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Social network analysis of project procurement in Iranian construction mega projects

Abstract

Several construction projects, worldwide, are suffering from delays and budget overruns; and Western Asia is not an exception. Studies have identified delays in progress payments and change order approvals as two of the main root causes of overruns in large building projects in the Middle East. In this study, the effect of procurement methods on these two factors has been investigated by analyzing the structure of social networks formed during these processes and evaluating the efficiency of information diffusion in such networks. Three contract types are focused, i.e., unit-rate; lump-sum; and EPC (Engineering, Procurement and Construction) to evaluate the functional performance of actor networks associated with them, and social network analysis (SNA) is used as the main analysis tool. After extracting the social networks formed in the mega-projects from the public domain in the Iranian construction industry, metrics from SNA were used to evaluate their functional performance concerning progress payment and change order management. The processes were compared at both network-level and the individuals involved. The observations were turned into an industry questionnaire and the key stakeholders involved in the projects were surveyed for validation and additional insights. The results identified the actors/roles of the most prominence in change and invoice networks of projects, as well as the strength and weaknesses of the three forms of standard contracts reviewed, as manifested in the performance of invoice and change management processes. It was observed that the formation of flat actor-networks in more modern contracts (such as the EPC) effectively supports a better flow of information, hence improves the performance of the processes under the study.

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Notes

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    In this study, the exchange rate between USD and IRR is considered at 33,315 as of December 2016.

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Acknowledgements

The authors would like to acknowledge the assistance received from the management and personnel of Banaye Rastin Company (Tehran—Iran), during different steps of data collection and validation.

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Correspondence to Mazdak Nik-Bakht.

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Appendices

Appendix 1: Description of the main roles and responsibilities of the main actors

Personnel of the contractor:

Project manager (PM) (contractor) This actor was representative of the contractor, responsible for delivering the project in the best possible manner within the contract requirements. So, the project manager was an actor who specified the project strategies and defined the main elements of the project such as budgeting, scheduling, performance requirements, and characteristics based on which, the project participants were selected. This actor was needed to coordinate and approve all the operations related to budget, cash flow, invoices, construction, contracting, and change process. In addition, a project manager was required to spend a large amount of time to liaise with local authorities, team members, top management, client personnel, and project operator
Superintendent (S) This actor was a fully authorized representative of the contractor at the construction site and managed all site-based staff employed by the company to ensure that construction progress was within the project scope. According to general conditions governing Iranian Contracts, contractors shall delegate authority to the superintendent to receive instructions and plans from consultants and to issue the financial invoices. All the site safety managers, assistant superintendent, project engineers, administrative and purchasing officers worked under the superintendent's supervision
Assistant superintendent (AS) This actor’s main responsibility was coordinating the foreman, civil, mechanical, and electrical engineers. Directing the site individuals to perform efficiently and effectively
Project control officer (CO) was a person who identified the current works needed to be completed according to the project schedule and planned day-to-day activities of the project. This actor compared the actual progress of the project versus the as-planned and constituted the progress meetings with the attendance of project manager, superintendent, technical office manager, and assistant superintendent to explain the project status and update the project schedule according to the information received from the participants. Besides that, writing the daily and monthly production reports was a duty of the project control officer
Technical office manager (TOM) The TOM was an engineer who worked as the Assistant Project Manager. This actor created and submitted the final invoices and followed them up until the issue of the related financial documents from the client's side. So he had to be well-informed about all the aspects of the invoices. Besides managing all technical office-based staff, he was a bridge between office and in-site staff for better information exchanges. Documenting the project progress details was one of key duties of the technical office manager
Technical engineer manager (TEM) This actor was an engineer who coordinated the designers of different fields in the case of the EPC contract. He was an experienced person who approved the final plans
Civil, mechanical, and electrical surveyor (CS, MS, ES) These actors collected information in different fields of the project and quantified the activities of the project within the unit price format. The data that they acquired were useful for writing the invoices, calculating the subcontractors' bill of quantity, evaluating the effects of change orders, material reconciliation, and determining the raw materials or equipment for purchase requests
Land surveyor (LS) (Topographer) LS mostly performed the landscaping works. By carrying out the topographic surveying, this actor calculated the vertical and horizontal peculiarities of different points and used them for quantifying the activities (excavation, embankment…) or checking the feasibility of change instructions in landscaping works
Accountant (A) This role entailed issuing cash receipts and monitoring accounts receivable and payable. Producing various reports, analyzing the financial performance of the project, and comparing the cost versus budget were the main duties of the accountant
Administrative officer (AO) (contractor) The role of administrator officer seemed to predominantly involve and relate to the coordination of the accountant, stockman, purchasing officer, and other office staff on the site. The AO worked under a direct supervision of the superintendent
Purchasing officer (PO) (contractor) The purchasing coordinator was responsible for evaluating the suppliers and arranging for the purchase of materials, equipment, and services based on the project needs, superintendent expectations, cost, quality, availability, and other factors
Warehouse man (WM) This actor organized and kept the warehouse of the project running efficiently. The main responsibilities of the workhouse man were keeping the orderliness and updating the inventory of materials in warehouse areas

Personnel of the consultant:

Project manager (PM) (consultant) This actor was responsible for providing the services which were required for building design, quality assurance, and contract administration. All of the personnel of the consultant team involved in the project were employed by this actor according to the mentioned goals. The consultant’s project manager could propose the strategic and operational issues for the clients too. He visited the site once per week before attending the decision making meetings
Mechanical, electrical, civil, and structural designer (MD, ED, CD, SD) (consultant) They were responsible for preparing conceptual and detailed design. Specifying the materials or brands of the equipment which were used in different fields of construction was their duty too. During the construction phase, they should review the effect of any changes related to design and materials on the quality and functionality of the construction project and validate any change request before issuing the instructions by the consultant
Civil, mechanical, and electrical supervisors (CSup, MSup, ESup) According to general conditions services consulting contracts of Iran, the consulting engineer shall appoint the supervisor engineers as the vice representatives in the workshops (sites). Controlling and monitoring the executive operation as performed by contactors/other agencies to be in accordance with drawings, technical specifications, and the client’s requirements in different fields of construction were the main duties of supervisors. So, they were needed to review and approve all technical submittals, but they did not have extensive inputs in the design approach. In addition, they were the first department to check the invoices after the contractor’s submission
Contracts officer (COFF) (consultant) The main duty of this actor was preparing the pre-tender documents according to the general conditions of contracts. This actor was required to monitor the invoices technically approved by supervisors and project manager of the consultant and check the conformity of these documents to contract provisions. In the change process, the consultant project manager generally consulted with this actor and asked the opinion according to the procurement framework
Estimator (E) (consultant) This actor assisted to prepare tender documents at the preconstruction phase. But during the project implementation, the estimator checked the invoice items based on the primitive plans and evaluated the contract variations due to change instructions. This actor reported the evaluations, calculations, and feasibility studies to the project manager and contract officerd

Personnel of the client:

Technical office administrator (TOA) (client) This actor was vice president for engineering of the client organization and the administrator of client engineers. All major decisions and plans related to projects had to be approved by this actor. In addition, the TOA coordinated engineers of the client with the finance, budget, and contracting departments. The technical office administrator reported the progress and problems of the project to the client organization and assisted them in various bureaucratic duties
Civil, mechanical and electrical engineers (CE, ME, EE) (client) As the nature of procurement method demands, and because of the importance of project ‘A’, the consultant engineers were under the direct supervision of the client civil, mechanical and electrical engineers who oversee the project implementation during the design, delivery, and construction phases on behalf of the client. All invoices and the considerable number of instructions, change orders, and designs needed to be approved by these engineers. The same as the consultant supervisors, the civil engineer was the coordinator of the other engineers in their organization
Operator representative (OR) The hospital operation team had statutory obligations concerning the operation and maintenance of the project. They had appointed a representative to supervise the design and building processes. The OR duties included appraisal of the design and installation of services and definition of a program for testing and delivery of the facility. This actor was an active participant in the decision-making meetings and conveyed the opinion and requests of the end-operator to the client, contractor, and consultant
Contract officer (COFF) (client) This actor was an expert in procurement and supervised the technical and administrative process of the project to be implemented according to the law and procurement framework. The CO was responsible for determining the prepayments or bounds which were considered in the contract. This actor also provided an opinion about the changes and quantity variations/deviations from the contract
Financial supervisor (FS) (client) This actor was responsible for checking the financial health of project invoices. The financial supervisor checked the price items and the related calculations and sent the approved documents to the financial officer
Financial officer (FO) (client) The FO received the invoices from the financial supervisor and after applying statutory deductions (tax income, insurance, prepayment, etc.) made a financial document according to the net amount of invoice and sent it to the budget officer
Budget officers (BO) (client) This actor assigned the funds for the project on behalf of the client. In addition, he supervised how money was spent in the project to ensure its compliance with the budget plans. After technical and financial approval of invoices, this actor assigned the budget for the contractor’s payment. Generally, the project manager of contractor liaised with this actor to follow up on the payment and obtain the current budget information for planning the project cash flow
Administrative officer (AO) (client) This actor performed various bureaucratic and administrative duties in the project, including the money transfer for the contractor’s payment. The AO was the actor issuing cheques on the contractor’s account, but the cheque needed to be certified by the financial manager for the final payment
Financial manager (FM) (client) The FM is one of the senior managers of the client organization. This actor supervised all the staff who led financial and budgeting jobs. This actor also listed the details of financial documents to ensure that legal requirements are met. The financial manager signed the payment cheque upon the approval of the invoice

Appendix 2: Definition of terms

Path length A path in a graph is a sequence of edges, connecting a sequence of nodes. The length of a path is the total number of steps (i.e., total number of edges) in that path.

Shortest path The shortest patch between every two node ‘i’ and ‘j’ in a social graph is the path connecting i to j in the least possible number of steps.

Degree centrality The simplest form of centrality, counting the total number of immediate neighbors of a node in a social network is considered that node’s degree centrality. Accordingly, out-degree and in-degree centrality can be defined in directed social graphs.

Closeness centrality Closedness centrality of node ‘i’ is defined as the total number of steps required to access every node of the social graph, from node ‘i’. This refers to the accessibility of nodes in a graph.

Betweenness centrality Betweenness of a node ‘i’ is the total number of shortest paths in the graph which pass through that node. A node with high betweenness centrality will be in a strategic position to control the connections among many other nodes.

Eigenvector centrality The eigenvector centrality is a measure of not only quantity but also the quality of nodes connecting to a specific node. It provides a metric for how a node is connected to other important nodes of a social graph, and ‘i’ is calculated as: \(\frac{1}{\lambda }\sum\nolimits_{t\varepsilon N(i)} v (t)\). Where N(i) is the set of neighbours of node ‘i’; \(v(t)\) is entries of eigenvector \({\varvec{v}}\).

Clustering coefficient The fraction of the number of edges between a node's neighbours (in a social graph) and the maximum possible number of such edges. This provides a measure of the level of connectivity among ‘friends-of-friends’ for each node of the social network. Average clustering coefficient of a network is the expectation of clustering coefficients over all nodes of the graph.

Density The portion of possible connections among the nodes of a network which are formed in practice. A network with a density of one will be a complete graph, where all possible connections are formed, and no more edge can be added.

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Shabani Ardakani, S., Nik-Bakht, M. Social network analysis of project procurement in Iranian construction mega projects. Asian J Civ Eng 22, 809–829 (2021). https://doi.org/10.1007/s42107-021-00348-1

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Keywords

  • Project delivery method
  • Construction contracts
  • Project procurement
  • Change order
  • Invoice management
  • Social network analysis
  • Standard contracts
  • Unit-rate contract
  • EPC