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Far Eastern University 2nd Semester 2022-2023

Institute of Architecture and Fine Arts

COURSE MODULE 04:

Relationship Management: Customers, Associates,
Sub-contractors, and Suppliers
ARC1703: BUILDING CONSTRUCTION 3
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Far Eastern University 2nd Semester 2022-2023
Institute of Architecture and Fine Arts

ARC1703 Specialization Course 03 Building Construction

Week 03: Contractor’s Legal Responsibilities: Laws, Taxation, and Insurances

Week 4. 1: Business Relationship Management

It is important to cultivate and maintain a positive relationship with vendors, suppliers, distributors,
subcontractors, and all other stakeholders on a project.

Networking is a central part of building solid and lasting business relationships. The ability to ask good
questions and listen well is an essential networking skill. Strong bonds often form out of mutual interests
and common ground happened upon through conversation.

A vital part of this is ensuring all contractual agreements, including payment terms etc., conform to the
parties’ expectations. However, both internally and externally, business relationship management relies
on interest being shown towards people, in a business and personal sense. If the layers of formality can
be reduced, with personal information forming part of business interaction, then the relationship is more
likely to result in mutually beneficial results.

Developing a healthy and friendly project ‘culture’, in which everyone feels like their work and point-of-
view is valued, can be key to the success of a project. Such culture can also be an attraction in terms of
new employees and clients.

Good business relationship management can lead to loyalty, which is important in terms of finding
suppliers and subcontractors that can be trusted, with regard to bids and project delivery.
Professionalism should be demonstrated at all times, as well as open and honest communication,
efficiency and consideration when dealing with their needs and requirements.

Week 4. 2: Relations Management in Construction

Relationship management is the process and strategy of continuing a level of engagement between an
organization and its target market, client base, stakeholders, business competitors, and so on. Strong
commitment and continuous multi-level understanding is required for relationship management to be
successfully implemented.

In construction, the rise of joint venture and partnering contracts, as well as supply chain collaboration,
has increased the focus on collaborative elements of project team management. Although many
construction companies still overlook the importance of maintaining stakeholder relationships effectively.

It is important to effectively manage relations between project parties as time delays, cost overruns and
quality defects can be the result of relationship deterioration. By improving some aspects of the
relationship, the chances and implications of poor performance can be reduced.
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Far Eastern University 2nd Semester 2022-2023
Institute of Architecture and Fine Arts

Week 4. 3: Customer Relationship Management

Customer relationship management (CRM) is the process of establishing and maintaining a strong
rapport between the organization and its customer base as a means of building support or loyalty. This
includes data and sales analysis, as well as brand management, to maintain customer interest in the
organization.

The aim of relationship management is to create a partnership between the organization and its audience
rather than considering the relationship merely transactional. By feeling that an organization responds
to their needs, customers are more likely to continue using their products and services. Additionally, by
maintaining a level of communication with customers, the business is able to identify potential sources
of costly problems before they come to a head.

While an organization may choose to hire a relationship manager to take on this responsibility, it may
also integrate these duties with other positions, such as marketing or human resources. Marketing
departments are highly involved in maintaining customer relationships, with targeted campaigns aimed
at increasing new and long-term interest.

Such techniques can include:

 Post-sale surveys.
 Announcements and newsletters.
 Customer engagement during development phases.
 Social media engagement.

Week 4. 4: Stakeholders Management

A stakeholder is anyone who has an interest in the process or outcome of a project. In a typical
construction project, any or all of the following may be a stakeholder:

1. the client
2. the main contractor
3. designers
4. subcontractors
5. people employed in any capacity in the project
6. local authorities
7. the end users
8. professional bodies
9. local residents
10. local business owners
11. politicians
12. lobby groups
13. and many more...
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Far Eastern University 2nd Semester 2022-2023
Institute of Architecture and Fine Arts

A. Stakeholders Classification

1. Direct stakeholders

Direct stakeholders are those directly associated or involved in the project. These include the
client, project sponsor, project manager, members of the project team, technical and financial
services providers, internal or external consultants, material and equipment suppliers, site
personnel, contractors and subcontractors as well as end users. They are also known as
internal stakeholders.

2. Indirect stakeholders

Indirect stakeholders are those indirectly associated with the project, such as; support staff
not directly involved in the project, national and local government, public utilities, licensing
and inspecting organisations, technical institutions, professional bodies, and personal interest
groups such as stockholders, labour unions and pressure groups. They are also known as
external stakeholders.

3. Positive stakeholders

Positive stakeholders are those who are likely to have a favourable impact on a project. These
people or organisations tend to also be direct stakeholders, and stand to gain from the
project’s success. Examples would be the organisations involved in the work itself that stand
to benefit financially.

4. Negative stakeholders

Negative stakeholders are those who are likely to have a detrimental impact on a project.
They tend to be people or organisations not directly involved in a project, but who are still
affected by it in some way. An example would be local residents with concerns about loss of
public areas to a new project.

5. Legitimacy and power

Stakeholders are further differentiated between those with legitimacy and power, and those
without it, as this will influence the degree to which they can affect the project, whether
positively or negatively:

Legitimacy is the perceived validity of a stakeholder’s claim to importance on the project.

Power is the stakeholder’s ability to influence the project and the parties involved in some
way, whether financially, legally or by some other form of pressure.
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Far Eastern University 2nd Semester 2022-2023
Institute of Architecture and Fine Arts

In order to run a successful project, it is important to address the needs of the projects stakeholders,
effectively predicting how the project will affect them and how they can affect the project. Ineffective
stakeholder management can result in dissatisfaction with the final product and negative impacts on the
projects budget and schedule.

B. Stakeholder management strategies

During the development stages of a project, a stakeholder management strategy should be

developed. An organization should consider the following factors when developing a stakeholder
management plan:

1. Who are the stakeholders?

2. What are their stakes?
3. What opportunities do they present?
4. What challenges or threats do they present?
5. What responsibilities are there towards stakeholders?
6. What strategies or actions should be used to engage stakeholders?

This process will allow the projects stakeholders to be effectively mapped out. The next step is to
assess their key characteristics and present this information in a way that helps the project team
implement effective stakeholder management initiatives. While it may not be possible to please all
stakeholders on every project, effective stakeholder management should aim to satisfy as many as
possible, which will often involve strategic prioritization of different stakeholders needs.

A common technique is the stakeholder matrix or stakeholder map which allows the priority level
of the stakeholder to be assessed using the power and legitimacy criteria previously described. The
result of these processes is a 4-tier hierarchy of stakeholder importance levels, which will dictate
how stakeholders are managed:

1. Inform

This category contains those stakeholders who require minimal effort. Stakeholders with lower
power but higher legitimacy need to be kept informed of decisions taken that may affect them
directly.

2. Consult

These are stakeholders who require more than just being informed about the project. Since
the secondary stakeholders with higher power but lower legitimacy need to be kept onboard
they should be consulted in order to seek their opinions and input for key decisions that directly
or indirectly affect them. It is unlikely that the strategy will be altered as a result of such
consultation, but tactics may be adjusted to maintain higher levels of commitment.
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Far Eastern University 2nd Semester 2022-2023
Institute of Architecture and Fine Arts

3. Involve

Stakeholders with high power levels, even those with low legitimacy, need to be involved in
all activities in the project according to their interest since they have the power to make
decisions that impact on the project. The management should work directly with these
stakeholders to ensure that their concerns are consistently understood, considered, and
reflected in the projects development.

4. Partner/collaborate

Primary stakeholders have high enough levels of legitimacy and power to affect project
success and as such, they should be treated as partners to increase their engagement and
commitment. This can be achieved by revising and tailoring project strategies, objectives, and
outcomes if necessary to win their support.

Week 4. 5: Supply Chain Management

The origins of supply chain management (SCM) lie in the manufacturing industries. The armory practices
of the late-19th century, and later the production methods of Henry Ford in the 1920s, created the SCM
system that remains largely unchanged today. The central focus is on the production process of goods
through the control of material flows.

Large efficiency gains can be achieved through managing the interfaces between organizations. Latham
and Egan recognized this as being relevant to construction in their respective reports.

SCM exists alongside and overlaps with many other management approaches including:

 Lean thinking.
 Business process reengineering (BPR).
 Mass customization.

A. What is supply chain management?

‘Supply’ is the flow of resources used to satisfy a demand, such as materials, labour, information,
skills, and so on. It can also refer to competencies, and represent combinations of resources.
Commodity suppliers tend to be more price focused, whilst strategic suppliers are more
quality/delivery focused.

‘Chains’ represents the notion of links within and between both resources and competencies. They
are based upon relationships between people and organisations, and processes within and
between organisations.
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Far Eastern University 2nd Semester 2022-2023
Institute of Architecture and Fine Arts

‘Management’ is the exercise of formal authority within a structured organisational setting that is
directed towards aims and objectives through the efforts of other people using systems and
procedures.

Supply chain management requires a holistic perspective and a view of organisations as parts of a
process. It requires the ability to look beyond organisational boundaries, and a recognition of the
interdependence of organisations.

Most definitions of supply chain management share generic characteristics:

1. Holistic.
2. Networks.
3. Relationship-focused.
4. Attitudinal.
5. Responsibility of managing chain.
6. Necessity for change of culture.

B. The need for SCM in construction

Managing the supply chain involves understanding the breakdown and traceability of products and
services, organisations, logistics, people, activities, information and resources that transform raw
materials into a finished product that is fit for its purpose.

Buildings are becoming increasingly complex, and require more design input by specialist
suppliers. At the same time there is increasing fragmentation of the industry as can be seen from
the growth of specialist suppliers/contractors, the proliferation of products and the fragmentation of
design and control activities.

The supply chain is relatively unstable, and the industry is project-based with defined start and end
points, and a traditional separation between design and construction. Demand is treated as a series
of competitively tendered prototypes constructed by temporary coalitions. This all has an impact on
organisational relationships.

Project relationships are short term and have defined start and end points, they are usually
informal/ad-hoc and focused on the project not the business. Relationships between competencies
vary from project to project. The resulting lack of continuity prevents the innovation and
improvement of process as well as the development of more complex relationships. The client may
also have an impact on the procurement route and choice of strategic suppliers.

On large or complex projects, responsibility and performance generally cascades down the supply
chain to a plethora of suppliers sometimes unknown at the top of the chain. The first and second
tier of the supply chain may sign up to fairly onerous agreements but as the chain develops, so the
contractual liabilities decrease until suppliers at the end of the chain are often not locked in at all.
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Far Eastern University 2nd Semester 2022-2023
Institute of Architecture and Fine Arts

Changing the perspective from delivery of a ‘project’ to the process of ‘project delivery’ requires the
building of long-term relationships (formal and informal), partnering, and alliancing.

Companies offering continuity in construction have taken an increasing interest in establishing

relationships beyond direct, first tier suppliers. Framework contracts and partnering agreements
have pioneered this approach, encouraging the involvement of selected suppliers at relatively early
stages of projects while offering continuity of work. This has led to greater collaboration between
lead designers and product designers to the advantage of all parties.

The Government Construction Strategy, recommended three different procurement routes that
aimed to improve the SCM process; private finance initiative (PFI), prime contracting and design
and build. With each of these, the client enters into a relationship with a single integrated supply
team, which may include the main contractor, designers, sub-contractors, suppliers, facilities
managers, and so on.

Week 4. 6: Collaborative Practices for Building Design and Construction

A. The importance of collaboration

Establishing collaborative practices is of particular importance on building design and construction

projects, as they are likely to involve bringing together a large number of diverse disciplines, many
of which will not have worked together before. They are also likely to involve the co-ordination and
integration of a great deal of complex information, procedures and systems.

Failure to establish clear and efficient project-wide collaborative practices can be disastrous.

This has become increasingly true as project structures have evolved from straight-forward client-
consultant-contractor relationships to more integrated structures with complex financing
arrangements, early engagement of the supply chain and the introduction of sub-contractor and
supplier design.

B. Working practices

B.1. Procurement

It is important to establish the broad principles of collaborative practice as early as possible

in a project, even if some specific details are left unresolved until later stages.

A decision to adopt a collaborative approach should be taken at the outset by the client
(perhaps with advice from independent client advisers) so that a requirement to follow
appropriate procedures can be included in appointment documents and can be a
consideration in the selection of procurement route, form of contract and preparation of
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Far Eastern University 2nd Semester 2022-2023
Institute of Architecture and Fine Arts

tender documentation. The implementation of collaborative practices should then be

discussed in detail during consultant team start-up meetings, specialist contractor start-up
meetings and pre-contract meetings.

The Government Construction Strategy recommends that public projects adopt design
and build, private finance initiative or prime-type contract procurement routes, as these
are considered to be more collaborative.

Other forms of collaborative procurement include partnering (sometimes referred to as

alliancing), which is a broad term used to describe a management approach that
encourages openness and trust between the parties to a contract. The parties become
dependant on one another for success and this requires a change in culture, attitudes,
behaviours and procedures throughout the supply chain. It is most commonly used on
large, long-term or high-risk contracts. Where a partnering relationship is for a specific
project, it is known as 'project partnering'. Where it is a multi-project relationship it is known
as 'strategic partnering'.

Partnering contracts are often arranged on a cost-reimbursable, target-cost, open-book

basis including both incentives, and penalties.

B.2. Organization

Organizational working practices that encourage collaboration might include:

1. Evaluation of the behaviours and collaborative competence of individuals in teams

during the procurement process.
2. Clear lines of communication and authority.
3. Protocols for the preparation and dissemination of information.
4. Co-location of team members.
5. Financial motivation (such as tying the consultant team and the contractor into a
common target cost for which there is joint 'pain' or 'gain').
6. Rewarding initiative. This can be particularly important for members of the client
team, whose careers are likely to be assessed solely on the basis of their 'normal'
activities, rather than their involvement in a project. Recognizing the work they put
into a project and rewarding them for this is important if they are to remain
committed.
7. Regular workshops and team meetings.
8. Problem resolution procedures, which should be based on solutions, not blame.
9. Procedures to ensure continuous improvement. This might require continual
benchmarking, target setting, assessment, feeding back and adaptation.
10. Early warning procedures.
11. Social activities.
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Far Eastern University 2nd Semester 2022-2023
Institute of Architecture and Fine Arts

B.3. Roles and responsibilities

Clarity of responsibility and co-ordination can be improved by the appointment of:

1. A project sponsor or client representative.

2. Client champions for different aspects of the project.
3. A project manager.
4. A lead consultant.
5. A lead designer.
6. A design coordinator (for the co-ordination and integration of designs prepared by
specialist contractors).
7. An information manager for computer-aided design (CAD) or building information
modelling (BIM).

In addition, the appointment of a construction manager or management contractor (or early

appointment of a design and build contractor) can result in better integration of design and
construction, as can the early involvement of specialist contractors or suppliers. This may
have an impact on the fee profile for a project which will be more likely to be 'front-loaded',
but should result in fewer problems as the project progresses.

B.4. Information management

Ensuring that consultants sign up to the use of compatible systems and adopt agreed
document and drawing standards will help facilitate collaboration.

Systems might include:

1. Computer Aided Design (CAD).

2. Building Information Modelling (BIM).
3. Common document management systems.
4. Common E document management systems (these can be in-house, or externally
hosted, ie. a project extranet).
5. Common data environment.

A consistent approach to software systems, versions, drawing standards and file formats
is very important for design projects and will avoid duplicated effort and errors.

Drawing standards might include:

1. Layering standards.
2. Zoning strategy.
3. Grid strategy.
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Far Eastern University 2nd Semester 2022-2023
Institute of Architecture and Fine Arts

4. Origin and orientation.

5. Naming protocols.
6. Agreed standards for dimensions, abbreviations and symbols.
7. Standard templates (for example drawing titles).
8. Standard page sizes and scales.
9. Distribution protocols.
10. Change control procedures.

Standardization procedures also apply to the production of other forms of project

documentation. It may be beneficial to create a document matrix outlining key documents
that will be required in the development of the project, their format and distribution.

Establishing a common data environment (CDE), within which the creation of information
such as drawings can be shared between the consultant team can improve efficiency,
avoid duplication and enhance co-ordination.

B.5. Building information modelling (BIM)

Building Information Modelling (BIM) is seen increasingly as a means of facilitating

collaborative working. BIM is a very broad term that describes the process of creating a
digital model of a building.

The range of levels of this type of modelling are categorized as:

1. Level 0: Unmanaged CAD.

2. Level 1: Managed CAD in 2D or 3D.
3. Level 2: Managed 3D environment with data attached, but created in separate
discipline models.
4. Level 3: Single, collaborative, online, project model with construction sequencing,
cost and lifecycle management information.

Fundamentally, the purpose of BIM is to ensure that appropriate information is created in

a suitable format at the right time so that better decisions can be made throughout the
design, construction and operation of built assets. It is not about creating a 3D model for
its own sake, and it is not an add-on process. BIM is fundamental to the way a project is
set up and run.

The move to a more collaborative way of working, and the adoption of BIM can require a
significant change in culture. It can be useful to appoint a BIM champion to ensure the
successful integration of BIM into the entire project team from the outset. This can also be
true for individual companies, where a BIM champion can help encourage and facilitate
the adoption of BIM.
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Far Eastern University 2nd Semester 2022-2023
Institute of Architecture and Fine Arts

Week 4. 7: Client and Architect, Developing the Essential Relationship

Whilst there are a great number of opportunities for architects, the profession must be better at adapting
to clients’ needs and demonstrating how they add value.

A. Championing the vision:

 Clients are prepared to invest trust in those who can deliver a vision.
 Clients see architects, in most cases, as the professional best placed to lead the vision.
 Vision matters on projects of all scales across most sectors.
 The perception of the value of vision can be fragile.
 Clients are, in most cases, keen to see architects step forward to lead the vision.
 BIM offers a fresh opportunity for architect(s) to re-establish their role leading the vision.
 Architects need to be business savvy, demonstrating an awareness of how to deliver value.

B. Listening and understanding:

 Clients think architects who listen and understand properly are rare.
 Architects must understand better how a building translates into real returns for the client.
 Clients build for a blend of motivations, and these musts all be appreciated.
 Knowing a client’s needs better means architects can trade benefits to optimize overall value.
 Better listening and understanding greatly improves collaboration and project outcomes.
 Architects have a role in reassuring clients who fear losses more than they cherish gains.
 Architects who listen and understand are better placed to challenge the brief.
 Good communication skills breed trust, reduce perceived risk, and boost repeat business.
 Different clients need to be listened to differently.

C. Engaging with people:

 Many architects lack the people skills needed for collaborative working.
 Good people skills boost your reputation, helping you to win work and repeat business.
 Some architects need a cultural shift to adjust to flat management structures.
 Good communication involves keeping the client ahead of the game.
 In highly fragmented sectors even greater attention must be paid to good people skills.
 Good people skills and communication mean clients have to do less and worry less.

D. Delivering technical content:

 Disruptive technologies and processes are forcing architects to adapt.

 Clients say it is hard to find practices good at both concept and technical work.
 Despite wishing otherwise, clients think it necessary to replace concept architects with a ‘safer
pair of hands’ after Stage 3.
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Far Eastern University 2nd Semester 2022-2023
Institute of Architecture and Fine Arts

 Clients want architects to maintain their interest all the way through the delivery phase and
beyond.
 Many clients adopting BIM want architects to lead the integrated consultant team.
 Clients want architects to place greater emphasis on how the building operates in use.

E. Learning and improving:

 In a competitive market architects must demonstrate how they benefit clients.

 Clients increasingly expect evidence of competence and the effectiveness of designs.
 The pressure for architects to provide demonstrable evidence is mounting.
 Some clients believe architects should validate their own work as standard, treating it as
customer service or CPD.
 Clients increasingly see the benefits of post-occupancy evaluations outweighing costs.
 To expand work in retrofit, architects need persuasive evidence and a strong business case.