Journal of Financial Management of Property and Construction

Robert Eadie; Srinath Perera; George Heaney

2011 Journal of Financial Management of Property and Construction

doi: 10.1108/13664381111179198

Purpose – The purpose of this paper is to report the production of the key process areas (KPAs) for an e‐capability maturity model for construction organisations, based on drivers and barriers to e‐procurement. Design/methodology/approach – Previous researchers have recognised the positive consequences of possessing a model to sustain the embedment of any business process within an organisation. The capability maturity model progressed into one of the most internationally recognised since the release of the Software Capability Maturity Model (CMM) in 1991. Since then, many CMMs have been developed. This paper reports on how a CMM based on drivers and barriers to e‐procurement identified in Eadie et al. can be developed to form the KPAs in the formation of a model to gauge the maturity of an organisation in relation to e‐procurement. Findings – It was found that factor analysis could be used as a data reduction technique to reduce the 20 drivers and 32 barriers identified as being applicable to e‐procurement in construction, to 12 KPAs: Quality management system; Cost management system; Intergroup coordination; Time management system; Operational analysis; Organisational change management system; Integrated teaming; Governance management system; Requirements development; Knowledge management system; Integration management system; and Organisational environment. Originality/value – This paper provides particulars of a research project which uses factor analysis to produce a set of KPAs from the drivers and barriers identified in Eadie et al. These KPAs are then subjected to a mapping process linking them to maturity levels to develop a CMM to analyse the e‐procurement capability of construction organisations. This mapping will be reported in a later paper. This e‐readiness of organisations will indicate the current state of a construction organisation in terms of its readiness to carry out e‐procurement. The paper describes in detail the identification of the KPAs.

Oluwole Alfred Olatunji

2011 Journal of Financial Management of Property and Construction

doi: 10.1108/13664381111179206

Purpose – The popularity of Building Information Modelling (BIM) has improved tremendously in recent years. The business sense it makes to construction small to medium‐sized (SME) organizations has also become vitally important, especially when the deliverables of BIM potentials are becoming more explicit than they were several years ago. Moreover, there is adequate evidence to suggest that an early adoption of BIM by construction SME organizations could mean marked sustainable business advantage to them. The purpose of this paper is to initiate a long‐term study on how BIM triggers market improvements in the Australian construction industry, to establish the specific impact of these on construction industry's contribution to Australian economy, also to develop a simple model on the cost of implementing BIM in a typical construction SME. Design/methodology/approach – This research relies on evidence from literature to identify different operational models of construction organizations, namely; matrix, divisional, functional and networked business models. A definite approach was taken to articulate some contributory concepts and rationales which drive organizational response to technological changes across the identified four categories of organization structure models. Focus group discussion was the primary research method for this study, while additional data were collected from public sources. Respondents and data were sourced from two firms selected from each type of organization model. In the end, 24 industry practitioners from a range of Australian construction SME businesses that provide software and technical support services, consultancy and contracting services took part in the study. Findings – Analysis of 32 sample cases revealed that BIM implementation costs were mostly defined by a range of cost variables, including software acquisition and technical support, hardware, training, services and implementation contingencies. On the average, software costs accounted for about 55 percent of total implementation costs. This particular cost descriptor was about five to seven times more than the cost of hardware (depending on the level of sophistication of operations, expected implementation outcomes and whether new hardware were used or existing installation were upgraded with BIM compliant drivers). The study also found that training cost was a third of software costs, while the average total cost of services, recruitment and contingencies, all added together, was about 5 percent of total implementation costs. In the end, a linear model was developed to predict the cost of BIM implementation in construction SMEs. Originality/value – A preliminary version of this study has been presented in the 2010 edition of the International Conference on Information Technology in Construction (CIB W078). As a study in a new direction, it focuses on specific organization models and their unique responses to drivers of change. While other studies have looked into macro implementation of BIM, mostly without considering the peculiarity and dynamics of organization structure, this study has focused on construction SME businesses offering a wide range of services.

John Lowe

2011 Journal of Financial Management of Property and Construction

doi: 10.1108/13664381111179215

Purpose – The purpose of this paper is to analyze the competition in the UK construction industry and the key sectors that supply it, thereby identifying the degree of industrial concentration affecting the construction product. Design/methodology/approach – The research is based on Official Statistics giving details of the concentration ratios of 127 industrial sectors in the UK. The quantitative information on concentration is backed up by qualitative data from reports by the Competition Commission and its predecessors plus enquiries from the Office of Fair Trading. This is used to grade each industry and weight the key inputs by their relative importance to obtain an overall picture of competition in construction. Findings – The paper concludes that construction is one of the most competitive sectors in the economy and its input structure is also amongst the least concentrated. This is measured by taking the industrial sectors that supply construction and weighting them in terms of their contribution. Research limitations/implications – The data used are not totally comprehensive as certain information is withheld because of commercial confidentiality. The sectors concerned, including banking and real estate, might warrant further investigation. Practical implications – The implications are that construction remains a highly competitive sector and there is little to be gained by regulation other than the work currently being undertaken on collusion in bidding, and on mergers and acquisitions. The key point is to ensure that competitive bidding is free from collusion. Originality/value – The paper goes beyond most of the existing research in challenging the conventional view that construction has a highly concentrated input structure.

Peter Byrne; Pat McAllister; Peter Wyatt

2011 Journal of Financial Management of Property and Construction

doi: 10.1108/13664381111179224

Purpose – The purpose of this paper is to investigate the effect of choices of model structure and scale in development viability appraisal. The paper addresses two questions concerning the application of development appraisal techniques to viability modelling within the UK planning system. The first relates to the extent to which, given intrinsic input uncertainty, the choice of model structure significantly affects model outputs. The second concerns the extent to which, given intrinsic input uncertainty, the level of model complexity significantly affects model outputs. Design/methodology/approach – Monte Carlo simulation procedures are applied to a hypothetical development scheme in order to measure the effects of model aggregation and structure on model output variance. Findings – It is concluded that, given the particular scheme modelled and unavoidably subjective assumptions of input variance, that simple and simplistic models may produce similar outputs to more robust and disaggregated models. Evidence is found of equifinality in the outputs of a simple, aggregated model of development viability relative to more complex, disaggregated models. Originality/value – Development viability appraisal has become increasingly important in the planning system. Consequently, the theory, application and outputs from development appraisal are under intense scrutiny from a wide range of users. However, there has been very little published evaluation of viability models. This paper contributes to the limited literature in this area.

Abel Olaleye

2011 Journal of Financial Management of Property and Construction

doi: 10.1108/13664381111179233

Purpose – The purpose of this paper is to examine the performance of asset classes in the South African investment market and assess the diversification benefits from adding listed property stock into domestic mixed‐asset portfolios. Design/methodology/approach – The data sets comprise of quarterly returns on property listed stock, all share, all bond and 90 day Treasury bill for the period of January, 1999 to December, 2009. Return‐risk performance of all the assets were compared using mean return, standard deviation, mean standard deviation ratio, coefficient of variation and correlation coefficient. To determine return enhancement and risk reduction benefits of property listed stock in mixed‐asset portfolios, 22 naïve portfolios (17 with property stock and five without) were constructed and, their return and risk levels, obtained using Markowitz's mean variance analysis, were compared. Findings – The results showed that there was evidence of superior return and risk‐adjusted performance of real estate stock over other assets. Also, adding property stock into mixed‐asset portfolios was found to have produced enhanced and statistically significant risk‐adjusted returns but minimal and insignificant risk reduction benefits. These results however are conditional on the percentage allocation to real estate and the asset class replaced. Research limitations/implications – The study has implication for investors. They could consider the inclusion of listed property stock in their portfolios with the expectation of a significant risk‐adjusted return enhancement but marginal risk reduction. Originality/value – The paper is one of the few attempts at assessing the diversification benefits of listed property stock, especially from the perspective of African emerging market.

S.D. Wapwera; Ali Parsa; Charles Egbu

2011 Journal of Financial Management of Property and Construction

doi: 10.1108/13664381111179242

Purpose – The purpose of this paper is to identify and analyse the methods of housing finance adopted by the low income and informal groups in Nigeria. Design/methodology/approach – A survey of 300 households in selected areas (low‐income/informal) of Jos Metropolis, Nigeria, was carried out, concerning the methods of housing finance used for building and home improvement. Findings – The survey showed that 75 per cent of the households utilized traditional methods of financing and 25 per cent using modern methods. Research limitations/implications – Based on data collected from the survey, the research serves as a basis for further research into traditional methods of housing finance in developing countries. Practical implications – The analysis of traditional financing methods highlights the range and structure of the traditional methods of financing in operation in informal and low income areas of Jos Metropolis, Nigeria. For example, informal and customary/traditional methods (Esusu/Asusu, Age grade association, Men's Revolving Loan Association, Social club contribution among others), of financing appear to be very effective housing finance methods. Social implications – The paper shows that In the absence of formal institutional financing methods, strengthening the community‐based social network through formalisation and empowerment for housing finance becomes vital. Originality/value – It is argued that it is possible to utilise and formalise these traditional methods of housing finance, in order to enhance access to finance for housing development in low‐income urban areas in developing countries.