosen freely ( Levin- 1981).

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University of South Australia

School of Building and Planning

Total Quality Management in Construction

Thesis submitted as part fulfilment for the

Master of Applied Science in Project Management

1.1 Scope of Study 5

1.2 Area of Study 6

CHAPTER 2 : Background of Quality / Quality Management

CHAPTER 3: Total Quality Management ( TQM )

CHAPTER 4 : Nature / Complexity of Construction Industry

CHAPTER 5 : Contract Strategies

CHAPTER 6 : Quality Management in Construction

CHAPTER 7: Total Quality Management ( TQM ) in Construction

CHAPTER 8: Partnering Concept

CHAPTER 9 : Partnering process, Benefits and Challenges

CHAPTER 10 : Applications of Partnering ( Japan and US)

CHAPTER 11: Applications of Partnering ( Australia )

CHAPTER 12 : Research Findings and Discussion

General Conclusions 196

Figure 1.0 Flow chart diagram of the report 9

Figure in Appendix 3 : Comparison of "normal" and "t-distribution"

Table 2.1 International Quality Standards 21

1.0 Background of the Study

Construction industry has experienced many problems in recent years. Construction

Issues related to mismanagement are :

Over-exuberance in using different procurement methods : Management oriented

Subcontractors may be seen as being responsible for the following issues :

Downgrading the importance of training of labour : As the need of the general

A reduced capacity to invest in research : This may be attributed to a number of factors

Quality Assurance ( QA) exists because of the degree of dissatisfaction experienced by

Unlike .a manufactured product construction is a service. Past success is not predictor of

1.1 Scope of Study

1.2 Area of Study

However this was not possible due to the following reasons :

1.3 Research Methodology

1.3.1 Literature Review

Committee of NSW / Master Builders Association of Australia ). A brief review of

1.3.2 Company Survey

Initially questionnaire was sent to 25 leading construction companies across Australia,

The companies were chosen from the following sources :

1.4 Structure of the Report

Figure 1.0 : Flow chart diagram of the report.

CHAPTER 2: Background of Quality / Quality Management

The enormous intensification of the world competition, social and technological

"Competition is a multi dimensional phenomenon which indicates not just the

Quality is now a global issue. As Feigenbaum ( 1987 ) noted:

2.1 History of Quality

2.2 What is Quality ?

conformance and nonconformance ( Crosby - cited in Brocka and Brocka

"A predictable degree of uniformity and dependability, at a low cost, suited to

"The total composite product and service characteristics of marketing,

Juran defines quality as consisting of two different, though related concepts.

"The totality of features and characteristics of a product or service that bear

A More comprehensive definition of quality is given by the American Society of Civil

2.3 The Evolution of Quality Management

Quality Management - QM ( or Total Quality Management - TQM ) is a way to

QM relies on people and involves everyone. QM is both a philosophy and a set of

2.3.2. Quality Control

2.3.3. Quality Assurance

2.3.4. Total Quality Management

Quality is to satisfy agreed customer requirements continually.

NIES defines "TQM" as :

continuous improvement in all processes , goods and services through the