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Contractor selection in construction industry: A multicriteria model

Conference Paper · December 2015

DOI: 10.1109/IEEM.2015.7385701

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 Contractor Selection in Construction Industry: a Multicriteria Model
M. C. B. Araújo, L. H. Alencar, C. M. M. Mota
Department of Management Engineering, Universidade Federal de Pernambuco, Recife, Brazil
(mariacreuzaborges@yahoo.com.br)
Abstract - Contractor selection is a strategic question
for the construction industry since the suppliers have an
important role in projects performance. Two essential issues
in this process are the choice of adequate criteria and
methods of supplier's evaluation. Therefore, this paper
proposes a model for contractor selection in the construction
industry. Normally, this selection is considering a group
decision problem, since various departments are influenced
for this choice and its managers participate of the process.
Moreover, this paper focuses on the situation in which the
company wants to select a set of contractors, maximizing the
use of resources according with the constraints imposed. In
this context, the model proposed considers the interaction
between a Group Decision and an Integer Programming
methods. Afterward, it was made a numerical application of
the proposed model. The criteria used in this simulation
were identified from a literature review in papers related to
the supplier's selection in the construction industry.
Keywords – Construction industry, Contractor selection,
Group decision aid
I. INTRODUCTION
The selection of a capable contractor is essential to
the good performance of any construction project [1],
since they are responsible by core activities in the process.
In addition, selecting suitable suppliers significantly
reduces material purchasing cost, improves the
competitiveness of businesses, increases flexibility and
product quality and helps with speeding up the process of
material purchasing [2].
In this way, according with [3], this process should
detect a supplier to whom the customer can entrust the
responsibility to perform the project adequately. In this
context, the selection criteria are very important for the
decision making, since which are strictly related with the
objectives of the client in relation to the contractor. If the
criteria are wrong, the contractor selected may not be
according with the client needs, even if the role decision
process is carried out in the right way.
Normally, it is necessary the use of various criteria to
achieve the companies’ goals ([4]; [5]) and it is necessary
to determine their relative importance [6]. Because of this,
this process is a complex multicriteria problem in which
various decision makers (DMs) evaluate the contractors’
attributes to deliver the project considering numerous
decision criteria [7]. Furthermore, the method of selection
is strictly important to the successful choice and depends
on the kind of criteria (qualitative or quantitative), number
of decision makers, information available, among
others.
Therefore, this paper proposed a contractor selection
model in the construction industry. Therefore, it was
organized as follows: Section 2 gives a systematic review
of contractor selection criteria in the construction
industry. Section 3 describes the model proposed and
Section 4 presents a numerical application. Finally,
Section 5 gives the final considerations of this research.
II. CONTRACTOR SELECTION CRITERIA
Selecting the right contractor for a project is a critical
challenge for any construction company [3]. This
selection is considered a decision-making problem that
involves several aspects, including the sector of
application, number of decision makers, selection criteria,
and selection methods. In this context, it is essential
employing criteria according with the real needs of the
company in order to contract suppliers that help the
enterprise to achieve its goals.
In this sense, this section presents the criteria used in
the stages of prequalification and final selection in
contractor selection in the construction industry. For this
purpose, it was made a Systematic Review to identify
them. To found relevant articles in this area, research was
conducted in five academic databases: Web of Science,
Science Direct, Scopus, Springer Link and Wiley Online
Library. Combinations of the following keywords are
made to filter papers related with the theme: Construction,
Contractor Selection, Supplier Selection, Project,
Industry, and Contract. The articles are select and
examine according with the steps identified by [8] to
Literature Review.
A. Prequalification Criteria
Contractor prequalification is performed to minimize
the risks and failures and to improve the performance
levels of chosen contractors in order to establishing
minimal capacities below which contractors will not be
considered [9]. Due the importance of this stage, some
authors focus in this phase in their papers. Only
prequalification criteria cited by two or more authors were
named in this subsection.
It was observed that the price criteria, that was
considered an essential issue in the past and sometimes
was the unique criteria of selection, principally by public
companies, did not appears in these papers, which
demonstrate a change of vision of enterprises, that
consider most important question like financial status
([10]; [11]) and financial stability ([12]; [13]) than the
simple price of bid. Additionally, it identified that the
most part of criteria are related with organizational
questions: responsiveness, responsibility, competency
([9]; [14]), reputation ([11]; [12]) and Health & Safety
policy ([11]; [15]; [16]). Finally, [11] and [13] cited
experience like prequalification criteria.
B. Final Selection Criteria
A total of 25 articles mentioning selection criteria to
construction industry are listed in Table I. Only criteria
mentioned by at least four authors are cited in the table.
On the contrary of the idea of selection contractors based
in only one criterion, mainly the price bid, the literature
shows that the contractor selection is considered a
multicriteria decision problem ([16]; [17]). In this context,
all the studied articles consider various criteria to the
selection process.
TABLE I
CONTRACTOR QUALIFICATION CRITERIA
Criterion Article
[1]; [2]; [3]; [7]; [10]; [17]; [18]; [19];
Price [20]; [21]; [22]; [23]; [24]; [25]; [26];
[27]; [28]; [29].
Financial status [3]; [16]; [17]; [18]; [26]; [30].
Financial stability [1]; [7]; [30]; [31].
[1]; [3]; [17]; [20]; [22]; [23]; [25];
Duration
[26]; [27].
Management capability [3]; [7]; [27]; [30]; [31]; [32].
[1]; [3]; [7]; [16]; [18]; [20]; [21]; [27];
Health and safety
[29]; [30]; [31]; [32]; [33].
Reputation [2]; [20]; [31]; [32]; [34].
Technical capability [3]; [7]; [28]; [31].
Experience in similar jobs [1]; [3]; [16]; [17]; [20]; [25]; [26];
[33].
Experience [18]; [21]; [30]; [33]; [34].
Past Project Performance [17]; [20]; [25]; [27]; [28]; [29]; [30];
[32]; [34].
[2]; [18]; [20]; [21]; [22]; [23]; [28];
Quality
[35].
Therefore, the most cited selection criteria in the
literature review were:
1) Price (C1): is the numerical monetary expression
relative to a good transitioned in the market.
2) Health and safety (C2): is related with the
standards and norms of health and safety in the
organization, as well as educational actions, conscientious
campaigns, among others.
3) Past Project Performance (C3): is related with
the performance of the contractor in project finalized,
according with the owners and managers of its.
4) Duration (C4): is measured by the time spent to
deliver a product or project executed to the client.
5) Experience in similar jobs (C5): it observes if the
contractor works with similar projects before.
6) Quality (C6): Is the capacity of supply goods and
services according with the standards specifications to
satisfy the client’s needs.
In this case, the aspects of cost, quality and time of
project are observed in the selection process.
III. PROPOSED SYSTEMATIC
The proposed systematic is shown in Fig. 1. The first
phase is the identification of actors that influences this
process. In several situations, a unique DM, that knows
the preferences and limits of others actors, is selected. In
cases where there are higher divergences between
decision maker's preferences, it is necessary the use of
group decision procedures. This article considers the
second option. In this way, it is should create a committee
of decision makers familiarized with the company's needs.
The number of decision makers and the area of operation
vary according with the type and size of the industry.
Creation of Committee
Identification of Contractors
Order – qualifying
Contractor Pre-selection
criteria
Did contractor
approve?
Yes
Order – winning Application of model with
criteria multiple decision makers
Ranking of Contractors
Application of an Integer
Restrictions Programming Method
Contractor Selection
Fig. 1. Proposed Systematic
Then, the committee should identify the potential
contractors, which represents the alternatives in the
proposed decision model. Later, the order-qualifying and
order winning criteria are firm. To determine them, each
individual can establish your own criteria and, after, the
group meets to discuss the proposals and determines the
set of global criteria. In other cases, it can make a
brainstorming section or uses a literature review to
identify the criteria.
In the pre-selection phase, a screening of contractors
is held. In this way, the alternatives that have a
performance below the acceptable in the order-qualifying
criteria are eliminated and those who obtain a
performance level specified continue to compete in the
process.
Later, a model with multiple decision makers was
applied. In this case, the method used was PROMETHEE-
GDSS, which make the ordering of the alternatives. The
use of this method is related to several aspects.
Primarily, due to "present non-compensatory
evaluations” [36], this method avoid that contractors with
high performance in some criteria and very low
performance in others to be chosen, since in the contractor
selection it is normally preferred suppliers with good
balanced performance. Additionally, the interaction
between the analyst and managers are easy since the
parameters are very intuitive. Also, this is a flexible
model [37] in relation to the parameters used in the
process, which facilitates the elucidation of preferences
by the managers.
Secondly, PROMETHEE GDSS permits the
consideration of preferences of all the decision makers
without needs a consensus, which facilitates the process in
cases of interest conflicts. Furthermore, the method
admits the attribution of weights to the decision makers so
that the power of each individual in relation to the process
is portrayed. The result of the application of this method
is a ranking of contractors.
In the final selection, to select a set of suppliers it
uses an Integer Programming method. In this case, it was
employed PROMETHEE V adaptation, proposed by [38],
which aims to insert all the alternatives that improve this
set, including those that have negative flows. In this
method, the resources constraints are considered to
choose the group of suppliers in the final selection, since
the company’s normally have a limited amount of
resources to achieve their objectives.
IV. NUMERICAL APPLICATION
It was made a numerical simulation of the proposed
model aiming demonstrate its use. For this application, it
was structured a typical problem of contractor selection in
the construction industry, in which the company would
select a group of suppliers for a project, considering the
need of contractors with balanced performance in the
criteria and the power of decision makers. The
PROMETHEE.GAIA and EXCEL software were used in
the simulation.
Initially, it was defined a simulate committee,
composed by three members (DM1, DM2 and DM3), in
order to select a group of contractors, among ten potential
suppliers (Co1, Co2, Co3, Co4, Co5, Co6, Co7, Co8, Co9,
Co10).
Following, it was defined the order-qualifying and
order-winning criteria which are related to the objectives
of the decision maker with respect to the contractors. The
contractors select by the model only will be adequate to
the preferences of the company with the criteria is in
accordance with this preference. The criteria used in this
simulation were exposed in sections II.A (pre-selection)
and II.B (selection).
Afterward, it was made the contractors pre-selection
from their performance in order-qualifying criteria. In
this phase, the members of committee achieve accordance
in respect of the supplier's evaluation regarding the
criteria, since in this phase it is observed if the alternatives
have a minimum acceptable performance in respect to
them, while performances above the qualifier level do not
interfere in the final selection. In this stage the potential
contractors Co4, Co6, Co7 and Co10 obtained performances
lower than the qualifier level and were removed to the
process.
After the definition of the contractors that continue in
the process, it was construct individuals evaluation matrix
in which were generated the entries of the decision model.
Following, each decision makers determined the weights,
preference functions and parameters for each criterion.
Moreover, the committee decided that the weight of each
decision maker was the same since anyone have more
power than the others. Using the PROMETHEE.GAIA
software, the PROMETHEE GDSS was applied. The
global ranking is exposed in Table 2.
TABLE 2
GLOBAL RANKING
Order Alternative Net flow
1º Co1 0.4397
2º Co8 0.2313
3º Co9 0.1257
4º Co3 -0.0683
5º Co2 -0.3393
6º Co5 -0.3890
The global ranking of contractors was coherent with
the individuals' rankings. The first alternative (Co1) is the
first for all decision makers. Co8 and Co9 vary between
the second and third position according with the DM. Co 3
ranks fourth for DM1 and DM2 and is indifferent to Co 8
(third position) to DM3. Finally, Co 2 and Co5 vary
between the fifth and sixth positions for all DMs.
For the final selection, the global net flows, obtained
in PROMETHEE GDSS were used as an entry for
PROMETHEE V, which identifies the better set of
contractors, considering the imposed constraints. In this
case, it was used the adaptation proposed by [38] for
PROMETHEE V, which accepts the inclusion of
alternatives with negative flows since their choice bring
improvements in the results. In this way, it was
considered the optimization of sets of the same size and
defined the c-optimal sets for each number c of items.
Following, the ranking of sets was made, according with
the results of objective functions and constraint. The
constraint imposed was the cash flow (308,000.00 dollars)
to the contract of suppliers. The input data for the problem
was:
 TABLE 3
INPUT DATA FOR PROMETHEE V
Alternative Price Net flow
Co1 100,000.00 0.4397
Co2 106,000.00 -0.3393
Co3 105,000.00 -0.0683
Co5 110,000.00 -0.3890
Co8 102,000.00 0.2313
Co9 105,000.00 0.1257
Using the tool Solver of Excel, with a tolerance of
0,1%, it was obtained that the optimal set was Co1, Co3
and Co8. Although Co3 have a negative net flow, this
alternative does not have a negative value, but its
outranking from the others. In this way, the alternative
will be incorporated to the set to improve its global
performance. As a result, the set of suppliers selected
were Co1, Co3 and Co8.
For the robustness verification of proposed model, it
was made a sensitivity analysis, in which the weights of
determined criteria and decision makers vary and the
others are modified proportionally. In the first analyze it
was made an increase and decrease of 5% in the weights
of C2 and C4 for each DM. In the second, the weight of
criteria is the same for each DM. And finally, it was made
an increase of 10% in the weight of each DM. As a result,
it was observed that the variation of weights does not
influence the results of the final selection, which implies
that the model is robust for small variations in the
weights.
V. FINAL CONSIDERATIONS
The contractor selection is a very important issue
in the construction industry since the contractor has an
essential role in the success or failure of projects in this
sector. Thereby, it is imperative identify criteria and
methodologies adequate to this selection problem in order
to choose satisfactory suppliers to the projects.
In this context, this paper proposed a multicriteria
model for the selection of contractors in this sector. This
model considers the existence of various decision makers
with different preference systems and a possible difficult
of consensus. Due this, employee PROMETHEE GDSS
method, which consider the preferences of each decision
maker individually and following aggregate this
preference. Furthermore, it is possible consider different
weights to the decision makers which represents their
power in the organization.
Moreover, the model aims to select a set of
contractors with maximum utilization of the available
resources, considering the existent constraints. Because of
this, it was used an adaptation of PROMETHEE V for the
final selection. The net flows of PROMETHEE GDSS
were used as the entries of the method as a form of
incorporate the preferences of DMs in the Integer
Programming.
In this way, the major differential of the proposed
model is the integration of the PROMETHEE GDSS and
PROMETHEE V for the contractor selection.
The need of a structured systematic derivates from
the fact that unstructured selection processes can be
results in the contract of suppliers that are not adequate to
the company’s needs. Moreover, this model facilitates the
interaction between the analyst and manager, due the
simplicity of the parameters, and is very flexible in the
identification of contractor’s preferences.
Finally, it was made a numerical application. In order
to use criteria normally consider by real companies, it was
made a literature review to identify the criteria mainly
used in contractor’s selection and employee the most cited
in the simulation. In this way, it was observed the
importance of choose criteria and determinate weights
adequate for the problem, since if they are determined in a
wrong way, the result does not be satisfactory.
Although the application was be made in construction
industry, the proposed model do not restrict to this sector,
but would be used for the supplier selection in various
types of organizations, as a form of improve the
management of supplier, aiming achieve the strategic
objectives of company and acquire more competitiveness
in the market.
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