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A Transition of Project Evaluation Modality From Traditional Norm

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					A Transition of Project Evaluation Modality: From Traditional Norm to Bill Quantity — A Case in China
Xiaoling Fu, Ting Liang College of Management, China University of Geosciences, Wuhan, 430074, China fxlwhict@public.wh.hb.cn
Abstract: The traditional mode of project evaluation had seriously impeded the fair competition in China. Since July 2003, China has carried out the reform of bill project evaluation. The results of the reform, however, are not very satisfactory in the past there years. Based on the Correlation analysis study on data from questionnaires and interviews, this paper reports the status quo of the reform, discusses various factors influencing the reform, and finally proposes some suggestions to facilitate the reform. Keywords: reform of project evaluation, influence factors, suggestions

1. INTRODUCTION Bill quantity evaluation is the common method and a mature project evaluation mode in many countries. In order to catch up with international standard after entry to WTO, China government put forward the reform of bill project evaluation. Bill project evaluation is different from traditional evaluation mode. In the past, China used ration system evaluation mode, but it does not suit the market economy in China any more. Bill project evaluation is the new method used in biding and tendering. In the new mode of bill project evaluation, the employer prepares detail quantity of bill about the project, and bidder side quotes price based on the quantity of bill and tendering documents [1]. Bill project evaluation was brought in effect on July 1st, 2003 in China. The norm document of bill project evaluation is the Code of Valuation with Bill Quantity of Construction Works (called "Code" in this paper). It was released by Ministry of Construction and Ministry of Quality Examination in China. This is a new milestone for construction evaluation reform in China [2]. However, there are many questions unanswered. For example, what is the status quo and effect of bill project evaluation reform in China? Are there any problems in the implement action process? How can we deal with these problems? In developed countries, many scholars have studied extensively on bill quantity evaluation, and put forward lots of new evaluation methods. Such as price-rationalized approach (Edwards, P.J. and Edwards, 1999) [3], and significant global cost model (A Kmunns and k.m.al-haimus, 2000) [4]. In this regard, an exploratory study was conducted in an attempt to identify the potential barriers of implementing bill quantity reform. It is expected the results that may provide useful insights to the industry practitioners and researchers. This paper systematically analyzes obstacles impacting on the implementation of reform plan of bill evaluation based on questionnaires and interviews, and gives some measures for practicing reform plan of bill quantity evaluation.

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2. METHODOLOGY A questionnaire named "actual state of bill quantity evaluation reform" which consists of three parts was derived. The first part of the questionnaire designed to gather information about respondents. The second part examined the potential barriers when industry decided to implement bill quantity reform. The last part asked the respondents their overall attitude to bill quantity reform. The sample in this study included construction companies, design departments, consulting companies, engineering management companies, real estate development companies and government departments. The questionnaires were issued in various ways, such as mail, e-mail, telephone, on-the-spot interview. A letter explaining the purpose of the study and the questionnaire were sent out and addressed to the relevant manager of these companies in a 3-months survey period. Finally, 200 questionnaires were handed out, a total of 173 completed questionnaires were returned, generating a response rate of 86.5%. After ruling out the invalid questionnaires, 115 completed questionnaires were used for the analysis. They consist of 115 companies in 12 provinces. Distribution of responses was shown in Table 1. Ownership of enterprises was shown in Table 2. Kinds of responses were shown in Table 3. These frequency analyses were carried out with SPSS [5].
Table 1. Distribution of responses
Region Hubei Guangdong Zejiang Shanghai Henan Jiangsu Shandong Sichuan Beijing Hebei Yunnan Fujian Total Number 76 9 8 7 4 4 2 1 1 1 1 1 115 Percent% 66.09 7.82 6.95 6.09 3.48 3.48 1.74 0.87 0.87 0.87 0.87 0.87 100 Construction Real estate Government Consultant Other Total State-owned Private-owned Joint-stock Other Total

Table 2. Ownership of responses
Number 52 24 30 9 115 Percent% 45.20 20.8 26.1 7.8 100

Table 3. Kind of responses
Number 57 6 7 21 24 115 Percent% 49.56 5.22 6.09 48.27 20.87 100

SPSS statistic software was used for frequency analysis and correlation analysis [6] on these data. 3. FINDINGS The possible barriers in the implementation of bill quantity reform were as follows. 3.1 Staff’s concept. 72.1% enterprises agreed that the understanding of employees influenced deeply on bill quantity implementation (Table 4). The employee’s idea was the greatest influence among all influence factors. The Pearson correlation coefficient ‘r’ between approval degree and method used in bidding was 0.20, significant correlation at the level of 0.05(Table 5). They are significantly correlated. It indicates that the concept of the employee influents a lot.
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3.2 Cost and time span in tendering & bidding 30.7% people thought that bill quantity cost more money than traditional mode of project evaluation (Table 4). 22.9% thought that spending more time than of traditional ration evaluation. The statistical result also shows that: those persons who thought bill quantity spending more time often choose to use ration evaluation method. Pearson correlation between support degree and time span was -0.1(Table 5). Those relations can also be found in approval degree and cost. 3.3 The ability of the employees 45.0% persons thought the employee's ability is the main influencing factor of Code, it resides the third (Table 4). Some employees are unfamiliar with Code, they have narrow knowledge horizon and lack experience. So, they often spend more money and time on bidding and tendering.
Table 4.
Name Staff's concept Society atmosphere Ability of staffs Knowledge about bill quantity Cost Time span Age of staffs Total responses Count 101 97 63 60 43 32 17 413

Influence factors
Percent of responses 24.5 23.5 15.3 14.5 10.4 7.7 4.1 100 Percent of cases 72.1 69.3 45 42.9 30.7 22.9 12.1 295

Table 5.
1 1.Approval degree 2.Training 3.Ability to make bill quantity 4.Method in bidding 5.Leaders' attitude to bill quantity 6.Number rate in resent 3 years 7.Time span 8.Cost 1 0.25** 0.18* 0.20* 0.15 0.15 0.01 -0.1 1 2

Correlations
3 4 5 6 7 8

0.33** 0.17* 0.30** 0.05 0.08 0.1

1 0.02 0.13 0.14 0.01 0.04 1 0.03 0.45** 0.09 -0.01 1 0.25** 0.08 0.19* 1 0.08 0.02 1 0.50* 1

**Correlation is significant at the 0.01 level (2-tailed).

*Correlation is significant at the 0.05 level (2-tailed).

3.4 Social environmental factor 69.3% persons thought the society atmosphere is main influence factor of Code implement, it resides the second. From the question’s answer of “what resistances do you think in promoting the reform of bill quantity evaluation?” in the questionnaire, almost people answered “social environmental factor” is a main resistance factor. The social environmental factor includes the market mechanism, trustworthiness degree, related laws and bidding method of other enterprise. At present, the market mechanism isn’t very perfect, and the legal system isn’t sound in China. The trades of engineering product isn’t in the complete market competition, there are many information dissymmetry in the market. The market mechanism’s imperfect will cause “looking for to rent” of the government’s staff, stir up the construction company revealing the information and contractors’ behavior of violate the rules. They may causes falsification and low price which even be lower than cost of the tendering project. Those factors influenced seriously the reform of bill quantity evaluation. 3.5 Imperfect of Code itself
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In the interview inquisition, many people said that Code itself has some deficiencies. The item characteristics and the contents are not accurate enough; the evaluation method is not perfect. Such as: the bill quantity evaluation included “management fee” respectively in the item engineering fee, no longer list management fee alone in the total price, but Code don’t define contents of management fee, which make enterprise hard to operate. Code separated the measure expenses of the entity expenses and the completion engineering implement of the engineering, it hard to deal with changes in the engineering processing. Code didn't make a compulsive provision to the item characteristic and the item contents, this will create dispute during the contract carrying out process. Imperfect in Code itself obstructed the bill quantity evaluation implement. 3.6. Management system of the business In the bidding with bill quantity evaluation, employer undertake the risk of “quantity”, bidder undertake the risk of “price”. If the construction enterprise wants to win in the bidding, it should have enterprise own ration system. But from our inquisition, only 5 enterprises in 115 enterprises have their own ration system, account for 4.35% of total unit. 95.65% enterprises didn't have own ration system. The great majority of construction enterprise didn't build up necessary databases, such as market price information database, information database of the former projects, related law database, policy database, standard norm database and professional statistics information database etc. All of these had impeded seriously the reform of bill quantity evaluation. 4. IMPLICATION OF RESEARCH 4.1 Strengthen training of Code, improve the ability of employee Government should enlargement propagandizing strength, extensive the importance and necessity of bill quantity evaluation reform. Government also should strengthen the study of Code, such as holding a training class periodically. In the training classes, experts should be organized to explain the contents of Code, explain the important point in the operation, or combine the actual example product engineering demonstration to explain in detail. Only by these methods can the employee really appreciate the main theme of bill quantity evaluation, control contents of Code, and use bill quantity flexibly in the actual construction projects. In addition, bill quantity evaluation request higher knowledge structure and the ability to the employee, the employee also should strengthen vocational learning, improve ability of themselves [6]. 4.2 Code should be included in the contents of national certified public architect and engineer examination The reform of bill quantity evaluation r is the most important reform in construction in resent years. In order to generalize bill quantity evaluation, let all persons who worked in the construction field know well and use Code smoothly, we suggested Code be included in the contents of related national examinations. Every examination has something to do with construction all should be included in, such as registered evaluation engineer, certified advisory engineer, registered constructer, registered real estate valuation examination etc. All workers who engaged in the construction field should understand and value Code, and aware of self-observance. 4.3 Execute compulsory and leading rightly The majority thought that bill quantity didn’t match with current status in China. So, on the one hand, the governments at all levels should draw up compulsive measures for reform implement, on the other hand, they should take a right leading, draw up some encouragement measures, guide enterprise to adopt bill quantity evaluation actively[7]. 4.4 Improve the market for environment of construction Firstly, national government should strengthen the trustworthiness mechanism; Secondly, every local government should strengthen to construct the information resources of whole society. The center of project
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bargain should build up an information resources database that is opened to the society to increase the clarity of bidding information, reduce the dissymmetry of information
[8]

. The third, the government should establish

exclusively an organization which takes charge of the project bargain market. We Suggest as follow: ①Examining the ability of personnel work in the supervise group; ①Increasing the income of these works in the supervise group; ③launching the function that the folks supervise, building up folks supervise system. 4.5 Establish or perfect related laws and regulation The government should draw up related laws, and establish supervise group, enforce strictly the law. The occupation morals law of engineering construction personnel should define occupation morals,the economy administration responsibility should undertake. The market supervise management law of engineering construction should define the duties of supervise group member, and the punishment of violation the regulation
[9]

. Those laws that cannot adapt to economy development level and macroscopic environment should be

modified. Code itself should be also perfected and modified. 4.6 Establish and perfect business’s internal management system so that improve competition ability Most construction enterprise level of management is not high in our country, independence offer ability is low, they often bid with experience, have no sound internal management system, it is hard to satisfy with bill quantity evaluation reform. In our Investigation, only 5 enterprises in 115 have their own ration system. Therefore, the construction enterprises should establish or perfect internal system, such as information management system, the ration system database of enterprise, market price information database, former project information database, standard norm database and professional statistics information database etc. The business also should carry on the research of core competencies and combine own actual circumstance. Only by making policy, integrating construction process, market and management together, can they make progress and keep in advance of other enterprises [10]. For reducing risk and lost, employer should improve the management system according to the bill quantity evaluation reform. They also should establish market price information database and laws database, understand their responsibility for “quantity”, manage the invitation to tender strictly, assign the risk to responsibility individual. 5. CONCLUSIONS All people in this field are acquainted with Code, and approve the importance and necessity of bill quantity reform. Some enterprises have organized staffs to study Code, but some enterprises hold an attitude of hesitation. The rate of complete implementation of bill quantity was low, and the result that carried out was bad. Most enterprises were opposed to the reform, thinking that the bill quantity reform cannot match with the current state in China. They maintain that the adoption of bill quantity will reduce the contractor’s profit. It may also bring “price war” between contractors, which in return will yield inferior engineering quality. The reform of bill quantity evaluation is the trend of necessity. There are some obstacles in the progress of bill quantity reform, the authors suggest six measures in improving the bill quantity reform based on the analysis.

REFERENCES [1]CCQE. (2003). Code of valuation with bill quantity of construction works. China’s construction department and quality examination department. GB50500-2003

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[2]Du Yingchi. (2004). Reviews on the code of valuation with bill quantity of construction work, Shanxi construction. 30(6):1-2 [3] Edwards P J, Edwards M. (1995). A price-rationalized approach to item separation in the measurement of building work, Construction Management and Economics, (13), 485-91. [4]A K.munns, k.m.al-haimus .(2000). Estimating using cost significant global cost models .Construction Management and Economics. (18), 575-585 [5]Lu Wendai, Zhu Yili, Sha Jie, Zhu Hongbing.(1997). SPSS for windows from rudimental to versed. Beijing: Electronic Industries press, 50-165 [6] Ma Qingguo.(2002), Management statistical. Beijing: Science press. 240-254 [7]Li Zuohua. (2004), Bill quantity evaluation mode and bidding. Industries construction and design. April, 75-77 [8]Anthony.p. lavers, david.e.shiers. (2000), Construction law and environmental harm: the liability interface Construction Management and Economics. (18), 893–902 [9]Jean jinghua chen , David chambers. (1999). Sustainability and the impact of Chinese policy initiatives upon construction .Construction management and economics, (17), 679-687 [10] Lam yow thim ,Chen Zonggui. (2000). The development of the construction legal system in China. Construction Management and Economics .May 22, 347–356

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