The American Professional Constructor, The Journal of the American Institute of Constructors (AIC) â€“ June 2000, Volume 24. Number 1
Computer Software for Construction Practice and Education Dr. John Gambatese and Dr. Jimmie Hinze
ABSTRACT Computer usage has become commonplace in construction practice and education. The computational speed and power of current personal computers make them ideal tools for many applications related to construction engineering and management. Advances in computer hardware and software capabilities have opened the door for creating innovative computer programs with a small amount of computer knowledge. Such computer programs can be regularly used to address the practical, everyday aspects of construction projects, plus be effectively utilized in the educational process. In order for construction industry practitioners and educators to effectively create such programs, it is helpful to understand the difficulties and best practices associated with their development. This paper describes research efforts to develop useful computer software for construction practice and education, and the lessons learned from the development efforts. The lessons learned provide valuable guidance for developing programs that have practical value in the workplace and are effective as learning tools in an academic setting and for on-the-job training.
KEY WORDS construction software, training, education, construction management
The American Professional Constructor, The Journal of the American Institute of Constructors (AIC) â€“ June 2000, Volume 24. Number 1
INTRODUCTION Construction engineering and management practice and education incorporate many tools. The tools used range from the very simple pencil, paper, and engineering scale to the high-powered super-computer. Each tool is designed for a specific use and adds some benefit to the construction process and the learning experience.
development of new tools and technologies has facilitated more efficient and effective construction processes and, as a result, improved the overall constructed project. Each new tool not only provides additional benefits to construction, but also stimulates the development of other useful tools. The benefits realized by using computers in construction practice and education have motivated an in-depth look into the development of computer programs for these purposes.
Understanding both the difficulties and best practices in creating such
software will lead to more efficient development efforts and more effective programs. Several computer programs were developed by and under the guidance of the authors that can be used on the job and in the classroom.
This paper describes the
development and organization of the programs and the lessons learned from the program development process.
RESEARCH OBJECTIVE The objective in developing the programs is to create computer applications that can be used for both construction practice and education.
It is intended that the
applications be of such size and complexity that a construction industry practitioner or educator could undertake their development with a small amount of computer
The American Professional Constructor, The Journal of the American Institute of Constructors (AIC) – June 2000, Volume 24. Number 1
programming knowledge. Difficulties and best practices associated with creating such programs are then derived from the development process.
Based on the learned
difficulties and best practices, recommendations are made for effectively and efficiently developing such programs by construction practitioners and educators. Developing a new computer program may seem like a daunting or highly technical process to many people.
The sophistication of many computer software
packages available today often leads one to believe that only a highly trained expert can create a useful, user-friendly program. Though this presumption may have had merit in the early 1980’s when personal computers were in the initial stages of development, it is not necessarily correct today.
In fact, the same advancements in computer
technologies that have led to the faster and more powerful programs that we regularly use every day have been incorporated into the tools used to develop the programs themselves. Computer software development is a field that requires many years of education and specialized training.
But, with just a small amount of computer
knowledge and some practical thinking, tremendously useful programs that focus on solving a single problem in construction can be created. Computer software development tools, often called “authoring tools”, are computer programs used to create other programs. Authoring tools provide drawing capabilities to create graphic screen objects, such as buttons, icons, menus, and text boxes, and a programming language to control object behavior. The tools typically allow access to external programs and databases to extend the capabilities of the new programs and provide the ability to incorporate both audio and video. The authoring tools available today provide an interactive environment for both creating and running
The American Professional Constructor, The Journal of the American Institute of Constructors (AIC) – June 2000, Volume 24. Number 1
computer applications. Several authoring tools are available that allow the creation of computer applications which run under Microsoft Windows. Two authoring tools were used to develop the programs described in this paper: Asymetrix ToolBook (Asymetrix Learning Systems, Inc., Bellevue, Washington) and Visual Basic (Microsoft Corporation, Redmond, Washington). Both ToolBook and Visual Basic are extremely user-friendly, easy to learn, and include on-line help and a reference manual that provide assistance with programming.
PROGRAM DEVELOPMENT Program development began with refining the construction topic to be addressed and functions to be provided by the program. To make programming simpler and to focus the software’s application, each program was developed to address one topic. Following program definition, the architecture and layout of the program was created. It was intended that the program structure would effectively and efficiently allow the user to implement the program’s utility.
For use on many jobsites, a program must be
organized to be easily and quickly understood, and usable on a wide variety of computers. Programs that incorporate some design content must be flexible to allow for design modifications or “tweaking” of the design, and must allow for a variety of configurations, sizes, materials, etc. Additional features were considered to meet the educational objectives for the programs. Learning construction principles through the use of computers is both an effective and convenient means of education.
Developing an understanding of
construction scheduling, for example, can be facilitated through the application of
The American Professional Constructor, The Journal of the American Institute of Constructors (AIC) â€“ June 2000, Volume 24. Number 1
various scheduling software packages available for sale. Though this practice may be appropriate to give the student an idea of how a program operates, using the program as a â€œblack boxâ€? without understanding the principles on which it is based is a very dangerous approach. It is very important that the student learns the basic construction principles and how the computer applies the principles. This need is facilitated through computer programs that illustrate the principles as a part of their use. Programs that take the user step-by-step through the solution process provide the student with a better understanding of the topic.
Illustration of the solution process was an additional
objective for the programs. To make the programs user-friendly and easily understood, development of the programs involved designing them to look and operate like other commonly used, offthe-shelf programs. To meet this objective, toolbars, menus, and help screens were included in a Windows-based environment. Graphics and icons were incorporated to highlight visual aspects of the programs. Color schemes were developed to effectively highlight program features and functions, and match commonly used programs. Program development followed with these objectives in mind. Each of the programs is briefly described in further detail below.
Construction Inspection Guide The complexity associated with many construction projects can cause some safety hazards to be overlooked, especially if reliance is placed on memory to perform safety inspections.
Assistance during safety inspections is provided through safety
checklists that force the investigator to evaluate specific jobsite conditions and
The American Professional Constructor, The Journal of the American Institute of Constructors (AIC) – June 2000, Volume 24. Number 1
practices. A computer program titled “Construction Inspection Guide” was developed to provide the ability to select and create project-specific safety checklists that are customized to match the specific work at hand. The program is organized to present the checklists in an efficient, logical manner that reflects the construction process. The process of selecting a checklist begins by choosing one of four checklist categories: General Requirements, Work Phases, Temporary Structures, or Construction Materials. The categories were developed to allow the user to focus on specific topics related to the work at hand or the features present on the construction site. General Requirements includes checklist topics that are generally applicable to all construction projects, such as personal protective equipment and housekeeping. Work Phases is organized according to specific work being performed on the project, from demolition to furnishings and finishes. Temporary Structures includes checklist topics that focus on structures which are used for construction purposes but do not become part of the completed project.
Construction Materials addresses the specific materials used for construction, such as wood and steel. The topics within each category contain numerous checklists related to the specific topic.
For example, the topic “Welding and Cutting” within the General
Requirements category contains various checklists applicable to the practice of welding and cutting metals as shown in Figure 1. One checklist, titled “Welding and cutting fire prevention” might be utilized by a safety inspector on a project involving the welding and cutting of steel members where flammable materials are present. The checklist can be printed out and used for reference during a safety inspection.
Inspection Guide not only aids in improving safety on the jobsite, but also provides a tool for construction safety education. The checklists are an efficient means by which safety regulations can be learned as opposed to reviewing the lengthy regulations themselves. The checklists can be used in the classroom or jobsite office, but are probably a more effective teaching tool if used in conjunction with a site visit as part of a safety inspection. Those performing safety inspections will find the checklists helpful regardless of the inspectorâ€™s knowledge of the work at hand.
Figure 1. Welding and Cutting Checklists
Design for Construction Safety ToolBox One party to the project team, the designer, has traditionally not been involved in construction worker safety.
Design professionals often state that their lack of
participation in hazard reduction on the jobsite is a result of their minimal education and training regarding construction worker safety and that no tools exist to help them address safety within their scope of work. A design tool in the form of a computer program titled “Design for Construction Safety ToolBox” has been developed through funding by the Construction Industry Institute (CII) to educate designers about safety hazards and assist them in addressing construction worker safety in their designs (Gambatese, et al 1997). The program incorporates the “best design practices” of over 400 design suggestions that can be implemented during the design phase in order to reduce or eliminate safety hazards during construction. The program allows the user to access the suggestions by focusing on one of three subjects: Project Components, Construction Site Hazards, or Project Systems. A review can be conducted by focusing on typical project components, such as the foundation, roof, piping, and tanks. The program also allows for focusing on specific safety hazards, such as toxic substances, lighting, and obstructions.
Lastly, the program allows the user to focus on project
systems such as metals, finishes, and electrical. The user begins by selecting a topic within one of the three categories (components, hazards, or systems). By selecting a topic, the program narrows its focus to only safety concerns and design suggestions regarding the topic chosen.
inputting information about the project’s design, the user is presented safety concerns
related to the design features along with various design suggestions to mitigate the concerns. Figure 2 shows an example screen presenting a safety concern and various design suggestions. For each safety concern, design suggestions can be saved, or other suggestions input, and printed out later. The program offers an ideal tool for both improving safety and educating designers.
It provides the link between the design and construction phases with
regards to construction worker safety and it educates the designer on ways to improve construction worker safety. Students in civil, structural, and construction engineering design curriculums are obvious groups for which the computer program can prove beneficial.
Figure 2. Safety Concern and Design Suggestions Screen
Concrete Wall Form Design Construction engineering and management practice and education involve the design of temporary structures.
At the core of this area is the design of concrete
formwork. Concrete formwork is a component of many construction projects and so it seems appropriate that this be addressed in all educational programs. A computer program was developed that focuses on the design of formwork for one component, namely concrete wall forms. Organizationally, the computer solution follows the manual solution. The order in which information is input into the program is the same as if the solution was being performed with a manual approach. As the information is input, the user is capable of making adjustments. For example, the first information to be input is related to the height of the concrete wall, the rate of placement, and the ambient temperature. From this information, the program computes the lateral load on the wall.
The user is
expected to use this value in most instances, but a modification of this lateral load will be accepted. The program then asks the user to input information about the plywood sheathing. With this information, the program determines the stud spacing as illustrated in Figure 3.
At this point, the user is again placed in a position of modifying the
computed value. The operation of the program does not consist of inputting a few bits of information and then letting the program provide the user with an answer.
formwork designer continues to play a role in the process as the final solution is being derived.
Figure 3. Wall Form Stud Spacing
Once the stud spacing has been established, the user continues with the same process to determine the wale and tie sizes and spacings. The formwork designer continues solving the wall form design by having the program check for a bearing failure and the design of the lateral braces. Finally, the program concludes the process by presenting all the information as shown in Figure 4, including a tabulation of the approximate material costs of the wall form materials. A graphic of the formwork and bracing can also be viewed. An important aspect of this program is that the computer user is constantly â€œin the loopâ€? in the derivation of the final answer. As the forgoing has described, the user must make decisions throughout the design process. In this way, the user does not view the
program as a “black box.” Having an understanding of the manual solution, while not essential, is very helpful to fully appreciate the contribution of the program. Utilizing the computer’s computational speed, the formwork designer can easily conduct sensitivity analyses with different grades of wood and with formwork components having different dimensions. Thus, the user can work through several solutions in a matter of a few minutes to derive a solution that is cost effective and perhaps lends itself well to a simple modular approach.
Figure 4. Wall Formwork Summary
Labor Productivity Labor on a construction project is perhaps the single most variable component. A general contractor will ordinarily have a fair amount of control over the costs of materials and the subcontracted work, but the labor component is subject to much variation. A simple computer program was developed to demonstrate the amount of variability associated with learning curves.
Understanding the principles of learning
curves is important in the construction industry. There are many repetitive tasks in the construction industry and these generally can be readily applied to learning curves. The general concept of learning curves is well known, i.e., the more often we do identical tasks, the better we perform them. Learning curves can be modeled and there is a generally accepted mathematical approach in their solution. The solution is easily interpreted through a graphical representation. A detailed treatise on learning curves can be found in various industrial engineering and construction productivity textbooks (Hinze 1998; Oglesby, et al 1989). Upon entering the program, the user begins by recording whether the inputs for the task will be individual units or cumulative units. Individual units is used for learning rates based on the actual time it takes to complete each specific unit, while cumulative units is for learning rates based on the average time it takes to complete all units through the unit under consideration.
Common construction practice is to discuss
productivity in terms of the average time to complete a number of units and, therefore, cumulative units would be more appropriate to use. Next, the user inputs the observed learning rate for the task along with the time associated with completing a specific unit (actual time if using individual units; average time if using cumulative units). If the
learning rate is not known, two or more data points can be entered and the program will use the Method of Least Squares to calculate the learning rate which best fits the data.
Figure 5. Learning Curve Illustrated
Following the input of the initial task information, the program sets up the learning curve mathematical model and calculates all associated variables. The user is given the opportunity to view a graph illustrating the learning curve.
Figure 5 shows an
example of the graphical representation of a learning curve within the program. Using the learning curve model, the program allows for additional information about particular units to be determined. For example, if a housing development project includes the construction of forty similar houses, the user can determine the expected time to
complete any specific house, the total or average time to complete a block of houses, the time difference between the calculated and actual observed performance, and the number of houses to complete before achieving a specified average time per house. If needed, the user can easily modify the learning rate and re-calculate the learning curve model to view the related affect on labor productivity. Thus, the program provides the user the ability to manipulate the learning curve input data to gain an understanding of the learning effects on task performance. The productivity program is quite simple, but the benefit of the computer software is that complex computations are made quickly, sensitivities to particular values can be easily explored, and the results are graphically represented to assist in interpreting the results.
CONCLUSIONS While the computer programs described in this paper are by no means the most sophisticated software packages available, they do provide useful and effective tools for construction practice and education.
Development of the programs has been
accomplished through limited initial knowledge of and skills in computer programming. The authorsâ€™ previous computer training was limited to introductory computer programming courses. This knowledge was vastly augmented by the extraordinary authoring tools available today. The programs have been used in both practice and university-level construction courses, and received positive feedback. The programs can easily be implemented by a construction firm to improve safety, address productivity concerns, and design formwork. The nature of the programs makes them ideal for contracting firms that
oversee safety on projects and self-performs concrete work. Company size is not an obstacle as the programs can be used without a great amount of technical knowledge, manpower, computing power, or capital resources. The programs are especially useful for construction companies that may have younger, less experienced employees who need education and training in the program content areas. The authors have incorporated the programs into various academic construction courses with success as well. Informal feedback received from students indicates that the programs greatly assist in understanding the concepts and provide a valuable, interactive learning experience. The learning curve concepts, in particular, can quickly be presented in class using the program compared with performing the calculations and drawing the learning curve graphics by hand. Most students quickly grasp how the programs operate and many feel that they help with learning the construction concepts. This success of the programs is attributed in part to the format in which the programs are presented. The illustrated step-by-step process that the user follows accentuates the userâ€™s learning of the principles applied and understanding of the results. During the program development process, it was found that certain aspects of the programs needed careful planning and other aspects required substantial effort. Planning and forethought regarding program architecture and layout was found to be a critical part of minimizing the overall programming effort required. Clear planning for all features and functions of the program at the start of its development greatly minimizes the amount of re-programming required during development.
The structure of the
programs that incorporate a database of information (Construction Inspection Guide and Design for Construction Safety ToolBox) could be developed and tested with only a
small amount of data available.
This allowed computer programming efforts and
database development efforts to be conducted simultaneously. Once the program architecture and general layout was established, substantial effort was required on tasks to formalize the layout, such as aligning text and sizing and spacing objects. Other functions and features that required substantial effort included graphing and charting features, printing formats, and color schemes. In general, the programming of numerical aspects of the programs (e.g. formulas and algorithms) tended to take less effort than that required for the graphical and visual aspects of the software.
RECOMMENDATIONS Development of these various programs will not only lead to improved construction engineering and management practice and education, but also the development of new programs. As new computer technologies are developed, better programs can be created. New programs need to be created that effectively provide assistance in construction practice and illustrate the construction principles in a medium in which students are familiar.
It is the researcher’s and educator’s role and
responsibility to discover and develop these tools. Every effort should be made to pre-plan the structure of the program. Giving some forethought to the program architecture and layout will save many hours of reprogramming later on in the development process. In order to help make the programs easy to use and be quickly grasped, menus, toolbars, and buttons should look and operate in a manner similar to that found on proprietary, off-the-shelf software. Color
schemes should also be chosen to accentuate certain features or important text, and accommodate people with color-blindness. In addition, though a substantial part of the programming effort goes towards the graphical and visual aspects of the software, it is these aspects that can lead to a user-friendly and highly useful program. It is not worth sacrificing ease of use and the program’s practical and educational value by not including needed visual representations.
ACKNOWLEDGMENT The authors express appreciation and gratitude to all those who have assisted in the development of the computer programs. Development of the concrete formwork design program was done by Mr. Brendan Kennedy. Many other individuals conducted independent reviews of the programs and provided valuable input. The authors are very grateful for their participation.
Gambatese, J.A., Hinze, J.W., and Haas, C.T. (1997).
“A Tool to Design for
Construction Worker Safety.” Journal of Architectural Engineering, ASCE, Vol. 3, No. 1, pp. 32-41.
Hinze, J.W. (1998). “Construction Planning and Scheduling.” Prentice-Hall, Inc., Upper Saddle River, NJ.
Oglesby, C.H., Parker, H.W., and Howell, G.A. (1989). “Productivity Improvement in Construction.” McGraw-Hill, Inc., New York, NY.
Dr. John Gambatese is an Assistant Professor in the Department of Civil and Environmental Engineering at the University of Nevada, Las Vegas, where he is Director of the Construction Management Program. As a faculty member he has taught classes on construction engineering, estimating, equipment, scheduling, safety, and contracts. His research has focused on construction worker safety, improving project constructability, energy efficient construction, and addressing life cycle properties of civil engineering facilities. Dr. Gambatese has worked in industry as a structural engineer, and as a project engineer for a construction management firm.
He is a licensed
Professional Engineer in California.
Jimmie Hinze is Interim Associate Dean of the College of Architecture and a Professor in the M. E. Rinker, Sr. School of Building Construction.
He holds a Ph.D. in
Construction Management from Stanford University and is a registered Professional Engineer. He has written textbooks on construction safety, scheduling and contracts, subjects that he has researched for the past 25 years.
Exploring a Graduate Program Emphasis: Construction Contract Administration Richard C. Ryan, Kenneth F. Robson, Mike Anglin
ABSTRACT With every building project there are design and construction components. These services are offered to the Owner in several different formats and combinations. Someone typically represents the Owner's interest during the building process by administering the construction contract and making sure that the design is built meeting the required level of quality. This party also acts as a communication medium for the Contractor to verify his understanding of the plans, specifications and required quality level. Realizing the importance of this evolving professional role, the University of Oklahoma Construction Science program is investigating the potential for a Master of Science construction contract administration emphasis.
KEY WORDS Building construction, contract administration, construction administration, contract administrator, graduate education
INTRODUCTION With every building project there are design and construction components. These services are offered to the Owner in several different formats and combinations. The
design element is provided totally separate from the construction element in the designbid-build process, whereas the design element is provided in conjunction with the construction element in the design-build process. In these primary methods, as with other variations, someone typically represents the Owner's interest during the building process by administering the construction contract and making sure that the design is built meeting the required level of quality. This party also acts as a communication medium for the Contractor to verify his understanding of the plans, specifications and required quality level. Depending on the Owner's preference, the Designer, Contractor, a third party or an in-house representative can be used to provide this contract administration service. The Designer has been typically used because of their role in creating the contract documents and familiarity with the project. The duty of contract administration has always existed in the construction phase. After the agreement is executed the Designer has recognized that "There is a basic level of architectural involvement that is required during construction to insure that the ideas encapsulated in the design are understood and made real by contractors and/or construction managers." (ARCHITECTURE, Jan 1987, p. 93) This need for involvement is greatly influenced by the quality of the contract documents. Inadequate plans and specifications require greater communication and documentation concerning questions and interpretation during construction. The ability to perform the contract administration function effectively is influenced by the Designer's workload, employing qualified personnel, the allocated budget, the project delivery schedule and the amount of emphasis placed on the duty after construction begins.
Owners, not understanding the importance of this part of the design process, often undervalue this function. During construction it is extremely important to document interpretations and changes in the contract documents in a timely fashion. "Although the overriding purpose of construction administration is to insure that a quality product is delivered by the contractor to the owner, the reduction of potential liability is always a factor, which is why record keeping is such an important function of contract administration." (ARCHITECTURE, Jan 1987, p. 93) Lack of focus on these duties after the agreement is signed and construction begins often affects the designer/contractor relationship adversely. This adversarial relationship has potential to influence the overall quality of the Owner's project. For the discussed reasons many design and construction companies are designating a specific person to perform the contract administration task. "Construction administration, as the term implies, is the array of contracted-for architectural tasks that follow completion of design phases in traditional delivery processes. In fast-track projects, construction administration services integrate ongoing construction and design. Construction administration tasks may include checking interdisciplinary construction drawings, collecting and filing construction documents, observing construction, administering
(ARCHITECTURE, Jan 1987, p. 93) Realizing the importance of this evolving professional role, the University of Oklahoma Construction Science program is investigating the potential for a Master of Science construction contract administration emphasis. Discussion in this article is based upon input from Oklahoma commercial project Designers and Contractors
concerning primary duties, essential qualities, performance and need for educational emphasis for construction Contract Administrators.
THE CONTRACT ADMINISTRATOR STUDY
Data Collection In spring 1999 the authors surveyed Designers and Contractors based in Oklahoma
performance and the potential for educational emphasis on the professional role. These groups were targeted in order to gain both perspectives. Ten participants from each profession were targeted in the study. Company selection was based upon affiliation with the University of Oklahoma College of Architecture or the Construction Science Division and a primary work emphasis on commercial or institutional construction. All surveyed Contractors perform the majority of their work in Oklahoma. Company respondents were presidents, vice presidents or senior project managers. Company yearly volumes range from $8 million to $300 million. Nine of ten surveyed Designers perform the majority of their work for construction in Oklahoma. Company respondents were principals, project managers, construction administrators and quality managers. Most of the companies also design for construction outside of the state of Oklahoma as well. A preliminary phone call was made to each targeted company to identify or notify a contact person. This was done to assure a more timely and greater response rate. The surveys were mailed or faxed to the contact person within the company. If
necessary, the contact person routed it to an appropriate person for completion and return. Follow-up phone calls were made to companies as necessary.
The Survey Instrument The survey instrument was created based upon the authors' experiences, literature review and understanding of construction contract administration (see Appendix 1: "Contract Administrator Questionnaire"). Questions 1 - 6 were used to obtain company and personal background information to verify similarities of the respondents. A definition of a "contract administrator" was included in the survey to establish a common basis for answering the included questions. Based upon this definition, questions 8, 9, 10 and 11 addressed the duties and characteristics of a contract administrator. Specific items were rated from 1 - 4, with 1 = very important and 4 = unimportant. A 0 rating was included for items not considered. These ratings were to be used to prioritize the importance of specific duties and desired characteristics of contract administrators. Questions 12, 13 and 14 addressed perceptions of contract administrator performance. This set of questions was included to compare the Designers' and Contractors' perceptions. Question 15 requested input regarding the suitable background for a contract administrator. Questions 16, 17 and 18 addressed the need for educational emphasis to prepare people for construction contract administration.
Survey Results Ninety percent of the Contractors agreed with the included definition for a "contract administrator.” One Contractor respondent thought that the definition described a construction manager. Fifty percent of the Designers agreed with the definition. Suggestions from those disagreeing included "add construction to the title", "also represents the Architect", "also oversees A & E contracts", "administration of any contract" and "an entity usually having design credentials.” The percentages in Tables 1, 2, 3 and 4 show the survey respondents' ratings of the listed contract administrator duties and qualities. Percentages represent very important (1) and important (2) ratings. In each table Designer and Contractor rating percentages are shown separately in columns 3 and 4 and then combined in column 5. Table 1 shows that Designer and Contractor perceptions regarding the administrative duties of the Contract Administrator were somewhat similar. Both parties placed the highest priority on "initial judging of contractor claim issues" and "issuing accurate and timely written project communications.” More emphasis is placed on administrative duties than design and construction management duties. Question Administrative Duty A Review and process submittals E Answer requests for information from the contractor F Review and process payment applications G Review and process change orders J Initially judge contractor claim issues K Administer pre-construction and other meetings L Issue accurate and timely written project communications N Manage project closeout documentation
Designer (%) 70 70
Contractor (%) 70 70
Both (%) 70 70
80 80 80 70
70 70 90 70
75 75 85 70
Table 1: Importance of Administrative Duties
Table 2: Importance of Design Duties shows less emphasis placed on design related duties by both parties. Question Design Duty B Make design decisions during construction D Make design decisions prior to construction M Value engineering
Designer (%) 20 50 50
Contractor (%) 60 60 40
Both (%) 40 55 45
Table 2: Importance of Design Duties
Table 3: Importance of Construction Management Duties shows both parties viewed "reviewing contract documents for constructability" and "observing construction" as important duties. Question Construction Management Duty C Develop budget information H Review contract documents for constructability I Observe construction
Designer (%) 50 70
Contractor (%) 40 70
Both (%) 45 70
Table 3: Importance of Construction Management Duties
Table 4: Importance of Qualities shows that "knowledge of construction issues" was the most desired quality. The next most important qualities prioritized as by both parties were being "fair and objective" and having a "team mentality.â€? "Knowledge of legal issues" and "knowledge of design issues" were the least desirable qualities prioritized by both parties. Ninety percent of Contractors perceived "knowledge of design issues" as important verses forty percent by Designers. This discrepancy may be due to the Designer's understanding that other staff provides design information to the Contract
Administrator to be provided to the Contractor. The Contractor possibly assumes that the Contract Administrator has the authority to provide the required design information. To a lesser degree of variance Contractors also perceived "leadership" and "negotiation abilities" less important than Designers. Question A B C D E F G H I
Quality Knowledge of design issues Knowledge of construction issues Knowledge of legal issues Fair and objective Firm and decisive Leadership Negotiation abilities Knowledge of the contract documents Team mentality
Designer (%) 40 80 70 80 80 80 80 80 80
Contractor (%) 90 90 50 80 70 60 60 70 80
Both (%) 65 85 60 80 75 70 70 75 80
Table 4: Importance of Qualities
Eighty percent and ninety percent of the Contractors and Designers respectively felt that Contract Administrators performed their duties average or better relating to questions 12 and 13. Seventy percent and sixty percent respectively either frequently or somewhat frequently worked with Contract Administrators (Question 14). Eighty percent of the Contractors felt that a construction background would be the best (Question 15), however several comments were made concerning the need for practical field experience in order to be successful. Sixty percent of the Designers also felt that a construction management background was better. Comments indicated that this background was better suited for understanding and working with the Contractor. Several from both parties noted that a background in design and construction would be the most suitable.
Seventy percent of the Contractors and ninety percent of the Designers indicated that industry should take pro-active steps to have qualified individuals trained to fill Contract Administrator positions (Question 16). Forty percent of the Contractors and seventy percent of the Designers felt there was a need for a university degree combining construction management and architectural design education into a Contract Administration degree (Question 17). Two Designers stated that a construction management degree combined with practical experience would be suitable. Eighty percent of the Contractors and ninety percent of the Designers indicated that the role of the Contract Administrator was increasing (Question 18).
OBSERVATIONS Both parties placed the most emphasis on Contract Administrator administrative duties. Design duties were not considered as important. It is assumed that both parties feel that it is important to observe construction for reasons of developing familiarity with the project and monitoring adherence to the plans and the quality of the construction. A construction background was definitely preferred over a design background. It is overwhelmingly obvious that both parties feel that the importance of the contract administrator is increasing. This perception suggests a potential growing job market for graduate students. The majority of both Contractors and Designers feel that industry should take steps to prepare contract administrators, however it is noteworthy that only forty percent of the Contractors felt that a degree emphasis would be beneficial. Based upon comments included in the returned surveys it can be assumed that Contractors feel that a construction management background combined with
practical experience is the most suitable for the position and a separate degree is not needed. A considerably larger percentage of Designers feels there is a need for a Contract Administration degree emphasis combining construction management and architectural design education. This is a major consideration for construction graduate program emphasis due to the typically large percentage of students with undergraduate architecture degrees.
GRADUATE PROGRAM POTENTIAL There are many reasons for exploring the construction contract administration professional role for construction graduate program emphasis. Most construction science academic graduate programs face the same issues of diverse participant backgrounds and cultures. A construction contract administration emphasis would establish a better defined program focus. It would differentiate a graduate construction program from other programs, promoting marketing and recruiting efforts. The proposed curriculum emphasis is a natural educational supplement to construction, architecture and engineering backgrounds. A revised focus might help overcome a lack of construction industry respect for a masters degree. The emphasis offers an educational opportunity to explore and minimize the perceived adversarial designer and contractor relationship. Though written twelve years ago, Vernie G. Lindstrom, Jr., then president of Kitchell Corporation, stated "Excellence in construction administration will significantly reduce the litigious environment we currently detest, and I have three suggestions for increasing the quality of construction administration. First, make construction administration a special architectural profession
(and not a necessary evil). Second, provide proper and continuing education in the skills of inspection to maintain high levels of competence. Third, instill in architects the need to be team players and provide timely response to requests for information and decisions." (ARCHITECTURE, Jan 1987, p. 101) As the design-build delivery method becomes more prevalent, demands for teamwork and communication in all phases of design and construction will greatly increase. Observations discussed in this article are only representative of Oklahoma's construction market. However collection and assessment of this input is necessary for contract administration to be considered as a graduate program emphasis. A person with design and construction backgrounds epitomizes the future direction of the construction industry. Emphasizing this education at the graduate level is unexplored in academic
administration graduate curriculum could incorporate design theory, drawing skills, Designer and Contractor contract administration practices and desired qualities for successful contract administrators.
REFERENCES Gordon, D. E., "Construction Administration: All Work and No Pay?", ARCHITECTURE, Jan 1987, p.92 - 97. "Construction Administration: Five Experts, Five Perspectives", ARCHITECTURE, Jan 1987, p. 98 - 102. http://www.csc-dcc.ca/programs/cccacat.html, The Certified Construction Contract Administrator (CCCA) Program.
APPENDIX 1 (Questionnaire has been reformatted to conserve space.) Contract Administrator Questionnaire 10.28.98 Richard Ryan, Associate Professor email@example.com Mike Anglin, Assistant Professor firstname.lastname@example.org
University of Oklahoma Construction Science 830 Van Vleet Oval Norman, OK 73019-6141 Please answer the following questions in the provided space. 1. What is the name of your company? 2. What is the primary type of work the company performs? 3. What is the approximate yearly volume of the company? 4. Where is the company located? Where does most of the work occur? 5. How long have you been or were you with the company? 6. What is your official title? 7. Listed below is a brief definition of a Contract Administrator. Please review this definition and indicate whether you agree or disagree with the definition (circle one). “CONTRACT ADMINISTRATOR”: a person or group of persons representing the Owner and delegated by the Owner to oversee the administration of the construction project contract. AGREE
If you disagree with or would like to add to the above definition please do so in the space below: ______________________________________________________________________ ___________________________________
Please answer the questions listed below based upon the Contract Administrator definition provided in question 7. 8. Listed below are descriptions which might describe the duties of a Contract Administrator. Please rate each duty from 1-4 with 1 being very important and 4 being unimportant. If any of the duties listed below should not be considered as Contract Administrator duties respond with a 0 for your answer (circle one). A)
Review and process submittals.
Make design decisions during construction.
E) Answer Requests For Information from the 0 Contractor. 4 F) Review and process payment applications. 0 4 G) Review and process change orders. 0 4 H) Review contract documents for 0 constructability issues. 4 I) Observe construction. 0 4 J) Initially judge contractor claim issues. 0 4 K) Administer pre-construction and other 0 meetings. 4 L) Issue accurate and timely written project 0 communications. 4 M) Value Engineering. 0 4 N) Manage project close-out documentation. 0 4
4 4 C)
Develop budget information. 4
Make design decisions prior to construction. 4
If necessary list other duties a Contract Administrator might perform? Please identify the importance of each additional duty by rating each duty from 1-4 with 1 being very important and 4 being unimportant. ________________________________________________ 3 4
10. Listed below are qualities which might describe the ideal qualities of a Contract Administrator. Please rate each quality from 1-4 with 1 being very important and 4 being unimportant. If any of the qualities listed below should not be considered as Contract Administrator qualities please respond with a 0 for your answer. A) Knowledgeable of design issues.
4 B) Knowledgeable of construction issues. 4 C) Knowledgeable of legal issues. 4 D) Fair and objective. 4 E) Firm and decisive. 4 F) Leadership qualities. 4 G) Negotiation abilities. 4 H) Knowledgeable of the Contract Documents. 4 I)
Team mentality. 4
11. If necessary list other qualities a Contract Administrator should have? Please identify the importance of each additional quality by rating each quality from 1-4 with 1 being very important and 4 being unimportant. ________________________________________________ 3 4
12. Based upon your experience with Contract Administrators please circle the word below which best describes your perception of their current level of performance based upon criteria listed in questions 8 and 9 (circle one). VERY GOOD
13. Based upon your experience with Contract Administrators please circle the word below which best describes your perception of their current level of performance based upon criteria listed in questions 10 and 11 (circle one). VERY GOOD
BAD VERY BAD
14. Using a scale of 1 - 4 with 1 being frequent and 4 being never, circle a number below which best describes how frequently you have worked with Contract Administrators. 1
15. Which person would be better suited for the position of Contract Administrator; a person with a construction management background or a person with an architectural design background; explain why? ______________________________________________________________________ ___________________________________ 16. Should industry take pro-active steps to have qualified individuals trained to fill Contract Administrator positions (circle one)? YES NO 17. Is there a need for a university degree which combines a construction management education and an architectural design education into a Contract Administration degree (circle one)? YES
18. Is the importance of the Contract Administrator position increasing or decreasing (circle one)? INCREASING Thank you for your participation.
Richard C. Ryan received a Bachelors Degree in Building Construction (1975) and a Masters Degree in Construction Management (1990) from Texas A&M University. After fourteen years in the construction industry he is currently an Associate Professor at the University of Oklahoma in the Construction Science Division of the College of Architecture.
Kenneth F. Robson received Bachelors Degrees in Environmental Design and Building Construction (1978) from Texas A & M University. He received a Masters of Industrial Science in Construction Management (1993) from Colorado State University. After fourteen years in the construction industry he is currently the Director of the University of Oklahoma Construction Science Division of the College of Architecture.
Mike Anglin received Bachelors Degrees in Construction Science and Business Administration (1982) and a Masters Degree in Construction Science (1992) from the University of Oklahoma. Currently he is working for the Federal Government.
ALTERNATIVE STRUCTURAL FRAMING SYSTEMS IN MICROELECTRONICS FACILITY CONSTRUCTION Colby Robinson, Allan D. Chasey
ABSTRACT Increasingly, owners of semiconductor manufacturing facilities want wafer fabrication facilities constructed in less time, for less money, and at higher quality levels. The structural framing systems that support wafer fabrication facility requirements are instrumental in determining how quickly a facility can be constructed and utilized. This paper discusses concrete versus steel for structural framing systems to consider the impact of cost and schedule based on the implementation of alternative structural systems. A baseline structure was developed for a time and cost analysis. To analyze how structural materials affect project schedule and cost, a survey was used to collect time and cost data from cleanroom construction industry professionals. collected were based on the model structure.
Case studies of two existing
semiconductor facilities augmented survey data. The research provides a researchbased decision aid for optimizing the design and construction of structural framing systems for semiconductor manufacturing facilities while considering the impact of those decisions on the construction schedule.
KEYWORDS Clean room construction, concrete framing systems, framing systems, semiconductor plant construction, steel framing systems, structural framing
INTRODUCTION Today’s semiconductor manufacturing plants are exceeding the $1 billion mark, and some forecasts predict they will rise to $4 billion over the next five years (Smith, 1998). These predictions have prompted semiconductor plant owners to demand a decrease in construction costs without sacrificing the quality and performance expectations of the plant. Time is the biggest factor in decreasing costs; lost days in semiconductor production can cost millions of dollars a day (Charlton, 1997). Therefore, semiconductor plant owners demand that their facilities be constructed in a shorter period of time to allow them to get their product manufactured and out to market as soon as possible. When considering the design and construction of a wafer fabrication facility, one of the first decisions that must be made by the design team is what type of structure will be selected to support the facility. The fast-track design schedules of these facilities must take into account the structural material fabrication, delivery, and erection. Among the items that the project team must consider when selecting a structural framing system is the structural material.
All considerations for structural material
selection must meet the owner’s two main concerns:
What is the date of beneficial use of the facility for producing product and earning revenue?
What is the investment cost for the project?
This research evaluated concrete versus steel for the structural framing system that supports a semiconductor manufacturing facility to determine the impact of structural alternative costs on the construction schedule. A cost model methodology was developed based on the cost of implementation of these alternative structural systems.
CONSIDERATIONS FOR STRUCTURAL ALTERNATIVES The focus of this research was to determine the impact of the construction schedule and the cost of the structure based on the choice of material or materials utilized.
Steel, precast concrete, and cast-in-place concrete have advantages and
disadvantages in the design and construction of a semiconductor manufacturing plant. Both concrete and steel have site-specific qualities that depend on many variables such as vibration criteria, seismic requirements, building code requirements, size of facility, material availability, skilled labor and contractor availability, and material transportation. The design team must consider the material qualities in addition to the cost and schedule parameter.
Baseline Structure Development A semiconductor facility baseline structure was designed by the research team for cost and schedule analyses. Figure 1depicts the baseline structure with the alternative structural steel and precast alternatives defined and utilized for the construction schedule estimates and proposed cost analyses.
Figure 1. Framing Options for the Baseline Structure
The structure designed is a module consisting of the process manufacturing area and the process support area below. parameters:
The baseline structure has the following
The approximate cleanroom square footage is 36,000 square feet.
The depth of the waffle slab is 42 inches.
The structure has 2 stories, or levels, the bottom level being the support area and the top level being the process manufacturing area (the cleanroom).
The air management scheme is a fan tower system.
The structure is to meet a vibration criteria of 250 microinches per second for the main process manufacturing area and 2,000 microinches per second for less sensitive areas.
The main life-cycle cost of the structural framing occurs during the construction phase of the facility with minor expenses needed for future maintenance, repair, and alterations to the structural framing (Kirk and Dell’Isola, 1995). Therefore, the focus of the alternative structural frame cost analysis is on the construction costs for the facility. The alternative structures chosen for the analysis were:
1. Structure 1-Precast Waffle Slab, Steel Building Frame 2. Structure 2-Precast Waffle Slab, Precast Building Frame 3. Structure 3-Cast-in-Place Waffle Slab, Steel Building Frame 4. Structure 4-Cast-in-Place Waffle Slab, Precast Building Frame
It is assumed that the area floor below the waffle slab and columns would be cast-inplace concrete on a mat slab for all four structural alternatives.
Percentage of Participants that Selected Factor 0%
Speed of Construction(1)
Cost of Material(3)
Future Facility Expansion
Skilled Labor Available
Fa cto rs
Building Code Reqmnts.
Extreme Weather Cond.
Layout of Entire Fac.
Design Change Potential
Location of Project Site
Trans. Material to Jobsite
Other: Job Specific Approach
Erection Equipment Avail.
Project Site Storage
Figure 2. Factors that Influence Structural Material Selection
RESEARCH APPROACH To determine cost and schedule impacts of using alternative structural systems, a formal survey was conducted with professionals who specialize in the design and construction of microelectronics facilities. The formal survey questions with regard to the actual materials themselves were specific to cast-in-place concrete, precast concrete, structural steel, and combinations of two of the three materials. Since the
survey results indicated little difference in time from design to structural finish for the systems studied, an informal survey was conducted with microelectronics facility constructors to determine if subsequent activities of the structural framing process altered the critical path of the schedule. Finally, using two case studies, the survey findings were tested by comparing the timeline and cost schedule of two facilities that were basically the same as the studyâ€™s baseline structure.
All participants of both
surveys and the case studies were promised anonymity.
Alternative Systems: Design to Framing Finish
Design to Material Order 10.00
Material Order to Jobsite Delivery
Jobsite Delivery to Finished Framing
Average Time (Weeks)
Figure 3. Approximate Project Times for the Alternative Structural Systems
STRUCTURAL MATERIAL SELECTION The formal survey respondents selected the considerations that may influence the decision of structural material selection, time and cost among them. Figure 2 ranks the considerations of selection. Speed of construction is the leading factor that determines structural material selection.
Vibration criteria, cost of materials, seismic requirements, and material
availability round out the top five factors, respectively. As stated earlier, the project team must decide which materials to select for the structure, depending on the many variables required for the specific project, time and cost being only two of those variables.
RESULTS OF THE TIME DATA COLLECTION
The Formal Survey The formal survey requested a time estimate for the construction of the baseline structure, from start of design to finish of the structural framing for each of the different framing materials. The project time for the structure was separated into three sections: 1. Design to order of the material, 2. Order of material to material delivery to jobsite, and 3. Start of erection to completion of entire structural framing. When applicable, the survey respondents were requested to include time for concrete formwork, reinforcing bar installation, and the fireproofing of structural steel. The project
times were averaged and shown with the standard deviation to mean total project time, as indicated in Figure 3. “CIP” in Figure 3 means cast-in-place concrete. Figure 3 shows that the time from design to structural framing finish is approximately the same for all four scenarios. An observation of the average time from design to structural framing finish shows that the precast waffle/steel frame system and the total precast system may have a 4 to 5 week disadvantage over the cast-in-place concrete waffle/steel frame and cast-in-place waffle precast systems.
standard deviation, no clear advantage of one system over another was available, according to the survey results. The design-to-material-order times are approximately the same for all four systems. The systems with cast-in-place concrete have shorter material-order-to-site delivery times (4 weeks) than the precast systems (9 weeks). The construction times are approximately the same for all four systems (16-20 week range).
Due to the competitive times for all of the structural systems, a further
analysis of the construction schedule was required.
The Informal Survey The purpose of the informal survey, also taken from the cleanroom construction industry, was to find a possible time benefit by looking at the impact that subsequent activities of the structural framing have on the critical path of the construction schedule. The informal survey focused on the activities following the installation of the cleanroom process floor, or waffle slab. From this survey it was determined that time savings in the construction schedule are possible when installing a precast waffle slab as the process floor. The precast waffle sections are fabricated ahead of time, transported to
the project site, and set in place. The precast sections are tied together with reinforcing steel with closure pours of cast-in-place concrete between each section. The slab and columns below the process floor are typically cast-in-place concrete. Figure 4 illustrates how the installation of a precast waffle slab can provide possible time savings in the construction schedule.
Figure 4. Cast-in-Place Concrete Waffle Slab Installation vs. Precast Concrete Waffle Slab Installation
Figure 4 draws a comparison between two structures, one constructed with a cast-in-place waffle slab, and another constructed with a precast waffle slab.
activities that follow the installation of the CIP waffle slab include coating the underside of the waffle slab with epoxy, followed by the installation of the mechanical, electrical, and process systems (MEP).
The epoxy coating provides a protective layer on the concrete slab against the various chemicals utilized within the facility. According to the industry professionals surveyed, curing of the cast-in-place waffle slab should take at least twenty-eight days prior to the epoxy application. The cure time allows for the cement and water in the concrete to adequately hydrate.
If the epoxy is applied prematurely, the excess
moisture in the concrete causes the epoxy coating to blister and peel away from the slab, causing a potential particulation problem. This dampness is not desirable in the area below the process floor where millions of dollars of process support equipment is installed. Air contamination from the epoxy and exposed concrete could also become a serious issue. Therefore, the cast-in-place waffle slab must be stripped of forms and thoroughly cured prior to the application of the epoxy coating on its underside. Furthermore, the MEP installation cannot begin until the epoxy coating has been applied and cured for at least one week. The precast waffle slab is cured prior to delivery because it is prefabricated during the excavation and support area work phase of the project, as shown in Figure 4. Therefore, the epoxy coating following the MEP installation can occur immediately after the first few precast waffle pieces are installed.
Case Studies To augment the findings shown in Figures 3 and 4, case studies were performed on two projects, shown in Table 1. Case Study 1 (CS1) had a cast-in-place waffle slab; Case Study 2 (CS2) utilized a precast waffle slab.
Specifics Structural Framing (Above Process Floor) Process Floor (Waffle Slab) Process Floor Area Support Area Slab, Columns
Case Study 1 Steel
Case Study 2 Precast Concrete
37,000 Square Feet Cast-in-Place Concrete
26,000 Square Feet Cast-in-Place Concrete
Table 1. Data from the Projects
The design start to construction finish of the structural framing of the two case studies (including the fireproofing of Case Study 1) is displayed in Figure 5.
CS 1 1 Structure
52 Weeks Design - Order Order-Jobsite Delivery Delivery - Finish
CS 2 2 Structure
Time in Weeks
Figure 5. Structural Framing Comparison from Design to Construction Finish
The overall time is approximately the same for both of the case study projects (51-52 weeks) just as the time indicated for the baseline structure in Figure 3. However, the average time for the baseline structure to go from design to framing finish was about 36 weeks, plus or minus 6 weeks for all four scenarios in Figure 3, as opposed to the 52 weeks for the case studies.
A further breakdown of the time shows that Case Study 2 took twice as long, or 24 weeks, as Case Study 1 to go from initial design to structural material order.
longer time was due to delays and other factors not directly involved with the structural design. Therefore, the initial design to structural material order could possibly have been shorter. In Figure 5, Case Study 1 appears to favor the times for the baseline structure model, as Figure 3 shows the average time being 11 weeks. Material procurement for Case Studies 1 and 2 were nine and eight weeks, respectively, which corresponds to the average times in Figure 3. Figure 3 indicates an average construction time of 18 weeks for the structural frame. Figure 5 shows that the precast frame of CS2 was erected in 19 weeks and the steel frame of CS1 took 31 weeks.
Both Figures include the construction below the
process floor and the necessary fireproofing for the steel frame. The activities following the installation of the waffle slabs provide a different picture in terms of construction time. Figure 6 illustrates the construction sequence for the same activities described in Figure 4.
Figure 6 shows that after the start of waffle slab installation the MEP installation of CS2 started 10 weeks sooner than did that of CS1. CS1’s cast-in-place concrete waffle slab had to cure prior to the application of the epoxy coating. With the exception of the closure strip pours of concrete between the precast waffle pieces, Project 2’s precast waffle slab required no additional cure time; therefore, the epoxy coating and the MEP installation in the support area occurred much sooner. Figure 6 illustrates the
benefit in construction time for subsequent activities following the start of the precast waffle slab installation.
Figure 6. Construction Time Comparison of Activities Following the Waffle Slab Installation
THE RESULTS OF THE COST DATA COLLECTION For further development of the cost analysis, the survey respondents provided data about typical, average sizes of structural crews for each of the four framing system alternatives.
Figure 7 shows the average number of workers, with the standard
deviation from the mean, for each of the systems.
All trades for each system were
combined to illustrate the total numbers.
Total Number of Workers
Figure 7. Average Structural Framing Crew Sizes for the Alternative Systems
The alternatives in Figure 7 that contained cast-in-place concrete showed the highest average number of workers. The increase in workers is due to the increased number of carpenters, laborers, and rodmen needed to construct the cast-in-place concrete structure. When comparing structural steel to the precast concrete systems, the systems involving structural steel show increased crew sizes because of the greater number of structural workers and fireproofers necessary.
The all precast concrete
system, which includes a precast concrete process floor and framing, shows a
significant reduction in workforce due to the fewer number of structural ironworkers, carpenters, finishers, and laborers required. The formal survey did not seek detailed cost inquiries with regards to the baseline structure. However, the survey did ask the respondents to select a material or combination of materials that would minimize the cost of the baseline structural framing and the process floor and still meet the required performance of the structure. The survey results indicated that the building frame with the lowest cost would be constructed of structural steel and cast-in-place concrete, while cast-in-place concrete would minimize construction cost of the process floor.
Cost Analysis Model The purpose of the cost analysis model is to compare construction cost data of the alternative structural systems for economic benefits.
The assumption for all
structures was that the process support area mat slab and columns were cast-in-place concrete. All structural scenarios were quantified by material elements and entered into an MS Excel s pre a ds he e.t Once quantified, each element was divided into unit material and labor data worksheets. Both worksheets contain “entry cells” to allow selected data to be adjusted to reflect different design criteria, construction wages and productivity, and/or current market conditions. The
requirements, for the model were entered on the material data sheets. The material cost for each unit is adjustable to allow for material quantities and price fluctuations in a
region or market.
The material costs utilized for this analysis came from Arizona
contractors experienced in the construction of semiconductor manufacturing plants. The cost model provides a cost comparison for the baseline structure based on current Arizona market costs, current Arizona labor rates, and structural crew sizes determined from the formal survey. The labor cost per element was developed to be adjustable to structural crew sizes and crew wages. Labor analysis of the cost model included the use of average structural crew sizes from Figure 6. The Davis-Bacon Act labor wage rates for Maricopa County, Arizona, were used in the cost analysis. Productivity for each element was estimated based on element totals from the material data sheet and the crew size. Using the data entered on the material data and labor data sheets, the cost model automatically calculates the following for the four structural scenarios: crew-hours per unit; labor cost per unit; material cost per unit; total unit price; total price for labor; total price for material; and total cost for each element. The total cost per square foot of cleanroom, or process area, is also calculated. The cost model summarizes the total costs of each of the four structural scenarios for the baseline model in Figure 1. Each structural scenario is then graphed in total cost per square foot of cleanroom for cost comparison purposes as shown in Figure 8. The cost model indicates that a steel frame with a cast-in-place waffle slab on cast-in-place columns and mat slab yields the highest cost per square foot of cleanroom. The least expensive alternative is the installation of a precast frame and a precast waffle slab. This conclusion is different from the results of the survey. The survey respondents, when asked for the type of structure that would both minimize cost
and meet required structure performance, indicated that a steel structure would be the least expensive.
Precast Frame, Precast Waffle
Precast Frame, CIP Waffle
Steel Frame, Precast Waffle
Steel Frame, CIP Waffle
Total Cost/Square Foot of Cleanroom
Figure 8. Alternative Structures Cost Comparison
RESEARCH CONCLUSIONS According to the industry survey results, no real time benefit seems to exist for the use of one structural material over another. However, the installation of a precast waffle slab could possibly save time on the construction schedule, provided all activities before and after the precast waffle slab installation are not delayed. The time saved can be attributed to the prefabrication of the precast waffle slab pieces while the initial site work is being accomplished. Currently, the precast structural frame and waffle slab may also reduce construction costs. The material costs found in this research were lower for precast products than the costs found for a steel frame and a cast-in-place concrete waffle slab. Crew sizes, and therefore crew costs, were found in the research survey and the regions studied to be lower for structures utilizing precast products.
An analysis of current market conditions, labor rates, structural crew sizes, etc. must be performed to determine which system would provide a structure with a minimized cost while still meeting the owner’s performance expectations.
model (based on the baseline structure) was developed to be adjusted to regional differences in structural requirements, material prices, labor rates, productivity rates, and crew sizes. Therefore, a cost model analysis could be performed to reflect all of the regional variables mentioned. Once current data is entered into the cost model, the structural material decision could be based on the bottom-line cost provided for each alternative. In utilizing the cost model, it must be noted that several additional considerations must be taken into account.
Ultimately, the project team must determine which
structural system to select for the facility structure, depending on owner requirements; however, the cost model developed can greatly assist in that decision-making process.
The writers would like to thank the various cleanroom construction industry professionals who took the time to add their expertise to this research project. A special thanks goes to the Intel Corporation for providing the funding for this research grant.
REFERENCES Charlton, N. T. (1997). “Framing Systems for Microelectronics Facilities.” Modern Steel Construction, May, 66-76.
Kirk, S. J. and Dell’Isola, A. J. (1995). Life cycle Costing for Design Professionals, 2nd ed. New York: McGraw-Hill Inc.
Smith, J. M. (1998). “Megafabs for $2500 a Square Foot:
Impossible.” Semiconductor Fabtech. 7th ed., 77-83.
Colby Robinson is a Project Manager for Mortenson Construction, California
Allan D. Chasey, Ph.D., P.E. is an Assistant Professor at Del E. Webb School of Construction. Address correspondence to: Allan D. Chasey, Ph.D., PO Box 870204, Arizona State University, Tempe, AZ 85287, email@example.com.
CUSTOMER SATISFACTION IN ELECTRICAL CONSTRUCTION John R. Cook, Norma Jean Andersen, Kenneth W. Andersen
ABSTRACT Measuring and improving customer satisfaction is critical in the construction industry. The present research developed a customer satisfaction model for electrical contractors that consisted of five satisfaction quality dimensions: safety, project management, contractor/customer relationship, cost, and prepared/skilled workforce. This customer satisfaction model was used as a framework to measure the relative importance customerâ€™s place on each satisfaction quality dimension when determining their satisfaction with electrical construction goods and services. A national survey of electrical construction customers indicated safety was the most important quality dimension followed by project management and contractor/customer relationship. The prepared/skilled workforce and cost dimensions were ranked lowest in importance. An additional study finding was
a negative correlation between the importance of
contractor/customer relationship and cost quality dimensions. The results of this study provide empirical evidence to help contractors, in all areas of construction, identify and prioritize behaviors that are most important to increasing customer satisfaction.
Customer satisfaction, electrical contracting, construction, quality
INTRODUCTION Progressive electrical construction firms are developing customer-focused business strategies to succeed in today’s increasingly competitive market. These business strategies include total quality management efforts aimed at developing competitive advantage by providing quality that meets or exceeds customer needs (Sepic & Mcnabb 1994). Dr. W. Edwards Deming, noted quality guru, states “Instead of worrying about a competitor, worry about better service to customers. Don’t be guided by the competitor. Make your own future” (Deming, 1991). The value of improving customer-focus may be emphasized by noting that, across all industries, about seventy percent of business sales are repeat business (Griffin, et al. 1995). Satisfied customers are more likely to be repeat customers. Customer satisfaction measures are needed to provide contractors fundamental information to achieve customer-focused performance. The present research was conducted to achieve two primary objectives. The first objective was to develop a customer satisfaction model that could be used to gather customer satisfaction information in the electrical construction industry. The second objective was to identify what aspects of electrical construction operations are most important to improving customer satisfaction. This research was part of a larger study that also included the development of
internal customer satisfaction processes and customer satisfaction instruments (Cook, et. al. 1998).
Customer Satisfaction Model The research effort began with a review of customer satisfaction literature. A significant level of research exists concerning customer satisfaction in general. However, few studies were uncovered that addressed customer satisfaction methods in electrical construction. Due to the lack of empirical findings in the electrical contracting area, two customer satisfaction methods used in manufacturing and service sectors were used to develop a customer satisfaction model for electrical construction: quality dimension development and critical incident analysis (Griffen et al. 1995; Hayes 1992). Quality dimension development is based on the service provider establishing quality dimensions for its own service or product. “Quality dimensions” are those characteristics of a product or service that a customer uses to determine satisfaction with the product or service. The quality dimension development process gathered information from electrical contractors through project taskforce meetings and interviews. Contractors participated in silent brainstorming activities where each person generated items they viewed as “what satisfied customers expected.” Taskforce members grouped these individual items into clusters of similar items. Several grouping iterations were
conducted and finally the clusters were named. This process produced initial customer quality dimensions. The critical incident approach asks customers to define their own requirements when determining satisfaction. The primary information source for the critical incident method used in this study was a ELECTRIâ€™21 Marketplace Perspectives and Strategies report that summarized a national survey of electrical contracting industry customers. The report contained hundreds of individual incidents related to customer satisfaction that were sorted and clustered into satisfaction item groupings.
Finally, the authors synthesized the results of both methods to produce a customer satisfaction model based on five satisfaction quality dimensions: contractor/customer relationship, project management, safety, prepared/skilled workforce, and cost (see Figure 1). Table 1 presents definitions for the five quality dimensions of the customer satisfaction model.
Customer Satisfaction Survey A national survey of 230 electrical construction customers was conducted to determine the relative importance of each quality dimension in the customer satisfaction model. A four-page questionnaire was used to gather customers’ ratings of importance for the five quality dimensions. A reminder postcard was sent two weeks after the initial mailing. Participation in the study was voluntary. Customers surveyed were provided by project taskforce members, regional NECA contractors, and ELECTRI’21 Council members. A total of 84 completed surveys were returned (an acceptable 37% response rate for a voluntary paperbased survey). For survey respondents, the most common job titles were project managers, vice presidents, senior project engineers, and construction managers. The most common customer industry settings were construction (49%), utilities (15%), and consumer products (11%). Sampled customers described their company’s region of operation as international (46%), national (17%), regional
(25%), or local (9%). Eighty-nine percent of respondents had worked with at least three different electrical contractors in the past two years.
Importance Rankings for Satisfaction Model Quality Dimensions Importance rankings for the five satisfaction model quality dimensions were gathered by two survey measures. First, customers were instructed to rank-
order the level of importance they place on each respective quality dimension when determining satisfaction. The instructions specified that no dimensions could be ranked equally important. The research team wanted to force customers to
questionnaires, sixty customers correctly completed the rank-ordering task. Incorrectly completed surveys typically ranked several dimensions equally. Additionally, of the sixty correctly completed questionnaires, four customers wrote statements like “... although these are rank-ordered, contractors working for me MUST be able to manage all equally, not sacrificing any.” This result was expected due to the difficult nature of prioritizing quality dimensions that are all very important to customer satisfaction. Customers
contractor/customer relationship, and project management statistically higher in importance than the dimensions prepared/skilled workforce and cost. Descriptive statistics and the results of paired-sample means comparisons for each quality dimension are presented in Table 2. A multiple-item rating instrument was the second survey tool employed to determine satisfaction quality dimension “importance” perceptions. Thirty quality dimension example items were rated on a 1-5 Likert scale (1 = “important” to 5 = “extremely important”). The example items included seven contractor/customer relationship items, seven project management items, five safety items, six prepared/skilled workforce items, and five cost items. Composite importance scores were calculated by averaging the respective example items for each
quality dimension. Internal consistency was high for all five composite importance scores (Cronbach coefficient alphaâ€™s > 0.90). Descriptive statistics and results of paired-sample means comparisons for the composite importance scores are presented in Table 2. Data from all returned questionnaires were used to calculate the composite importance ratings. Customers rated the safety dimension significantly higher in importance than all other dimensions. The project management dimension was rated statistically
prepared/skilled workforce, and cost dimensions. Additional
contractor/customer relationship either very high or very low in importance. The other four quality dimensions had ranking patterns that were relatively uniform or normal in nature. Further investigation of contractor/customer relationship rankings uncovered a strong negative correlation with cost rankings (r = - 0.49; p<0.01). This result may be interpreted in two ways. First, customers who emphasize establishing long-term contractor relationships and partnering place less importance on cost issues when determining satisfaction levels. A second interpretation may be a result of the bidding process between contractor and customer. For example, a customer of electrical contracting services in the government sector, where contracts would most likely be awarded by competitive bid, may be forced to consider cost the most important quality dimension, thus minimizing
Satisfaction Model Quality Dimensions
Prepared / Skilled
(n=60) Composite Importance b Scores
(n=84) a: Mean rankings with different letter superscripts are statistically different at the α < .01 level. Scores are from the single-item rank-ordering task for overall quality dimensions ( 5 = “most important” to 1= “least important” ). b: Mean rankings with different letter superscripts are statistically different at the α < .05 level. Scores are from the 30 quality dimension example items grouped by quality dimension ( 5 = “extremely important” to 1 = “important” ). Table 2. Importance Ratings for Satisfaction Model Quality Dimensions
Customer Satisfaction and Quality Ratings of Electrical Contractors Surveyed customers also rated overall satisfaction and quality levels with electrical contracting work. The average satisfaction level with electrical contracting work for all customers was a “somewhat satisfied” response (average score = 3.98 on a 1-5 scale with 1 being “very dissatisfied” and 5 being “very satisfied”). About 35% of customers indicated they were “very satisfied” while 12% were “somewhat or very dissatisfied.” On average, customers rated the quality level of electrical contracting work as “average to above average” (average score = 3.83 on a 1-5 scale with 1 = “poor” and 5 = “excellent. The results are positive in the fact that only one customer rated electrical contracting work “below average or poor.” However, only 14% of customers rated quality as “excellent.”
Customer Comments Regarding Satisfaction A final survey question asked customers to indicate what electrical contractor behaviors or performance factors were most important to excellent customer satisfaction. Selected customer comments that represent key perspectives are provided below: “Electrical contractors should maintain the philosophy, and instill the same in their employees, that “whatever” is necessary to complete the project “on time” must be done!
This is accomplished by employing skilled craftsman, plus
managing with “can-do” people to recognize what is required to perform the usual highly-technical aspects of electrical construction.” “Managing overall project costs and completing projects on schedule, are most important to customer satisfaction. If an electrical contractor bids a project in accordance with the plans and specifications, for a fair price, and completes the work on schedule with qualified project supervision and management, then qualities such as integrity, trust, pride, sincerity and the like are inherent to this contractor, and a long-term working relationship will follow automatically.” Customers emphasized the importance of safety, effective project management, open communication, and a willingness to partner. These customer comments provided general support for the five customer satisfaction quality dimensions presented in the customer satisfaction model. Finally, the present survey results should be examined with the understanding that the possibility of non-response bias exists. The survey was voluntary and the response rate was moderate. The authors discussed the results with both responding and non-responding customers and no significant non-response issues were determined. These results provide a solid start to developing customer satisfaction instruments supported by empirical evidence. Comment The present research attempts to assist electrical contractors identify and prioritize those behaviors that are most important to achieving excellent customer satisfaction. The proposed customer satisfaction model identifies five core quality
dimensions that provide a usable framework for electrical contractors to gather customer satisfaction information for the purpose of improving their firmâ€™s customer-focus. These five satisfaction quality dimensions were also prioritized in a national survey of electrical contracting customers. Overall, surveyed customers were somewhat satisfied with electrical contracting work and judged the quality of electrical contractor work as above average. Two areas deserving future research effort are apparent: the influence of contract bid requirements on customer decision priorities, and the applicability of these results to other construction disciplines. Further investigation is needed to stratify customer samples by common bidding strategies (e.g., hard bid and negotiated service contracts). Given the interesting results of the present study concerning cost and contractor/customer relationship quality dimensions, it appears likely that bid requirements significantly influence how customers prioritize contractor performance when determining satisfaction. This research study was directed at electrical construction. One may argue that the presented customer satisfaction model and importance rankings may be applicable in other contracting areas as well. However, further research is needed to confirm this suggestion. The methods used to develop the customer satisfaction model, quality dimension development and critical incident identification are certainly appropriate for other construction areas. Finally, for an electrical contracting firm to successfully develop a customer-focused business strategy, the entire organization must develop a climate where all employees accept responsibility to satisfy customers. Owners
and senior managers must sincerely emphasize and demonstrate a commitment to effective measurement and use of customer satisfaction information.
ACKNOWLEDGMENTS This research was made possible by an ELECTRI’21 grant. The authors thank the ELECTRI’21 council members and staff of the Electrical Contracting Foundation for their valuable input and direction.
Cook, J. R., Andersen, K. W., & Andersen, N. J. (1998). Customer Satisfaction Models for Electrical Contractors (Index No. F9801-5,500; Available from The Electrical Contracting Foundation, 3 Bethesda Metro Center, Suite 1100, Bethesda, MD 20814).
Deming, W. E. (1991, October). Automobile, 6(7), 30-38.
Foxman, L. & Polsky, W. (1991). Customer satisfaction: a five-star rating. Personnel Journal, June, 70(6), 27-28.
Griffin, A., Gleason, G., Preiss, R. & Shevenaugh, D. (1995). Best practice for customer satisfaction in manufacturing firms. Sloan Management Review, 36(2), 87-98.
Hayes, B. E. (1992). Measuring Customer Satisfaction. Milwaukee: ASQC Quality Press.
Sepic, T. & Mcnabb, D. (1994). Applying TQM’s golden rule to your support service. Journal for Quality and Participation, 17(3), 44-49.
John R. Cook, Ph.D. is an Associate Professor of Industrial and Manufacturing Engineering at North Dakota State University. His current research and teaching interests include customer satisfaction, workstation design, socio-technical job design, human-computer interaction, and industrial ergonomics.
Norma Jean Andersen, Ph.D., CPC joined the faculty in the Technology Department at Moorhead State University in the fall of 1999.
Prior to her
academic career, Dr. Andersen co-owned and managed a commercial construction business in Wyoming for over fifteen years.
research interests include the implementation of change management in the construction industry, total quality management, partnering, and the impact workforce changes on the construction industry.
Kenneth W. Andersen, Ph.D., CPC is currently an Associate Professor at North Dakota State University teaching construction management in the Department of Civil Engineering and Construction. Prior to teaching he owned and managed a commercial construction company in Wyoming for over fifteen years.
Address all correspondence to: John R. Cook, Ph.D., CIE 202K, North Dakota State University, Fargo, ND 58105, e-mail: firstname.lastname@example.org.
An Assessment Model For Quality Performance Control in Residential Construction Zeljko M.Torbica, Robert C. Stroh
ABSTRACT This paper is concerned with two important aspects of the home-building segment of construction: quality performance of homebuilders and home-buyer satisfaction. A model for assessing a homebuilder’s quality performance is presented. It is argued that customer satisfaction can provide the strategic intelligence needed to direct the quality improvement effort.
KEY WORDS Quality Improvement, Customer Satisfaction, Homebuilding
Background Observers close to the construction industry have expressed great concerns over the problems facing the industry. The industry has been criticized for common cost overruns, expensive delays, high-accident rates, ever-increasing litigation costs, and declining international competitiveness. There is a consensus among professionals and researchers that the solution to the problem lies in formal quality management at all levels of design, procurement and construction.
As Tucker puts it: “The future
advancement and accomplishments of our industry will depend upon our acceptance of the quest for quality much more than reaching any specific milestones” (Tucker 1990,p.
Providing superior quality is rapidly becoming the way for companies to
differentiate themselves from competitors and win more projects. To meet this quality challenge, many companies are adopting new management practices that focus on the continuous improvement of product and service quality. Companies need assurance that their improvement efforts are organized and that their priorities are on the right track (Kelvin and Lynch 1992). Quality improvement is difficult to achieve unless quality is accurately and periodically measured. One reason for that difficulty is the lack of good overall measures of quality in its broadest sense. Companies say they have difficulty even making a baseline assessment of their quality (ENR 1995). Before one can define methods for improving and maintaining the quality of construction, two fundamental questions need to be answered: Who sets the quality standards and what is high quality in construction?
Objective The objective of this paper is to define quality in the home building industry and to present a tool for measuring that quality.
Quality in Construction There are, generally, two approaches to quality in construction, conformance to requirements approach and customer satisfaction approach.
Conformance to Requirements Definition of Quality Traditionally, the construction industry has preferred the conformance-torequirements definition of quality where the major concern has been how well the constructed facility conforms to design specifications.
According to this approach,
excellence is equated with meeting specifications and with â€œmaking it right the first time.â€? The conformance-to-requirements definition of quality demonstrates a number of very important attributes and strengths. Measuring quality by using this definition is relatively straightforward and easy (Reeves and Bednar 1994)
for it is readily
translatable into operational criteria (Seymour and Sui-Pheng 1990). This approach, however meaningful, also possesses some inherent limitations. A serious weakness is that its primary focus is internal; it assumes that providing a facility which satisfies the design and specifications, as developed by a designer and interpreted and implemented by a constructor, is of high quality. In many cases this quality paradigm has been proven inadequate. There is ample evidence that construction is not immune to technically incomplete and unsound designs and specifications (Burati et al. 1992). The issue becomes the quality of design and specifications, since they come to be viewed as a neutral touchstone against which quality in implementation is assessed. Another limitation of the conformance-to-requirements definition of quality is that it assumes that we can get stable and complete requirements; it ignores the potential mismatch between what is specified and what the customer needs or wants. In fact, customers may not know or care about how well the constructed facility conforms to specifications; they want their needs and expectations to be met. The crucial task is
how to establish design requirements and specifications that best reflect their needs and expectations.
This is a particularly problematic step for non-technical
requirements, such as aesthetics, comfort, and convenience, which usually are not completely addressed by specifications (Kenny 1988). While the conformance-to-requirements definition is appropriate for the construction phase of a project, it is more problematic for the design phase which, by its nature, requires much judgment, discretion and creativity (Davis et al. 1989). There is also questionable usability of the definition for evaluation of service quality for it fails to address the unique characteristics of service (Reeves and Bednar 1994).
especially true when a high degree of human contact is involved. Considering limitations in the development, interpretation and implementation of design requirements and specifications, it is obvious that the conformance-torequirements approach should not be used as the exclusive criterion for defining quality.
As Seymour and Sui-Pheng (1990) pointed out, the conformance-to-
requirements definition is far too limiting and provides an incomplete vocabulary of quality. In summary, there is a need for a more robust view of quality.
Customer Satisfaction Definition of Quality For a company to compete effectively on the quality of its products and services “a deeper understanding to the customer’s perspective is a necessary first step” (Garvin 1984, p.43).
A more robust view of quality comes with the customer satisfaction
approach which places the emphasis upon the customer. It demands an entirely new perspective--one that calls for viewing quality externally, from the customer’s
perspective, rather than internally, from a quality-assurance point of view. According to that approach, quality is the extent to which a product or service meets a customer’s expectations. The serious limitation of this definition is its complexity; it is the most complex definition of quality and the most difficult to measure for different customers place different weights on the various attributes of a product and service. Apparently, both approaches to quality have strengths and limitations in relation to measurement, generalizability, and practical usefulness. They should not be seen as mutually exclusive; rather they should be viewed as complementary to each other. The main premise of this paper is that in the marketplace, quality must ultimately be evaluated from the customer’s perspective.
Consequently, we define quality as
customer satisfaction with a product and service received.
Customer Satisfaction as a Performance Criteria Recently a number of companies have begun to create new performance measurement systems that supplement and extend the more traditional financial measures of company performance. In response to changing markets, and concerns about a “short-term orientation,” these firms have begun to use, so called, nonfinancial measures, such as quality and customer satisfaction (Eccles and Pyburn 1992). The use of “soft” performance criteria, such as customer satisfaction, in construction is at an early evolutionary stage.
Companies still track customer
satisfaction less than they do individual project performance, overall company performance, or safety and estimating, for example (ENR 1995).
In this paper we
argue that customer satisfaction can be used for evaluation of quality and ultimately for assessment of success of a company’s quality improvement program. A Model for Evaluation of Homebuilder Quality Improvement Effort In this section we present a model in which customer satisfaction is utilized for evaluation of a homebuilder’s quality improvement effort. Before we can elaborate on the model, it is necessary to provide simple, conceptually sound definitions of a customer. The simplest available definition of a customer is “one who pays the bill” (Austin and Peters 1985)-- a “paying” customer. Within the construction context, it is the owner or client. Another type of customer, equally important, is one who uses a product or service-- a “user” customer. Most facilities have been designed and built for a client other than the user--the designer and contractor, paid by one client, design and build for another, the user. It is very important to make the distinction between the two types of customers for they use different sets of criteria against which they judge their satisfaction. The unique characteristic of the homebuyer population is that it represents both types of customers, paying and user customers. Figure 1 shows a model depicting the relationships between a homebuilder’s quality improvement program, product and service quality, and customer satisfaction. According to the model, a quality improvement effort, if observed and managed in an organized fashion, will lead to achieving higher product and service quality, which will eventually lead to improved customer satisfaction. This model assumes that the homebuilder’s product includes not only the house, but the process of providing the house. In fact, the quality of service may be the only
factor that sets a homebuilder apart from other homebuilders who are offering similar homes for similar market segments (NAHB 1988). As Brown and Fern (1981) pointed out, rarely are market offerings all products or all services but most often they are a blend of the two.
Consequently, every product and service must be designed,
produced, and delivered in the context of a total package of products and services -- it is the “total offering” that generates the total degree of customer satisfaction.
HOMBSAT--An Instrument for Measuring Home-Buyer Satisfaction Although the construction industry has recognized quality and client satisfaction as decisive business factors, it is still unknown how well the industry is meeting client expectations. There are no commonly accepted methods of measuring customer satisfaction in the construction industry. One reason for this is the existence of a wide variety of customers that can be found across the spectrum of construction projects. Customers encountered in a typical highway construction project, for example, use a different set of criteria against which they judge their satisfaction, from, for example,
that used by a purchaser of a single-family house. Consequently, measuring customer satisfaction in different segments of construction requires different “custom-designed” methods and instruments. The absence of a generally acceptable operational definition of customer satisfaction in construction appears to result in neglected implementation of this critical concept. In order to measure the extent of home-buyer satisfaction we need an instrument to enable structured observation and measurement of the concept.
Based on an
exhaustive review of the literature, an instrument for measuring home-buyer satisfaction, called HOMBSAT (HOMe-Buyer SATisfaction), was developed (Torbica 1997). To test the HOMBSAT instrument, data were collected from home buyers regarding their level of satisfaction with design, house, and service. The measures proposed were tested and shown to be reliable and valid, and it was concluded that the HOMBSAT represents a credible instrument to measure home-buyer satisfaction. More detailed discussion on the development and testing of the HOMBSAT can be found in Torbica (1997). The instrument consists of 51 items-14 items representing the DESIGN dimension, 16 items representing the HOUSE dimension, and 21 items representing the SERVICE dimension of homebuilder’s total offering. A complete list of 51 items is shown in the Appendix. To measure homebuyer perception about design/house/service quality, a seven point Likert-type scale, like one shown in Figure 2, is used.
Home Buyer Satisfaction Scores Operationally, customer satisfaction is a complex and elusive phenomenon (Peterson and Wilson 1992) that is not directly measurable by any observable variable.
It is, however, indirectly measurable via a multiple-indicators approach (Johnson and Fornell 1991). Typically, a concept is rated on several scales representing items, or statements associated with a single dimension, and the results are averaged to provide a single score for each dimension. The summed scale score serves as an index of attitudes towards the concept.
Homebuilder’s quality performance can be indirectly inferred from scores on each of the three HOMBSAT dimensions. The scores for DESIGN, HOUSE, and SERVICE for a company are obtained by averaging the individual home-buyer scores. The individual home-buyer scores are the mean of the individual’s responses for the items within each dimension. The scores can be used independently, or in combination. For example, if the design is not provided by homebuilder itself, it can be excluded from consideration. On the other hand, a total company score for home-buyer satisfaction can be calculated by adding up the average score on each of the three dimensions and then dividing by three. HOMBSAT instrument has been successfully used in a study of Total Quality Management (TQM) practice employed by 16 medium to large Florida homebuilders
(see Torbica&Stroh 1999). The study has confirmed that implementation of TQM is positively associated with home-buyer satisfaction.
Organizational efforts towards continuous improvement should be focused on creating performance measurement systems that provide relevant, factual information on core business processes and key activities (Miller 1992).
We have shown that
customer satisfaction, as an external measure, can provide the strategic intelligence needed to direct the quality improvement effort. We have also pointed out that in the home building industry the home buyer represents both the “paying” customer and the “using” customer. This situation requires that the tool for measuring quality address the needs and wants of both customer types.
HOMBSAT, the measurement tool proposed, is most valuable when it is used periodically to track home-buyer satisfaction trends. Also, HOMBSAT can be used by homebuilders to track and make comparisons among the company’s quality performance provided by different divisions, projects, or in different geographic locations.
Austin, N. and Peters, T. (1985). A Passion for Excellence. Warner Books, New York.
Brown, J. R. and Fern, E. F. (1981). “Goods vs. Service Marketing:
Perspective”. In Donnelly, J. H. and George, W. R., Eds., Marketing of Services. America Marketing Association, Chicago, 205-212.
Burati, J. L. Jr., Farrington, J. J., and Ledbetter, W. B. (1992). “Causes of Quality Deviations in Design and Construction”. Journal of Construction Engineering and Management. ASCE, 118 (1), 34-49.
Davis, K., Ledbetter, W. B., and Burati, J. L. (1989). “Measuring Design and Construction Quality Costs”. Journal of Construction Engineering and Management. ASCE, 115 (3), 385-400.
Eccles, R. G. and Pyburn, P. J. (1992, October). “Creating a Comprehensive System to Measure Performance”. Management Accounting. 41-44.
ENR. (1995, February 1). “TQM is underutilized, according to poll”. 14.
Garvin, D. A. (1984, May-June). “Product Quality: An Important Strategic Weapon”. Business Horizons. 43-47.
Johnson, M. D. and Fornell, C. (1991). “A Framework for Comparing Customer Satisfaction Across Individuals and Product Categories”.
Journal of Economic
Psychology. 12, 267-286.
Kelvin, F. C. and Lynch, R. L. (1992, April). “For Good Measure”. CMA Magazine. 2023.
Kenny, A. A. (1988, June). "A New Paradigm for Quality Assurance". Quality Progress. 30-32.
Miller, J. A. (1992, April). “The New Activity Performance Measures”. CMA Magazine. 34.
NAHB. (1988). Customer Service For Home Builders. Washington, D.C.
Peterson, R. A. and Wilson,W. R. (1992). “Measuring Customer Satisfaction: Fact and Artifact”. Journal of the Academy of Marketing Science. 20 (1), 61-71.
Reeves, C. A. and Bednar, D. A. (1994). “Defining Quality: Alternatives and Implications”. Academy of Management Review. 19 (3), 419-445.
Seymour, D. and Sui-Pheng, L. (1990). “The quality debate”.
Management and Economics. 8, 13-29.
Torbica, Z. (1997). “Total Quality Management and Customer Satisfaction in Home Building”. Ph.D. Dissertation. University of Florida, Gainesville, Florida. Torbica, Z. M. and Stroh, R. C. (1999). "Impact of Total Quality Management on Homebuyer Satisfaction." Journal of Construction Engineering and Management. 125 (3), 198-203.
Tucker, R. L. (1990, May). “The Biq “Q””. The Construction Specifier.151-152.
Appendix HOMBSAT Questionnaire: DESIGN: 1 2 3 4 5 6 7 8 9 10 11 12 13 14
How satisfied are you with your house floor plan? How satisfied are you with the scale and proportion of floor plan? How satisfied are you with the number of rooms in your house? How satisfied are you with the size of the rooms in your house? How satisfied are you with the layout of the rooms, that is, the design in relation to your daily life? How satisfied are you with the location of the different rooms? How satisfied are you with individual space for each member of your household? How satisfied are you with your kitchen design? How satisfied are you with bathroom(s) design? How satisfied are you with the number of bathrooms in your dwelling unit? How satisfied are you with ceiling height? How satisfied are you with the amount of privacy available in your house? How satisfied are you with the number and placement of electrical outlets? How satisfied are you with the brightness or light in your house during the daytime? HOUSE:
15 16 17 18 19 20 21 22 23 24 25 26 27
How satisfied are you with the energy-efficient features in your house? How satisfied are you with utility cost? How satisfied are you with low-cost maintenance features in your house? How satisfied are you with easiness of maintenance of your house? How satisfied are you with the cost and effort needed to keep the house up? How satisfied are you with the operation of Heating/Air Conditioning? How satisfied are you with the quality of building materials used in your house? How satisfied are you with the quality of materials used in floors? How satisfied are you with the quality of materials used in walls? How satisfied are you with the operation of windows? How satisfied are you with the operation of doors? How satisfied are you with the operation of electrical features? How satisfied were you with quality of finish workmanship?
28 29 30
How satisfied are you with the quality of workmanship of painting (free of nail pops, free of shrinkage cracks, etc)? How satisfied are you with the roof performance? How satisfied are you with the performance of foundation?
SERVICE: 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48 49 50 51
Extent to which home builder set your expectations early. Extent to which home builder personnel were available during evening and weekend hours. Extent to which you were welcomed enthusiastically. Extent to which home builder presented the basic advantages of their home. Extent to which home builder pointed out some hidden values of the home. Extent to which you were treated like a person, not a number. Extent to which home builder personnel showed interest in you as a customer. Extent to which you were given a quiet place to make decisions. Extent to which home builder explained every step of home buying and building process to you. Extent to which it was made clear to you whom you should contact during construction. Extent to which home builder explained to you warranty coverage. Extent to which home builder explained to you your responsibilities for maintenance and upkeep. Extent to which home builder explained to you the way the various items in your home operate. How satisfied were you with professionalism of home builder personnel? How satisfied were you with competence (skills and knowledge) of home builder personnel? How satisfied were you with responsiveness (willingness to help and provide prompt service) of home builder personnel? How satisfied were you with reliability (ability to perform the promised service dependably and accurately) of home builder personnel? How satisfied were you with courteousness of home builder personnel? How satisfied were you with communication with builder’s construction personnel? How satisfied were you with builder’s responsiveness to questions/ concerns? How would you rate your satisfaction with your builder’s attitude about customer service (i.e. after move-in)?
Zeljko M.Torbica is an assistant professor in the department of construction management at Florida International University.
He earned his doctorate in
construction management from the University of Florida. Dr. Torbica has been trained in Europe and in the United States in the areas of Civil Engineering, Project Management and Construction Management. Prior to his academic career, he worked for seven years for a leading international construction and consulting company. His work has been published in the leading professional journals. Dr. Torbica is a Project Management Professional (PMP), as well as a Certified Quality Engineer (CQE). His areas of expertise include Total Quality Management (TQM), Project Management, International Construction, Productivity Improvements and Cost Engineering. He may be contacted at Florida International University, Department of Construction Management, 2912 College Avenue, Davie, FL 33314; 954-236-1507, Fax 954-2361598, e-mail email@example.com.
Robert C. Stroh is director of Shimberg Center for Affordable Housing at the University of Florida.
He earned a doctorate in Genetics from Pennsylvania State University.
Stroh may be contacted at Shimberg Center of Affordable Housing, University of Florida, P.O. Box 115703, Gainesville, FL 32611-5703; 352-392-7697, Fax 352-3924364, e-mail firstname.lastname@example.org.
INTERNATIONAL SAFETY AND HEALTH STANDARDS IN CONSTRUCTION Theo C. Haupt Richard J. Coble
ABSTRACT Minimum safety and health requirements have tremendous variation dependent on the global construction location. In determining such requirements, issues that include worker culture, ethnic traditions, religious observances, and familiarity with the work to be accomplished must be considered, evaluated and accommodated in the recommendation of any minimum standard.
International Organization for Standardization (ISO) 9000 is in place, but it lacks what is needed for safety management. With the meaning of safety management being so varied throughout the world, a new international safety and health standard is needed, but it must be performance based to accommodate the differing cultures and construction methodologies of the world. This paper discusses the need for safety management standards and the degree to which they are desirable as they pertain to occupational safety and health performance on construction projects in an international context. Further various approaches to safety management are compared. Current ISO standards and their appropriateness for construction are reviewed. The characteristics of a new international safety and health standard are outlined. A performance-based approach is advocated. Examples of performance-based standards are drawn from Europe and cross- referenced to the applicable OSHA standards.
construction safety and health, standards for construction safety and health
INTRODUCTION The construction industry is experiencing fundamental changes enforced by several influences which include increasing trade liberalization (Alleyne, 1997), globalization and internationalism accompanied by direct action by international owners of the products of construction to make the construction industry perform better (Atkin and Pothecary, 1994). The movement towards global integration is unstoppable (Alleyne, 1997). The growing markets in the Far East, Middle East, Africa and South America present numerous opportunities for industry participants, but human rights that include worker protection are increasingly becoming a point of concern. Indeed, the world as a whole is critical of gross abuses of human rights and terrorism anywhere and should feel no less strongly about health (Alleyne, 1997) â€“ occupational safety and health on construction sites included. Human rights issues have become a focal point of debate throughout the world. It is the opinion of the authors that worker safety and health are a sub-set of these issues, and accordingly should come under some of the same scrutiny. In 1990, worldwide expenditures for healthcare reached $1.7 trillion, about 8% of the world's total economic output, without any signs of decreasing (Fauci, 1999).
Despite this huge expenditure, there is still ill health resulting from the poor utilization or poor application and lack of resources. This is true for the global construction industry. It would be more effective if governments would target some of these funds at efforts to improve safety in an industry that has been responsible world wide for more accidents and fatalities than any other (Smallwood and Haupt, 2000; Wong, Chan and Lo, 1999; Anumba; 1999; Churcher and Alwani-Starr, 1996; Birchall and Finlayson, 1996; Khalid, 1996; King and Hudson, 1994). Currently, there are no uniformly accepted safety and health standards, although ISO 9000 touches on safety and health. There is also mounting pressure internationally for ISO to develop such standards because of the global emphasis on making work places safe and reasonably free from health hazards (ANSI, 1996). The variance in environmental and occupational health and safety standards has been cited as one of the four routes of the international transfer or acquisition of health risks (Alleyne, 1997). Owners are increasingly becoming disillusioned with the inability of the construction industry to respond adequately to their demands for improved productivity and quality, attention to environmental issues, reduced life cycle costs, value for money and improved occupational safety and health performance on their building projects. The danger exists, however, that, in pursuit of achieving some of these demands, contractors will compromise on performance standards perpetuating the problems rather than solving them.
It is apparent that the continual development and emergence of international quality management standards that are market driven will also impact on how occupational safety and health on construction sites is managed (Bowman, 1995). It is possible that dedicated occupational safety and health management standards will either emerge or be developed in the near future. This has already taken place for quality and environmental management in the form of the ISO 9000 and 14000 family of standards respectively (Curado, 1997). It is therefore logical to expect occupational safety and health management to follow the same trend. In the increasingly global competitiveness of the construction business, quality control and quality assurance with respect to a consistent level of performance in health and safety in construction is no longer optional (Kashef et al, 1996). This paper addresses the problem of whether management standards are desirable and, indeed, necessary as they pertain to occupational safety and health performance on construction projects in an international context. Current ISO standards and their appropriateness for construction are reviewed. The characteristics of a new international safety and health standard are outlined. A performance-based approach is advocated. Examples of performance-based standards are drawn from Europe and cross- referenced to the applicable OSHA standards.
Are minimum standards necessary? OSHA has defined standards as requiring conditions, or the adoption or use of one or more practices, means, methods, operations, or processes, reasonably necessary or appropriate to provide safe or healthful employment and places of employment (Hammer, 1981). There is debate about whether standards in occupational safety and health in construction are necessary and, indeed, have value (Curado, 1997). Some authors contend that standards should be avoided entirely in favor of regulation and legislation. This approach certainly has merits for construction contracting on a national basis by indigenous contractors familiar with the application and interpretation of local regulations and legislation. It, however, becomes questionable when one considers the practicality of such an approach in the complex multi-organizational and cross-cultural context of international construction contracting. The interpretation of the local safety regulations and legislation would present a minefield of problems to foreign contractors unfamiliar with the local conditions. Consequently, compliance with these through implementation on construction sites would be extremely difficult. Indeed, noncompliance could prove to be extremely costly should any litigation become necessary. It is for this reason that the authors are of the opinion that currently non-existent minimum international occupational safety and health standards, would be a more desirable option. Some of the tangible benefits of having standards have been described by Waring (1996) as being the systematic identification and description of formal
human processes, the analysis of hazards, the assessment of risks, the prescription of control measures, the specification of appropriate procedures and, finally, the verification that the procedures are working. Curado (1997), however, in his discussion on the pros and cons of occupational safety and health standardization and certification, makes the point that, despite the many apparent benefits of
standards based occupational safety and health
management systems, they may be inappropriate as a framework for standardization of systematic aspects of management since the responsibilities for occupational safety and health are not solely a management issue. The authors concur that successful occupational safety and health performance on construction sites requires commitment from management and involves every worker (Hinze 1997). However, performance based standards for occupational safety and health are still worth considering.
Current international standards The ISO 9000 series of standards, developed by the International Organization for Standardization (ISO), provides a framework for developing, operating and documenting a quality management system. These standards are at the present time rapidly becoming the pre-eminent, world-wide quality system which, it is claimed, will result in a quality management system suitable for all organizational management systems, encompassing products and services, personnel, finance, cost, health and safety. It is the last applications that are of interest. The claimed benefits include improved teamwork and financial savings.
ISO 9000 has been universally adopted, and is now understood internationally to represent the commitment of an organization to a quality process (Brown and Andes, 1994). ISO 9000 is a quality system, based on the idea of building quality into every aspect of the organization with an integrated quality management system. ISO 9000 relies heavily on the concept that quality management is an integral part of the overall management organization of a firm. ISO 9000 provides quality assurance that includes planned and systematic quality activities designed to prevent problems from occurring, detect them when they do occur and prevent them from recurring (Brown and Anders, 1994). Features of ISO 9000 include the visible commitment required by management, the requirement for processes within an organization to be recorded in writing, and the unique independent verification/audit process. The most common reasons for the adoption of ISO 9000 have been the desire for improved quality that cannot be evaluated in a vacuum, the assurance of supplier quality and competitive marketing advantage. Additionally, quality must relate to standard specification. External benefits include access to future markets, use as a marketing tool, and prevention from being excluded from domestic and foreign markets. Internal benefits of ISO 9000 include increased quality awareness, improved communication throughout the organization, involvement of entire management and staff in the quality system, control of costs, improved supplier quality, and standardization of processes. The underlying philosophy is one of prevention rather than detection.
Industry experience with ISO 9000 The current growth in demand for certification is part of the broader quality push taking place in the last 20 years. This demand is being driven substantially by large customers requesting that their suppliers be certified and some large markets such as the European Community (EC) requiring certification for entry (Brown and Van der Wiele, 1995). Reasons given for seeking and obtaining ISO 9000 certification include the expectation that it will lead to improved consistency and performance which will meet customer expectations (Brown and Van der Wiele, 1995), increased marketing benefits, improved internal efficiencies, and a good basis from which to start the process of quality management. Another factor is that certification may be an effective means of changing the culture of an organization. Benefits accruing include raising the quality awareness within an organization, providing greater awareness of problems, improving customer service, and enhancing product quality. However, industry experience suggests that improvement in productivity costs, wastage rates, staff motivation and staff retention has been insignificant. Other difficulties and problems encountered with gaining ISO 9000 certification include: •
Gaining management commitment;
Gaining employee commitment;
Interpretation of standards; and
Problems with documentation (Brown and Van der Wiele, 1995).
Some of the measures which have been taken to gain commitment from management
discussions on the advantages of ISO 9000, and the enhancement of employee understanding through communications and regular meetings. The actual process of documentation and development of procedures has consistently proven to be a common source of difficulty and problems. Typical of these has been developing the desired standardization of tasks, making sense of the standards, gaining employee participation, and documenting procedures for audit purposes (Brown and Van der Wiele, 1995). ISO 9000 standards have been seen as more appropriate for manufacturing and less for construction. In the case of construction, each project is unique with respect to the working environment, available resources, project duration, and budget. Other criticisms of ISO 9000 include that they are not written in simple understandable terms, include difficulties in understanding exactly what the standards require, and result in inconsistencies with the interpretation of the standards themselves by consultants and assessors (Brown and Van der Wiele, 1995).
Applicability and appropriateness of ISO 9000 to safety and health in international construction
All the standards developed by ISO are voluntary including ISO 9000. Only a certain percentage of ISO standards, particularly those dealing with health, safety or the environment, have been adopted in some countries to form part of their regulatory framework or are referred to in legislation for which it serves as a technical basis (ISO, 1998). There seems to be little other evidence in the literature of the use of ISO 9000 as a quality management system in occupational safety and health in construction. Some of the features of the standard that seem to be appropriate include the need for commitment from management to the implementation of the standards, the need to formally document procedures, and the need for improved and continuous communication throughout organizations. Research has shown that, for occupational safety and health performance to improve, there has to be:
commitment to this objective from management;
formally documented safety and health practices on construction sites in the form of a safety plan; and
Communication at all levels of the organization.
The cost of registration in respect of ISO 9000 is perceived to be an expensive overhead seemingly working only in favor of the largest contractors who are able to absorb the cost implications. Seen in this light, ISO standards act as very effective barriers to entry for smaller contractors wishing to gain access to the global market (Taylor, 1995). These contractors are concerned that certification will raise costs without a commensurate improvement in quality (Small Business Research Trust, 1992). There is no widespread optimism that ISO 9000 or any other standard will actually save money. This is contrary to the views and experiences of Hinze (1997) and Levitt and Samelson (1993) that an effective safety and health program does actually save money.
According to Taylor (1995), the main issues concerning the implementation of ISO 9000 are: •
the perceived prohibitive costs of registration;
the poorer implementation practices by smaller contractors; and
the required commitment from management.
Reasons given for registration include: •
pressure from clients;
improved efficiency and productivity;
improved quality product and image; and
Marketing and competitive advantages.
These reasons suggest that the motivation for applying ISO standards to construction safety and health is misdirected. Research has shown that, for the management of safety and health in construction to be effective within any organization, there needs to be a culture of safety implying the active involvement of every employee in achieving a safe working environment (Hinze, 1997; Levitt and Samelson, 1993; Hammer, 1981).
Currently, in many
construction firms, the prevailing culture in construction firms is one of economics and profit maximization. Investments are made in construction safety based on the potential dollars saved on workmen's compensation and other insurance premiums. A major concern about ISO 9000 and similar international quality management systems is that they have been formulated based on standards and norms that are acceptable in developed and industrialized countries. It would be extremely difficult, if not impossible, for most contractors in underdeveloped and developing countries to be able to comply with the stringent requirements for registration and certification. Consequently, they cannot compete with large ISOcertified foreign contractors. Many projects in these countries are funded by foreign aid agencies that insist on working with contractors who are registered or certified in terms of ISO and other standards. Ironically, many of these projects are classified as development projects. Yet the indigenous contracting community is excluded from participation, resulting in domination of local construction industries by foreign-owned companies. In this context, other
prejudicial factors, beside the stringent requirements for registration and certification, include: •
the effective size of these contractors;
the prohibitive costs to implement the standards;
the lack of understanding of the standards themselves and requirements; and
the fact of no clear advantages accruing to them from ISO registration and certification.
Performance based safety and health standards While ISO 9000 and other similar systems are not appropriate for implementation in safety and health for international contracting, they may provide a basis or model to follow. A new performance based international occupational safety and health standard for international construction might be more appropriate. There has, in fact, been a growing trend for countries to develop and adopt a performance based approach to the establishment of building codes and related standards (Bowen and Thomas, 1997). It is recognized that consensus on what would constitute minimum requirements could be difficult to achieve without the widest possible consultation and participation in the formulation process. However, genuine international approaches are more likely to succeed in the functional area of health, which is intrinsically non-conflictive (Alleyne, 1997). The standards should be written
using simple language that is unambiguous with respect to their meaning regardless of the country in which they are applied. This could prove problematic since current construction terminology varies considerably from country to country. Additionally, it is important that these standards, if they are to succeed, promote consistency, thereby eliminating confusion caused by differences in interpretation, perception, and application. There is a case for an approach similar to that of international road signs which are universally understood and complied with. Everyone knows that when they see a stop sign they should stop regardless of whether they are driving in Taiwan or Turkey. The stop sign brings about the desired outcome – that of stopping. In recent years, the technology of safety improvement has been characterized by three approaches. These approaches are summarized as follows: •
The traditional safety management style relies on efforts to improve engineering and work environments accompanied by authoritarian management models dependent on hierarchical structures, formal rules and procedures, and the policing of workers to ensure compliance (Human Performance Technology, 1998). This approach tends to be a reactive one.
Behavioral safety management has been fairly successful since the early 1980’s. This approach is characterized by behavior modifications through observation,
language and jargon, individualized competence building, and rigorous training (Human Performance Technology, 1998). •
More recently, performance based management has become popular in that it focuses on the improvement of worker performance. Further, it also concentrates on outcomes rather than actions. It provides an ideal basis for identifying those worker behaviors which result in accidents, addressing all the major factors which influence these behaviors, and providing continuous improvement (Human Performance Technology, 1998). In this approach, the best features of each of the other approaches are combined with performance management and modern training technology to bring about more effective and rapid implementation. This approach is characterized by the building of both individual and organizational
technology, quicker and more sustainable results, and more effective training methods. Performance based safety management systems are easily implemented in a short period of time, are inexpensive and lend themselves to “train the trainer” applications and are very flexible (Human Performance Technology, 1998).
According to Brown and Thomas (1997), some of the requirements which a successful minimum international standard must meet include: •
Greater clarity of intent and consistency of scope;
Improved clarity of requirements;
Greater ease of use;
Reduced need for change;
Greater responsiveness to, and tolerance of, innovation;
Greater flexibility in application;
Easier application to renovation; and
Increased supportiveness of the global trade environment.
The standard must, additionally, take cognizance of and make allowances for country-specific needs and worker culture in differing international settings. The impact of cultural influences, religious observances, and ethnic traditions must be acknowledged and considered. To illustrate this point, consider workers in India who wear turbans and are required to wear hard hats. Indeed, they would find them extremely difficult to wear with turbans in place. Additionally, it would be unacceptable to expect the current use of bamboo scaffolding in China to be changed in favor of steel and aluminum scaffolding. A performance based approach makes provision for the freedom to choose one of many possible means to achieve the desired performance or outcome while allowing for flexibility and innovation which have become the driving forces behind the establishment of these universal standards. Ideally, there should be the perception and practice of international solidarity in health, such that there is the feeling that ill health, injury and
suffering, especially when unjustified, wherever they occur, demean us all. Occupational safety and health practices on construction sites are no exception.
Example of performance-based standards The following examples of performance-based standards are taken from the Council Directive 92/57/EEC (1992):
Scaffolding and ladders
All scaffolding must be properly designed, constructed and maintained to ensure that it does not collapse or move accidentally.
Work platforms, gangways and scaffolding stairways must be constructed, dimensioned, protected and used in such a way as to prevent people from falling or exposed to falling objects.
Demolition work Where the demolition of a building or construction may present a danger: (a)
appropriate precautions, methods and procedures must be adopted;
the work must be planned and undertaken only under the supervision of a competent person.
These sections are the equivalent of OSHA 29 CFR 1926 Subparts L (1926.450453) and T (1926.850-860).
Rather than seek to conform to comprehensive international standards, which are inappropriate for safety and health management in construction, minimum occupational safety and health standards need to be designed. The thrust of these must be to build and develop a culture of safety on construction sites throughout the entire world. They must be inclusive in that registration and certification should be achievable, and indeed desirable, by most contractors, indigenous and international, in developed, underdeveloped and developing countries. These standards must be uniform, performance based, and represent a minimum level of requirements which are acceptable to the global construction industry in all contexts. They must provide safety assurance, which includes planned and systematic activities designed to prevent accidents, injuries and near misses from occurring, detect them when they do occur, and prevent them from recurring. They should emphasize the need for commitment from management to the implementation of the standards, the need to formally document safety and health procedures in the form of safety plans, and the need for improved and continuous communication throughout entire organizations. Consideration must at the same time be given to the controversial aspect of enforcement and non-compliance. Minimum international standards for the management of occupational safety and health on construction sites are desirable and necessary in the
context of international construction contracting. What these should be will have to be resolved in the not too distant future.
Alleyne. G.A.O. (1997): “Global Health - the Paradigm, Policy and Program Implications.” National Council for International Health Monthly Seminar Series, 18 August, Washington, D.C., Pan American Health Organization.
Standardization of Occupational Health and Safety Management Systems- Is there a Need? ANZI.
Anumba, C.J. (1999): "Concurrent engineering in construction - An opportunity to improve construction safety," In Singh, A., Hinze, J. and Coble, R. (eds.), Implementation of Safety and Health on Construction Sites, Rotterdam, Balkema, pp. 157-164.
Atkin, B. and Pothecary, E. (1994): “Building Futures” Reading, St George’s Press.
Birchall, S. and Finlayson, H. (1996): "The application of European derived safety management regulations to the U.K. construction industry," In Singh, A., Hinze, J. and Coble, R. (eds.), Implementation of Safety and Health on Construction Sites, Rotterdam, Balkema, pp. 41-52.
Bowen R. and Thomas, R. (1997): “TG11 – Performance-based Building Codes” CIB Coordinators’ Trend Reports: An Anthology of Future Perspectives: CIB Publication 211. Rotterdam, CIB.
Brown, A. and Van der Wiele, T. (1995): ‘Industry experience with ISO 9000.” Asia Pacific Journal of Quality Management vol. 4 no 2, MCB University Press, pp. 8-17.
Brown, D. and Anders, V. (1994): “ISO 9000 – A quality system for the present and
Churcher, D.W. and Alwani-Starr, G.M. (1996): "Incorporating construction health and safety into the design process," In Singh, A., Hinze, J. and Coble, R. (eds.), Implementation of Safety and Health on Construction Sites, Rotterdam, Balkema, pp. 29-40.
Coble, R. (1998): “Environmental issues as they relate to construction.” International Conference on Environment, Quality and Safety in Construction, 16 June 1998, CIB W99 Lisbon, Portugal, pp. 55-60.
Curado, M. T. (1997): “Managing Safety in Construction: Are standards the way forward?” In Haupt, Theo C and Rwelamila, Pantaleo (Ed) Health and Safety in Construction: Current and Future Challenges, Bellville, Pentech, pp.242-254.
Council Directive 92/57/EEC (1992) : "Council Directive 92/57/EEC of 24 June 1992 on the implementation of minimum safety and health requirements at temporary or mobile construction sites (eighth individual Directive within the meaning of Article 16 (1) of Directive 89/391/EEC)" Official Journal of the European Communities no. L 245/6.
Fauci, A. S. (1999): "Infectious Diseases: Impact on Global Health," Professional Safety, Journal of American Society of Safety Engineers, vol. 44, no.7, pp.16-17.
Hammer, W. (1981): “Occupational Safety Management and Engineering” Englewood Cliffs, Prentice-Hall, Inc.
Hinze, J.W. (1997): “Construction Safety” New Jersey, Prentice-Hall, Inc.
Human Performance Technologies (HPT) (1998): “Start a Behavioral Safety Program
Khalid, A.G. (1996): "Construction site injuries: The case of Malaysia," In Singh, A., Hinze, J. and Coble, R. (eds.), Implementation of Safety and Health on Construction Sites, Rotterdam, Balkema, pp. 93-102.
Kashef, A.E., Salim M., Betts M. R. & Choudhry (1996): “The Role of ISO 9000 Standards in the Construction Industry” CIB W89 Beijing International Conference, 21-24 October 1996, pp. 10-19.
King, R.W. & Hudson, R. (1994): "Construction Hazard and Safety Handbook, Butterworth.
Levitt, R. E. & Samelson, N. M. (1993): “Construction Safety Management” New York, John Wiley and Sons, Inc.
Small Business Research Trust (1992): “Quality Standards” The Natwest Quarterly Survey of small business in Britain vol. 8 no 3, Milton Keynes, Small Business Research Trust.
Smallwood, J. & Haupt, T. (2000): "Safety and health Team Building," In Hinze, J., Coble, R., and Haupt, T. (eds), Construction Safety and Health Management, New Jersey, Prentice-Hall, pp. 115-144.
Taylor, W. A. (1995): “Organizational differences in ISO 9000 implementation practices” International Journal of Quality and Reliability Management vol. 12 no 7, MCB University Press, pp. 10-27.
Waring, A.E. (1996): “Safety Management Systems” London, Chapman and Hall.
Wong, K., Chan, P.C. & Lo, K.K. (1999): "Factors affecting the safety performance of contractors and construction sites," In Singh, A., Hinze, J. and Coble, R. (eds.), Implementation of Safety and Health on Construction Sites, Rotterdam, Balkema, pp. 19-24.
Theo C. Haupt is a lecturer in the Department of Construction Management and Quantity Surveying at Peninsula Technikon, Cape Town, South Africa. He has served as the chairperson of the Western Cape branch of the South African Institute of Building (SAIB). He remains a National Council member of SAIB and enjoys membership in Architects and Surveyors Institute (ASI), Chartered Institute of Building (CIOB), and Commonwealth Association of Surveying and Land Economics (CASLE). His research interests include infrastructure policy and delivery in te context of developing countries. However, he is presently engaged in doctoral study at the University of Florida, where his focus has been on construction safety issues. He has published several safety-related articles and conference papers. He is currently the CIB W99 international area coordinator for Africa.
Richard J. Coble is an associate professor in the M.E. Rinker Sr., School of Building Construction and the director of the Center for Construction Safety and Loss control at the University of Florida. He has extensive hands-on experience in
undertaken several major construction
throughout the U.S.A. His major research interest is in safety and health in construction, and he has recently been conducting investigative studies into workman's compensation fraud. He has shown a strong research interest in the area of automating the construction foreman, which is integral to scheduling for safety into all aspects of the construction process. He is currently the international director of CIB W99, which is an international consortium of construction safety experts. He has published widely in the area of safety and health.
Bonding Capacity: Equitable and Contractual Indemnification under the General Indemnification Agreement Don Jensen ABSTRACT The construction contract surety bond for payment is a financial risk mitigation mechanism designed to protect creditors. Such a mechanism is a financial line of credit extended to the contractor by the surety. In return for the extension of financial credit, the contractor typically executes a general indemnity agreement. The purpose of the general indemnity agreement is to create a secured credit transaction between the surety and contractor. The security provided is the asset base of the contractor. Thus, a payment bond is neither a indemnification agreement, nor insurance, but instead a contract to answer for the debt of another that is secured by the assets of the contractor.
KEYWORDS Payment Bond, Miller Act, Secured Transaction, General Indemnity Agreement, Collateral
INTRODUCTION The fundamental purpose of a construction payment bond is the minimization of financial risk of nonpayment to creditors. The intent of same is to compensate a creditor to a construction contract from financial risk resulting from a defaulting debtor. In short, a payment bond is a security instrument, in the sense that the surety provides a line of financial credit to the contractor. In essence, the surety is advancing financial credit to the
contractor, and in return the contractor’s asset base is used as collateral for the payment bond guarantee (Welch, Morelewics, Ruck and Treker, 1992). For this credit line, the surety charges a premium (interest rate) for the credit guarantee. This type of credit transaction is commonly termed a secured transaction (Bachrach, 1990; Powers Farmer Co., 1994; Article 9, sec. 9-105 et seq). Sykes v. Everrett, 83 S.E.585 (1914). Before issuing the payment bond, the typical surety will require the execution of a general indemnity agreement. The general indemnity agreement is designed to supplement a surety’s common law rights to reimbursement and indemnification. This supplementing is accomplished by two contractual provisions typically stipulated to in the general indemnity agreement. The first provision is termed the indemnity clause. The second is titled the collateral clause. It is the combination of both clauses that creates the secured credit transaction known as suretyship. This paper shall examine the interrelationship between a construction payment bond required by the Miller Act and the rights and remedies afforded the surety under these two provisions commonly encountered in the general indemnity agreement.
MILLER ACT A federally funded construction project typically requires a payment bond. This requirement is a function vis-a-vis the Miller Act (40 U.S.C. sec. 270 (a) et seq.). The Miller Act requires the contractor, subcontractor, or material vendor to furnish such a bond because one does not have a statutory right to lien federal public property (Lybeck, Shreves, 1998). United States ex rel. Heller Electric Co., Inc. v. William F. Klingensmith, Inc., 670 F.2d 1227 (1982). As a consequence, this federally enacted legislation requires
execution of a payment bond in favor of the U.S. Government as a condition precedent to the letting of a public work contract. Thus, the intent of the payment bond is to run to the federal government (owner) a prophylactic financial mechanism protecting against a creditor’s lien. The payment bond also however, benefits the subcontractor, materialman, and labor in protecting the personal property rights of same (Stearn, 1993; Surety Underwriting Manual, 1973). It is important to note, that the Miller Act only applies to a public work contract. However, 40 U.S.C. section 270 (b) of the Miller Act does not statutorily define the term public work. The U.S. Supreme Court however, in United States ex rel. Noland Co. v. Irwin, 316 U.S. 29 (1942), defined public work as:
“any projects of the character heretofore constructed...by public authority...with public aid... to serve the interest of the general public.”
Miller Act payment bond therefore serves as a substitute for realty similar to private construction against which a forfeiture action can be brought by a creditor against a debtor for material and or services rendered in the execution of a public work contract. U.S. ex re. Sherman v. Carter, 353 U.S. 210, (1957); Clifford F. MacEvoy Co. v. U.S. ex rel. Calvin Tomkins Co., 322 U.S. 102 (1944); Arthur N. Olive Co. v. U.S. f/u/b Dan C. Marino, 297 F.2d 70 (1961). Thus the Miller Act, by legislative intent, does not mitigate financial risk exposure for nonpayment to the prime contractor. Instead, the Miller Act functions as legislative financial assurance extended to, and provided for, the subcontractor, labor and supplier providing service and/or material to a federally funded construction project. In essence, the
contractual risk of nonpayment is transferred to the party underwriting the primary construction contract termed surety (entity issuing the bond) and, therefore, not to the subcontractor, labor, materialmen and mechanic (craft person). Standard Acci. Ins. Co. v. Rose, 234 S.W.2d 728 (1950). Thus, a surety (also termed suretyship) provides a secured credit instrument in the form of a payment bond agreement, whereby the surety conditionally promises its asset base as collateral security instead of the asset base of the debtor or obligor (contractor). As such, a payment bond issued by a surety is not a hold harmless agreement, nor is it an insurance contract, but instead a separate contract predicate to an underlying obligating contract serving as a collateral base guaranteeing the underlying contractual agreement (Stearns, 1993; Burnett, 1990). Therefore, a surety is an entity that contracts to solely answer for the debt or misperformance of another (74 Am. Jr. 2d Suretyship sec. 3). Meyer v. Building & Realty Serv. Co., 196 NE 250 (1935); Ellis v. Phillips, 110 NW 2d 772 (1961). It is important to note that a suretyship agreement, as a secured credit transaction, must always be a tripartite arrangement. Meaning there exist an entity issuing the bond (obligor- termed the surety, party extending financial credit), the principal (contractor receiving the financial credit), and the owner (obligee- party the bond is written in favor of in the event principal defaults). Stabs v. Tower, 40 NW 2d 362 (1949). The principal is the party who enters into primary contract with the owner, thereby formulating the original underlying construction contract agreement. Meyer v. Bldging & Realty Serv. Co., 196 NE 250 (1935). The principal and surety enter into a subsequent general indemnity agreement providing for a collateral arrangement (secured transaction), made contingent upon the original agreement between the principal and owner. Johnson v. Touchert, 24 NE 580
(1890). First National Bank v. Fidelity & Dep. Co., 40, So 415 (1906); Noland Co. v. West End Realty Corp., 147 SE 2d 105 (1966). Should one entity formulating the tripartite paradigm be contractually lacking, then there exist no suretyship arrangement. Stabs v. Tower, 40 NW 2d 362 (1949). This is true because, the surety is bound to the same obligation as the principal as principal is to obligee (Stearns, 1993). However, it is important to note that the surety is liable both jointly and severally as the principal up to the penal sum (face amount) of the payment bond. Thus, the surety is bound similarly as the principal under the obligation of the construction contract. Bradley v. Surff & Co., 93 S.E.2d 364 (1956).
As a consequence, once the principal is discharged from the
underlying obligation of the construction contract, then so too is the surety. Carter v. Curlew Creamery Co., 147 P2d 276 (1944); National Union Fire Ins. Co. v. Robuck, 204 So. 2d 2204 (1980); Argonaut Inc. Co. v. ABC Steel Products Co. 582 S.W.2d 883 (1979). Thus, the suretyâ€™s obligation and financial liability to the obligee is no greater than or less than, that of the underlying contract, which is equivalent to the penal sum (face amount of bond) of the payment bond.
PURPOSE OF A PAYMENT BOND The terms and conditions of the construction payment bond are such that typically the principal will promptly pay a person or business entity that has furnished labor and or material for use in the performance of contract work (48 C.F.R. sec 53.301-25-A). Moreover, it is important to note that material need not be installed in the work - same may be stored material at the project site, or at a remote storage location. Nevertheless, such
circumstances and conditions are within the legislative parameters of the federal Miller Act and, therefore protected by the payment bond. Thus, the payment bond fundamentally substitutes as a payment mechanism for material delivered or service rendered by a potential lien claimant should the principal fail to make payment to same. F.D. Rich v. U.S. ex rel Ind. Lumber Co., 417 U.S. 116, (1974). Further, a federal Miller Act payment bond does not pay for the performance of the work to be completed, or corrected in the event there is a default termination by the owner/obligee against principal/contractor. Instead, the payment bond pays strictly for labor and material installed or inventoried at the construction project that is owing and due against the payment bond penal amount. Thus, the claimant (party bringing an action to lien and foreclosure on the bond) against the payment bond is not the intended beneficiary of the payment bond, but instead the owner/obligee assumes that contractual role. This concept and issue is the creation of much litigation when the claimant creditor has failed to perfect notice under the Miller Act provisions. Corpus Christi Bank and Trust v. Smith, 525 S.W.2d 501 (1975). Therefore, the payment bond protects the owner from liens and other claims made during and, after completion of the work and, similarly after final payment has been rendered to the contractor of record. United States v. Chester Heights Assoc., 406 F. Supp. 600 (1975). A payment bond does not obligate the surety to make payment unless and until the contractor is declared by the owner to be in default. Moreover, not every breach by the contractor qualifies as a default by the contractor. The following conditions typically constitute a contractorâ€™s contractual default: (a) failure to pay labor, (b) failure to pay material, (c) allowing lien actions to be brought against the bond, (d) abandonment of the
work, and (e) bankruptcy proceedings. Massachusetts Bonding Ins. v. U.S., 71 Supp. 36 (1947); U.S. for the Use of Gibson v. Harman 192 F.2d 999 (1951); U.S. for the H.O. Kilsby v. George 325 F.2d 54 (1963). Further, when the contractor has breached a material condition of the contract, the owner must give a written record detailing each instance that defines the anticipatory breach, and request that the contractor give written assurance of cure. If the contractor does not make cure regarding the anticipatory breach, then the owner may claim that the contractor is in technical default. Subsequent to this action, the owner thereafter makes a formal written demand to the surety to perform per the provisions of the payment bond. At this juncture, the owner’s rights against the surety are coextensive with those of the contractor relative to the underlying construction contract. Thus, should the surety disavow liability under the bond, then the owner may bring a civil action against the surety. Arcady Farms Miling Co. v. Wallace, 89 S.E.2d 413 (1955). Once the owner provides the surety with notice to cure, the surety is required to anticipate the contractor’s breach. However, once a default is declared by the owner, the surety must pay the contract cost owing and due or assert available contractual defenses (e.g., fraud). At this juncture, the surety typically requests that the contractor make written statements admitting or denying the owner’s claim of default under the original underlying contract. Subsequent to this condition, the surety typically makes demand against the collateral employed to perfect the secured credit interest the surety has in the contractor’s assets under the general indemnity agreement. Then the surety seeks to settle with the claimant on the payment bond and, then seeks indemnity of the claim against the contractor under the general indemnity agreement. Indemnity Insurance Co. Of North
America v. U.S. 74 F.2d 22 (1941). COMMON LAW INDEMNITY Implicit in every suretyship agreement is the common law construct of indemnity. Indemnity means a collateral contract or assurance by one person who engages to secure another against anticipated losses by legal consequence of an act or forbearance to act. Boyle v. Burt, 179 N.W.2d 513 (1970). This implicit obligation is termed common law indemnity. Common Law indemnity is not imposed by contract, but instead by law. Stuart v. Hertz Corp., 351 So.2d 703 (1977); Barnett Bank of Miami v. Mutual of Omaha Ins. Co., 354 So.2d 114 (1978); Florida Rock & Sand Co. v. Cox, 344 So.2d 1926 (1977). The legal issue of indemnity arises whenever the surety is presented with a payment bond claim (King, 1993; Hayes, 1986). It is an established principle of common law that when a bond with surety is executed, there arises an implied contract ( a contract inferred by law resulting from a partyâ€™s acts or conduct) that the principal will reimburse the surety for any and all payments surety may make in compliance with the obligation of the payment bond to the underlying construction contract (Hinchey, 1988). At common law, the surety has four basic equitable remedies: a) quia timet, b) exoneration, c) contribution, and d) indemnity/reimbursement. Quia timet is the right of the surety to preclude the principal from diverting contract funds or require the principal to post collateral for anticipated bond losses (Mann, 1993). Fidelity and Deposit Company of Maryland v. McClintic Corp., 176 A. 341 (1935). Exoneration is the contractual right of the surety to require the principal to pay a claim made. Morley Construction Company v. Maryland Casualty Company, 84 F.2d 522 (1936); Sanford v. U.S. Fidelity & Guaranty Co., 435 S.E.61 (1902). Contribution is the
right surety possesses to recover a portion of the claim or claims paid to another surety or sureties. Stuart v Hertz Corp, 351 So.2d 703 (1977); VTN Consol, Inc. v. Coastal Engr. Assoc., 341 So.2d 226 (1977). This condition or circumstance typically arises when cosureties exist under the same underlying construction contract (Restatement Third, Suretyship and Guaranty sec. 55, 1996). U.S. v. Horvath Brothers, Inc., 278 F. Supp. 159 (1961). Last, indemnity/reimbursement is the contractual right of the surety to recover a financial loss from the principal or indemnitor(s) signing for or, in conjunction with, the principal. Lake Charles Electric Company v. Globe Indemnity Company, 128 So.2d 280 (1961);
Leuning v. Hill, 486 P.2d 87, (1971);
O.K. Door v. Lincoln Engineering
Construction Comp., 119 N.W.2d 153 (1961).
GENERAL INDEMNITY AGREEMENT The general indemnity agreement is an expressed contract between the surety and principal (Welch, et al, 1992). Such an agreement allows recourse by the surety against the principal and indemnitor(s) (Welch, et al, 1992). Four Seasons Environmental, Inc. v. Westfield Co., 638 N.E.2d 91 (1994). In short, the general indemnity agreement protects a surety against financial loss, liability, and/or expense resulting from a contractor’s failure to perform an underlying construction contract as discussed prior hereto. Four Seasons Environment, Inc. v. Westfield Co., 638 N.E.2d 91 (1994);
Rappold v. Indiana
Lumbermen’s Mutual Insurance Co., 431 S.E.2d 302 (1993);
Construction Co. v. American National Bank & Trust Co., 603 N.E.2d 733 (1992). Thus, the intent of the general indemnity agreement is to incorporate the surety’s common law
equitable rights and extend such common law rights by written agreement with additional terms and conditions of indemnification and collateralization. Commercial Union Insurance Company v. Melikeyan, 430 So.2d 1217 (1983). These equitable remedies do not accrue however until the surety has actually sustained a financial loss. Phelps v. Dawson 97 F.2d 339 (1938); American Sur. Co. v. Bethlehem Nat’l Bank, 33 F. Supp. 722 (1940). Thus, once the surety has satisfactorily satisfied the principal’s contractual obligation, the surety possesses an equitable right to indemnification and reimbursement by the principal (Stearn, 1993). Transamerica Premier Insurance Co. v. K&S Construction, 850 F. Supp. 93 (1994). Because suretyship is concerned with the obligation and satisfaction of a debt by another, the indemnity agreement ensures that the burden of the debt be borne by the principal obligor. Thus, implied right of the security party (surety) to reimbursement by the principal is therefore either implied at common law, or is supported by an express promise to indemnify the surety under the general indemnity agreement. Therefore, given either scenario, the surety has an equitable right to reimbursement, that is, the surety has an entitlement to recover from the principal all costs and expenses incurred on account requiring satisfaction of principal’s obligation by the surety. Pearlman v. Reliance Ins. Co., 371 U.S. 136 (1962); Fidelity & Dep. Co. of Maryland v. Bristol Steel & Iron Works, 722 F.2d 1160 (1983); American Surety Co. v. DeCarle, 25 F.2d 18 (1928). In this regard, it must be noted that the surety’s entitlement is constrained to cost of disbursement incurred, and does not provide an equitable entitlement to profit. Westminster Elec. Corp. v. Salem Engineering, 712 F.2d 720 (1983); L.P. Friestedt Co. v. United States Fireproofing Co., 125 F.2d 1010 (1942). Further, the equitable right to reimbursement belongs to the
security party (surety) at the time of assuming the obligation of the principal’s underlying contractual obligation (King, 1993; Bachrach, 1990). Glenn v. American Surety Co., 160 F.2d 977 (1947); U.S. v. Crow, 414 F. Supp. 160 (1976). Therefore, the intent of general indemnity agreement is to expressly provide additional terms and conditions creating salvage to the surety (Welch et al, 1992).
Salvage is operationally defined as
reimbursement of surety’s financial losses resulting from obligation on the payment bond from the asset base of the principal or indemnitor(s) or both. The above contractual right is combined with the surety’s contractual right to the balance of contract funds remaining relative to the defaulted contract by the defaulting principal (Stearn,1993). Transamerica Premier Insurance Co. v. K&S Construction, 850 F. Supp. 93 (1994). The enforcement of these additional indemnification rights is accomplished by two separate contract clauses. The first is the indemnity clause, the second is the collateral clause.
INDEMNITY CLAUSE There exist no standard general indemnity agreement format. Therefore, each surety company employs its own general indemnity agreement (sometimes referred to as Master Surety Agreement). However, there does exist a Model Indemnity Agreement promulgated by the Fidelity and Surety Committee of the International Association of Insurance Counsel 1995. The following is an excerpt from the Model Indemnity Agreement setting forth, in part, recommended language for an indemnification clause:
The undersigned shall indemnify and keep indemnified the Company against any and all liability loss and expense of whatsoever kind or nature, including,
but not limited to, court costs, attorney’s fees, and interest, which the Company may sustain or incur (i) by reason of having executed or procured execution of any Bond or Bonds as surety for any of the undersigned, (ii) by reason of the failure of the Undersigned to perform or comply with this Agreement, or (iii) to enforce any of the covenants and conditions of this agreement.
The above indemnity clause language provides that the principal and indemnitor(s) shall indemnify, exonerate, and hold harmless the surety against any and all asserted liabilities. Further, the indemnity clause language establishes that the principal is also liable to the surety for all actual losses or expenses the surety may sustain on the payment as provided for and stipulated to the indemnity agreement. Premiere Electrical Construction Co. v. American National Bank & Trust Co., 603 N.E.2d 733 (1992); Commercial Insurance Company of Newark, New Jersey v. Pacific-Peru Construction Corporation, 558 F.2d 948 (1977); Transamerica Insurance Company v. Bloomfield, 402 F.2d 357 (1968); Fireman’s Fund Insurance Company v. Nizdil, 709 F. Supp. 975, (1989); Fidelity and Deposit Co v. Fleisher, 772 S.W.2d 809 (1989).
Further, the general indemnity agreement, in
conjunction, with the stipulated indemnity clause language also incorporates a trust fund provision. The trust fund provision, under the surety’s legal and equitable rights of subrogation protect same’s right to contract funds to the exclusion of most other creditors. The trust fund provision declares all monies due or to become due under the construction contract by surety are held in trust as trust funds by the principal and/or indemnitor(s). The trust fund therefore, is dedicated strictly to the financial extinguishment of all labor,
material, and service rendered in the prosecution of the work under the payment bond. In re Alcon Demolition, Inc., 204 B.R. 440 (Bankr. D.N.J. 1997); In Re Pyramid Industries, 210 B.R. 445 (Bankr. N.D. Ill. 1997); In re Comcraft, 206 B.R. 551 (Bankr D. Or. 1997). As noted herein, the courts are consistently consistent in construing and upholding such an indemnity provisions against the principal except when the surety has acted in bad faith or has perpetrated a fraud. Fidelity and Deposit Company of Maryland v. Bristol Steel & Iron Works, Inc., 722 F.2d 1160 (1983); Enzbrook v. Federal Insurance Company, 370 f.2d 784 (1967). Therefore, the general indemnity agreement through the indemnity clause conjoins the suretyâ€™s common law equitable right to reimbursement with that of extended indemnity rights relative subrogation right to trust funds maintained against the bonded construction contract.
THE COLLATERAL CLAUSE The second way the surety, under the general indemnity agreement, enforces indemnification rights is to require the establishment of a reserve fund for potential payment of liabilities on the payment bond. Generally, the general indemnity agreement provides that the surety may demand that the principal and/or indemnitor(s) pay funds to the surety in the amount of the demand made by claimant. Such a clause is defined as a collateral clause, collateral deposit clause or a reserve deposit provision. Here too similar to the indemnification clause, there is no standard industry language. However, the Model Agreement of Indemnity recommends the use of a clause providing that the principal should deposit collateral with the surety upon the condition precedent a claim is made for payment against the surety by a creditor. The following is an excerpt of such a provision:
The undersigned will deposit with the Company (surety) as collateral security, immediately upon demand, a sum of money, at the option of the company, equal to (1) the liability of the company, if established; (2) the liability asserted against the Company; or (3) the reserve established by the company, or any increase thereof, to cover any liability, loss, expense or possible liability for any loss or expense for which the undersigned may be obligated to indemnify the company under the terms of this agreement.
As similar to the indemnification clause, here too, the collateral deposit clause conjoins the common law remedies available to surety with that explicit contract language. Typically, in order to assure repayment of the disbursement under the collateral clause, the surety requires highly liquidable collateral (assets) as security against the payment bond obligation agreement (Welch, et al, 1992). This collateral amount serves as salvage in the event the principal or indemnitor fails to perform the bonded contract, or pay debt, or similarly where same simultaneously files bankruptcy.
This collateral amount, in
conjunction with the suretyâ€™s right to collect outstanding receivables or progress payment funds due and owing on the contract, serves as the salvage base to the surety (Bruner, 1998). National Surety Co. v. Titan Const. Co., 15 A.2d 258 (1940); Safeco Ins. Co. of Am. v. Schwab, 739 F.2d 431 (1984); United Bonding Ins. Co. v. Stein, 273 F. Supp. 929 (1967). Typically, conditions of collateral clause takes two forms. The first is call collateral requiring the principal and/or indemnitor to deposit collateral when a claim is made against the surety. The second type is pledged collateral. This collateral is actually assigned to
and, in the possession of the surety. Typically, such collateral is either a negotiable instrument defined by Article 9, Section 9-105 of Uniform Commercial Code (UCC), or is an Article 5 UCC irrevocable letter of bank credit payable upon presentments by surety. Thus, the fundamental purpose of a collateral security clause is to force a protesting principal and/or indemnitor(s) to deposit with the surety reserve funds or other assets (collateral), equating to salvage against the penal sum of the liability on the bond agreement, while the principal still has an asset base to post as collateral (Meeker, 1982). Safeco Ins. Co. of Am. v. Schwab (1984); U.S. ex rel Trustees of Elec. Workers Local Pension Fund v. D Bar D Enterprises, Inc. et al., 772 F. Supp. 167 (1991). It is important to note that the collateralization clause provision is not an indemnification clause provision. The collateral deposit provision of the general indemnity agreement establishes the suretyâ€™s entitlement to specific performance of the general indemnity agreement (Bachrach, 1998). United Bonding v. Stein, 273 F. Supp 929 (1967); Milwaukee Const. Co. Inc. v. Glenn Folds Ins. Co., 367 F.2d 964 (1966). The collateral deposit provision provides that once a surety receives a creditor demand for payment against the payment bond, the principal and/or indemnitor(s) must deposit with the surety funds that the surety is to hold as pledged collateral as a reserve fund. This collateral amount then serves as salvage to pay the loss incurred by the surety resulting from the underlying contract. Technically, this is reimbursement to the surety. Safeco Ins. of Amer. v. Schwab, 739 F.2d 431 (1984). To invoke the collateral clause, the surety must prove that its remedies under the indemnification clause provision are inadequate because the surety has not sustained a financial loss. Standard Sur. & Casualty Co. of N.Y. v. Caravel Indem. Corp. 15 A.2d 258 (1940). Therefore, generally speaking such a provision is only
enforceable on this basis. Seaboard Sur. Co v. Racine Screw Co., 203 F.2d 532 (1953). Consequently, the surety can institute an action for specific performance to enforce the collateral reserve provision when the following conditions exist: a) terms of the indemnity agreement are sufficiently definite to allow for enforcement; b) there is no adequate remedy at law; c) the indemnity agreement is just and reasonable and supported by consideration; d) the performance sought is substantially identical to that promised in the indemnity agreement (Meeker, 1982). Moreover, the obligee and/or claimant cannot invoke, or place a requirement (condition precedent) to request the surety call and post collateral. Instead, the collateralization clause is a reservation of right strictly that of the surety, and available to same only when a claim or demand is made to the surety to perform under the payment bond. Safeco Ins. Co. of Amer. v. Schwab, 739 F.2d 431 (1984). Thus, the call provision of the collateral clause is preserved strictly as a right to the surety to be secured by the principal against loss being reserved while the ultimate liability of the principal to claimant is being resolved. Therefore, no other party, other than the surety, to the tri-parties agreements possesses the equitable right to specific performance under the collateral clause stipulated to in the general indemnification agreement. Thus, only the surety is entitled to specific performance of collateral security clauses provision within the indemnification agreement.
CONCLUSION A surety payment bond is a tripartite agreement between the owner, the principal, and the surety. The purpose of a payment bond, under the Miller Act, is to minimize financial risk to those individuals supplying labor and material to a construction project from
nonpayment by a defaulting contractor debtor.
A payment bond is a contractual
agreement, whereby the surety thereto provides financial guarantee to answer for the debt of the contractor up to the penal sum of the bond. In return for this extension of financial guarantee, the contractor executes a general indemnity agreement with the surety. In essence, the general indemnity agreement creates a secured credit line between the surety and contractor for which the surety charges a premium. Therefore, payment bond capacity is a secured transaction evidenced by the general indemnity agreement, and thus does not function as insurance or as a hold harmless agreement. Within the general indemnity agreement are two important provisions creating security to the surety. Each provision supplements the surety’s common law entitlement to reimbursement. These provisions are known as the indemnity clause, and collateral clause. In essence, this clause and others like it, stipulate that the contractor is fundamentally liable to the surety for all payments made by surety in satisfying the underlying construction contract. As security, the collateral clause requires the contractor to pledge its asset to secure to surety’s commitment to answer for its debt under the payment bond requirements.
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Don Jensen, J.D., Ph.D. has advanced degrees in Construction Management, Finance and Law. He is a professor of construction law, and project management at the University of North Florida and serves as a claims consultant.