The cidb Construction Industry Indicators Summary Results ... · The summary results included in...

T h e C o n s t r u c t i o n I n d u s t r y D e v e l o p m e n t B o a r d

The c idb Cons t ruc t ionIndus t ry Ind ica tors

Summary Resu l t s : 2007

development through partnership

The cidb Construct ion Industry

Indicators (CIIs) are measures

of the per formance o f the

industry, focusing on cl ients,

the cl ient 's agent / consultant

and cont rac tors . The CI I s

have been captured annually

since 2003, and are current ly

be ing captured by the

c idb in par tnersh ip w i th

the Department of Quant i ty

Survey ing and

C o n s t r u c t i o n

Management o f

the Universi ty of

the Free State.

The full report will be available on the cidb's websitehttp://www.cidb.org.za, and includes historical trendsin the indicators.

The cidb's aim is that the CIIs are used for:

• monitoring construction industry development needs and trends;

• informing industry participants of key performance factors; and

• company and project benchmarking.

By capturing and publishing these CIIs, the cidb's aimis to encourage the construction industry and its supplychain to strive to improve their performance. In supportof this, a client satisfaction survey form is attached toallow contractors an opportunity to benchmark themselves against the client satisfaction CIIs presentedhere. Contractors are urged to submit the attachedquestionnaire to the client / client's agent upon practicalcompletion of the project.

PERFORMANCE IMPROVEMENT;WHY IS IT IMPORTANT?

What is client satisfaction?

The level of satisfaction of a client with a contractor'sperformance on a project is an important indicator (or measure) of the contractor's ability to execute andcomplete a project within the required expectations ofthe client. "Feedback is the food of champions", and itis important for contractors to get feedback from clientson their projects so that the contractor can improvetheir performance on future projects. The attachedquestionnaire can be used to obtain feedback from theclient or client's agent upon practical completion of the project.

Performance and competitiveness:

Not only is client feedback to contractors on individualperformance important, but it is also important for contractors to know how they measure against theindustry norm - which is an indicator of their competiveness'. The CIIs presented here provide ameasure where contractors can measure their performance against the industry norm.

THE cidb CONSTRUCTIONINDUSTRY INDICATORSSUMMARY RESULTS: 2007The cidb Construction Industry Indicators (CIIs) aremeasures of the performance of the industry, focusingon clients, the client's agent / consultant and contractors.The CIIs have been captured annually since 2003, andare currently being captured by the cidb in partnershipwith the Department of Quantity Surveying andConstruction Management of the University of the Free State.

The summary results included in this publication reflectselected indicators measured for projects completed inthe 2006 calendar year, derived from 114 clients fromacross all nine provinces and 219 contractors. The indicators presented here cover:

• client satisfaction;• contractor satisfaction;• profitability and payment delays; • procurement indicators;• health and safety; and• empowerment.

KEY FOCUS AREAS - THE "BOTTOM 30%":

While the overall performance results for the industryare encouraging, the challenge is to raise the performance of the industry as a whole, and in particular the performance of "the bottom 30%".

• Clients were neutral or dissatisfied with the overall performance of the contractor on 26% of projects;

• Clients were neutral or dissatisfied with the quality of work delivered on 33% of projects;

• Around 25% of the projects surveyed had levels of defects which are regarded as inappropriate;

• Contractors were neutral or dissatisfied with the quality of tender documents and specifications on around 30% of the projects surveyed;

• Safety on building and construction sites as well as transportation to the sites remains a concern;

• Around 20% of projects surveyed were undertakenusing general conditions of contract other than those recommended in the cidb's Standard for Uniformity, or using general conditions of contract that were substantially amended; and

• Around 5% of payments to contractors and the clients' agent / consultants were delayed by longer than 90 days.

1The cidb Construction Industry Indicators, Summary Results: 2007

Why is it important to improve?

The contractor's survival depends on repeat work fromclients, which is based on the contractor's performanceon past projects. Contractors need to provide value formoney to the client, and many clients are no longerawarding contracts on the lowest tender price, but onthe performance of the contractor on past contracts.

Contractors who improve their performance and, typically, who are above the industry norm will have acompetitive advantage over other competitors.Contractors will also be able to complete the projectswithin less time, less cost and higher quality and addingvalue for money to the client and higher profits.

"Clients in construction want their projectsdelivered on time, on budget, free from

defects, efficiently, right the first time, safelyand by profitable companies. Regular clients

expect continuous improvement from their construction team to achieve year on year

reductions in project cost and reductions inproject time."

Movement for Innovation (M4I), UK

These are but a few benefits that are possible throughimproved practice.


Construction schedule:

Clients were satisfied that contractors completed the project within the quoted tendered construction schedule (excluding the impact of variation orders) on67% of the projects, and were neutral or dissatisfiedwith the construction schedule on 24% of the projects.

67%

CLIENT SATISFACTION

Performance of the agent / consultants' team:

Clients were satisfied with theoverall performance of the agentemployed on 78% of the projects surveyed. On theother hand, clients were neither satisfied nor dissatisfied(i.e. or neutral) on 19% of the projects, and dissatisfiedon 3% of the projects. Notably, there was a slightdecrease in client satisfaction with increasing project value.

Performance of the contractor:

Clients were satisfied with theoverall performance of the contractor employed on 76% of the projects. On theother hand, clients were neither satisfied nor dissatisfied on 22% of the projects, and dissatisfied withthe performance of the contractor on 2% of the projects. An increase in client satisfaction was foundwith increasing project size - and implicitly with gradeof contractor.

78%

76%

CONTRACTOR SATISFACTION

Performance of the client:

Contractors rated the performanceof clients as satisfactory on 75%of the projects surveyed, 18% as neither satisfactory norunsatisfactory, and 8% as unsatisfactory. Of significance,the contractor satisfaction with the client was stronglynegatively correlated with increasing contract size.


Satisfied

NeitherSatisfied orDissatisfied

Dissatisfied

0.1 1 10 100 1000

Contract Value (Rm)

Contract procurement / adjudication:

Contractors rated the contractprocurement / adjudicationprocess as satisfactory on 76% of the projects surveyed,as neutral on 22% and dissatisfied on 2% of the projects.

Quality of tender documents and specifications:

The satisfaction of the contractorwith the client was strongly correlated with the quality of the tender documents andspecifications - which also showed a negative correlationwith contract size. Contractors were neutral or were dissatisfied with the quality of tender documents andspecifications on 29% of the projects surveyed. Therewas no significant variation in contractor satisfactionbetween the public and private sector clients.

Management of variation orders:

The satisfaction of the contractorwith the client was also stronglycorrelated with the management of variation orders,and contractors were neutral or were dissatisfied withthe management of variation orders on 36% of theprojects surveyed.

75%

76%

71%

64%

The quality of tender documents and specificationsas well as the management of variation orders are amatter of concern in the industry - and is a reflectionof the procurement capability of clients and their representatives or agents.

Quality of work delivered:

Clients were satisfied with thequality of the completed work athandover on 67% of the projects, were neither satisfiednor dissatisfied on 22% of the projects, and dissatisfiedon 2%. A slight increase in client satisfaction was foundwith increasing project size - and implicitly with gradeof contractor. There was no significant variationbetween public and private sector clients. (This relativehigh level of satisfaction however does not appear tocorrelate with anecdotal information about quality concerns expressed in the industry. This matter is beinginvestigated further.)

Resolution of defects:

Clients were satisfied with theresolution of defective work duringthe construction period on 69% of the projects surveyed.There was no significant variation in the client satisfactionwith project size.

Level of defects:

The quality of the completedwork is correlated with the levelof defects at handover / practical completion. 76% offacilities were apparently defect free or had "few"defects at practical completion / handover, and 18% offacilities had "some" defects. 6% of facilities had majordefects or were totally defective. Although the level ofdefects is strongly correlated with the satisfaction of theclient with the contractor, a higher level of defects wasfound on smaller works, and lower levels of defects onlarger works.

Client satisfaction is a key factor in determining clientloyalty and repeat business in the private sector. It isalso a key factor in the public sector as quality isincreasingly being taken into account in the tenderadjudication process.

While the overall results for client satisfaction areencouraging, the performance of the client's agents /consultants and the performance of contractors on20% to 25% of projects surveyed are distinctly belowthe performance of their peers. These organisationsshould be aware of their performance as it couldsubstantially influence their ability to attract repeatbusiness.

Of particular concern is that around 25% of projectssurveyed had a level of defects which the cidbregards as inappropriate.

76%

67%

69%


ECONOMIC INDICATORS

Profitability:

70% of contracts surveyed were undertaken with profitmargins of 5% or more (and 32% of contracts undertaken with profit margins of greater than 10%).26% of contracts surveyed were undertaken at profitmargins of 5% or less, while 4% of contracts ran at a loss.

>10%

6-10%

0-5%

Loss

0% 10% 20% 30% 50%40%

Prof

itabi

lity

(%)

Payment of Contractors:

57% of final payments were made within 30 days ofpractical completion, and 38% within 30 and 90 days.6% of payments were delayed by longer than 90 days.

120+

0% 10% 20% 30% 50%40%

Paym

ent D

elay

s (d

ays)

90+ to 120

60+ to 90

30+ to 60

14+ to 30

<=14

Payment of Client's Agent / Consultants:

Consultants faired slightly less well than contractors,and 50% of consultants were paid within 30 days ofinterim and final account, 46% between 30 days and90 days. 4% of payments were delayed by longer than 90 days.

120+

0% 10% 20% 30% 50%40%

Paym

ent D

elay

s (d

ays)

90+ to 120

60+ to 90

30+ to 60

14+ to 30

<=14

Profitability of contractors and payment proceduresby clients has improved quite significantly.Notwithstanding this, there is still a disturbing trendthat around 5% of payments were delayed by longerthan 90 days - which could be in conflict with thecidb Code of Conduct for all parties engaged in construction procurement.


EMPOWERMENTAround 80% or more of Grade 2 to 6 General Building(GB) contractors are black owned (>50%), whilearound 80% or more Grade 2 to 5 Civil EngineeringContractors (CE) contractors are black owned. Around40% or more of Grade 2 to 5 General Building (GB)contractors are female owned (>50%), while around80% or more Grade 2 to 3 Civil EngineeringContractors (CE) contractors are female owned.

% Black Ownership (>50%)

ContractorGrade

CE GB CEGB

% FemaleOwnership (>50%)

2

3

4

5

6

7

8

95%

96%

92%

86%

78%

63%

53%

92%

92%

84%

78%

65%

37%

26%

51%

63%

47%

41%

33%

22%

0%

42%

39%

36%

31%

22%

15%

3%

Black ownership in the contracting industry is progressing well up to Grade 6 in General Buildingand up to Grade 5 in Civil Engineering.

GENERAL CONDITIONS OF CONTRACT

General Conditions of Contract:

Around 20% of projects surveyed were undertakenusing general conditions of contract other than thoserecommended in the cidb's Standard for Uniformity, or using general conditions of contract that were substantially amended.

GCC 2004

JBCC 2000

FIDIC 1999

NEC

0% 10% 20% 30% 50%40%

Other

HEALTH & SAFETY

Health & Safety:

Records of Health and Safety claims by the FederatedEmployers' Mutual Assurance Company Limited (FEMA)(which accounts for about 50% of industry compensationclaims) for 2006 show 9 184 reportable accidents and73 fatalities, with an estimated total cost of claimsamounting to R124m.

Motor vehicleaccident

Fall onto different level

Stuck by

Other

0% 10% 20% 30% 50%40%

Construction related injuries and fatalities remainsunacceptably high. Specifically, motor vehicle accidents remain the largest contributor to construction related fatalities.

PO Box 2107, Brooklyn Square, 0075 Pretoria, South Africa

Registers Helpline: 0860 103 353

website: www.cidb.org.zaE-mail: [email protected]: +27 (0)12 482 7200Fax: +27 (0)11 388 6852

Design & Layout - Phakisa Communications

CUSTOMER SATISFACTION SURVEYThe cidb's aim is to encourage the construction industry and its supply chain to strive to improve their performance. The cidb encourages contractors tobenchmark themselves against the cidb client satisfaction Construction IndustryIndicator CIIs (http://www.cidb.org.za), and contractors are urged to submit this questionnaire to the client / client's agent upon practical completion of the project.

CClliieenntt DDeettaaiillss::

Name:

Company:

Fax:

Phone:

CCoonnttrraaccttoorr DDeettaaiillss::

Name:

Company:

Fax:

Phone:

PPrroojjeecctt DDeettaaiillss::

Project Name:

Project Number:

Location:

Please complete the following questionnaire in respect of the main contractorfor the project identified above, and return the questionnaire to the contractorat the above address.

Dissatisfied Neither satisfied nor dissatisfied Satisfied

1 2 3 4 5 6 7 8 9 10

1 How satisfied was the client with the overall performance of the contractor employed (tick one):


1 2 3 4 5 6 7 8 9 10

2 How satisfied was the client with the ability of the main contractor to keep to the tendered construction schedule excluding the time impact of variation orders (tick one):


1 2 3 4 5 6 7 8 9 10

3 How satisfied was the client with the quality of the completed work delivered (tick one):


1 2 3 4 5 6 7 8 9 10

4 How satisfied was the client with the resolution of defective work during the construction period by the main contractor (tick one):

Totally Defective Major Defects ApparentlyDefect Free

1 2 3 4 5 6 7 8 9 10

5 What was the condition of the facility at the time of handover / practical completion with respect to defects (tick one):

Some Defects Few Defects

6 Do you have any further comments?

development through partnership

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