RESEARCH PROPOSAL

ACHIEVING INTEGRATED SUPPLY CHAIN MANAGEMENT: LESSONS FROM IPD

Kirsten Joseph

Erich Pretorius

STUDENT NR 212024930

STUDENT NR 212015117

SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE DEGREE OF

BACCALALUREUS SCIENTIAE IN QUANTITY SURVEYING IN THE FACULTY OF CIVIL
ENGINEERING, BUILT ENVIRONMENT AND INFORMATION TECHNOLOGY AT THE CENTRAL
UNIVERSITY OF TECHNOLOGY, FREE STATE

SUPERVISOR: DR FA EMUZE

MAY 2013

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Abstract
The construction industry’s method of constructing structures has been changing over the past
decade as technology has progressed. We have moved from labour intensive construction methods
towards the integration of human and plant, which has increased the industry’s complexity. Yet the
main outcome of the industry has not changed over the past 100 years which is to construct
communities, educational institutions, and infrastructure, and residential buildings, commercial,
industrial and health care buildings. The construction industry is fragmented and drivers wedges
between the key entities within the industry. In spite of significant financial and temporal investment,
promising construction projects often result in wasted time, lost money and litigation. The paper aims
to investigate how an integrated supply chain management system can improve the construction
process through the use of integrated project delivery (IPD) principles.

Keywords: integrated, IPD, construction, supply chain management

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Table of Contents
Abstract.................................................................................................................................................................................. 2
Table of Contents ............................................................................................................................................................... 3
Table of Figures ................................................................................................................................................................... 4
Definition of Terms ............................................................................................................................................................... 5
1. The Research Background ......................................................................................................................................... 7
1.1 Introduction ................................................................................................................................................................. 7
1.2 The statement of the problem.................................................................................................................................. 8
1.3 Research Questions.................................................................................................................................................. 8
1.4 Research Sub-questions .......................................................................................................................................... 8
1.5 The limitations of the study ...................................................................................................................................... 8
1.6 The assumptions ....................................................................................................................................................... 8
1.7 The importance of the study .................................................................................................................................... 9
1.8 The aims and objectives of the study ..................................................................................................................... 9
1.9 Conclusion ................................................................................................................................................................ 10
2. The Review of Related Literature................................................................................................................................ 11
2.1 Introduction ............................................................................................................................................................... 11
2.2 Origin of supply chain ............................................................................................................................................. 12
2.3 Concept of supply chain management ................................................................................................................. 12
2.4 Supply chain in construction .................................................................................................................................. 12
2.5 IPD and project supply chain ................................................................................................................................. 13
2.6 What are transaction governances structures .................................................................................................... 14
2.7 What is the role of TGS in supply chain ............................................................................................................... 17
2.8. Understanding Supply Chain Management among independent actors ....................................................... 19
2.8.1 The coordination of actions among actors in the Supply Chain................................................................ 19
2.9 Disruptions in the Supply Chain: ........................................................................................................................... 20
2.9.2 Issues that could lead to disruptions in the supply chain ........................................................................... 21
2.10 Conclusion .............................................................................................................................................................. 22
3. Research Design and Approach ................................................................................................................................. 23
3.1 Introduction ............................................................................................................................................................... 23
3.2 Research Methodology/Design ............................................................................................................................. 23
3.3 Research Approach ................................................................................................................................................ 24
3.4 Research Method .................................................................................................................................................... 24

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 3.4.1 Qualitative Method ........................................................................................................................................... 24
3.5 Data Collection......................................................................................................................................................... 25
3.6 Data analyses .......................................................................................................................................................... 25
3.7 Validity and Reliability ............................................................................................................................................. 25
3.8 Conclusion ................................................................................................................................................................ 25
4. Ethical considerations ................................................................................................................................................... 26
5. Qualifications of Researchers ...................................................................................................................................... 27
6. Outline of the proposed study ...................................................................................................................................... 28
7. References ..................................................................................................................................................................... 29
8. Programme ..................................................................................................................................................................... 32
9. Budget ............................................................................................................................................................................. 33

Table of Figures
1. Table A: Issues within the Supply Chain causing disruptions……………………………………….21

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Definition of Terms
Supply Chain

A supply chain consists of various entities, namely suppliers, manufacturers, transporters,

warehouses and retailers etc. to meet a client client’s need. Each entity within a supply chain has
certain functions to fulfil such as receiving and filling a customer request. (Chopra & Meindl, 2004:1)

The supply chain entails the complete physical procedure from procurement of raw materials through
all process phases until the completed fabrication reaches the end user. (CIPS:1)

Integrated Project Delivery

The American Institute of Architects (2007) defines IPD as system of which a project can be
delivered, this system integrates individuals, systems, business organizations and practices into a
procedure which harmoniously combines the expertise and insight of all contributors to limit waste
and improve competence through all stages of construction: design, fabrication and construction.

Objective

According to (Ansoff, I) as cited by (Daily News, 2010:1), "Objectives are decision rules which
management to guide and measure the organization's performance."

Innovation

Innovation is the application of new knowledge to industry, and includes new products, new
processes, and social and organisational change, based on Firth & Mellor’ theory (1999) (cited in
Widen, 2003:144).

Performance

In general terms, performance is an act or execution of an organisation, group or individual. It is the

fulfilment of a promise, contract or any other obligation. According to the Concise Oxford English
Dictionary (2008:964) performance refers to “the action or process of performing task or function and
the capabilities of a machine, product or employee.”

Supply Chain Management

Supply chain management is the management of upstream and downstream relationships with
suppliers and customers to deliver superior customer value at less cost to the supply chain as a
whole (Christopher, 1998) cited by (Hong-Minh, 2002)

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Abbreviations
SCM- Supply Chain Management

IPD- Integrated Project Delivery

CSCM- Construction Supply Chain Management

AIA – America Institute of Architects

BIM – Building Information Model

CI’s – Contract Instructions

CSCM - Construction supply-chain management

KPI – Key Performance Index indicators

MC – Main Contractor

RFI – Request for Information

SA – South Africa

SCM – Supply-Chain Management

SI’s – Site Instructions

TCE – Transaction Cost Economics

TGS - Transaction Governance Structures

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 1. The Research Background

1.1 Introduction
The construction industry has changed over the millennia, no longer is the built environment just a
means of shelter from mother nature; but it a reflection of man’s dominion over the environment. We
have dominated the skies through spectacular skyscrapers, dominated the sea through underwater
and floating buildings, and according to Collins (2002) very soon even space will become another
area of dominance.

Yet the construction industry has failed to dominate the social and economic aspects of the built
environment; as the construction industry is fragmented and drivers wedges between the key entities
within the industry. In spite of significant financial and temporal investment, promising construction
projects often result in wasted time, lost money and litigation. Government’s total expenditure in 2012
amounted to R202 Billion (PWC, 2013:6). This emphasizes the significance of the construction
industry embracing change. A recent survey conducted by the CIDB in UK, revealed that 66% of the
respondents point to that the construction industry lacks innovation or “out of the box thinking” (Rust
& Koen, 2011:2). This is on top of the other challenges the industry is presently facing, such as skills
scarcities, growing prominence on environmental and sustainability issues, and energy scarcities
(load-shedding).

This issues are not limited to South Africa alone, the construction industry worldwide are facing
challenges (Ofori, 2010:1). The world has adapted to tackle these issues through SCM, IPD and BIM.
Since the mid 1990s, researchers and other experts inside the construction industry have shifted in
favour of SCM philosophy for the purpose of making the industry more active and proficient (Khalfan,
McDermott, & Cooper, 2004:897). In South Africa government has introduced SCM in the public
sector through the Procurement Policy Framework Act no. 5 of 2000 (Ambe & Badenhorst-Weiss,
2012: 243). SCM is gradually procuring acceptance in the construction community, especially with
companies having major manufacturing, logistics, and distribution needs. One key tendency of
current research in this field of study is the study of the adaption of SCM principles to projects from a
technological standpoint, which involves studying BIM (Dong, Khanzode, & Lindberg, 2013:535). The
successful aspects of integrated collaboration using BIM can be categorized as product information
sharing, governmental roles interaction, and production activities coordination, conditions for
teamwork and reference data merging (Khalfan, Khan, & Maqsood, 2015:912).

However the use of technology only is not adequate for improved performance, and that the culture
of the industry needs to be addressed first (Froise, 2014:1). Which implies better responsible

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amongst all members within the industry needs to be the norm. Friendships need to be build between
SCM members for collabrative information sharing and long lasting partnerships to occur
regularly.This paper will aim to investigate and indentify the affect of transaction governance
structures between supply chain members in IPD in South African construction; as well as to
determine the systems that coordinate the actions among autonomous/independent actors in supply
chain and their effect on the entire supply chain in South African construction

1.2 The statement of the problem

South African construction industry is fragmented and promotes competitive short-term relationships,
where entities within a construction supply chain are self-serving and build the barriers which prohibit
beneficial joint, long term relationships and effective information sharing. Thus, the research will
address: what do transaction governance structures between supply chain members affect IPD; and
how does the coordination of actors in supply chain affect the combined actions of the entire supply
chain in South African construction.

1.3 Research Questions

1.3.1 How do transaction governance structures between supply chain members affect IPD in South
African construction?

1.3.2. How does the coordination of actions among autonomous/independent actors in supply chain
affect the combined actions of the entire supply chain in SA Construction?

1.4 Research Sub-questions

 What are transaction governance structures?
 What are transaction governance structures in supply chain?
 How are the actions among the actors in the Supply Chain coordinated?
 What can lead to disruptions in the supply chain?

1.5 The limitations of the study

The researchers, geographically and time constraints, thus the research will only reflect on the
problems associated with selected projects and situations.

1.6 The assumptions

 Transaction governance structures will determine the level on integration among supply chain
members.
 The types of transactions among parties determine the governance structure.
 Disruptions in the supply chain will lead to increased costs.
 Coordination of different actors in the supply chain will influence the time frame of projects .

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1.7 The importance of the study
The construction industry is a complex system involving a number of professionals to complete
projects in time, within the cost requirement and at the optimal quality. SCM in often misunderstood
and undervalue as management system (Department of National Treasury of the Republic of South
Africa, 2015:1). According to (Benton & Mchenry, 2010:2) the fragmentation among member of a
chain may result in the following risks being experienced during the construction of a project:

 Domestic financial problems

 Operational capital problems
 Delayed compensation from the project owner
 Substandard design and specification documentation
 Insufficient technical proficiencies
 Inadequate information technology
 Absence of communication among supply chain members
 Production ineptitudes
 Insufficient work quality
 Work method issues
 Delivery reliability issues
 Bulk material quality issues

(Department of National Treasury of the Republic of South Africa, 2015:1) have openly
emphasized the importance of using SCM as key mechanism in government policy.

1.8 The aims and objectives of the study

The aim of the research is to prove that the introduction of IPD principles improves the traditional
SCM system adopted by construction sites in South Africa, by creating an environment which favours
early information sharing, open market economics and better interrelationships among supply chain
members.

In order to realize these aims the following objectives must be researched:

 To define transaction governance structures

 To identify the transaction governance structures in supply chain
 To investigate possible pitfalls with the current transaction governance structures in South
African construction.
 To determine the systems that coordinate the actions among autonomous/ independent actors
in supply chain and their effect on SA construction.

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1.9 Conclusion
The paper will aim to investigate: What are the transaction governance structures? What are the
transaction governance structures in supply chain? How the actions among the actors in the Supply
Chain are are coordinated? What can lead to disruptions in the supply chain? By answering these
questions we will define transaction governance structures; identify the transaction governance
structures in supply chain; to investigate possible pitfalls with the current transaction governance
structures in South African construction; to determine the systems that coordinate the actions among
autonomous/ independent actors in supply chain and their effect on SA construction. To ultimately
solve the research question: what do transaction governance structures between supply chain
members affect IPD; and how does the coordination of actors in supply chain affect the combined
actions of the entire supply chain in South African construction.

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2. The Review of Related Literature

2.1 Introduction
The construction industry’s method of constructing structures has been changing over the past
decade as technology has progressed. We have moved from labour intensive construction methods
towards the integration of human and plant, which has increased the industry’s complexity. Yet the
main outcome of the industry has not changed over the past 100 years which is to construct
communities, educational institutions, and infrastructure, and residential buildings, commercial,
industrial and health care buildings. The industry is fragmented and renowned for involving an
assortment of both minor and large firms, associated bulk material suppliers, and numerous other
professionals (Benton & Mchenry, 2010:5). Currently the traditional method of construction
procurement strategies to acquire new project is declining, because this methodology creates
adversarial attitudes which cause conflicts and disagreements, under par collaboration, absence of
attention on clients’ requirements, and inability to meet clients’ needs. (Obafemi & Roy, 2013:2)
There is a strong need for the different links within the construction project framework to link together
to form a supply chain, a business model which originated for the manufacturing industry which has
yield major success.

Supply chain management is main contributor for government implementing policy to reform the SCM
in the public sector. The public sector SCM is inefficient especially in the procurement phase which
has negative effects such as suppliers charge undue rates, goods and services contracted for and
delivered are of poor quality and unreliable and there is corruption and waste. This is in complete
contrast with the private sector which has been investing in SCM to increase profitability for
shareholders, as well as guarantee that the products delivered and the services provided fulfil the
clients’ needs. (Department of National Treasury of the Republic of South Africa, 2015:1) Therefore
South Africa is therefore no stranger to the importance of supply chain implementation in order to
overcome isolation tendencies common with the traditional construction process.

For any construction project the supply chain consists mainly of the architect, civil, electrical, and
mechanical and other engineers, the main contractor, subcontractors and suppliers who comes
together to construct a specific project within that specified time and budget (Benton & Mchenry,
2010: x) Yet a traditional construction supply chain management structure cannot combat the
fragmentation amongst supply chain members early enough to prevent potential risks. Thus there is a
need for the adaptation of integrated project delivery principals in order to reduce risk and produce a
building cost effectively within the time requirements imposed by the client.

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2.2 Origin of supply chain
SCM is concept which was initiated in the manufacturing industry. According to Shingo’s theory (cited
in Vrijhoef & Koskela, 1999:134) the JIT delivery system which is part of the Toyota Production
System is considered as the first signs of SCM being recognized as concept. The system was
designed to control supplies to the Toyota motor factory, at the optimum amount as well as at the
precise time. A drastic reduction in inventory and the effective monitoring of suppliers’ collaboration
with the production line was the primary outcome of the system. Subsequently as the system
developed it became part of the production system in the Japanese automotive industry,
supplementary management concepts together with the new SCM approach began influencing the
conceptual progression towards the current understanding of SCM. (Vrijhoef & Koskela, 1999:134)

Yet according to Dumond’s theory ( cited in Hugo, Badenhorst-Weiss, & van Biljon, 2009:3) SCM is a
mere extension of logistics; Hugo, Badenhorst-Weiss, & van Biljon (2009:2) further states that SCM is
also an additional improvement in managing the supply base and procuring function. This is in
contrast with Vrijhoef & Koskela (1999:135) theory that admits that SCM is mainly dominated by
logistics, but the modern notion of SCM involves many other functions which are beyond the logistic
function.

2.3 Concept of supply chain management

According to Hugo, Badenhorst-Weiss, & van Biljon (2009:5) SCM is management concept which
has the main goal of integrating a web of links forming the chain from the sources of the supply to
distribution and the client in the execution of certain practices and activities that will eventually create
and enhance value for the end user in the form of products and services which are specially designed
to fulfil client requirements. The flow of information within a standard structure of supply chain in
manufacturing begins with the customers and circulates between the customers, retailers,
assemblers, manufactures and suppliers. The flow of material within a standard structure of supply
chain in manufacturing flows from the procurement of raw materials to the factory etc. for fabrication
which flows to sales and eventually ends up with the end user. Increased transparency and alignment
of supply chain’s synchronization and structure is the aim of SCM, instead of focusing solely on the
preceding entity or level, SCM considers the entire supply chain, irrespective of the functional or
corporate boundaries. (Cutting-Decele, et al., 2007:76) SCM encompasses the tactical and
procedure synchronisation of subcontractors, material suppliers and information inside the supply
chain to provide fulfilment to the eventually occupiers or end users. (Benton & Mchenry, 2010:23)

2.4 Supply chain in construction

Lack of communication among supply chain members, inadequate information technology, domestic
financial problems, is a few of the hurdles faced by project owners, yet inspite of these obstacles;

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they still must be prepared to take realistic risks. The risks involved do not only affect the project
owner but all members of the supply chain. The industry encounters levels of complexity as a whole,
while the industry evolves and attempts to compete with growing energy, labour and materials costs.
Partial integration of the lessons acquired from the manufacturing sector places CSCM in a
favourable position to alleviate risks. CSCM can substitute disintegration and ineptitudes with
integration, value and enhanced project quality. (Benton & Mchenry, 2010:23)

The integration is vital for solving the problems faced within the industry, by creating better integration
and communication through supply chain. Thus a shift in the method of procuring contractors’ from
traditional low cost selection towards best value selection needs to be made. The traditional
relationship of principal – client interaction only needs to be altered to include interaction of client with
the entire supply chain. The project teams need build repetitive long-term relationships instead of one
build relationships which are accustomed to traditional supply chains.

SCM cannot be directly applied to construction in the same way as in manufacturing; thus the role of
SC in construction develops the specific characteristics associated with a CSC. According to
Vrijhoef’s theory (cited in Cutting-Decele, et al., 2007:76) a construction supply chain is characterized
by: The first being the fabrication function within the construction process is centred around a single
product, this product or object is fabricated from the incoming materials directed to the construction
site; secondly, it is a short-term SC constructing a single construction venture by means of repetitive
reconfiguration of government structure of the development. The primary cause of the construction
supply chain being epitomized as instable, fragmented, is the separation among the design and
construction of the built structure; lastly, it is commonly considered to be a make-to-order supply
chain, implying that every venture produces a new product or prototype. Construction supply chains
are currently beset with waste and problems produced by myopic control. (Vrijhoef & Koskela,
1999:169) Thus, a construction supply chain management system can be relied on to solve all of the
construction industry’s problems and requires an integration of IPD lessons.

2.5 IPD and project supply chain

According to Emdant, Mauck, & Jogan,(2010:2) the definition of IPD:”Integrated Project Delivery
(IPD) is a project delivery approach that integrates people, systems, business structures, and
practices into a process that collaboratively harnesses the talents and insights of all participants to
reduce waste and optimize efficiency through all phases of design, fabrication, and construction.
”According to Obafemi & Roy (2013:2) research, construction supply chains using IPD principles
have aided in the completion of high performance projects through the creation of a collaborative
system; which can be used to address the coherent problems currently plaguing traditional
construction procurement. Construction industry is currently specialized to such a degree that no

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single firm is capable of providing all the specialized expertise needed; thus there are numerous firms
focusing on different disciplines to meet the varied and complex demands. Therefore, IPD controlled
projects are easy to manage because all the entities involved in the project sign up to a single
primary contract with the client. IPD is still new concept within the building process practice, which is
similar to the design-build contract. IPD principle instigates earlier involvement by the participants
which results in the price being set later and participants share the financial risks and rewards from
the project, this creates a mutual partnership. (LAHDENPERA¨, 2012:61)

IPD most perceptible benefits come in the course of construction where attention turns to quality
control and budget monitoring; resulting in a more proficient procurement of material installation, as
well as a reduction in RFIs. An intelligent fully updated model is provided to the owner for an
assortment of imminent building uses. This reduces the volume of design/drawing amendments,
which leads to numerous amounts of SIs and CIs; which has a profound impact on the project
schedule and costing. According to Benton & Mchenry (2010: 3) end users or occupiers are excluded
from the major of the process and are only affected indirectly. IPD makes a provision for clients to be
involved much sooner in the IPD work flow which results in easier understanding and gratification; to
achieve a greater efficiency in the construction operations and content occupants, The establishment
of collaboration teams, which is inclusive of all the stakeholders invested in the project, will lead to
effectively designed building, better construction and improved operation of higher performance,
more sustainable built environments

The integration of these principles with supply chain management will ensure that all members who
are responsible directly or indirectly with the construction process will be involved with the design
process to improve the project schedule by eliminating any possible production delays which
eventually lead to financial problems, suppliers will also be able to provide advice on which materials
are readily available and which materials require a comprehensive lead time. According to Obafemi &
Roy (2013:2) this approach ensures that all members in the supply chain will be liable for the risks
and gain a share in the profits, which is one of the core problems contributing towards the adversarial
nature of traditional procurement. In turn this will lead to main contractors, subcontractors and all
other participants working together as friends and looking out for the interests of the client, because
they cooperatively and independently obligate themselves to each other to execute all the conditions,
terms and requirements of the principal contract. Main contractors thus become more reliant on the
other actors in the CSCM (Vrijhoef & Koskela, 1999:169).

2.6 What are transaction governances structures

According to Ring and Van de Ven’s theory (cited in Zhang, 2006:60) TGSs are defined as the
legitimate systems of governance that apply to various types of transactions ( ranging from markets

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to hierarchies), and the organizational and bureaucratic precautions that parties assign into a
transaction.

There are various theories explaining the process of resource and information exchange amoung
parties, the most important exchange being resource dependence theory, TCE and relational
contracting. (Patterson, Forker, & Hanna, 1999: 86) According to Pinckney’s theory (cited in Zhang,
2006: 59) financial insitutions, security firms, and insurance companies have begun integrating with
one another and according to Langlois & Robertson’s theory (cited in Zhang, 2006:86) in the
computer industry regular exodus towards market TGS, have been observed; which is regarded as a
comprehensive shift of TGS.

A TGS is created during each society’s evolution, each TGS containing a distinctive blend of market,
social and legal sanctions for regulating monetary interactions (Sun, 2012: iii). Other researchers
prophesize that TGS will become more market based as information technology advances, based on
Malone, Yates & Benjamin’s theory (cited in Zhang, 2006:86); while others believe that TGS will
deviate from hierarchical integration towards a greater amount of outsourcing and, simultaneously,
divert from autonomous market rivalries towards complaisant partnerships, based on Clemons, Reddi
& Row’s theory ( cited in Zhang, 2006:86). These observations are starting to be realized through the
use of integrated supply chain management and IPD principles, which not only makes a provision for
cooperative partnerships among supply chain members; but tools such as BIM makes TGS more
market based. Writers over the years in these fields have defined and studied the move from
traditional competitive, “arm’s length” , buyer-supplier relationships towards longer-term, more
complaisant relationships where buyers and suppliers view one another as partners. Commitment to,
and the establishment of, a collaborative exchange where both parties share mutually in the risks and
profits, is the essence of the partnership. (Patterson, Forker, & Hanna, 1999:85)

The perplexed setting of TGS raises questions about the motives for its shift, the nature of the new
TGSs, and the dominant influences on the design and choice of a TGS. TGS has been the central
paradigm for solving these questions. From the moment of TCE initiation, it has become an essential
anchor for studying an extensive series of economic and organizational problems. (Zhang, 2006:59)

Transaction cost economics and the discrepancies on its principal theme, opens the door to various
possibilities for explaining why different inter-organizational interactions form and under what
circumstances every form might best perform (Patterson, Forker, & Hanna, 1999:86). According to
Leblebici’ theory ( cited in Patterson, Forker, & Hanna, 1999:86) the transaction-cost approach is
founded on the basis that the presence of various organizational structures, regardless if they are
markets, hierarchies, or clans, is essentially determined by how proficiently each structure can
arbitrate exchange transactions amongst parties. A number of corresponding theories have been

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presented into the debate, namely property rights, organization and resource-based theory. (Zhang,
2006:59) Which has resulted in the awareness of TGS shifts from polar classification of market
versus hierarchy in favour of a continuum of market-hierarchy based on observations made by John
Reve, 1982; Heide & Miner, 1992; Hennart, 1993 ( cited in Zhang, 2006:59). In spite of advances in
the theoretical structure, pragmatic studies founded on the market-hierarchy continuum continue to
be limited. Researchers freely consent to theory that TGS has a multi-dimensional in nature, but have
little unanimity as to the magnitudes that depict the paradigm and the measures used to evaluate the
magnitudes. (Zhang, 2006:59)

According to (Zhang, 2006:60) Coast (1937) presented the TGS theory; Williamson (1979; 1981;
1991) extended it and demarcated it as the framework that governs exchanges of merchandises or
services among technologically distinguishable interfaces or assembly phases. TCE is constructed
upon two assumptions, i.e. resourcefulness and confined rationality. Due to these circumstances,
transaction costs, the resources required for running the monetary system (Arrow 1969:48), are
unavoidable. TCE defines three characteristics influencing the transaction costs and, therefore, the
choice of TGS. These characteristics are asset specificity, uncertainty and frequency.

Asset specificity relates to the amount of which an asset can be dispatched to another uses and by
another users minus forfeiting productive value (Williamson, 1989:142). Numerous amounts of
transactions necessitate the expenditure of certain assets. The greater the certainty of the asset, the
more difficult it is to dispatch for other uses it the relationship using the asset concludes. The
procurement of a certain asset frequently obliges the party, providing the asset, to agree to a
preliminary capital expenditure before the transaction can be concluded. This places additional risk
on the provider of the asset. As it turns out the transaction with party in need of the particular asset is
concluded, the supplier of the asset is left with an asset that is not easily or inexpensively dispatched.
(Patterson, Forker, & Hanna, 1999:86). According to Williamsom’s thoery ( cited in Patterson, Forker,
& Hanna, 1999:86) recognizes six principal categories of asset specificity including:

 Location specificity;
 Physical asset specificity;
 Anthropological asset specificity;
 Devoted assets;
 Product name capital;
 And time-based specificity

The theory of uncertainty speaks of the circumstance needed for being capable of predicting
applicable contingencies surrounding the transaction (John & Weitz, 1988: 337). There are various
form of uncertainty. According to (Patterson, Forker, & Hanna, 1999:86) they are catergorized
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according to primary and secondary uncertainty. Primary being the state of contingency, which
commonly stems from unsystematic acts of nature and erratic deviations in client preferences.
Certain working conditions are highly volatile, and it is very improbable that anyone contributing in
such a market will have the capability of designing a schedule of works that accommodates every
imaginable contingency that might occur. Secondary uncertainty arises from the absence of
communication between participants, where one party has no means of finding out the synchronized
verdicts and schemes prepared by others (Williamson, 1989:146). Within a supply chain it is usually
the end user, who under traditional construction operations only views the completed product.
Functioning in competitive surroundings frequently excludes communication, which results in
competitors being reluctant to share ideas with associated market contributors, and buyer-supplier
interaction is delayed (Patterson, Forker, & Hanna, 1999:87).

Frequency discusses the discrepancy among a once-off or short term exchange and a repetitive or
long-term exchange ( John & Weitz, 1988:337). The significance of the transaction frequency
revolves around the debate that escalation in the regularity for fixed costs allowances for the
distribution of costs among more entities which will result in easier absorption of costs.

TCE recognises that market TGS or hierarchy TGS are capable of governing a certain level of
uncertainty, frequency and asset specificity. Price is the undetectable influence that arbitrates supply
and demand in market TGS; whereas a principal power governs and distributes resources. A
considerable volume of research has produced outcomes consistent with the transaction cost theory.
TCE is not immune to criticism, researchers have criticized the theory for being more distorting that
illuminating, for the theory existing separate from reality, absence of simplification, for bestowing an
under socialized perspective on human incentive and an over socialized perspective on organized
control, and for additional alleged acts (Zhang, 2006:60).

Faced with comprehensive changes of TGS and tested by the new environment, researchers and
experts are bringing up questions. Why are TGS changes in diverse directions? What are the
prominent aspects related with these changes? Solutions to these problems are of essential to
governmental philosophers, financial experts, human behaviour experts, and others concerned with
the framework of civilization and the running of monetary structures (Zhang, Melcher, & Li, 2003:1).

2.7 What is the role of TGS in supply chain

TCE centres on the body of transactions that take place each time a good or service is transferred
between members of the supply chain. When the transactions are domestic, costs implied by the
transaction consists of managing and coordinating personnel and acquiring contributions and capital
equipment. The transaction costs of purchasing the identical good or service from an outside supplier
can consist of source selection (bid process), contract administration, performance evaluation, and

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dispute resolution, as a result, the body of transactions or governance structure influences
transaction costs.

Clemons’ prediction of TGS “deviating from hierarchical integration towards a greater amount of
outsourcing and, simultaneously, divert from autonomous market rivalries towards complaisant
partnerships”; (Benton & Mchenry, 2010:72) defines outsourcing as one of the principle required for
an integrated supply chain management system. This however poses its own set of questions, single
versus multi sources. The principal advantage of multiple sourcing is the creation of a competitive
and assured supply. It is generally accepted that competition has a direct colloration with costs being
driven down. A simple example is the lack of competition in the electrical supply industry in South
Africa, this results in the uncompetitive nature of the prices laid on consumers. The other factor is that
multiple supplies assures an undisrupted stream of material. For example when brick manufacters go
on strike, construction is not delayed as an alternative source was sourced in the beginning of the
project. The principal advantage of single sourcing the supplier is more comfortable with reducing the
cost per unit; another benefit is cooperation and communication which leads to win-win relationships
amoung buyers and suppliers. Which is consistant with the subsequent part of Clemons’ theory.

Ownership speaks of the prescribed right to govern a company and to correct the company’s
financial gains. Ownership of an asset is described by means residual rights, rather than openly
stipulating a list of specific rights over an asset. (Zhang, Melcher, & Li, 2003:10). According to
Grossman & Hart ( cited in Zhang, Melcher, & Li, 2003:10 ) residual right is the right to govern every
part of an asset that have not been specifically ceeded by the contract.

The purchasing of residual rights can result in ownership being obtained. A company might buy its
supplier resulting in residual rights of control being subtracted from the owner of supplying company.
Residual rights can obtained or fortited through unions, joint endeavors, derivatives, or outsourcing.
A high level of hierarchy TGS is linked with a high level of ownership (Zhang, Melcher, & Li, 2003:10).

The amount of suppliers is the amount of companies capable of producing a specific kind of product
or service. Choices concerning the amount of suppliers can have a immense effect on the amount of
interaction with suppliers and the level of rivirail between suppliers. A fraction of the suppliers delivers
a sense of security to suppliers. It inspires suppliers to devote funds and human assets into the
transaction liaison. A common perspective is that companies strive for a stability among the level of
competition between supplier to accomplish economic proficiency and the level of teamwork with
supplier to govern the dependability and quality of supplies. The level of market orientation of the
TGS is indicated by the amount of suppliers used. The large amounts of supplier is related to the
large level of market TGS (Zhang, Melcher, & Li, 2003:10).

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The time requirement and the comprehensiveness of the contracts are another aspect of TGS. A
comprehensive and enforceable contract is challenging to compose, particularly when the intent of
the transaction turn out to be complicted. An extensive and partial contract is connected to the
uncertainty and is expected to be satisfied under a hierarchical framework for instance employment
contracts. A short and comprehensive transaction contract is expected to be implimented in a market
(Zhang, Melcher, & Li, 2003:10). If contracts are intrinsically imperfect, parties might notice possible
gains from unprincipled conduct. Therefore,care must be dedicated on more multifarious governance
devices to fill gaps in the agreement, resolve conflicts, and become accustomed to new situations.

Clear synchronization consists of negotiation and multi-dimensional communication among members

to accomplish integration between monetary undertakings that are cooperatively held and to address
problems that cannot be supervised through autonomous activities or implicit coordination. Implicit
coordination takes place the moment the companies’ activities turn out to be spotted, predictable, and
matched with anticipations or activities of others (Zhang, Melcher, & Li, 2003:10).

2.8. Understanding Supply Chain Management among independent actors

According to London and Chen.( 2007:4, cited by (Emuze, 2009:11), the supply chain is concerned
with firms involved in upstream and downstream contractual relationships, who deliver a commodity,
product or service related to the core business of a construction project.

Construction supply-chain management offers new approaches to decrease the cost of and increase
the reliability and speed of facility construction. The SCM in context relates to the production activities
of autonomous actors (subcontractors and suppliers in construction) and seeks global optimization of
these undertakings.

Subcontractor and suppliers production contains the largest value of project cost; supply-chain
approaches may have similar settlements. According to (Bertelsen, 1993), as cited by (O'Brien:1),
limited studies in construction suggest that poor supply-chain strategy regularly increases project cost
by ten percent and this estimate is probably conservative. Project phases might be similarly affected
by the poor coordination of SCs.

The position of each member of the chain is said to be inherently conservative, as the majorities have
adapted to the status quo and remain in separate silos to protect their interest as stated by Saxon.
(2002, as cited by (Emuze, 2009:11) this in turn means that the SC needs to develop mutual trust
and align project goals in order to have a constructive outcome.

2.8.1 The coordination of actions among actors in the Supply Chain

According to (Cutting-Decelle, et al., 2007: 77, 78) the actors within the CSCM can be recognized,
dependent on whether the focuses will be directed on the SC or the construction site, or both.

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The emphasis may be on the influences of the supply chain on site activities. The area of interest
may be that of the cost and duration of site undertakings within the area of Supply Chain. The
attention is strained to ensure that dependable material and labour flows to the site and disturbances
to the workflow are avoided. This may be attained by focusing on the connection between the site
and direct suppliers.

The contractor, whose main interest is in site activities, is in the finest position to adopt this focus.
(Cutting-Decelle, et al., 2007) According to (Cutting-Decelle, et al., 2007) the attention may be
directed on the supply chain, or additionally with the purpose of reducing the costs, predominantly the
area concerning the logistics, lead-time and inventory. Material and component suppliers may also
accept this effort.

The relocating of activities from the site to prior stages of the supply chain; this foundation may
simply be to avoid the principally inferior conditions on site, or to attain wider concurrency between
activities, which is not possible with site construction with its many practical dependencies. The goal
is again to reduce the total costs and duration. Suppliers and contractors may initiate this effort to
reduce the costs and given timeframes. (Cutting-Decelle, et al., 2007:78) The focus may also be on
the integrated management and improvement of the supply chain and the site production. Thus, site
production is incorporated into SCM. Clients, suppliers or even contractors may initiate this focus.
(Cutting-Decelle, et al., 2007:78)

2.9 Disruptions in the Supply Chain:

There has been numerous research work and real test cases evaluated in the construction industry,
where many ineffective systems and problems can be perceived. Analysis of these problems has
shown that a major part of them are supply chain problems, originating at the boundaries of different
actors or tasks. Taken from (Vrijhoef et al., 2001) as cited from (Cutting-Decelle, et al., 2007:78) this
also applies to the SCM in SA Construction:

• Design/engineering border: Improper documents, changes in design, prolonged waiting periods

for architect’s approval.

• Engineering/buying and preparation border: Inaccurate data, engineering drawings not suitable
for intended use.

• Purchasing & preparation/suppliers interface, purchase & preparation/subcontractors

interface: Inaccurate data, information needs that are not met, argumentative bargaining and other
changes.

• Suppliers/subcontractors interface and suppliers/site interface: Delivered supplies not in

agreement with planning, faulty deliveries, long storage periods etc.
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• Subcontractors/site interface: Subcontracted work not delivered according to main design,
contract and planning.

• Site/completion of building interface: Challenging completion due to any quality problems that
may arise from supplies.

• Completion of building/occupation interface: Delayed occupation due to late completion and

unresolved quality complications.

• Purchasing & preparation/site interface: Inaccurate data, information needs not met, unrealistic
planning.

2.9.2 Issues that could lead to disruptions in the supply chain

In addition to above mentioned: Disruptions in the Supply Chain: various other problems within the
Supply Chain that might cause delays and disturbances in SCM

Table A: Issues within the Supply Chain causing disruptions

Issues Barriers arising from the Possible solutions

issues
Financial  Late and incorrect  Fair payments for
payments contractors

 Retention  Place value over

price
 Tendering process
 Trust between
parties

Programming Unrealistic program times Early involvement from

actors in the SC
Contractual Traditional contracts do Contract forms
not engender good encouraging collaboration
working relationships
Contractors Estimators are too Education of staff on
demanding on small firms people skills and
that cannot comply with communication skills
price related issues
Knowledge and  Inaccurate  Time taken to learn
information sharing acceptance of the from partners

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 businesses of other
actors in SC

Adapted from Dainty et al. (2001: 172 cited by (Emuze, 2009, p. 46) .

2.10 Conclusion
The construction industry is growing in its complexity; building no longer serve one function but can
facilitate a number of internal environment requirements. As a result traditional methods of
constructions are have been proven to be obsolete and inadequate for delivering high performance
building on time, within the budget and at the appropriate quality. The industry was thus forced to
adapt a new approach taken from the manufacturing industry to improve the traditional construction
procedure; even so it has met its own set of obstacles through its integration with the construction
industry. The system was defined as a concept called supply chain management (SCM), which
aimed to achieve collaboration, create environments which cater for open information sharing and
establish joint partnerships. IPD principle integration with SCM has been gain traction in the industry
to improve project’s designs, construction and operation which result in more sustainable built
environment. Transaction governance structures are the legal statues of governance that are applied
to various kinds of transactions, and the organizational and bureaucratic precautions that parties
assign into a transaction. Transaction cost economics stipulates the characteristics of transaction
costs influencing TGS as asset specificity, uncertainty and frequency. The type of transaction as well
as the constructs of the society in which the TGS exists determines the type of TGS. TGS in
construct is as simple as the contract between buyer and supplier.

According to (O'Brien:6) SCM will be advanced in concurrence with the various actors involved, it
offers unique scope for academic research to make a contribution. The coordination within the Supply
Chain is very difficult to conceptualize, and build trust to run on a wide basis of projects for many
firms through improved organizing, costing and the organization of different activities.

Through various research activities regarding the Supply-Chain, practical evidence will be provided
for opportunities and pitfalls within the concept as a whole in South African Construction. Improved
Supply-Chain determinations will be determined by the cooperation within the industry. As the
researchers we are in a fundamental position to enhance these efforts. (O'Brien: 6)

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3. Research Design and Approach

3.1 Introduction
Research is technique used by people to gain knowledge. Research in common phraseology denotes
to a pursuit for knowledge. Research can also be defined as a scientific and methodical pursuit for
relevant information on a specific topic. The main objective of research is to determine solutions to
questions or problems or gaps by applying a scientific approach. (Kothari, 2004:1-2)

Research methodology is a means of analytically solving the research problem. The study involves
various steps which are embraced by researchers, as well as logic, in studying the research problem.
It is therefore essential for a researcher to be aware of the numerous methods and techniques
available to him in order to conduct research. Researcher would need to understand the method of
which in developing specific indices or tests; mathematical knowledge background on data handling
concepts such as calculating means, modes, medians and standard deviation; understand how to
relate certain research procedures to different situations; and be able to reflect on the findings,
identify the gaps and recommend solutions. For example, a building designer, who’s role is to
prepare designs for a building, needs to assess the feasibility of his design decisions, i.e., he has to
justify his decision for using a certain type, number and location of doors, windows and ventilators, as
well as the use of certain materials instead of others. (Kothari, 2004: 8)

This chapters will define the method in which the research problem will be addressed and how the
data will be collected and analysised, in order to find the problems and possible solutions which can
be found through the interpertation of the knowledge gained.

3.2 Research Methodology/Design

In this study, the researchers will conduct a literature review, questionnaires, observations, interviews
and tests. The research will employ an empirical investigation inclusive of quantitative techniques to
gather information, analyse the gain information and reflect on the findings thereof. One of the tools
researchers will be employing to gather information, is a test which that will record the speed at which
supply chain members respond to questions, by comparing two electronic mediums: e-mail and
whatsapp. We want to understand the relationships of transaction governance and Supply Chain
members. And to understand the coordination of independent actors in the Supply Chain. Through
this we will use a multiple Case Studies and Interviews

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3.3 Research Approach
Research will be conducted in a scientific manner where the information gained from literature needs
to be proved relevant to a practical construction site through case study analysis. The practical
problems identified during a case study analyses will need to solve through literature, as researchers
are incapable of implementing possible recommendations themself. Our approach will be cantered on
the following aspects: International, national (South Africa) and local (Bloemfontein) perspectives.

3.4 Research Method

3.4.1 Qualitative Method

A qualitative research method will be followed for the consideration of the SCM in Construction. The
research will emphasise the understanding within the SC as it will provide responses to the
interaction and actions of the different actors.

Within the research aims, with regards to the qualitative context, positive paradigms are judged
inappropriate . Given the qualitative context of the research aims, positivist paradigms of cause and
effect were judged inappropriate (Jeon, 2004).

The qualitative research methodology is arguably well placed to illuminate interpretation of the actors
in the SCM in SA Construction.

The Qualitative research method will inform and characterize the research strategy to be adopted
(Tennant & Fernie, 2012:7). With an intervening importance on the actors embedded in the daily
realities of supply chain management practice, interviews will be judged to provide the ideal method
to explore and cross-examine stakeholder interpretation.

Interviews will be conducted with participants from participating construction organisations which
conformed to the specific criteria of the study. Kvale and Brinkmann (2009), as cited in Cresswell
(2012:163), explains where the data from the interviews will be analysed and then verified for validity,
the reliability if the of any findings and then reporting the study.

There are various interview techniques available such as formal and highly structured interview
templated to open ended formats that rely on the exploration at the other, Wertz, et al., 2011 as cited
by (Tennant & Fernie, 2012).

With regard to the Qualitative method, multiple case studies will be conducted, where a case study is
a research method which involves the case to be up-close and in depth and also being an
examination in detail with regards to the subject of the research. (Yin, 2014:5)

The "case" being studied will be focussed on the actors and TGS within the SC in SA Construction.

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3.5 Data Collection
We want to understand the relationships of transaction governance and Supply Chain members; as
well as to understand the coordination of independent actors in the Supply Chain; through this we will
use a multiple Case Studies and Interviews. Primary data will be obtained through contacting specific
construction companies via electronic mediums such as email, telephone and other social media.
The information will be captured through the conduction of interviews and completion of
questionnaires. The secondary data will obtained from a number of hard copy and soft copy (internet)
sources such as journals, conferences, books, reports etc.

3.6 Data analyses

Data will be analysed by a computerized statistical programme, programme that will check for validity
and correctness of research conducted and will be used to process and analyse the data to be
collected through questionnaires and interviews.

Case studies will also be conducted on different sites in the Bloemfontein, Free State area.
Information will be processed and interpreted as to define the analysis of the research.

3.7 Validity and Reliability

The information gathered from this research will be used to expand on current theories through
empirical research. To ensure a level of validity well designed questionnaires with unique
characteristics will be used as an instrument for obtaining the data; periodical observations will be
conducted to ensure data collected is more accurate.

3.8 Conclusion
The research methodology used in this paper entails qualitative tools through which data will be
collected to support literature findings based on the sub-questions and objectives of the study. The
aim of the study is gain knowledge and verify the assumptions made, which in turn might improve the
overall health of the construction industry.

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4. Ethical considerations
The information will be provided by the respondents of interviews and case studies, and will be
treated confidentially so as to protect the names of the respondents. The information will be used
only for this research project of which the researcher will be involved.

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5. Qualifications of Researchers
The researcher E.D Pretorius has a National Diploma in Building from the Central University of
Technology, Free State.

The researcher K.O Joseph has a National Diploma in Building (Cum Laude) from the Central
University of Technology, Free State.

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6. Outline of the proposed study
Chapter 1 presents the background of the study in the form of a statement of the problem, research
questions, aim and objectives, scope, assumptions and significance of the study. Chapter 2 then
reflects review of the related literature, whilst Chapter 3 identifies the research method employed.
Chapter 4 relays the participants perceptions concerning the phenomenon, and Chapter 5 presents
the summary, conclusions and recommendations that were deduced from the research project. The
covering letter, questionnaire and interview protocol close out the treatise as appendices.

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7. References

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Patterson, J. L., Forker, L. B., & Hanna, J. B. (1999). Supply Chain Consortia: The rise of
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8. Programme
Time – Table Research Project
Period Planned Activities
July 2015 Draft Literature review, and all other
documentation, notes and sources
August 2015 Draft empirical data requirements and collection
of questionairres , interviews, observations and
test
September Data Collection and Data Analysis.
2015
October 2015 Submit Draft Treatise to Dr Emuze
November Submit Final Treatise
2015

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9. Budget

Materials Activities SA Rand

1 Preliminary R3500
2 Stationary R500
3 Enumerators R2 000
4 Traveling Costs R3 000
5 Statistical Data Analysis R3 000
6 Printing R6 000
Total Estimated Cost R18 000

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