Subcontractor Selection Process Through Vendor Bids: A Case of An Outsourcing Service in Construction

Abstract

Subcontractors handle a large portion of the work in construction projects. The ability of the general contractor to deliver projects on time, within budget and with the expected level of quality are significantly dependent on the performance of subcontractors. Thus, selecting the right subcontractor for the right task is a determining factor for project success. Literature has identified several criteria for subcontractor selection that predominantly includes financial capacity, ability to complete on time and reputation and quality of workmanship. However, as projects are becoming more global and complex, ensuring selection and award through a fair and competitive formal process becomes imperative. Nevertheless, an understanding of a formal process, backing the selection criteria, seems to be lacking; more so in the context of engineering outsourcing services. Vendor bid analysis is one such service, wherein the general contractor packages the bids received from several subcontractors to a team in a different country who evaluate and enable the general contractor to select and award the subcontractors for project tasks. To this end, an exploratory case study was conducted in an outsourcing firm in India that provide services to general contractors in the USA to understand the formal process of subcontractor selection across organizational boundaries along with its inherent risks and challenges. Data was collected through a participatory research approach, supplemented with participant observation and team interviews which were analysed through inductive reasoning and cross-case comparison methods. The findings showed a formalized 5-phase process across the organizational interface that included assess, identify, evaluate, negotiate and optimize phases. Further, delving into the evaluate, negotiate and optimize phases, the nuances in outsourced projects and the firms strategy to overcome them were evident, such as selection criteria and negotiation strategy adopted in the case of a single bidder with high pricing to mitigate probable bid-rigging practices or ensuring constant training to overcome the challenges due to lack of trade and country specific know-how. In addition, through a reflective approach, the value addition services provided to the general contractor aimed to optimize the process and improve project governance. These findings are expected to provide practical implication for firms in similar business and act as a steppingstone to conduct further robust research.

Synthesis towards unveiling the complexity underlying underpayment for subcontractors in construction

“…The selection of a suitable subcontractor is vital for successful project completion and the continuous operation of the Main Contractor's business. Part of the subcontractor selection process involves ensuring that the subcontractor's order value aligns with the budget (Arslan et al, 2008;Benton and McHenry, 2010;Ramalingam, 2020).…”

Level of sub-contracting design responsibilities in design and construct civil engineering bridge projects

“…SCs can supply workers, materials, equipment, tools and designs and can also bring unique skills and talents for specialised work. Many studies therefore address SC selection and focus on the criteria (and their relative weights) that contractors implicitly or explicitly use to select their SCs (Abbasianjahromi et al, 2013;Hartmann and Caerteling, 2010;Hartmann et al, 2009;Kumaraswamy and Matthews, 2000;Ramalingam, 2020;Ulubeyli and Kazaz, 2016;Ulubeyli et al, 2010). Other studies focus on the resources of SCs, or the relationship between MC and SC (Aagaard et al, 2015;Elazouni and Metwally, 2000;Gil et al, 2001;Shafaat et al, 2014;Tan et al, 2017;Yik et al, 2006).…”

“…, 2013; Hartmann and Caerteling, 2010; Hartmann et al. , 2009; Kumaraswamy and Matthews, 2000; Ramalingam, 2020; Ulubeyli and Kazaz, 2016; Ulubeyli et al. , 2010).…”

Subcontracting Strategy in Industrial Projects: Evidence from Saudi Arabia

“…Subcontracting refers to an arrangement whereby a contractor authorizes another firm (a subcontractor) to undertake part of the work he has secured with the owner (Lehtinen, 2001). Subcontract arrangements are widely used in construction because of the structure of the industry; the industry's workload is highly diversified by type, size, function, form and method of production, and materials used (Ramalingam, 2020). Everyday economic facts justify the use of subcontracting because it utilizes resources efficiently and economically.…”