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  • Research www.rics.org

    Corporate Professional Local

    Understanding construction consortia: theory, practice and opinions

    RICS Research paper series Volume 6, Number 1 March 2006

    Stephen Gruneberg and Will Hughes University of Reading

  • Stephen Gruneberg, BSc, MSc, PhD, FRSA is a research fellow in the School of Construction Management and Engineering at the University of Reading. He is an economist specialising in the construction industry and is an experienced lecturer. He has written and co-written a number of books on the economic theory of construction. His recent research has covered productivity in construction, training, and the relationship between planning data and construction demand.

    Will Hughes, MCIOB, BSc, PhD is a Reader in Construction Management and Economics and Head of the School of Construction Management and Engineering, University of Reading, having started his career as a joiner in the West Midlands. His PhD was on organisational analysis of building projects and he has researched and published extensively in this topic. His current research interests are in the costs of the commercial processes in construction and contracting based upon paying for the performance of a building, rather than for what it is made of. He is editor of the international refereed journal Construction Management and Economics, and is an active member of the Association of Researchers in Construction Management, having completed two years as chairman (1998-2000), and remains responsible for developing and maintaining their information resources for researchers in this field.

  • Understanding construction consortia: theory, practice and opinions

    Volume 6, Number 1 March 2006

    Stephen Gruneberg and Will Hughes, University of Reading

  • © RICS

    March 2006 ISSN 1464-648X ISBN 1842 192 485

    Published by:

    RICS 12 Great George Street London SW1P 3AD United Kingdom

    The views expressed by the author(s) are not necessarily those of the RICS nor any body connected with it. Neither the author(s), nor the RICS accept any liability arising from the use of this publication.

    This paper can be copied free of charge for teaching and research purposes, provided that:

    • the permission of the RICS is sought in advance

    • the copies are not subsequently resold

    • the RICS is acknowledged

    Malcolm Bell Leeds Metropolitan University England

    Alistair Blyth University of Westminster England

    Thomas Bohn University of Leipzig Germany

    Paul Bowen University of Cape Town South Africa

    Terry Boyd Queensland University of Technology Australia

    S E Cheung City University of Hong Kong Hong Kong

    Chris Cloete University of Pretoria South Africa

    Charles Cowap Harper Adams University College England

    Hoffie Cruywagen Association of Quantity Surveyors in South Africa South Africa

    Christopher Fortune Heriot-Watt University Scotland

    Karen Gibler Georgia State University United States of America

    Andy Hamilton University of Salford England

    John Henneberry University of Sheffield England

    Michael Hoxley Anglia Ruskin University England

    Will Hughes University of Reading England

    Eddie Hui Hong Kong Polytechnic University Hong Kong

    Norman Hutchison University of Aberdeen Scotland

    Aims and scope of the RICS Research Paper Series

    The aim of the RICS Research Paper Series is to provide an outlet for the results of research relevant to the surveying profession. Papers range from fundamental research work through to innovative practical applications of new and interesting ideas. Papers combine academic rigour with an emphasis on the implications in practice of the material presented. The Series is presented in a readable and lucid style which stimulates the interest of all the members of the surveying profession.

    Managing editor

    Stephen Brown Head of Research RICS 12 Great George Street London SW1P 3AD United Kingdom sbrown@rics.org

    Tel: +44 (0)20 7334 3725

    Editorial board

    Adarkwah Antwi University of Wolverhampton England

    Tim Dixon Oxford Brookes University England

    Les Ruddock University of Salford England

    Clive Warrren University of Queensland Australia

    Christine Whitehead London School of Economics England

    Panel of refeees

    Akintola Akintoya Glasgow Caledonian University Scotland

    Ghassan Aouad University of Salford England

    David Baldry University of Salford England

    Ramin Keivani Oxford Brookes University England

    Andrew Knight Nottingham Trent University England

    Richard Laing Robert Gordon’s University Scotland

    S M Lo City University of Hong Kong Hong Kong

    David Lowe University of Manchester England

    William McCluskey University of Ulster Northern Ireland

    John Mansfield Nottingham Trent University England

    Jacob Opadeyi University of the West Indies Trinidad and Tobago

    Rob Pickard University of Northumbria England

    David Proverbs University of Wolverhampton England

    Rainer Schultz University of Aberdeen Scotland

    Martin Sexton University of Salford England

    Low Sui Pheng National University of Singapore Singapore

    Francois Viruly University of Witwatersrand South Africa

    Peter Wyatt University of the West of England England

  • Contents

    1 Introduction 5

    2 Construction consortia in general 10

    3 Results from the interviews 23

    4 Contrasting views of consortia 35

    5 Conclusions 47

    Acknowledgements 49

    References 50

    Appendix A: Interview questions 52

    RICS research paper series 54

  • Understanding construction consortia: theory, practice and opinions

    Stephen Gruneberg and Will Hughes (University of Reading, UK)

    Abstract

    Firms form consortia in order to win contracts. Once a project has been awarded to a consortium each member then concentrates

    on his or her own contract with the client. Therefore, consortia are marketing devices, which present the impression of team-

    working, but the production process is just as fragmented as under conventional procurement methods. In this way, the consortium

    forms a barrier between the client and the actual construction production process.

    l Firms form consortia, not as a simple development of normal ways of working, but because the circumstances for specific

    projects make it a necessary vehicle. These circumstances include projects that are too large or too complex to undertake alone

    or projects that require on-going services which cannot be provided by the individual firms in-house.

    l It is not a preferred way of working, because participants carry extra risk in the form of liability for the actions of their partners in

    the consortium.

    l The behaviour of members of consortia is determined by their relative power, based on several factors, including financial

    commitment and ease of replacement.

    l The level of supply chain visibility to the public sector client and to the industry is reduced by the existence of a consortium

    because the consortium forms an additional obstacle between the client and the firms undertaking the actual construction work.

    Supply chain visibility matters to the client who otherwise loses control over the process of construction or service provision,

    while remaining accountable for cost overruns. To overcome this separation there is a convincing argument in favour of adopting

    the approach put forward in the Project Partnering Contract 2000 (PPC2000) Agreement.

    l Members of consortia do not necessarily go on to work in the same consortia again because members need to respond flexibly

    to opportunities as and when they arise.

    l Decision-making processes within consortia tend to be on an ad hoc basis.

    l Construction risk is taken by the contractor and the construction supply chain but the reputational risk is carried by all the firms

    associated with a consortium.

    l There is a wide variation in the manner that consortia are formed, determined by the individual circumstances of each project; its

    requirements, size and complexity, and the attitude of individual project leaders. However, there are a number of close working

    relationships based on generic models of consortia-like arrangements for the purpose of building production, such as the

    Housing Corporation Guidance Notes and the PPC2000.

    Contact

    Stephen Gruneberg Will Hughes School of Construction Management and Engineering School of Construction Management and Engineering University of Reading University of Reading PO Box 219 PO Box 219 Whiteknights Whiteknights Reading RG6 6AW Reading RG6 6AW UNITED KINGDOM UNITED KINGDOM

    Tel: +44 (0) 118 378 5416 Tel: +44 (0)118 378 5416 Email: s.l.gruneberg@reading.ac.uk Email: w.p.hughes@reading.ac.uk

  • The contractual environment

    onstruction consortia arise in several different forms. They are one of many ways in which traditionally separate

    parts of the construction procurement process might be integrated. Sometimes, this integration involves a single firm taking on obligations wider than it is capable of undertaking alone, and then subcontracting elements of the work; at other times, groups of firms get together to act as a consortium to meet the needs of a client.

    An example of such arrangements, which may involve a number of firms with differen

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