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The Use of IT in Commercial management of Construction Projects M.Sarshar1, A.

Connolly2

Abstract The construction industry uses standard off the shelf software packages for many of its major activities such as, drawing packages, accounting packages and project management packages. Yet standard packages are not used for commercial and commercial management aspects of operations, in a similar manner.

The existing packages on the market are diverse and lack functional integrity. Some implementations of new commercial software in major companies have resulted in grave challenges and risks to the business.

In order to investigate the reasons, a literature search on the use of IT in the construction industry was undertaken. It was found that commercial systems have received very little attention and focus from the construction IT research community.

This paper reviews some of the existing literature, in order to emphasise this gap in research. It urges further research in this critical aspect of managing major projects. Key Words: Construction IT, commercial management software, construction contract management

Background Commercial management packages within the construction industry are wideranging and complicated to use. The current packages do not support many of the important aspects of the detailed commercial processes. The problem
1

School of Built Environment, Liverpool John Moores University, Byrom Street, Liverpool L3 3AF. Tel- 00 44 151 231 2871 Email M.Sarshar@ljmu.ac.uk 2 N.G. Bailey,

magnifies when companies attempt to implement new systems, where companies face significant challenges during the delivery phase of new software. Commonly the requirements have been poorly understood and a coherent plan for change over has not been devised.

Commercial management systems appear to vary in design from company to company, with the absence of a commonly used IT package that is suitable for use in the construction industry as a whole. For the administration of construction contracts, much of the administration tasks are standard practice with the basic contract administration being governed by The Housing Grants, Construction and Regeneration Act 1996. Standard IT packages are greatly used in many other industries. The construction industry has adopted some standard off the shelf software successfully, such as drawing packages, accounting packages and project management packages. Yet, is there something significantly different about each construction firm that means IT systems can not be developed for commercial management in a similar way? Can the systems that are in use be improved further so that time and money can be saved? Could the different construction professions and parties to the contract integrate their IT systems to save time and money and reduce human error? If these systems can be developed why has this not happened yet?

Faithful & Gould Ltd, a medium sized Quantity Surveying (QS) firm in the UK attempted to implement a new commercial management software package for the UK wide cost consultancy. A catalogue of errors occurred in the implementation of this system leading to dramatic consequences. Faithful & Gould Ltd rolled out a new management accounting IT system in circa 1999 that was to improve their commercial billing and commercial management systems and bring about great change and benefits to the company and clients alike but, the system roll out was a complete failure. The poor implementation strategy that was to manage the change over to the new system, meant huge amounts of data was lost and the company struggled to bill clients and receive monies into the company accounts as a result. As a direct consequence of the failed implementation, Faithful & Gould Ltd came

close to bankruptcy. They were subsequently bought by WS Atkins group which secured the companys future.

Walmsley (2007) reports on a catalogue of errors in developing and implementing a tailor made commercial system for a major contractor in the UK. These errors have led to significant financial impact on the company, during the transition. Due to confidentiality issues, many of these problems have not been widely reported.

A literature search into construction IT research reveals that there is little work specifically on commercial contract management. This is perturbing as there are enough difficulties and disputes in the UK construction industry without further hindrance. Many disputes are documented as being caused by poor commercial management and administration (Furmston 1996). Many of the commercial processes required in construction companies are repetitive and the processes are documented in the standard types of construction contracts adopted in the UK (Sun 2003). Can basic failures in contract administration such as: late payment to suppliers and sub-contractors, lack of payment notices, poor change control and lack of final account information be improved upon if the IT systems are improved?

This paper searches the existing literature for some direction and guidelines. There are little guidelines. Furthermore some of the few existing suggestions appear impracticable. The paper provides an elementary high level requirements map for commercial management systems and appeals for more research in this critical area.

ICT in the Construction Industry Globalisation of economies brought about by the IT revolution has produced large changes in most industries (Baldwin 1998) and led to advanced industrial nations trading together is a virtual environment (Brandon 1995). Many industries boomed, telecommunications for example, yet others have stalled or contracted (Sun 2004).

It has been stated that the UK construction industry is seriously lagging behind the aerospace, finance and telecommunications industries in the development and use of IT (Latham 1999). However, most of the business processes and work that surround any construction projects now rely on IT systems and tools to design, inform, manufacture, process and communicate information and like any other industry where these processes are required, IT appears to be utilised (Alshawi 1999).

In terms of future directions for ICT in the construction industry, Construct IT in the UK developed a vision for the use of ICT in the next ten years(Sarshar 2000 and 2002). This vision was further adopted by CIB Working Commission 78 (Amor et al 2002). This vision was based on extensive literature search and discussions amongst experts and academics. It consists of seven major themes: 1. Model driven as opposed to document driven information management

on projects. 2. Life cycle thinking and seamless transition of information and

processes between life cycle phases. 3. 4. Use of past project knowledge (/ information) in new developments. Dramatic changes in procurement philosophies, as a result of the

internet. 5. Improved communications at all life cycle phases, through

visualisation. 6. 7. Increased opportunities for simulation and what if analysis. Increased capabilities for change management and process

improvement.

These themes do not include any intention to research into the key legal aspects the standard contracts and the constraints these impose on the use of IT in the construction industry (Amor et al 2002). This clearly has a bearing on the research directions of the construction ICT community.

Another key researcher in this area, Alshawai (1999), has provided a review of the application and use of IT in the construction management of projects

from an industry and research perspective. He gave an overview of major functions and impact of IT to the general performance. It was recognized that post contract functions are highly dependent on gathering and presenting information; this is costly and time-consuming and the processes that are undertaken to fill these functions are usually unstructured. Manipulation of information can not be done manually it needs to be managed electronically and presented with the correct level of detail. Alshawi (1999) mentions producing reports in the study varied in structure from one site to another and that information sent to head office was in different formats and he suggested process re-engineering is required before successful implementing patient of IT.

Alshawi (1999) suggests deregulation of professional roles and organisational systems in order to increase competition between professions. The authors question if this suggestion, as deregulation of professional roles and organisational systems will result in people being unsure of their job roles limits and where their boundaries are. Another suggestion was that clients should demand a better service. The authors are in full support of this proposal, however Alshawi (1999) continues to claim that the client should be more aware of the industry's failings. The author questions if this is a positive step. This study also stated that the industry must realise that they were facing long-term recession and overcapacity. However RICS indicates that quantity surveyors are in great demand (RICS 2000).

In short advances in ICT are not likely to be a key driver in imposing major change in the current structures of the industry. ICT systems need to respond support current structures and professions, reducing the barriers between professional communication, rather than eliminating professions altogether.

Carter conducted an EU funded research (titled eLEGAL) on the use of ICT in construction contracts. His findings demonstrate that Paper is still used in for the use of large quantities for the administration of contracts but this is not due to an unwilling construction industry, simply the failure to establish legal qualification within contracts (Carter et al 2001). Carter et all (2001)

recognised that advances in IT could be used to enable the construction industry to manage large construction and engineering projects by way of assisting the co-ordination of the virtual enterprises that often are used.

Carter et al (2001) also recognised that that there were several areas of legal uncertainty that threatened the adoption of such advances for the management of contracts and undertook a study called eLEGAL. Carter et al (2001) was aware that without some acceptance of and a move towards defining IT as legally admissible then many areas that could benefit from the use of IT would not be able to gain from such assistance. Legislation is now able to support the use of IT in business throughout the EU but, the standard forms of contract adopted in the UK Construction Industry do not make provision for the use of IT as yet and therefore, the eLEGAL project concluded that the use of IT to support contract practices may not be admissible (Carter et al 2001). According to Carter et al (2001) the construction industry is failing to adopt IT for the management and administration of contracts.

Since Carter et al (2001) wrote the Industry failing to adopt IT for the administration of documents the, JCT 2005 has been published and the new suite of contracts does make some provision for IT to be included within the contract (JCT 2005). Claus 18.1 allows the parties to agree the medium for which communication and general administration of the contract can be undertaken. However, in the guide notes to the JCT 2005 suite of contracts it is mentioned that the contracts did not go further to adopt and supports the use of IT for the management of contracts as there remains much disagreement within the Construction Industry to its legality and authority.

Managing Change, Implementing New Systems Another premise of this paper is that several construction companies have faced critical challenges in implementing new commercial management systems. For this reason some literature in change management during the introduction of new systems were examined to establish if this problem is only limited to commercial management systems. This was certainly not the case,

and there is much to learn from change management literature.

In a study of a large project, the new Terminal 5 at Heathrow Airport, two types of innovation were identified, bounded and unbounded (Harty 2005). The research team aimed to explain an alternative way to understanding the unbounded innovations within the construction industry using sociology of technology concepts. The study was seen as an exciting opportunity as there was to be 500 or more contractors on site and was known as one of the biggest construction projects in the world at that time. Harty (2005) explains that the employer (BAA) for the project was keen to role out a new system of 3D Auto CAD. The study was undertaken over an 18 month period on site. One of the findings of the study was that the system to be implemented was not actually capable of delivering the ideas or visions of BAA. The 3D AutoCAD system did not have the functionality to carry out the tasks required of the engineers and drafters and the system could not be used for drafting design as well as manufacture (Harty 2005).

The system integration methods in the study of Heathrows Terminal 5 alienated some users and break out systems developed as the staff were determined to carry out their duties and get the project completed successfully (Harty 2005). The break off systems developed to enable actors to work rather than wait for further development of the software systems (Harty 2005).

Harty (2005) did not investigate attitudes to change and adoption of the vision and there were no references to the attitudes of the employees and subcontractors to the adoption of the vision. These factors are interdependent to the success of any change (Hazzan 2004).

Harty (2005) Quotes: The focus groups were an attempt at alignment. Efforts were being made to engineer a built victory generously a system of 3-D CAD software and practices but crucially with more than one system builder and with a number of ideas and visions informing its assembly none of which had the ability to override others or persuade them to change.

Harty (2005) did not mention if the rank structure was in place, if any prior discussions had been undertaken with the team members or if focus groups were set up. Similar research was carried out to explore the problems with introducing any form of management led change; aimed at understanding change within project-based organisations (Bresnen 2005). Bresnen (2005) explains that the research was conducted by applying a framework to two case studies on two separate UK companies that were applying management led change in the form of new IT Systems. The study also analysed the reaction by the project centralised team to resist the change. The author questions why they only investigated the resistance to change and not items or issues that inhibited the change in order to understand any resistance found. Bresnen (2005) also found that the diversity of the project managers systems throughout each company, as well as their attitudes, had considerable influence on whether the systems were accepted and therefore successful adopted by the firm as a whole (Bresnen 2005).

The difference between project-based organisations compared with other decentralised organisations is the practices of each and, therefore the spread of power of each are different (Bresnen 2005).

Bresnen (2005) states that this results in the implementation of change throughout a company is more difficult as a result and will vary across the regions.

There needs to be a sharing of interest between the project teams and head office management (Bresnen 2005). Implementation is more successful when management are selective to who can be included in planning and implementing change within an organisation (Hazzan 2004). Those considered as best of breed should be chosen to help implement the changes they will have greater knowledge of what is required (Katranuschkov 2006). Least resistance is encountered from those who have the power and knowledge of the new systems, if they are able to put this knowledge to use (Hazzan 2004). Alpha project managers remained outside the system in a 'not

broken doesn't need fixing' attitude to what was seen as a redundant system.

When involving project managers, those who were respected by their peers the resistance to change was influenced by these individuals (Bresen 2005). Project Managers that didn't meet regularly could not share their opinions or knowledge to influence change positively. However; they also couldn't gain solidarity to resist the changes being implemented (Fernie 2006). Successful change reinforces and does not undermine existing systems (Hazzan 2004).

Project Managers have admitted fictitious reporting to show head office only the successful results (Bresnen 2005). Bresnan (2005) identifies that it is important for the senior management and the project managers at regional level to have the same goals to overcome this. However, Bresnan (2005) did not mention if that those who implemented the change first improved the processes or if there was an incentive to succeed, such as the bonus scheme.

Woodward et al (1994) studied change management during the implementation of a cost management system. The purpose of the study was to describe the philosophy behind the need for change (Woodward et al 1994). However, there is no mention of whether the study was a success. The findings of Woodwards study are inconclusive and the research methodology questionable. Woodward et al (1994) claims that the traditional role of a quantity surveyor cannot adequately cover the cost management discipline in today's construction industry and that this adds to the cause of a budget overspend. The authors questions this finding as the role of the quantity surveyor is dependent upon the work given to the quantity surveyor from the employer. It is too simplistic to rule out the role of the quantity surveyor.

Procuring Commercial management Software There are various software solutions on the UK market that are developed to aid the management of contracts. Many software suppliers to the construction industry now offer impressive solutions that are delivered as modules or packages that can be bolted together to form a fully integrated business IT

system. The quantity of suppliers that produce and sell such products and services in the UK are so vast nowadays, it is not possible to list all of the products on the open market. On the whole the IT suppliers advertise their products as standard package software that is already designed and developed specifically for the construction industry, which can be tailored upon delivery to meet the customers individual requirements. This is a credible way of ensuring their construction company customers are satisfied with the product they have purchased and is aimed at delivering products that will meet the individual business requirements of the construction orientated customer at a cost much less than that of the bespoke software. (McConnell 1997).

It is therefore critical for construction companies to fully capture the requirements of their systems before they embark on purchasing new software, and test their software against these requirements. The range of task within the management of contracts is extensive and contracts are stipulated in many areas by the constraints of timetables and stipulated dates within a contract. It is important that the procedures and tasks to be carried out are done so in an efficient manner if the required documents and information is to be presented and the tasks are to be completed satisfactorily by these deadlines. Failure to meet these deadlines can incur financial penalties imposed by the contract and, result in a breach of the law pertaining to the administration and government of construction contracts (Brandon 1995).

The administration and management of the construction contracts are not the only procedures and tasks a construction company has to undertake. There are many other business management procedures that are required for the firm to function successfully. These processes are required for a department to function. Fig 1 illustrates an overview of the departments generally required within a construction firm, although this can differ from company to company. There is a need for some level of integration between the activities of some of these departments.

Company Departments

Marketing and Business Development

Health and Safety

Human Resources

Project Management

Accounts and Finance

Quality Assurance

IT Management

Commercial Management

Fig 1 Typical departments within a construction company

Focusing only on the management of contracts, a summary of the common processes involved is shown in Fig. 2. This figure highlights the range of tasks expected as a minimum, although some variance to this is probable, dependant on the stipulations within a particular contract.

Returning Documents Receipt & Legally Checking Documents Applications

Set Up On System Contract Purchasing

Practical Completion

Final Accounts

Sub-contracting Cost Reporting CVR Fig 2 Range of tasks within a contract.

Labour Management

Each of the above procedures can consequently been expanded into more detail. Figure 3 provides an example:

Project Management Files

Material Department

SOR info Labour info VO costs Sub-contractor costs Cost Reporting CVR Material cost Material description

Variation description Quantity Surveyor Variation submission

Fig 3 Description of ideal variation management system

In order to capture the requirements adequately, and be able to test and implement the eventual system effectively, there is a body of knowledge in the software industry, termed the Systems Development Life Cycle. In this approach the development of an IT system is divided into several stages (Tomayko et al 2004). These stages together called the development lifecycle (Maher 2006). The management of an ideal development project is extremely complicated and therefore the stages are broken down into manageable chunks (Sommerville 2007).

The construction industry needs to utilize such approaches in order to reduce the risk of introduction of new commercial management software within the business.

Future Directions

This paper explored set out to explore the construction IT literature, in order to explore how to improve the procurement and implementation of commercial management systems in the construction industry.

It became obvious that the main body of construction IT literature has paid little attention to commercial and legal aspects of managing projects. When there are references, on several occasions the role of the QS has been questioned and dismissed. This is contrary to real-life evidence that there is a shortage of QSs in the UK and the demand for this profession is increasing, even though the role is becoming more strategic.

Many companies have had problems in implementing new commercial management systems. Here the picture is different and there is a large body of literature which the industry can learn form. In particular the literature on change management and also in software development address similar problems and can add value.

There are still many unresolved questions, which researchers need to investigate. For example: What does the construction industry require of a commercial management system? Do these requirements remain the same for each construction company or can there be a standard solution? Do the current commercial management systems used in large construction firms deliver their key requirements? How do construction companies monitor their systems effectiveness and further develop their IT systems to meet the needs of the company? How will commercial management systems integrate with other key construction applications, such as drawings and accounting?

There is a critical need to shift the focus of the construction IT research to include this all important topic.

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