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.

Use of past project knowledge (/ information) in new developments.

4.

Dramatic changes in procurement philosophies, as a result of the

internet.
5.

Improved communications at all life cycle phases, through

visualisation.
6.

Increased opportunities for simulation and what if analysis.

7.

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

Practical
Completion
Contract
Final
Accounts

Purchasing

Labour
Management

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

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.

References
Alshawi, M., Underwood, J. (1999) The Application of Information Technology
in the Management of Construction. The Royal Institution of Chartered
Surveyors. This reference is incomplete. You need to identify which RICS
publication.

(Amor 2002) This reference is missing

Baldwin, A., Betts, M., Blundell, D., Hansen, K., Thorpe, T. (1998) Measuring
the Benefits of IT Innovation. Construct IT Centre of Excellence.
Brandon, P., Betts, M. (1995) Integrated Construction Information. Padstow,
T.J. Press (Padstow) Ltd, 1st Ed.
Bresnen, M., Implementing change in construction project organisations,
Building Research & Information, Volume 33 NO 6, p547-560.

Carter, C., Hassan, T., Merz, M., White, E. (2001) The Elegal Project
Specifying Legal Terms of Contract in ICT Environment.
http//www.itcon.org/2001/12/

Furmston, M, 1996. Contract, Tort and Construction Disputes. Construction

Law, 5 (3), pp. 81-82.
Harty, c., A sociology of technology approach, Building Research &
Information, Volume 33 NO 6, 512-522.
Hazzan, O., Tomayko, J.E. (2004) Human Aspects of Software Engineering.
United States of America, Charles River Media, 1st Ed.
Katranuschkov, P., (2006) Process Modelling, Process Management and
Collaboration. http//www.itcon.org/33/

Latham, M. (1994), Constructing The Team: Final Report, HMSO, London.

McConnell, S. (1998) Software Project Survival Guide. United States of

America, Microsoft, 1st Ed.

RICS 2000). This reference is missing

Sarshar, M., Abbott, C., Aouad, G., A Vision for Construction IT 2005-2010,
RICS (Royal Institute of Chartered Surveyors) Research Series, Dec 2000.

Sarshar, M., Tanyer, A., Aouad, G., Underwood, J., A Vision for Construction
IT 2005-2010: Two Case Studies, Engineering, Construction & Architectural
Management, Issue 2, April, 2002.
Sommerville, I. (1982) Software Engineering. Harlow, Pearson Education
Limited, 8th Ed.

Sun,M. Howard,R. (2003) Understanding I.T. in Construction. London: Spon

Press.

Tomayko 2004 This reference is missing

Walmsley, M., (2007), Critical analysis of the implementation of a major

commercial system, within a large contractor, UG dissertation, Liverpool John
Moores University, April 2007.

Woodward et al (1994) This reference is missing