Frost & Sullivan: Cost is not the Primary Factor in Contractor Selection

~Contractors who assist clients in reducing overall project risk have the competitive advantage~

SYDNEY, Nov. 26, 2014 /PRNewswire/ -- In the recent past, the Australian construction industry has seen a raft of mergers and acquisitions. According to a new study, this trend may be driven partly by the competitive advantage needed to win new large projects. Frost & Sullivan's recently completed, Australian Construction Project Management and Delivery - Voice of the Customer study revealed that for the client, the primary factor in selecting a contractor is track record and expertise. Findings of this study were derived from in-depth interviews with 30 client-side project managers across Australia, across various industries, both from the public and private sectors.

The work of the client side construction project managers is becoming increasingly difficult due to the increasing complexity of projects, as well as the regulations that govern them. As the average size of construction projects in Australia continues to increase, so too does the need of client side project managers to reduce overall risk.

As such, demonstrable expertise and the track record of contractors will play a significant role in acquiring new projects. This is due to the fact that while clients are under significant cost pressures, the scale of the capital outlay for construction projects prompts them to adopt risk minimisation strategies, with the contractor's capabilities given high priority. It is reassuring to know that clients are not adopting a "penny wise, pound foolish" approach in selecting contractors.

"Clients understand that a construction project is a dynamic process and unforeseen challenges are bound to creep up," claims Frost & Sullivan analyst Emily Hing. "What they want to know is - are the contractors capable of handling these issues?"

Perhaps unsurprisingly, managing cost over-runs was the most mentioned challenge faced by client side construction project managers. While in the past, cost overruns may have been viewed as unavoidable, clients are increasingly trying to proactively manage this issue. For example, clients are beginning to bring contractors on board at an earlier stage of the planning and design process, so that budgeting can be made more accurately and cost savings maximised. Frost & Sullivan predicts that adoption of the Early Contractor Involvement (ECI) model is likely to increase, particularly in the private sector.

"If clients could work out a way to bring on board construction firms early in the planning process, yet still maintain the integrity of the tendering process, this would create a win-win situation for both parties," said Frost & Sullivan Consultant, Dev Anand Dorasamy. "Not only could the project be planned more efficiently, but contractors could also minimise expensive tendering costs."

While client-side project managers understand the importance of regulations in the industry, they find complying with these regulations a significant challenge. In fact, complex regulations and increased bureaucracy was the most mentioned macro challenge faced by client side construction project managers. Challenges relating to regulation and compliance include the lack of clear legislative direction from State Governments (thus creating a policy vacuum), compliance with environmental requirements, and delays in the approval of sites.

Changes in communication solutions were identified as the most significant shift in the impact of technology in the construction industry.  Of particular note was the increased use of construction collaboration platforms that allowed project managers and various stakeholders to share documents and updates of the project seamlessly. Given that inefficient communication was cited as the primary source of dissatisfaction with contractors, the increased adoption of this technology is a step in the right direction.

If you are interested in more information on this research, please send an email to Donna Jeremiah, Corporate Communications, at djeremiah@frost.com, with your full name, company name, job title, telephone number, company email address, company website, city, state and country.

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'Australian Construction Project Management and Delivery – Voice of the Customer Study'

Contact:

Donna Jeremiah
Corporate Communications – Asia Pacific
P: +61 (02) 8247 8927
F: +61 (02) 9252 8066
E: djeremiah@frost.com

Carrie Low
Corporate Communications – Asia Pacific
P: +603 6204 5910
F: +603 6201 7402
E: carrie.low@frost.com